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 results for its third
quarter ended September 30, 2023.
“Shoals delivered another outstanding
performance in the third quarter, growing revenue 48%
year-over-year, setting a new company record. I want to thank the
management team and associates for their outstanding performance
and execution this quarter,” said Brandon Moss, CEO of Shoals.
Mr. Moss added, “Backlog and awarded orders
increased 34% year-over-year and 16% sequentially to a Company
record of $633.3 million as the Company added over $220
million in orders in the quarter. While the domestic utility scale
solar market is currently experiencing slower growth, we believe
our strong value proposition and the emerging strength from our
international business will continue to drive order growth. We are
pleased that international now represents more than 10% of our
backlog and awarded orders.”
“Finally, during the quarter we were excited to
complete the ramp-up of our third Tennessee facility, which has
already added 15 GW of new capacity to our year-end 2022 base of 20
GW. With all shifts active at all facilities, Shoals’ capacity is
35 GW, with the ability to scale the existing site footprint to 42
GW. The increased capacity enables Shoals to serve growing demand
well into 2025, further enhance production efficiency, and maintain
our attractive margins,” concluded Mr. Moss.
Third Quarter 2023
Financial ResultsRevenue grew 48%, to $134.2 million,
compared to $90.8 million for the prior-year period, driven by
higher sales volumes as a result of increased domestic demand for
solar EBOS.
Gross profit was $14.2 million, compared to
$36.0 million in the prior-year period. Gross profit as a
percentage of revenue decreased to 10.5% from 39.7% in the
prior-year period, primarily due to $50.2 million in wire
insulation shrinkback expenses, slightly offset by lower raw
materials input costs, increased leverage on fixed costs, and
efficiencies gained in operations. The wire insulation shrinkback
expenses represents the low end of the range of potential loss and
is based on the Company’s continued analysis of information
available as of today. On October 31, 2023, the Company filed a
complaint against Prysmian Cables and Systems USA, LLC, the
supplier of the wire exhibiting wire insulation shrinkback, seeking
compensatory and punitive damages, recovery of all costs and
expenses incurred by the Company in connection with the
identification, repair and replacement of the defective wire, and
other legal and equitable relief. The Company is unable to predict
the outcome of this litigation or the impact on its business and
financial results.
General and administrative expenses were
$22.6 million, compared to $13.9 million during the same
period in the prior year. This increase was primarily the result of
higher non-cash stock-based compensation, legal fees related to the
patent infringement and wire insulation shrinkback complaints, and
planned increases in payroll expense due to higher headcount
supporting growth.
Loss from operations was $(10.6) million,
compared to income from operations of $20.0 million during the
same period in the prior year.
Net loss was $(9.8) million compared to net
income of $12.8 million during the same period in the prior
year. Basic and diluted net loss per share was $(0.06) compared to
basic and diluted net income per share of $0.07 in the prior-year
period.
Adjusted gross profit* for the quarter was
$64.4 million, reflecting a 48% adjusted gross profit
percentage*.
Adjusted EBITDA* increased 81% to
$48.0 million compared to $26.6 million for the
prior-year period.
Adjusted net income* grew 101% to $33.4 million
compared to $16.6 million during the same period in the prior year.
Adjusted diluted earnings per share was $0.20 compared to $0.10 in
the prior-year period.
* A reconciliation of the Company’s non-GAAP
measures to the most closely comparable U.S. generally accepted
accounting principles (“GAAP”) measures are found within this
release.
Backlog and Awarded OrdersThe
Company’s backlog and awarded orders as of September 30, 2023
were $633.3 million, representing a 34% increase compared to
the same time last year and a 16% sequential increase from June 30,
2023. The increase in backlog and awarded orders reflects continued
robust demand for the Company’s solar products, with strong growth
in international markets, which now comprises more than 10% of
backlog and awarded orders.
Backlog represents signed purchase orders or
contractual minimum purchase commitments with take-or-pay
provisions and awarded orders are orders we are in the process of
documenting a contract but for which a contract has not yet been
signed.
