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 fourth
quarter ended December 31, 2023.
“Shoals continued its strong growth trajectory
in the fourth quarter, with revenue growing 38% year-over-year,
reflecting the exceptional dedication and execution of the
management team and associates,” said Brandon Moss, CEO of
Shoals.
Mr. Moss added, “Demand for our products remains
robust, with backlog and awarded orders increasing 47%
year-over-year, as the Company added over $128 million in new
orders in the quarter. International markets continue to develop as
a growth driver, representing more than 13% of our backlog and
awarded orders. Domestically, we further strengthened our
leadership position after engaging a new top solar EPC in a master
supply agreement subsequent to the quarter end.”
“While customer momentum remains strong as
reflected by record quoting activity and order volumes, we are
expecting a softer first half of 2024 as sustained higher interest
rates are resulting in project delays. Despite near term
challenges, the long-term outlook for Shoals remains bright, and we
expect revenue growth to drive operating leverage in the second
half of the year,” concluded Mr. Moss.
Fourth Quarter 2023
Financial ResultsRevenue grew 38%, to $130.4 million,
compared to $94.7 million for the prior-year period, driven by
higher sales volumes as a result of increased domestic demand for
solar EBOS.
Gross profit increased to $55.4 million,
compared to $40.4 million in the prior-year period. Gross
profit as a percentage of revenue was 42.5% compared to 42.7% in
the prior-year period. The decline from the prior-year period was
primarily due to higher labor costs, slightly offset by increased
leverage on fixed costs.
General and administrative expenses were
$21.5 million, compared to $14.9 million during the same
period in the prior year. This increase was primarily the result of
planned increases in payroll expense due to higher headcount
supporting growth and legal fees related to the patent infringement
and wire insulation shrinkback complaints.
Income from operations was $31.9 million,
compared to $23.4 million during the prior-year period.
Net income was $16.6 million compared to
net income of $118.3 million during the prior-year period.
Net income attributable to Shoals Technologies
Group, Inc. was $16.6 million compared to $112.6 million
during the same period in the prior year. The prior-year period
benefited from a $110.9 million gain on termination of the tax
receivable agreement partially offset by a $6.7 million
payable pursuant to the tax receivable agreement adjustment. Basic
and diluted net income per share was $0.10 compared to basic and
diluted net income per share of $0.94 and $0.70 in the prior-year
period.
Adjusted EBITDA* increased $9.0 million to
$39.1 million compared to $30.1 million for the
prior-year period.
Adjusted net income* was $21.3 million
compared to $25.0 million during the same period in the prior
year. Adjusted diluted earnings per share* was $0.12 compared to
$0.15 in the prior-year period.
Full Year 2023 Financial
ResultsRevenue grew 50%, to $488.9 million, compared
to $326.9 million for the prior-year, driven by higher sales
volumes as a result of increased domestic demand for solar
EBOS.
Gross profit was $168.3 million, compared
to $131.3 million in the prior-year. Gross profit as a
percentage of revenue decreased to 34.4% from 40.2% in the
prior-year, primarily due to $61.7 million in wire insulation
shrinkback reserve and expenses, slightly offset by lower raw
materials input costs, increased leverage on fixed costs, and
efficiencies gained in operations. 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
$80.7 million, compared to $55.9 million during the prior
year. This increase was primarily the result of higher non-cash
stock-based compensation, planned increases in payroll expense due
to higher headcount supporting growth, and legal fees related to
the patent infringement and wire insulation shrinkback
complaints.
Income from operations was $79.0 million,
compared to $66.3 million during the prior year.
Net income was $42.7 million compared to
net income of $143.0 million during the prior year.
Net income attributable to Shoals Technologies
Group, Inc. was $40.0 million compared to $127.6 million
during the prior year. The prior-year period benefited from a
$110.9 million gain on termination of the tax receivable
agreement partially offset by a $6.7 million payable pursuant
to the tax receivable agreement adjustment. Basic and diluted net
income per share were $0.24 compared to basic and diluted net
income per share of $1.11 and $0.85 in the prior-year period.
