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 first
quarter ended March 31, 2024.
“Despite additional project delays in the
period, the team’s continued strong execution allowed Shoals to
meet our first quarter outlook. While some industry and supply
chain disruptions persist, including extended equipment lead times
and long interconnection queues, we remain confident in the
long-term fundamental drivers of the industry and our ability to
execute our strategic plan. Our offering continues to resonate with
customers, supported by backlog and awarded orders increasing 17%
year-over-year, and more than $75 million in new orders added
during the quarter,” said Brandon Moss, CEO of Shoals.
“In the short term, our results will continue to
be impacted by project timing, but the medium- and long-term
outlook for domestic utility scale solar remains bright, as
reflected in robust quoting activity and pipeline levels. Load
growth is expected to increase significantly over the next five
years, driven by a combination of data center growth, reshoring of
manufacturing, electric vehicles and increased weather volatility,
requiring more heating and cooling. Meeting all that new demand
will require more generation capacity and we expect solar to be a
prime beneficiary. We remain very excited about the opportunity
ahead,” added Mr. Moss.
First Quarter 2023
Financial ResultsRevenue decreased 14%, to
$90.8 million, compared to $105.1 million for the
prior-year period, due to lower sales volumes resulting from fewer
production days, as well as project delays.
Gross profit was $36.5 million, compared to
$48.3 million in the prior-year period. Gross profit as a
percentage of revenue was 40.2% compared to 45.9% in the prior-year
period. The decline from the prior-year period was primarily due to
higher labor costs and reduced leverage on fixed costs.
General and administrative expenses were
$22.8 million, compared to $20.0 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 matters.
Income from operations was $11.6 million,
compared to $26.1 million during the prior-year period.
Net income was $4.8 million compared to
$17.0 million during the prior-year period.
Net income attributable to Shoals Technologies
Group, Inc. was $4.8 million compared to $14.3 million
during the prior-year period. Basic and diluted net income per
share was $0.03 compared to basic and diluted net income per share
of $0.10 in the prior-year period.
Adjusted EBITDA* decreased $17.6 million to
$20.5 million compared to $38.1 million for the
prior-year period.
Adjusted net income* decreased $12.7 million to
$12.6 million compared to $25.3 million during the prior-year
period. Adjusted diluted earnings per share* were $0.07 compared to
$0.15 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 March 31, 2024,
were $615.2 million, representing a 17% increase compared to
the prior-year period and a 3% sequential decrease from December
31, 2023. The increase in backlog and awarded orders as compared to
the prior-year period reflects consistent demand for the Company’s
innovative products, with robust growth in international markets,
which comprises more than 12% 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.
Second Quarter 2024 OutlookThe
Company is providing an outlook for the second quarter given the
near-term uncertainty in the utility scale solar market, which has
resulted in shifting order patterns. Based on current business
conditions, business trends and other factors, for the quarter
ending June 30, 2024, the Company expects:
- Revenue to be in the range of $85
million to $95 million
- Adjusted EBITDA to be in the range
of $20 million to $25 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 $440
million to $490 million
- Adjusted EBITDA* to be in the range
of $130 million to $150 million
- Adjusted net income* to be in the
range of $85 million to $100 million
- Cash Flow from operations to be in
the range of $100 million to $115 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 May 7, 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 13743838. The telephonic replay will be available
until 11:59 p.m. Eastern Time on May 21, 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 Statements
This 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 second quarter of 2024 and for the full year ending December
31, 2024; expectations regarding the utility scale solar market;
project delays; regulatory environment; pipeline and orders;
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; 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; we may face difficulties with
respect to the planned consolidation and relocation of our
Tennessee-based manufacturing and distribution operations, and may
not realize the benefits thereof; unsatisfactory safety performance
may subject us to penalties, negatively impact customer
relationships, result in higher operating costs, and negatively
impact employee morale and turnover; 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 legal proceedings and claims,
including the patent infringement complaints that we filed with the
U.S. International Trade Commission (the “ITC”) and two District
Courts, the securities litigation initiated in March 2024, and
other legal proceedings and claims, which may or may not arise in
the normal course of our business; 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; and
future growth in the EV charging market is highly dependent on the
demand for, and consumers’ willingness to adopt, EVs.