Full Year 2023 OutlookBased on
current business conditions, business trends and other factors, the
Company is narrowing its outlook for revenue and raising its
outlook for Adjusted EBITDA and Adjusted net income. The outlook
for interest expense and capital expenditures remains unchanged.
For the year ending December 31, 2023, the Company expects:
- Revenue to be in the range of $485
million to $495 million
- Adjusted EBITDA to
be in the range of $165 million to $175 million
- Adjusted net income
to be in the range of $110 million to $120 million
- Interest expense to
be in the range of $22 million to $26 million
- Capital
expenditures to be in the range of $8 million to $12 million
A reconciliation of Adjusted EBITDA and Adjusted
net income guidance, which are forward-looking measures that are
non-GAAP measures, to the most closely comparable GAAP 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. 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.
Webcast and Conference Call
InformationCompany management will host a webcast and
conference call on November 7, 2023 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 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 1-888-886-7786 (domestic) or +1-416-764-8658
(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 access ID number
for the replay is 52432861. The telephonic replay will be available
until 11:59 p.m. Eastern Time on November 21, 2023.
About Shoals Technologies Group,
Inc.Shoals Technologies Group, Inc. is a leading provider
of electrical balance of systems (EBOS) solutions for solar,
storage, and electric vehicle charging infrastructure. Since its
founding in 1996, the Company has introduced innovative
technologies and systems solutions that allow its customers to
substantially increase installation efficiency and safety while
improving system performance and reliability. Shoals Technologies
Group, Inc. is a recognized leader in the renewable energy industry
whose solutions are deployed on over 62 GW of solar systems
globally. For additional information, please visit:
https://www.shoals.com.
Investor Relations Contact
Shoals Technologies Group, Inc.Email:
investors@shoals.com
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 possible or assumed future results of
operations; business strategies; technology developments; financing
and investment plans; warranty, litigation and liability accruals
and estimates of loss or gains; litigation strategy and expected
benefits or results from the current intellectual property and wire
insulation shrinkback litigation; competitive position; industry
and regulatory environment; potential growth opportunities,
including international growth, production and capacity at our
plants; and the effects of competition. Forward-looking statements
include statements that are not historical facts and can be
identified by terms such as “anticipate,” “believe,” “could,”
“estimate,” “expect,” “intend,” “may,” “plan,” “potential,”
“predict,” “project,” “seek,” “should,” “will,” “would” or similar
expressions and the negatives of those terms.
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.
Some of the key factors that could cause actual
results to differ from our expectations include, among others,
lower than anticipated growth in demand for solar energy projects
and EV charging infrastructure; defects or performance problems in
our products or their parts, including those related to the wire
insulation shrinkback matter, and related warranty claims; our
failure to recover the costs and expenses incurred by us in
connection with the identification, repair and replacement of the
defective Prysmian wire; macroeconomic events, including heightened
inflation, rises in interest rates and a potential recession;
supply chain challenges, including as a result of additional duties
and charges on imports and exports; our failure to, or incurrence
of significant costs in order to, obtain, maintain, protect, defend
or enforce our intellectual property and other proprietary rights;
governmental policies and regulations, and any subsequent changes,
which may present technical, regulatory and economic barriers;
changes in the United States trade environment; failure to
integrate acquired businesses, and delays, disruptions or quality
control problems in our manufacturing operations in part due to
vendor concentration.
Other risks and uncertainties are described in
the section entitled "Item 1A. Risk Factors" of our periodic
reports filed with the Securities and Exchange Commission,
including our Annual Report on Form 10-K for the year ended
December 31, 2022 and our most recent Quarterly Report on Form
10-Q. 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 Gross Profit, Adjusted Gross
Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and
Adjusted Diluted Earnings per Share (“EPS”)
We define Adjusted Gross Profit as gross profit
plus (i) wire insulation shrinkback expenses. We define Adjusted
Gross Profit Percentage as Adjusted Gross Profit divided by
revenue. We define Adjusted EBITDA as net income (loss) plus (i)
interest expense, net, (ii) income tax benefit (expense), (iii)
depreciation expense, (iv) amortization of intangibles, (v)
equity-based compensation, (vi) acquisition-related expenses, (vii)
wire insulation shrinkback expenses, and (viii) wire insulation
shrinkback litigation expenses. We define Adjusted Net Income as
net income (loss) attributable to Shoals Technologies Group, Inc.