Adjusted EBITDA* increased 86% to
$173.4 million compared to $93.0 million for the
prior-year.
Adjusted gross profit* for the full year was
$230.0 million, reflecting a 47.0% adjusted gross profit
percentage*.
Adjusted net income* increased 78% to
$111.3 million compared to $62.4 million during the prior
year. Adjusted diluted earnings per share* was $0.65 compared to
$0.37 in the prior-year.
* 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 December 31, 2023
were $631.3 million, representing a 47% increase compared to
the same time last year and approximately flat compared to
September 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 comprises more
than 13% 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.
First Quarter 2024 OutlookThe
Company is providing an outlook for the first quarter given the
headwinds in the utility scale solar market, which have resulted in
certain customers changing order patterns. It is not the Company’s
intention to provide quarterly guidance on an ongoing basis. Based
on current business conditions, business trends and other factors,
for the quarter ending March 31, 2024, the Company expects:
- Revenue to be in
the range of $90 million to $100 million
- Adjusted EBITDA to be in the range of
$15 million to $20 million
Full Year 2024 OutlookBased on
current business conditions, business trends and other factors, for
the full year 2024, the Company expects:
- Revenue to be in the range of $480
million to $520 million
- Adjusted EBITDA to
be in the range of $150 million to $170 million
- Adjusted net income
to be in the range of $90 million to $110 million
- Cash Flow from
operations to be in the range of $100 million to $120 million
- Capital
expenditures to be in the range of $15 million to $20 million
- Interest expense to
be in the range of $15 million to $20 million
A reconciliation of Adjusted EBITDA guidance 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 February 28, 2024 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 1-877-407-0789 (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 access ID number
for the replay is 13743350. The telephonic replay will be available
until 11:59 p.m. Eastern Time on March 13, 2024.
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; including our financial guidance for the first quarter
of 2024 and for the full year ending December 31, 2024; 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, if
demand for solar energy projects does not continue to grow or grows
at a slower rate than we anticipate, we may not be able to achieve
our anticipated level of growth and our business will suffer; if we
fail to accurately estimate the potential losses related to the
wire insulation shrinkback matter, or fail to recover the costs and
expenses incurred by us from the supplier, our profit margins,
financial results, business and prospects could be materially
adversely impacted; defects or performance problems in our products
or their parts, including those related to the wire insulation
shrinkback matter, could result in loss of customers, reputational
damage and decreased revenue, and may have a material adverse
effect on our business, financial condition and results of
operations; we may experience delays, disruptions, quality control
or reputational problems in our manufacturing operations in part
due to our vendor concentration; if we or our suppliers face
disputes with labor unions, we may not be able to achieve our
anticipated level of growth and our business could suffer; if we
fail to retain our key personnel and attract additional qualified
personnel, or successfully integrate our new Chief Executive
Officer, our business strategy and prospects could suffer; our
products are primarily manufactured and shipped from our production
facilities in Tennessee, and any damage or disruption at these
facilities may harm our business; the market for our products is
competitive, and we may face increased competition as new and
existing competitors introduce EBOS system solutions and
components, which could negatively affect our results of operations
and market share; current macroeconomic events, including high
inflation, high interest rates, a potential recession and
geopolitical instability could impact our business and financial
results; our industry has historically been cyclical and
experienced periodic downturns; the interruption of the flow of raw
materials from international vendors has disrupted our supply
chain, including as a result of the imposition of additional
duties, tariffs and other charges on imports and exports; we are
subject to risks associated with the patent infringement complaints
that we filed with the U.S. International Trade Commission and two
District Courts; and if we fail to, or incur significant costs in
order to, obtain, maintain, protect, defend or enforce our
intellectual property and other proprietary rights, including those
that are subject to the patent infringement complaints we filed
with the ITC and two District Courts, our business and results of
operations could be materially harmed.