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) equity-based compensation, (vi)
wire insulation shrinkback expenses, and (vii) 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 / write-off of
deferred financing costs, (v) equity-based compensation, (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 to Adjusted EBITDA, and net income
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) |
|
|
|
March 31,2024 |
|
December 31,2023 |
Assets |
|
|
|
|
Current Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
15,236 |
|
|
$ |
22,707 |
|
Accounts receivable, net |
|
|
103,403 |
|
|
|
107,118 |
|
Unbilled receivables |
|
|
23,406 |
|
|
|
40,136 |
|
Inventory, net |
|
|
59,565 |
|
|
|
52,804 |
|
Other current assets |
|
|
6,872 |
|
|
|
4,421 |
|
Total Current Assets |
|
|
208,482 |
|
|
|
227,186 |
|
Property, plant and equipment, net |
|
|
26,213 |
|
|
|
24,836 |
|
Goodwill |
|
|
69,941 |
|
|
|
69,941 |
|
Other intangible assets, net |
|
|
46,772 |
|
|
|
48,668 |
|
Deferred tax assets |
|
|
465,700 |
|
|
|
468,195 |
|
Other assets |
|
|
8,198 |
|
|
|
5,167 |
|
Total Assets |
|
$ |
825,306 |
|
|
$ |
843,993 |
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
Current Liabilities |
|
|
|
|
Accounts payable |
|
$ |
15,728 |
|
|
$ |
14,396 |
|
Accrued expenses and other |
|
|
10,352 |
|
|
|
22,907 |
|
Warranty liability—current portion |
|
|
31,708 |
|
|
|
31,099 |
|
Deferred revenue |
|
|
21,834 |
|
|
|
22,228 |
|
Long-term debt—current portion |
|
|
— |
|
|
|
2,000 |
|
Total Current Liabilities |
|
|
79,622 |
|
|
|
92,630 |
|
Revolving line of credit |
|
|
168,750 |
|
|
|
40,000 |
|
Long-term debt, less current portion |
|
|
— |
|
|
|
139,445 |
|
Warranty liability, less current portion |
|
|
20,091 |
|
|
|
23,815 |
|
Other long-term liabilities |
|
|
2,866 |
|
|
|
3,107 |
|
Total Liabilities |
|
|
271,329 |
|
|
|
298,997 |
|
Commitments and Contingencies |
|
|
|
|
Stockholders’ Equity |
|
|
|
|
Preferred stock, $0.00001 par value – 5,000,000 shares
authorized; none issued and outstanding as of March 31, 2024
and December 31, 2023 |
|
|
— |
|
|
|
— |
|
Class A common stock, $0.00001 par value – 1,000,000,000
shares authorized; 170,420,309 and 170,117,289 shares issued and
outstanding as of March 31, 2024 and December 31, 2023,
respectively |
|
|
2 |
|
|
|
2 |
|
Class B common stock, $0.00001 par value – 195,000,000 shares
authorized; none issued and outstanding as of March 31, 2024
and December 31, 2023, respectively |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
474,749 |
|
|
|
470,542 |
|
Retained earnings |
|
|
79,226 |
|
|
|
74,452 |
|
Total stockholders' equity |
|
|
553,977 |
|
|
|
544,996 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
825,306 |
|
|
$ |
843,993 |
|
Shoals Technologies Group, Inc. |
Condensed Consolidated Statements of Operations
(Unaudited) |
(in thousands, except per share amounts) |
|
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
|
2023 |
|
Revenue |
|
$ |
90,807 |
|
|
$ |
105,086 |
|
Cost of revenue |
|
|
54,347 |
|
|
|
56,829 |
|
Gross profit |
|
|
36,460 |
|
|
|
48,257 |
|
Operating expenses |
|
|
|
|
General and administrative expenses |
|
|
22,772 |
|
|
|
19,992 |
|
Depreciation and amortization |
|
|
2,104 |
|
|
|
2,165 |
|
Total operating expenses |
|
|
24,876 |
|
|
|
22,157 |
|
Income from operations |
|
|
11,584 |
|
|
|
26,100 |
|
Interest expense, net |
|
|
(4,362 |
) |
|
|
(5,996 |
) |
Income before income taxes |
|
|
7,222 |
|
|
|
20,104 |
|
Income tax expense |
|
|
(2,448 |
) |
|
|
(3,121 |
) |
Net income |
|
|
4,774 |
|
|
|
16,983 |
|
Less: net income attributable to non-controlling interests |
|
|
— |
|
|
|
2,687 |
|
Net income attributable to Shoals Technologies Group,
Inc. |
|
$ |
4,774 |
|
|
$ |
14,296 |
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
|
2023 |
|
Earnings per share of Class A common stock: |
|
|
|
|
Basic |
|
$ |
0.03 |
|
|
$ |
0.10 |
|
Diluted |
|
$ |
0.03 |
|
|
$ |
0.10 |
|
Weighted average shares of Class A common stock
outstanding: |
|
|
|
|
