Shoals Technologies Group, Inc. (“Shoals” or the “Company”)
(Nasdaq: SHLS), a leading provider of electrical balance of system
(“EBOS”) solutions for solar, battery storage and electric vehicle
charging infrastructure, today announced financial results for its
first quarter ended March 31, 2021.
“Shoals continues to deliver strong financial
results, with record first quarter revenues and gross margin
improving 635 basis points year-over-year. System solutions grew
46% year-over-year and contributed 73% of revenues in the quarter.
Our performance reflects continued strong customer demand for our
products and we expect growth to accelerate as we progress through
the remainder of the year,” said Jason Whitaker, Chief Executive
Officer of Shoals.
Mr. Whitaker added, “We are making steady
progress on our growth initiatives of converting more customers to
our BLA solution, broadening our product offering into
complementary categories of EBOS, expanding internationally and
introducing new products for EV charging infrastructure. When we
went public in January, we had converted four major solar EPCs and
developers to our system. As of the end of the first quarter, there
were eight major EPCs and developers using BLA and we have a dozen
new customers that we are currently in the process of converting to
our system. We installed our new IV curve benchmarking products on
two projects earlier this year and are on track to meet our goal of
commercial sales in the fourth quarter. We shipped pre-production
samples of our first wire management products to a customer in
April, ahead of schedule, and we expect first commercial sales in
the fourth quarter as well. We now have our sales team in place in
Europe and expect to see orders from that region this year. Lastly,
we have made significant progress on our new products for EV
charging and are planning to accelerate the launch of our first
product from 2022 to the second half of 2021. We see a tremendous
opportunity for Shoals in EV infrastructure and we are moving
rapidly to capitalize it.”
First Quarter 2021 Financial
ResultsRevenues were $45.6 million, compared to $40.7
million for the prior-year period, an increase of 12%, driven by a
46% year-over-year increase in System Solutions revenues which was
partly offset by a decline in Components revenues. The growth in
System Solutions revenues reflects strong demand for the Company’s
combine-as-you-go system. The decline in Components revenues was in
line with plan and reflected an expected change in the timing of
orders from certain customers relative to last year and the
conversion of other customers from buyers of components to buyers
of system solutions. The sale of system solutions represented 73%
of revenues versus 56% in the prior-year period.
Gross profit increased 32% to $18.8 million,
compared to $14.2 million in the prior year period, driven
primarily by a higher proportion of revenue from combine-as-you-go
system solutions, purchasing efficiencies from increased volumes,
improved material planning which reduced logistics costs,
enhancements to product design that lowered manufacturing costs,
and other manufacturing efficiencies resulting from higher
production volume. Gross margin increased by 635 bps to 41.2% from
34.8% in the prior-year period.
Operating expenses were $8.9 million compared to
$4.6 million during the same period in the prior year. This
increase was primarily a result of higher equity-based
compensation, planned increased payroll expense due to higher
headcount to support our growth and product initiatives, COVID-19
related costs, new public company costs and non-recurring expenses
related to our IPO.
Income from operations was $9.9 million,
compared to $9.6 million during the same period in the prior year,
an increase of 3%.
Net loss was $8.3 million, compared to net
income of $9.3 million during the same period in the prior year.
The decrease in net income was primarily the result of a $16.0
million charge the Company recorded in the first quarter related to
the early repayment of a portion of its term loan facility. Net
income and loss for 2021 is not directly comparable to 2020 because
prior to its IPO, the Company was organized as a tax flow-through
partnership rather than a corporation and did not record income
taxes. Basic and diluted loss per share was $0.06.
Adjusted EBITDA increased 17% to $14.1 million,
compared to $12.1 million for the prior-year period.
Adjusted net income was $8.8 million, compared
to $8.9 million during the same period in the prior year. Diluted
adjusted net income per share was $0.05.
Backlog and Awarded OrdersThe
Company’s backlog and awarded orders at March 31, 2021 were $180.6
million, an increase of 42% year-over-year and 15% versus December
31, 2020. The increase in backlog and awarded orders reflects
continued robust demand for the company’s products from customers
in the U.S.
Full Year 2021 OutlookBased on
current business conditions, business trends and other factors, the
Company reaffirms its previously announced outlook for the full
year ending December 31, 2021 which calls for:
- Revenues to be in the range of $230
million to $240 million, up 31.0% to 36.7% year-over-year
- Adjusted EBITDA to be in the range
of $75 million to $80 million
- Adjusted net
income to be in the range of $47 to $51 million
Additionally, the Company currently expects
approximately 45% of its revenues to be recorded in the first half
of 2021, using the midpoint of guidance.