These and other important risk factors are
described more fully in the Company’s most recent Annual Report on
Form 10-K and subsequent Quarterly Reports on Form 10-Q and other
documents filed with the Securities and Exchange Commission and
could cause actual results to vary from expectations. 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 wire insulation shrinkback expenses. We define Adjusted Gross
Profit Percentage as Adjusted Gross Profit divided by revenue. We
define Adjusted EBITDA as net income plus (i) interest expense,
net, (ii) income tax expense, (iii) depreciation expense, (iv)
amortization of intangibles, (v) payable pursuant to the TRA
adjustment, (vi) gain on termination of TRA, (vii) loss on debt
repayment, (viii) equity-based compensation, (ix)
acquisition-related expenses, (x) COVID-19 expenses, (xi)
non-recurring and other expenses, (xii), wire insulation shrinkback
expenses, and (xiii) wire insulation shrinkback litigation
expenses. We define Adjusted Net Income as net income 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) adjustment
to the provision for income tax, (iii) amortization of intangibles,
(iv) amortization of deferred financing costs, (v) payable pursuant
to the TRA adjustment, (vi) gain on termination of TRA, (vii) loss
on debt repayment, (viii) equity-based compensation, (ix)
acquisition-related expenses, (x) COVID-19 expenses, (xi)
non-recurring and other expenses, (xii) wire insulation shrinkback
expenses, and (xiii) 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.Consolidated Balance
Sheets(in thousands, except shares and par value) |
|
|
December 31, |
|
|
2023 |
|
|
2022 |
Assets |
|
|
|
Current Assets |
|
|
|
Cash and cash equivalents |
$ |
22,707 |
|
$ |
8,766 |
Accounts receivable, net |
|
107,118 |
|
|
50,575 |
Unbilled receivables |
|
40,136 |
|
|
16,713 |
Inventory, net |
|
52,804 |
|
|
72,854 |
Other current assets |
|
4,421 |
|
|
4,632 |
Total Current Assets |
|
227,186 |
|
|
153,540 |
Property, plant and equipment,
net |
|
24,836 |
|
|
16,870 |
Goodwill |
|
69,941 |
|
|
69,941 |
Other intangible assets,
net |
|
48,668 |
|
|
56,585 |
Deferred tax assets |
|
468,195 |
|
|
291,634 |
Other assets |
|
5,167 |
|
|
6,325 |
Total
Assets |
$ |
843,993 |
|
$ |
594,895 |
|
|
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
Current Liabilities |
|
|
|
Accounts payable |
$ |
14,396 |
|
$ |
9,481 |
Accrued expenses and other |
|
22,907 |
|
|
17,322 |
Warranty liability—current portion |
|
31,099 |
|
|
560 |
Deferred revenue |
|
22,228 |
|
|
23,259 |
Long-term debt—current portion |
|
2,000 |
|
|
2,000 |
Total Current Liabilities |
|
92,630 |
|
|
52,622 |
Revolving line of credit |
|
40,000 |
|
|
48,000 |
Long-term debt, less current
portion |
|
139,445 |
|
|
189,063 |
Warranty liability, less
current portion |
|
23,815 |
|
|
— |
Other long-term
liabilities |
|
3,107 |
|
|
4,221 |
Total Liabilities |
|
298,997 |
|
|
293,906 |
Commitments and
Contingencies |
|
|
|
Stockholders’ Equity |