plus (i) net income impact from assumed exchange of Class B common
stock to Class A common stock as of the beginning of the earliest
period presented, (ii) amortization of intangibles, (iii)
amortization of deferred financing costs, (iv) equity-based
compensation, (v) acquisition-related expenses, (vi) wire
insulation shrinkback expenses, and (vii) wire insulation
shrinkback litigation 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 stock
outstanding for the applicable period, which assumes the exchange
of all outstanding Class B common stock for Class A common stock as
of the beginning of the earliest period presented.
Adjusted Gross Profit, Adjusted Gross Profit
Percentage, 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 Gross Profit, Adjusted Gross Profit
Percentage, 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 Gross Profit, Adjusted Gross Profit Percentage, Adjusted
EBITDA, Adjusted Net Income, and Adjusted Diluted EPS: (i) as
factors in evaluating management’s performance when determining
incentive compensation, as applicable; (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 Gross Profit,
Adjusted Gross Profit Percentage, 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; 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 Gross
Profit, Adjusted Gross Profit Percentage, 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 gross
profit to Adjusted Gross Profit and Adjusted Gross Profit
Percentage, net income (loss) to Adjusted EBITDA, and net income
(loss) attributable to Shoals Technologies Group, Inc. to Adjusted
Net Income and Adjusted Diluted EPS below and not rely on any
single financial measure to evaluate our business.
|
Shoals Technologies Group, Inc.Condensed
Consolidated Balance Sheets (Unaudited)(in thousands,
except shares and par value) |
|
|
|
|
|
September 30,2023 |
|
December 31,2022 |
Assets |
|
|
|
Current Assets |
|
|
|
Cash and cash equivalents |
$ |
9,224 |
|
|
$ |
8,766 |
|
Accounts receivable, net |
|
108,886 |
|
|
|
50,575 |
|
Unbilled receivables |
|
28,506 |
|
|
|
16,713 |
|
Inventory, net |
|
60,961 |
|
|
|
72,854 |
|
Other current assets |
|
6,664 |
|
|
|
4,632 |
|
Total Current Assets |
|
214,241 |
|
|
|
153,540 |
|
Property, plant and equipment,
net |
|
22,789 |
|
|
|
16,870 |
|
Goodwill |
|
69,941 |
|
|
|
69,941 |
|
Other intangible assets,
net |
|
50,564 |
|
|
|
56,585 |
|
Deferred tax assets |
|
477,073 |
|
|
|
291,634 |
|
Other assets |
|
5,540 |
|
|
|
6,325 |
|
Total
Assets |
$ |
840,148 |
|
|
$ |
594,895 |
|
|
|
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
Current Liabilities |
|
|
|
Accounts payable |
$ |
16,615 |
|
|
$ |
9,481 |
|
Accrued expenses and other |
|
21,516 |
|
|
|
17,322 |
|
Warranty liability—current portion |
|
17,254 |
|
|
|
560 |
|
Deferred revenue |
|
27,025 |
|
|
|
23,259 |
|
Long-term debt—current portion |
|
2,000 |
|
|
|
2,000 |
|
Total Current Liabilities |
|
84,410 |
|
|
|
52,622 |
|
Revolving line of credit |
|
— |
|
|
|
48,000 |
|
Long-term debt, less current
portion |
|
188,380 |
|
|
|
189,063 |
|
Warranty liability, less
current portion |
|
39,360 |
|
|
|
— |
|
Other long-term
liabilities |
|
3,358 |
|
|
|
4,221 |
|