For a reconciliation of a non-GAAP figure to the
applicable GAAP figure please see page 10 of this release. These
expectations do not consider, or give effect for, material
acquisitions that may be completed by the Company during 2021 or
other unforeseen events, including changes in global economic
conditions.
Webcast and Conference Call
InformationCompany management will host a webcast and
conference call on May 3, 2021, at 5:00 p.m. Eastern Time, to
discuss the Company's financial results.
Interested investors and other parties can
listen to a webcast of the live conference call and access the
Company’s first quarter update presentation by logging onto the
Investor Relations section of the Company's website at
https://investors.shoals.com.
The conference call can be accessed live over
the phone by dialing 1-877-407-0789 (domestic) or +1-201-689-8562
(international). A telephonic replay will be available
approximately two hours after the call by dialing 1-844-512-2921,
or for international callers, +1-412-317-6671. The conference ID
for the live call and pin number for the replay is 13719340. The
replay will be available until 11:59 p.m. Eastern Time on May 17,
2021.
About Shoals Technologies Group,
Inc.Shoals Technologies Group, Inc. is a leading provider
of electrical balance of system (“EBOS”) solutions for solar,
battery storage and electric vehicle charging infrastructure. The
Company’s mission is to provide innovative products that reduce the
cost of installation while improving system performance,
reliability and safety. At least one Shoals’ product was used on
more than half of the solar energy projects installed in the U.S.
in 2020. To learn more about Shoals Technologies, please visit the
company's website at https://www.shoals.com.
Investor Relations Contact Shoals Technologies
Group, Inc.
Email: investors@shoals.com
Phone: 615-323-9836
Non-GAAP Financial Information(1) A
reconciliation of projected adjusted EBITDA, adjusted net income,
and adjusted diluted earnings per share, which are forward-looking
measures that are not prepared in accordance with GAAP, to the most
directly comparable GAAP financial measures, is not provided
because we are unable to provide such reconciliation without
unreasonable effort. The inability to provide a quantitative
reconciliation is due to the uncertainty and inherent difficulty in
predicting the occurrence, the financial impact and the periods in
which the components of the applicable GAAP measures and non-GAAP
adjustments may be recognized. The GAAP measures may include the
impact of such items as non-cash share-based compensation,
amortization of intangible assets and the tax effect of such items,
in addition to other items we have historically excluded from
adjusted EBITDA and adjusted net income per share. We expect to
continue to exclude these items in future disclosures of these
non-GAAP measures and may also exclude other similar items that may
arise in the future (collectively, "non-GAAP adjustments").
Forward-Looking StatementsThis report contains
forward-looking statements that are based on our management’s
beliefs and assumptions and on information currently available to
our management. Forward-looking statements include information
concerning our projected future results of operations, business
strategies, and industry and regulatory environment.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements. Given these uncertainties, you
should not place undue reliance on forward-looking statements.
Also, forward-looking statements represent our management’s beliefs
and assumptions only as of the date of this report. You should read
this report with the understanding that our actual future results
may be materially different from what we expect.
Except as required by law, we assume no
obligation to update these forward-looking statements, or to update
the reasons actual results could differ materially from those
anticipated in these forward-looking statements, even if new
information becomes available in the future.
Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted Net IncomeWe
define Adjusted EBITDA as net income (loss) plus (i) interest
expense, (ii) income taxes, (iii) depreciation expense, (iv)
amortization of intangibles, (v) loss on debt repayment, (vi)
equity-based compensation, (vii) COVID-19 expenses and (viii)
non-recurring and other expenses. We define Adjusted Net Income as
net income (loss) plus (i) amortization of intangibles, (ii) loss
on debt repayment, (iii) amortization of deferred finance costs,
(iv) equity-based compensation, (v) COVID-19 expenses and (vi)
non-recurring and other expenses, all net of applicable income
taxes. We define Adjusted Diluted EPS as Adjusted Net Income
divided by the diluted weighted average shares of Class A common
shares outstanding for the applicable period, which assumes the pro
forma exchange of all outstanding Class B common shares for Class A
common shares.
Adjusted EBITDA, Adjusted Net Income and
Adjusted Diluted EPS are intended as supplemental measures of
performance that are neither required by, nor presented in
accordance with, GAAP. We present Adjusted EBITDA, Adjusted Net
Income and Adjusted Diluted EPS because we believe they assist
investors and analysts in comparing our performance across
reporting periods on a consistent basis by excluding items that we
do not believe are indicative of our core operating performance. In
addition, we use Adjusted EBITDA, Adjusted Net Income and Adjusted
Diluted EPS: (i) as factors in evaluating management’s performance
when determining incentive compensation; (ii) to evaluate the
effectiveness of our business strategies; and (iii) because our
credit agreement uses measures similar to Adjusted EBITDA, Adjusted
Net Income and Adjusted Diluted EPS to measure our compliance with
certain covenants.