|
|
|
Preferred stock, $0.00001 par value - 5,000,000 shares authorized;
none issued and outstanding as of December 31, 2023 and
2022 |
|
— |
|
|
— |
Class A common stock, $0.00001 par value - 1,000,000,000 shares
authorized; 170,117,289 and 137,904,663 shares issued and
outstanding as of December 31, 2023 and 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
December 31, 2023 and 2022, respectively |
|
— |
|
|
1 |
Additional paid-in capital |
|
470,542 |
|
|
256,894 |
Accumulated earnings |
|
74,452 |
|
|
34,478 |
Total stockholders’ equity
attributable to Shoals Technologies Group, Inc. |
|
544,996 |
|
|
291,374 |
Non-controlling interests |
|
— |
|
|
9,615 |
Total stockholders'
equity |
|
544,996 |
|
|
300,989 |
Total Liabilities and
Stockholders’ Equity |
$ |
843,993 |
|
$ |
594,895 |
Shoals Technologies Group, Inc.Consolidated Statements of
Operations(in thousands, except per share amounts) |
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenue |
$ |
130,436 |
|
|
$ |
94,651 |
|
|
$ |
488,939 |
|
|
$ |
326,940 |
|
Cost of
revenue |
|
75,056 |
|
|
|
54,272 |
|
|
|
320,635 |
|
|
|
195,629 |
|
Gross
profit |
|
55,380 |
|
|
|
40,379 |
|
|
|
168,304 |
|
|
|
131,311 |
|
Operating
expenses |
|
|
|
|
|
|
|
General and administrative expenses |
|
21,453 |
|
|
|
14,871 |
|
|
|
80,719 |
|
|
|
55,908 |
|
Depreciation and amortization |
|
2,057 |
|
|
|
2,134 |
|
|
|
8,550 |
|
|
|
9,073 |
|
Total operating expenses |
|
23,510 |
|
|
|
17,005 |
|
|
|
89,269 |
|
|
|
64,981 |
|
Income from
operations |
|
31,870 |
|
|
|
23,374 |
|
|
|
79,035 |
|
|
|
66,330 |
|
Interest expense, net |
|
(5,700 |
) |
|
|
(5,778 |
) |
|
|
(24,100 |
) |
|
|
(18,538 |
) |
Payable pursuant to the tax
receivable agreement adjustment |
|
— |
|
|
|
(6,675 |
) |
|
|
— |
|
|
|
(6,675 |
) |
Gain on termination of tax
receivable agreement |
|
— |
|
|
|
110,883 |
|
|
|
— |
|
|
|
110,883 |
|
Income before income
taxes |
|
26,170 |
|
|
|
121,804 |
|
|
|
54,935 |
|
|
|
152,000 |
|
Income tax expense |
|
(9,588 |
) |
|
|
(3,502 |
) |
|
|
(12,274 |
) |
|
|
(8,987 |
) |
Net
income |
|
16,582 |
|
|
|
118,302 |
|
|
|
42,661 |
|
|
|
143,013 |
|
Less: net income attributable
to non-controlling interests |
|
— |
|
|
|
5,691 |
|
|
|
2,687 |
|
|
|
15,402 |
|
Net income
attributable to Shoals Technologies Group, Inc. |
$ |
16,582 |
|
|
$ |
112,611 |
|
|
$ |
39,974 |
|
|
$ |
127,611 |
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Earnings per share of
Class A common stock: |
|
|
|
|
|
|
|
Basic |
$ |
0.10 |
|
|
$ |
0.94 |
|
|
$ |
0.24 |
|
|
$ |
1.11 |
|
Diluted |
$ |
0.10 |
|
|
$ |
0.70 |
|
|
$ |
0.24 |
|
|
$ |
0.85 |
|
Weighted average
shares of Class A common stock outstanding: |
|
|
|
|
|
|
|
Basic |
|
170,075 |
|
|
|
120,236 |
|
|
|
164,165 |
|
|
|
114,495 |
|
Diluted |
|
170,287 |
|
|
|
168,631 |
|
|
|
164,504 |
|
|
|
167,631 |
|
Shoals Technologies Group, Inc.Consolidated Statements of
Cash Flows(in thousands) |
|
|
Year Ended December 31, |
|
|
2023 |
|
|
|
2022 |
|