Total Liabilities |
|
315,508 |
|
|
|
293,906 |
|
Commitments and
Contingencies |
|
|
|
Stockholders’ Equity |
|
|
|
Preferred stock, $0.00001 par value - 5,000,000 shares authorized;
none issued and outstanding as of September 30, 2023 and
December 31, 2022 |
|
— |
|
|
|
— |
|
Class A common stock, $0.00001 par value - 1,000,000,000 shares
authorized; 170,054,787 and 137,904,663 shares issued and
outstanding as of September 30, 2023 and December 31,
2022, respectively |
|
2 |
|
|
|
1 |
|
Class B common stock, $0.00001 par value - 195,000,000 shares
authorized; none and 31,419,913 shares issued and outstanding as of
September 30, 2023 and December 31, 2022,
respectively |
|
— |
|
|
|
1 |
|
Additional paid-in capital |
|
466,768 |
|
|
|
256,894 |
|
Accumulated earnings |
|
57,870 |
|
|
|
34,478 |
|
Total stockholders’ equity
attributable to Shoals Technologies Group, Inc. |
|
524,640 |
|
|
|
291,374 |
|
Non-controlling interests |
|
— |
|
|
|
9,615 |
|
Total stockholders'
equity |
|
524,640 |
|
|
|
300,989 |
|
Total Liabilities and
Stockholders’ Equity |
$ |
840,148 |
|
|
$ |
594,895 |
|
|
|
|
|
|
|
|
|
|
Shoals Technologies Group, Inc.Condensed
Consolidated Statements of Operations (Unaudited)(in
thousands, except per share amounts) |
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Revenue |
$ |
134,209 |
|
|
$ |
90,823 |
|
|
$ |
358,503 |
|
|
$ |
232,289 |
|
Cost of
revenue |
|
120,059 |
|
|
|
54,776 |
|
|
|
245,579 |
|
|
|
141,357 |
|
Gross
profit |
|
14,150 |
|
|
|
36,047 |
|
|
|
112,924 |
|
|
|
90,932 |
|
Operating
expenses |
|
|
|
|
|
|
|
General and administrative expenses |
|
22,551 |
|
|
|
13,853 |
|
|
|
59,266 |
|
|
|
41,037 |
|
Depreciation and amortization |
|
2,170 |
|
|
|
2,229 |
|
|
|
6,493 |
|
|
|
6,939 |
|
Total operating expenses |
|
24,721 |
|
|
|
16,082 |
|
|
|
65,759 |
|
|
|
47,976 |
|
Income (loss) from
operations |
|
(10,571 |
) |
|
|
19,965 |
|
|
|
47,165 |
|
|
|
42,956 |
|
Interest expense, net |
|
(5,899 |
) |
|
|
(4,754 |
) |
|
|
(18,400 |
) |
|
|
(12,760 |
) |
Income (loss) before
income taxes |
|
(16,470 |
) |
|
|
15,211 |
|
|
|
28,765 |
|
|
|
30,196 |
|
Income tax benefit
(expense) |
|
6,642 |
|
|
|
(2,452 |
) |
|
|
(2,686 |
) |
|
|
(5,485 |
) |
Net income
(loss) |
|
(9,828 |
) |
|
|
12,759 |
|
|
|
26,079 |
|
|
|
24,711 |
|
Less: net income attributable
to non-controlling interests |
|
— |
|
|
|
4,801 |
|
|
|
2,687 |
|
|
|
9,711 |
|
Net income (loss)
attributable to Shoals Technologies Group, Inc. |
$ |
(9,828 |
) |
|
$ |
7,958 |
|
|
$ |
23,392 |
|
|
$ |
15,000 |
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Earnings (loss) per
share of Class A common stock: |
|
|
|
|
|
|
|
Basic |
$ |
(0.06 |
) |
|
$ |
0.07 |
|
|
$ |
0.14 |
|
|
$ |
0.13 |
|
Diluted |
$ |
(0.06 |
) |
|
$ |
0.07 |
|
|
$ |
0.14 |
|
|
$ |
0.13 |
|
Weighted average
shares of Class A common stock outstanding: |
|
|
|
|
|
|
|
Basic |
|
169,965 |
|
|
|
112,975 |
|
|
|
162,173 |
|
|
|
112,561 |
|
Diluted |
|
169,965 |
|
|
|
113,584 |
|
|
|
162,611 |
|
|
|
112,816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shoals Technologies Group, Inc.Condensed
Consolidated Statements of Cash Flows (Unaudited)(in
thousands) |
|
|
|