Among other limitations, Adjusted EBITDA,
Adjusted Net Income and Adjusted Diluted EPS do not reflect our
cash expenditures, or future requirements for capital expenditures
or contractual commitments; do not reflect the impact of certain
cash charges resulting from matters we consider not to be
indicative of our ongoing operations; in the case of Adjusted
EBITDA, does not reflect income tax expense or benefit for periods
prior to the reorganization; and may be calculated by other
companies in our industry differently than we do or not at all,
which may limit their usefulness as comparative measures.
Because of these limitations, Adjusted EBITDA,
Adjusted Net Income and Adjusted Diluted EPS should not be
considered in isolation or as substitutes for performance measures
calculated in accordance with GAAP. You should review the
reconciliation of net income to Adjusted EBITDA, Adjusted Net
Income and Adjusted Diluted EPS below and not rely on any single
financial measure to evaluate our business.
Shoals Technologies Group,
Inc.Consolidated Balance Sheets (in
thousands, except shares)
|
March 31,2021 |
|
December 31,2020 |
Assets |
|
|
|
Current Assets |
|
|
|
Cash and cash equivalents |
$ |
4,227 |
|
|
$ |
10,073 |
|
Accounts receivable, net |
28,138 |
|
|
27,004 |
|
Unbilled receivables |
9,995 |
|
|
3,794 |
|
Inventory, net |
21,092 |
|
|
15,121 |
|
Other current assets |
6,512 |
|
|
155 |
|
Total Current Assets |
69,964 |
|
|
56,147 |
|
Property, plant and equipment, net |
13,160 |
|
|
12,763 |
|
Goodwill |
50,176 |
|
|
50,176 |
|
Other intangible assets, net |
69,992 |
|
|
71,988 |
|
Deferred tax asset |
48,492 |
|
|
— |
|
Other assets |
475 |
|
|
4,236 |
|
Total Assets |
$ |
252,259 |
|
|
$ |
195,310 |
|
|
|
|
|
Liabilities and Stockholders' Deficit / Members’
Deficit |
|
|
|
Current Liabilities |
|
|
|
Accounts payable |
$ |
12,941 |
|
|
$ |
14,634 |
|
Accrued expenses |
8,534 |
|
|
5,967 |
|
Long-term debt—current portion |
3,500 |
|
|
3,500 |
|
Total Current Liabilities |
24,975 |
|
|
24,101 |
|
Revolving line of credit |
39,000 |
|
|
20,000 |
|
Long-term debt, less current portion |
189,450 |
|
|
335,332 |
|
Payable Pursuant to the Tax
Receivable Agreement |
41,692 |
|
|
— |
|
Total Liabilities |
295,117 |
|
|
379,433 |
|
Commitments and Contingencies (Note 12) |
|
|
|
Stockholders’ Deficit / Members’ Deficit |
|
|
|
Members’ deficit |
— |
|
|
(184,123 |
) |
Preferred stock, no par value - 5,000,000 shares authorized; none
issued and outstanding as of March 31, 2021 |
— |
|
|
— |
|
Class A common stock, $0.00001 par value - 1,000,000,000 shares
authorized; 93,539,692 shares issued and outstanding as of March
31, 2021 |
1 |
|
|
— |
|
Class B common stock, $0.00001 par value - 195,000,000 shares
authorized; 73,066,607 shares issued and outstanding as of March
31, 2021 |
1 |
|
|
— |
|
Additional paid-in capital |
78,073 |
|
|
— |
|
Accumulated deficit |
(98,340 |
) |
|
— |
|
Total stockholders’ deficit attributable to Shoals Technologies
Group, Inc. / members' deficit |
(20,265 |
) |
|
(184,123 |
) |
Non-controlling interests |
(22,593 |
) |
|
— |
|
Total stockholders’ deficit / members’ deficit |
(42,858 |
) |
|
(184,123 |
) |
Total Liabilities and Stockholders’ Deficit / Members’
Deficit |
$ |
252,259 |
|
|
$ |
195,310 |
|
|
|
|
|
|
|
|
|
Shoals Technologies Group,
Inc.Consolidated Statements of Operations
(in thousands, except per share amounts)
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
Revenue |
$ |
45,604 |
|
|
$ |
40,740 |
|
Cost of
revenue |
26,830 |
|
|
26,554 |
|
Gross
profit |
18,774 |
|
|
14,186 |
|
Operating
Expenses |
|
|
|
General and administrative expenses |
6,816 |
|