Cash Flows from
Operating Activities |
|
|
|
Net income |
$ |
42,661 |
|
|
$ |
143,013 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
10,529 |
|
|
|
10,509 |
|
Amortization/write off of deferred financing costs |
|
2,165 |
|
|
|
1,365 |
|
Equity-based compensation |
|
20,862 |
|
|
|
16,108 |
|
Provision for credit losses |
|
296 |
|
|
|
200 |
|
Provision for obsolete or slow-moving inventory |
|
5,041 |
|
|
|
2,073 |
|
Provision for warranty expense |
|
59,556 |
|
|
|
560 |
|
Deferred taxes |
|
11,334 |
|
|
|
8,406 |
|
Payable pursuant to the tax receivable agreement adjustment |
|
— |
|
|
|
6,675 |
|
Gain on termination of tax receivable agreement |
|
— |
|
|
|
(110,883 |
) |
Changes in assets and liabilities: |
|
|
|
Accounts receivable |
|
(56,839 |
) |
|
|
(19,207 |
) |
Unbilled receivables |
|
(23,423 |
) |
|
|
(3,180 |
) |
Inventory |
|
15,009 |
|
|
|
(36,927 |
) |
Other assets |
|
1,355 |
|
|
|
244 |
|
Accounts payable |
|
5,171 |
|
|
|
(11,029 |
) |
Accrued expenses and other |
|
4,471 |
|
|
|
10,110 |
|
Warranty liability |
|
(5,202 |
) |
|
|
— |
|
Deferred revenue |
|
(1,031 |
) |
|
|
21,418 |
|
Net Cash Provided by
Operating Activities |
|
91,955 |
|
|
|
39,455 |
|
Cash Flows from
Investing Activities |
|
|
|
Purchases of property, plant and equipment |
|
(10,578 |
) |
|
|
(3,154 |
) |
Other |
|
(269 |
) |
|
|
(503 |
) |
Net Cash Used in
Investing Activities |
|
(10,847 |
) |
|
|
(3,657 |
) |
Cash Flows from
Financing Activities |
|
|
|
Distributions to non-controlling interests |
|
(2,628 |
) |
|
|
(7,762 |
) |
Employee withholding taxes related to net settled equity
awards |
|
(3,880 |
) |
|
|
(1,297 |
) |
Payments on term loan facility |
|
(51,500 |
) |
|
|
(2,000 |
) |
Proceeds from revolving credit facility |
|
45,000 |
|
|
|
46,000 |
|
Repayments of revolving credit facility |
|
(53,000 |
) |
|
|
(53,140 |
) |
Proceeds from issuance of Class A common stock in follow-on
offering, net of underwriting discounts and commissions |
|
— |
|
|
|
42,943 |
|
Deferred offering costs |
|
(1,159 |
) |
|
|
(1,463 |
) |
Early termination payment of tax receivable agreement |
|
— |
|
|
|
(58,000 |
) |
Payment of fees for tax receivable agreement termination |
|
— |
|
|
|
(1,870 |
) |
Net Cash Used in
Financing Activities |
|
(67,167 |
) |
|
|
(36,589 |
) |
Net Increase
(Decrease) in Cash, Cash Equivalents and Restricted
Cash |
|
13,941 |
|
|
|
(791 |
) |
Cash, Cash Equivalents
and Restricted Cash—Beginning of Period |
|
8,766 |
|
|
|
9,557 |
|
Cash, Cash Equivalents
and Restricted Cash—End of Period |
$ |
22,707 |
|
|
$ |
8,766 |
|
Shoals Technologies Group,
Inc.Adjusted Gross Profit, Adjusted Gross Profit
Percentage, Adjusted EBITDA, Adjusted Net Income and
Adjusted Diluted Earnings per Share (“EPS”)
Reconciliation of Gross Profit to Adjusted Gross
Profit and Adjusted Gross Profit Percentage (in thousands):
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenue |
$ |
130,436 |
|
|
$ |
94,651 |
|
|
$ |
488,939 |
|
|
$ |
326,940 |