Nine Months Ended September 30, |
|
2023 |
|
2022 |
Cash Flows from
Operating Activities |
|
|
|
Net income |
$ |
26,079 |
|
|
$ |
24,711 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
7,744 |
|
|
|
8,001 |
|
Amortization/write off of deferred financing costs |
|
1,032 |
|
|
|
1,023 |
|
Equity-based compensation |
|
17,060 |
|
|
|
11,887 |
|
Provision for credit losses |
|
296 |
|
|
|
— |
|
Provision for obsolete or slow-moving inventory |
|
3,639 |
|
|
|
443 |
|
Provision for warranty expense |
|
59,723 |
|
|
|
— |
|
Deferred taxes |
|
2,456 |
|
|
|
5,299 |
|
Changes in assets and liabilities: |
|
|
|
Accounts receivable |
|
(58,607 |
) |
|
|
(40,084 |
) |
Unbilled receivables |
|
(11,793 |
) |
|
|
1,972 |
|
Inventory |
|
8,254 |
|
|
|
(43,601 |
) |
Other assets |
|
(1,192 |
) |
|
|
(381 |
) |
Accounts payable |
|
7,390 |
|
|
|
1,186 |
|
Accrued expenses and other |
|
3,330 |
|
|
|
7,679 |
|
Warranty liability |
|
(3,669 |
) |
|
|
— |
|
Deferred revenue |
|
3,766 |
|
|
|
26,879 |
|
Net Cash Provided by
Operating Activities |
|
65,508 |
|
|
|
5,014 |
|
Cash Flows from
Investing Activities |
|
|
|
Purchases of property, plant and equipment |
|
(7,642 |
) |
|
|
(2,393 |
) |
Other |
|
(269 |
) |
|
|
(503 |
) |
Net Cash Used in
Investing Activities |
|
(7,911 |
) |
|
|
(2,896 |
) |
Cash Flows from
Financing Activities |
|
|
|
Distributions to non-controlling interests |
|
(2,628 |
) |
|
|
(7,762 |
) |
Employee withholding taxes related to net settled equity
awards |
|
(3,852 |
) |
|
|
(1,297 |
) |
Payments on term loan facility |
|
(1,500 |
) |
|
|
(1,500 |
) |
Proceeds from revolving credit facility |
|
5,000 |
|
|
|
46,000 |
|
Repayments of revolving credit facility |
|
(53,000 |
) |
|
|
(15,500 |
) |
Other |
|
(1,159 |
) |
|
|
— |
|
Net Cash Provided by
(Used in) Financing Activities |
|
(57,139 |
) |
|
|
19,941 |
|
Net Increase in Cash,
Cash Equivalents and Restricted Cash |
|
458 |
|
|
|
22,059 |
|
Cash, Cash Equivalents
and Restricted Cash—Beginning of Period |
|
8,766 |
|
|
|
9,557 |
|
Cash, Cash Equivalents
and Restricted Cash—End of Period |
$ |
9,224 |
|
|
$ |
31,616 |
|
|
|
|
|
|
|
|
|
Shoals Technologies Group,
Inc.Adjusted EBITDA, Adjusted Net Income and
Adjusted Diluted Earnings per Share (“EPS”)
(Unaudited)
Reconciliation of Gross Profit to Adjusted Gross
Profit and Adjusted Gross Profit Percentage:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Revenue |
$ |
134,209 |
|
|
$ |
90,823 |
|
|
$ |
358,503 |
|
|
$ |
232,289 |
|
Cost of revenue |
|
120,059 |
|
|
|
54,776 |
|
|
|
245,579 |
|
|
|
141,357 |
|
Gross profit |
|
14,150 |
|
|
|
36,047 |
|
|
|
112,924 |
|
|
|
90,932 |
|
Wire insulation shrinkback
expenses(a) |
|
50,211 |
|
|
|
— |
|
|
|
61,705 |
|
|
|
— |
|
Adjusted gross profit |
$ |
64,361 |
|
|
$ |
36,047 |
|
|
$ |
174,629 |
|
|
$ |
90,932 |
|
Adjusted gross profit
percentage |
|
48.0% |
|
|
|
39.7% |
|
|
|
48.7% |
|
|
|
39.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income to Adjusted EBITDA
(in thousands):
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Net income (loss) |
$ |
(9,828 |
) |
|
$ |
12,759 |
|
|
$ |
26,079 |
|
|
$ |
24,711 |
|
Interest expense, net |
|
5,899 |
|
|
|
4,754 |
|
|
|
18,400 |