|
2,558 |
|
Depreciation and amortization |
2,068 |
|
|
2,061 |
|
Total Operating Expenses |
8,884 |
|
|
4,619 |
|
Income from
Operations |
9,890 |
|
|
9,567 |
|
Interest expense, net |
(3,709 |
) |
|
(272 |
) |
Loss on debt repayment |
(15,990 |
) |
|
— |
|
Income (loss) before
income taxes |
(9,809 |
) |
|
9,295 |
|
Income tax expense |
1,475 |
|
|
— |
|
Net income
(loss) |
(8,334 |
) |
|
9,295 |
|
Less: net loss attributable to
non-controlling interests |
(5,475 |
) |
|
— |
|
Net income (loss)
attributable to Shoals Technologies Group, Inc. |
$ |
(2,859 |
) |
|
$ |
9,295 |
|
|
|
|
|
|
Period fromJanuary 27, 2021 to March 31,
2021 |
|
|
Earnings per share of
Class A common stock: |
|
|
|
Basic |
$ |
(0.06 |
) |
|
|
Diluted |
$ |
(0.06 |
) |
|
|
Weighted average
shares of Class A common stock outstanding: |
|
|
|
Basic |
93,540 |
|
|
|
Diluted |
93,540 |
|
|
|
|
|
|
|
|
Shoals Technologies Group,
Inc.Consolidated Statements of Cash Flows
(in thousands)
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
Cash Flows from
Operating Activities |
|
|
|
Net income (loss) |
$ |
(8,334 |
) |
|
$ |
9,295 |
|
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities: |
|
|
|
Depreciation and amortization |
2,401 |
|
|
2,322 |
|
Amortization/write off of deferred finance costs |
5,110 |
|
|
9 |
|
Equity-based compensation |
1,392 |
|
|
— |
|
Deferred taxes |
557 |
|
|
— |
|
Gain on sale of assets |
61 |
|
|
— |
|
Changes in assets and liabilities: |
|
|
|
Accounts receivable |
(1,134 |
) |
|
9,763 |
|
Unbilled receivables |
(6,201 |
) |
|
(3,389 |
) |
Inventory |
(5,971 |
) |
|
(3,167 |
) |
Other current assets |
(3,465 |
) |
|
(32 |
) |
Accounts payable |
(1,693 |
) |
|
2,208 |
|
Accrued expenses |
(502 |
) |
|
929 |
|
Net Cash Provided by
(Used in) Operating Activities |
(17,779 |
) |
|
17,938 |
|
Cash Flows Used In
Investing Activities |
|
|
|
Purchases of property, plant and equipment |
(863 |
) |
|
(795 |
) |
Net Cash Used in
Investing Activities |
(863 |
) |
|
(795 |
) |
Cash Flows from
Financing Activities |
|
|
|
Member distributions |
— |
|
|
(214 |
) |
Employee withholding taxes related to net settled equity
awards |
(137 |
) |
|
— |
|
Deferred financing costs |
(94 |
) |
|
— |
|
Payment on term loan facility |
(150,875 |
) |
|
— |
|
Proceeds from revolving credit facility |
19,000 |
|
|
— |
|
Payments on senior debt - term loan |
— |
|
|
(875 |
) |
Proceeds from senior debt - revolving line of credit |
— |
|
|
24,000 |
|
Proceeds from issuance of Class A common stock sold in an IPO, net
of underwriting discounts and commissions |
154,521 |
|
|
— |
|
Deferred offering costs |
(9,619 |
) |
|
— |
|
Net Cash Provided By
Financing Activities |
12,796 |
|
|
22,911 |
|
Net Increase
(Decrease) in Cash and Cash Equivalents |
(5,846 |
) |
|
40,054 |
|
Cash and Cash
Equivalents—Beginning of Period |
10,073 |
|
|
7,082 |
|
Cash and Cash
Equivalents—End of Period |
$ |
4,227 |
|
|
$ |
47,136 |
|
|
|
|
|
|
|
|
|
Shoals Technologies Group,
Inc.Adjusted EBITDA and Adjusted Net Income
Reconciliation (Unaudited)(in thousands)
Reconciliation of Net Income to Adjusted EBITDA (in
thousands):
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
Net income (loss) |
$ |
(8,334 |
) |
|
$ |
9,295 |
|
Interest expense |
3,709 |
|
|
272 |
|
Income tax benefit |
(1,475 |
) |
|
— |
|
Depreciation expense |
405 |
|
|
326 |
|
Amortization of
intangibles |
1,996 |
|
|
1,996 |
|
Loss on debt repayment |
15,990 |
|
|
— |
|
Equity-based compensation |
1,392 |
|
|
— |
|
COVID-19 expenses(a) |
55 |
|
|
— |
|
Non-recurring and other
expenses(b) |
339 |
|
|
182 |
|
Adjusted EBITDA |
$ |
14,077 |
|
|
$ |
12,071 |
|
|
|
|
|
|
|
|
|