|
Cost of revenue |
|
75,056 |
|
|
|
54,272 |
|
|
|
320,635 |
|
|
|
195,629 |
|
Gross profit |
$ |
55,380 |
|
|
$ |
40,379 |
|
|
$ |
168,304 |
|
|
$ |
131,311 |
|
Gross profit percentage |
|
42.5% |
|
|
|
42.7% |
|
|
|
34.4% |
|
|
|
40.2% |
|
|
|
|
|
|
|
|
|
Wire insulation shrinkback
expenses(a) |
$ |
— |
|
|
$ |
— |
|
|
$ |
61,705 |
|
|
$ |
— |
|
Adjusted gross profit |
$ |
55,380 |
|
|
$ |
40,379 |
|
|
$ |
230,009 |
|
|
$ |
131,311 |
|
Adjusted gross profit
percentage |
|
42.5% |
|
|
|
42.7% |
|
|
|
47.0% |
|
|
|
40.2% |
|
Reconciliation of Net Income to Adjusted EBITDA
(in thousands):
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income |
$ |
16,582 |
|
|
$ |
118,302 |
|
|
$ |
42,661 |
|
|
$ |
143,013 |
|
Interest expense, net |
|
5,700 |
|
|
|
5,778 |
|
|
|
24,100 |
|
|
|
18,538 |
|
Income tax expense |
|
9,588 |
|
|
|
3,502 |
|
|
|
12,274 |
|
|
|
8,987 |
|
Depreciation expense |
|
889 |
|
|
|
487 |
|
|
|
2,612 |
|
|
|
1,858 |
|
Amortization of
intangibles |
|
1,896 |
|
|
|
2,021 |
|
|
|
7,917 |
|
|
|
8,651 |
|
Payable pursuant to the TRA
adjustment(b) |
|
— |
|
|
|
6,675 |
|
|
|
— |
|
|
|
6,675 |
|
Gain on termination of
TRA |
|
— |
|
|
|
(110,883 |
) |
|
|
— |
|
|
|
(110,883 |
) |
Loss on debt repayment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Equity-based compensation |
|
3,802 |
|
|
|
4,221 |
|
|
|
20,862 |
|
|
|
16,108 |
|
Acquisition-related
expenses |
|
— |
|
|
|
10 |
|
|
|
— |
|
|
|
42 |
|
COVID-19 expenses(c) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-recurring and other
expenses(d) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Wire insulation shrinkback
expenses(a) |
|
— |
|
|
|
— |
|
|
|
61,705 |
|
|
|
— |
|
Wire insulation shrinkback
litigation expenses(e) |
|
662 |
|
|
|
— |
|
|
|
1,260 |
|
|
|
— |
|
Adjusted EBITDA |
$ |
39,119 |
|
|
$ |
30,113 |
|
|
$ |
173,391 |
|
|
$ |
92,989 |
|
Reconciliation of Net Income Attributable to
Shoals Technologies Group, Inc. to Adjusted Net Income (in
thousands):
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income attributable to
Shoals Technologies Group, Inc. |
$ |
16,582 |
|
|
$ |
112,611 |
|
|
$ |
39,974 |
|
|
$ |
127,611 |
|
Net income impact from assumed
exchange of Class B common stock to Class A common stock(f) |
|
— |
|
|
|
5,691 |
|
|
|
2,687 |
|
|
|
15,402 |
|
Adjustment to the provision
for income tax(g) |
|
— |
|
|
|
(1,433 |
) |
|
|
(653 |
) |
|
|
(3,726 |
) |
Tax effected net income |
|
16,582 |
|
|
|
116,869 |
|
|
|
42,008 |
|
|
|
139,287 |
|
Amortization of
intangibles |
|
1,896 |
|
|
|
2,021 |
|
|
|
7,917 |
|
|
|
8,651 |
|
Amortization of deferred
financing costs |
|
— |
|
|
|
342 |
|
|
|
2,165 |
|
|
|
1,365 |
|
Payable pursuant to the TRA
adjustment(b) |
|
— |
|
|
|
6,675 |
|
|
|
— |
|
|
|
6,675 |
|
Gain on termination of
TRA |
|
— |
|
|
|
(110,883 |
) |
|
|
— |
|
|
|
(110,883 |
) |
Loss on debt repayment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Equity-based compensation |
|
3,802 |
|
|
|
4,221 |
|
|
|
20,862 |