|
|
|
12,760 |
|
Income tax expense
(benefit) |
|
(6,642 |
) |
|
|
2,452 |
|
|
|
2,686 |
|
|
|
5,485 |
|
Depreciation expense |
|
674 |
|
|
|
478 |
|
|
|
1,723 |
|
|
|
1,371 |
|
Amortization of
intangibles |
|
1,978 |
|
|
|
2,121 |
|
|
|
6,021 |
|
|
|
6,630 |
|
Equity-based compensation |
|
5,092 |
|
|
|
3,991 |
|
|
|
17,060 |
|
|
|
11,887 |
|
Acquisition-related
expenses |
|
— |
|
|
|
20 |
|
|
|
— |
|
|
|
32 |
|
Wire insulation shrinkback
expenses(a) |
|
50,211 |
|
|
|
— |
|
|
|
61,705 |
|
|
|
— |
|
Wire insulation shrinkback
litigation expenses(b) |
|
598 |
|
|
|
— |
|
|
|
598 |
|
|
|
— |
|
Adjusted EBITDA |
$ |
47,982 |
|
|
$ |
26,575 |
|
|
$ |
134,272 |
|
|
$ |
62,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income Attributable to
Shoals Technologies Group, Inc. to Adjusted Net Income (in
thousands):
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Net income (loss) attributable to Shoals Technologies Group,
Inc. |
$ |
(9,828 |
) |
|
$ |
7,958 |
|
|
$ |
23,392 |
|
|
$ |
15,000 |
|
Net income impact from assumed
exchange of Class B common stock to Class A common stock(c) |
|
— |
|
|
|
4,801 |
|
|
|
2,687 |
|
|
|
9,711 |
|
Adjustment to the provision
for income tax(d) |
|
— |
|
|
|
(1,134 |
) |
|
|
(653 |
) |
|
|
(2,293 |
) |
Tax effected net income
(loss) |
|
(9,828 |
) |
|
|
11,625 |
|
|
|
25,426 |
|
|
|
22,418 |
|
Amortization of
intangibles |
|
1,978 |
|
|
|
2,121 |
|
|
|
6,021 |
|
|
|
6,630 |
|
Amortization of deferred
financing costs |
|
341 |
|
|
|
339 |
|
|
|
1,032 |
|
|
|
1,023 |
|
Equity-based compensation |
|
5,092 |
|
|
|
3,991 |
|
|
|
17,060 |
|
|
|
11,887 |
|
Acquisition-related
expenses |
|
— |
|
|
|
20 |
|
|
|
— |
|
|
|
32 |
|
Wire insulation shrinkback
expenses(a) |
|
50,211 |
|
|
|
— |
|
|
|
61,705 |
|
|
|
— |
|
Wire insulation shrinkback
litigation expenses(b) |
|
598 |
|
|
|
— |
|
|
|
598 |
|
|
|
— |
|
Tax impact of
adjustments(e) |
|
(15,039 |
) |
|
|
(1,529 |
) |
|
|
(21,969 |
) |
|
|
(4,621 |
) |
Adjusted Net Income |
$ |
33,353 |
|
|
$ |
16,567 |
|
|
$ |
89,873 |
|
|
$ |
37,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) For the three months ended
September 30, 2023 represents, (i) $50.2 million wire insulation
shrinkback warranty expenses related to the identification, repair
and replacement of a subset of wire harnesses presenting
unacceptable levels of wire insulation shrinkback. For the nine
months ended September 30, 2023 represents, (i) $59.1 million wire
insulation shrinkback warranty expenses related to the
identification, repair and replacement of a subset of wire
harnesses presenting unacceptable levels of wire insulation
shrinkback, including $8.9 million recorded during the six months
ended June 30, 2023, and (ii) $2.6 million of inventory write-downs
of the defective red wire. We consider expenses incurred in
connection with the identification, repair and replacement of the
impacted wire harnesses as well as the write-down of related
inventory distinct from normal, ongoing service identification,
repair and replacement expenses that would be reflected under
ongoing warranty expenses within the operation of our business and
normal write-downs of inventory, which we do not exclude from our