(a) |
Represents costs incurred as a direct impact from the COVID-19
pandemic, disinfecting and reconfiguration of facilities, medical
professionals to conduct daily screenings of employees, premium pay
during the pandemic to hourly workers and direct legal costs
associated with the pandemic. |
|
|
(b) |
Represents certain costs associated with non-recurring professional
services, Oaktree’s expenses and other costs. |
|
|
Reconciliation of Net Income (Loss) Attributable
to Shoals Technologies Group, Inc. to Adjusted Net Income (in
thousands):
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
Net income (loss) attributable to Shoals Technologies Group,
Inc. |
$ |
(2,859 |
) |
|
$ |
9,295 |
|
Net income (loss) impact from
pro forma conversion of Class B common shares to Class A common
shares (a) |
(5,475 |
) |
|
— |
|
Adjustment to the provision
for income tax (b) |
1,134 |
|
|
(2,072 |
) |
Tax effected net income
(loss) |
(7,200 |
) |
|
7,218 |
|
Amortization of
intangibles |
1,996 |
|
|
1,996 |
|
Amortization of deferred
finance fees |
370 |
|
|
9 |
|
Loss on debt repayment |
15,990 |
|
|
— |
|
Equity-based compensation |
1,392 |
|
|
— |
|
COVID-19 expenses (c) |
55 |
|
|
— |
|
Non-recurring and other
expenses (d) |
339 |
|
|
182 |
|
Tax impact of adjustments
(e) |
(4,171 |
) |
|
(475 |
) |
Adjusted Net Income |
$ |
8,771 |
|
|
$ |
8,930 |
|
|
|
|
|
|
|
|
|
(a) |
Reflects net income (loss) to Class A common shares from pro forma
exchange of corresponding shares of our Class B common shares held
by our founder and management. |
|
|
(b) |
Shoals Technologies Group, Inc. will be subject to U.S. Federal
income taxes, in addition to state and local taxes with respect to
its allocable share of any net taxable income of Shoals Parent,
LLC. The adjustment to the provision for income tax reflects the
effective tax rates below, assuming Shoals Technologies Group, Inc.
owns 100% of the units in Shoals Parent, LLC. |
|
|
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
Statutory U.S. Federal income tax rate |
19.8 |
% |
|
21.0 |
% |
State and local taxes (net of
federal benefit) |
0.9 |
% |
|
0.7 |
% |
Effective income tax rate for
Adjusted Net Income |
20.7 |
% |
|
21.7 |
% |
|
|
|
|
|
|
(c) |
Represents costs incurred as a direct impact from the COVID-19
pandemic, disinfecting and reconfiguration of facilities, medical
professionals to conduct daily screenings of employees, premium pay
during the pandemic to hourly workers and direct legal costs
associated with the pandemic. |
|
|
(d) |
Represents certain costs associated with non-recurring professional
services, Oaktree’s expenses and other costs. |
|
|
(e) |
Represents the estimated tax impact of all Adjusted Net Income
add-backs, excluding those which represent permanent differences
between book versus tax. |
|
|
Reconciliation of Diluted Weighted Average
Shares Outstanding to Adjusted Diluted Weighted Average Shares
Outstanding (in thousands, except per share):
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
Diluted weighted average
shares of Class A common shares outstanding |
93,540 |
|
|
N/A (b) |
Assumed pro forma conversion
of Class B common shares to Class A common shares |
73,067 |
|
|
N/A (b) |
Adjusted diluted weighted
average shares outstanding |
166,607 |
|
|
N/A (b) |
|
|
|
|
Adjusted Net Income (a) |
$ |
8,771 |
|
|
N/A (b) |
Adjusted Diluted EPS |
$ |
0.05 |
|
|
N/A (b) |
|
|
|
|
|
|
(a) |
Represents Adjusted Net Income for the full period presented. |
|
|
(b) |
This Non-GAAP measure is not applicable for this period, as the
reorganization transactions had not yet occurred. |
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