|
|
|
16,108 |
|
Acquisition-related
expenses |
|
— |
|
|
|
10 |
|
|
|
— |
|
|
|
42 |
|
COVID-19 expenses(c) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-recurring and other
expenses(d) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Wire insulation shrinkback
expenses(a) |
|
— |
|
|
|
— |
|
|
|
61,705 |
|
|
|
— |
|
Wire insulation shrinkback
litigation expenses(e) |
|
662 |
|
|
|
— |
|
|
|
1,260 |
|
|
|
— |
|
Tax impact of
adjustments(h) |
|
(1,673 |
) |
|
|
5,779 |
|
|
|
(24,604 |
) |
|
|
1,158 |
|
Adjusted Net Income |
$ |
21,269 |
|
|
$ |
25,034 |
|
|
$ |
111,313 |
|
|
$ |
62,403 |
|
(a) For the year ended December 31, 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, 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 9 - Warranty Liability, in
our consolidated financial statements included in our Annual Report
on Form 10-K for more information.
(b) Represents an adjustment to eliminate the
adjustment of the payable pursuant to the TRA.
(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 and direct legal costs associated
with the pandemic.
(d) Represents certain costs
associated with non-recurring professional services, our prior
private equity owners’ expenses and other costs.
(e) For the year ended December 31,
2023 represents $1.3 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 16 - Commitments and
Contingencies, in our consolidated financial statements included in
our Annual Report on Form 10-K for more information.
(f) Reflects net income to Class A
common stock from assumed exchange of corresponding shares of our
Class B common stock held by our founder and management.
(g) Shoals Technologies Group, Inc.
is subject to U.S. Federal income taxes, in addition to state and
local taxes. 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 prior to March 10, 2023.
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Statutory U.S. Federal income
tax rate |
21.0 |
% |
|
21.0 |
% |
|
21.0 |
% |
|
21.0 |
% |
Permanent adjustments |
2.0 |
% |
|
0.2 |
% |
|
1.9 |
% |
|
0.2 |
% |
State and local taxes (net of
federal benefit) |
3.3 |
% |
|
3.0 |
% |
|
3.3 |
% |
|
3.0 |
% |
Effective income tax rate for
Adjusted Net Income |
26.3 |
% |
|
24.2 |
% |
|
26.2 |
% |
|
24.2 |
% |
(h) 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 December 31, |
|
Year Ended December 31, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
Diluted weighted average
shares of Class A common stock outstanding, excluding Class B
common stock |
|
170,287 |
|
|
120,998 |
|
|
164,504 |
|
|
114,803 |
Assumed exchange of Class B
common stock to Class A common stock |
|
— |
|
|
47,633 |
|
|
5,698 |
|
|
52,828 |
Adjusted diluted weighted
average shares outstanding |
|
170,287 |
|
|
168,631 |
|
|
170,202 |
|
|
167,631 |
|
|
|
|
|
|
|
|
Adjusted Net Income |
$ |
21,269 |
|
$ |
25,034 |
|
$ |
111,313 |
|
$ |
62,403 |
Adjusted Diluted EPS |
$ |
0.12 |
|
$ |
0.15 |
|
$ |
0.65 |
|
$ |
0.37 |
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