non-GAAP measures. In the future, we also intend to exclude from
our non-GAAP measures the benefit of liability releases, if any. We
believe excluding expenses from these discrete liability events
provides investors with a better view of the operating performance
of our business and allows for comparability through periods. See
Note 14 - Commitments and Contingencies, in our condensed
consolidated financial statements included in this Quarterly Report
on Form 10-Q for more information.
(b) For the three and nine months
ended September 30, 2023 represents $0.6 million of expenses
incurred in connection with the lawsuit initiated by the Company
against the supplier of the defective red wire. We consider this
litigation distinct from ordinary course legal matters given the
expected magnitude of the expenses, the nature of the allegations
in the Company’s complaint, the amount of damages sought, and the
impact of the matter underlying the litigation on the Company’s
financial results. In the future, we also intend to exclude from
our non-GAAP measures the benefit of recovery, if any. We believe
excluding expenses from these discrete litigation events provides
investors with a better view of the operating performance of our
business and allows for comparability through periods. See Note 14
- Commitments and Contingencies, in our condensed consolidated
financial statements included in this Quarterly Report on Form 10-Q
for more information.
(c) Reflects net income to Class A
common stock from assumed exchange of corresponding shares of our
Class B common stock held by the Founder and management. There were
no shares of Class B common stock outstanding during the three
months ended September 30, 2023.
(d) Shoals Technologies Group, Inc.
is 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. owned 100% of the units in Shoals Parent
LLC for all periods presented.
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Statutory U.S. Federal income tax rate |
21.0 |
% |
|
21.0 |
% |
|
21.0 |
% |
|
21.0 |
% |
Permanent adjustments |
1.8 |
% |
|
0.1 |
% |
|
1.4 |
% |
|
0.1 |
% |
State and local taxes (net of
federal benefit) |
3.3 |
% |
|
2.5 |
% |
|
3.2 |
% |
|
2.5 |
% |
Effective income tax rate for
Adjusted Net Income |
26.1 |
% |
|
23.6 |
% |
|
25.6 |
% |
|
23.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(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 September 30, |
|
Nine Months Ended September 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Diluted weighted average shares of Class A common stock
outstanding, excluding Class B common stock |
|
170,365 |
|
|
|
113,584 |
|
|
|
162,611 |
|
|
|
112,816 |
|
Assumed exchange of Class B
common stock to Class A common stock |
|
— |
|
|
|
54,253 |
|
|
|
7,619 |
|
|
|
54,579 |
|
Adjusted diluted weighted
average shares outstanding |
|
170,365 |
|
|
|
167,837 |
|
|
|
170,230 |
|
|
|
167,395 |
|
|
|
|
|
|
|
|
|
Adjusted Net Income |
$ |
33,353 |
|
|
$ |
16,567 |
|
|
$ |
89,873 |
|
|
$ |
37,369 |
|
Adjusted Diluted EPS |
$ |
0.20 |
|
|
$ |
0.10 |
|
|
$ |
0.53 |
|
|
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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