Basic |
|
|
170,282 |
|
|
|
146,409 |
|
Diluted |
|
|
170,514 |
|
|
|
147,107 |
|
Shoals Technologies Group, Inc. |
Condensed Consolidated Statements of Cash Flows
(Unaudited) |
(in thousands) |
|
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
|
2023 |
|
Cash Flows from Operating Activities |
|
|
|
|
Net income |
|
$ |
4,774 |
|
|
$ |
16,983 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
|
3,002 |
|
|
|
2,507 |
|
Amortization/write off of deferred financing costs |
|
|
2,626 |
|
|
|
350 |
|
Equity-based compensation |
|
|
5,023 |
|
|
|
7,523 |
|
Provision for credit losses |
|
|
— |
|
|
|
308 |
|
Provision for obsolete or slow-moving inventory |
|
|
— |
|
|
|
2,322 |
|
Provision for warranty expense |
|
|
565 |
|
|
|
— |
|
Deferred taxes |
|
|
2,495 |
|
|
|
2,999 |
|
Changes in assets and liabilities: |
|
|
|
|
Accounts receivable |
|
|
3,715 |
|
|
|
(25,148 |
) |
Unbilled receivables |
|
|
16,730 |
|
|
|
(2,948 |
) |
Inventory |
|
|
(6,761 |
) |
|
|
(3,197 |
) |
Other assets |
|
|
(3,165 |
) |
|
|
(3,281 |
) |
Accounts payable |
|
|
1,332 |
|
|
|
12,521 |
|
Accrued expenses and other |
|
|
(13,402 |
) |
|
|
(1,057 |
) |
Warranty liability |
|
|
(3,680 |
) |
|
|
(160 |
) |
Deferred revenue |
|
|
(394 |
) |
|
|
191 |
|
Net Cash Provided by Operating Activities |
|
|
12,860 |
|
|
|
9,913 |
|
Cash Flows from Investing Activities |
|
|
|
|
Purchases of property, plant and equipment |
|
|
(2,483 |
) |
|
|
(2,003 |
) |
Net Cash Used in Investing Activities |
|
|
(2,483 |
) |
|
|
(2,003 |
) |
Cash Flows from Financing Activities |
|
|
|
|
Distributions to non-controlling interests |
|
|
— |
|
|
|
(2,628 |
) |
Employee withholding taxes related to net settled equity
awards |
|
|
(816 |
) |
|
|
(3,532 |
) |
Payments on term loan facility |
|
|
(143,750 |
) |
|
|
(500 |
) |
Proceeds from revolving credit facility |
|
|
143,750 |
|
|
|
5,000 |
|
Repayments of revolving credit facility |
|
|
(15,000 |
) |
|
|
(8,000 |
) |
Deferred financing costs |
|
|
(2,032 |
) |
|
|
— |
|
Other |
|
|
— |
|
|
|
(556 |
) |
Net Cash Used in Financing Activities |
|
|
(17,848 |
) |
|
|
(10,216 |
) |
Net Decrease in Cash and Cash Equivalents |
|
|
(7,471 |
) |
|
|
(2,306 |
) |
Cash and Cash Equivalents—Beginning of Period |
|
|
22,707 |
|
|
|
8,766 |
|
Cash and Cash Equivalents—End of Period |
|
$ |
15,236 |
|
|
$ |
6,460 |
|
Shoals Technologies Group, Inc. |
Adjusted Gross Profit, Adjusted Gross Profit Percentage,
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 (in thousands): |
|
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
|
2023 |
|
Revenue |
|
$ |
90,807 |
|
|
$ |
105,086 |
|
Cost of revenue |
|
|
54,347 |
|
|
|
56,829 |
|
Gross profit |
|
$ |
36,460 |
|
|
$ |
48,257 |
|
Gross profit percentage |
|
|
40.2 |
% |
|
|
45.9 |
% |
|
|
|
|
|
Wire insulation shrinkback expenses (a) |
|
$ |
— |
|
|
$ |
2,006 |
|
Adjusted gross profit |
|
$ |
36,460 |
|
|
$ |
50,263 |
|
Adjusted gross profit percentage |
|
|
40.2 |
% |
|
|
47.8 |
% |
Reconciliation of Net Income to Adjusted EBITDA (in
thousands): |
|
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
|
2023 |
|
Net income |
|
$ |
4,774 |
|
|
$ |
16,983 |
|
Interest expense, net |
|
|
4,362 |
|
|
|
5,996 |
|
Income tax expense |
|
|
2,448 |
|
|
|
3,121 |
|
Depreciation expense |
|
|
1,106 |
|
|
|
484 |
|
Amortization of intangibles |
|
|
1,896 |
|
|
|
2,022 |
|
Equity-based compensation |
|
|
5,023 |
|
|
|
7,523 |
|
Wire insulation shrinkback expenses (a) |
|
|
— |
|
|
|
2,006 |
|
Wire insulation shrinkback litigation expenses (b) |
|
|
849 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
20,458 |
|
|
$ |
38,135 |
|
Reconciliation of Net Income Attributable to Shoals Technologies
Group, Inc. to Adjusted Net Income (in thousands): |
|
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
|
2023 |
|
Net income attributable to Shoals Technologies Group, Inc. |
|
$ |
4,774 |
|
|
$ |
14,296 |
|
Net income impact from assumed exchange of Class B common stock to
Class A common stock (c) |
|
|
— |
|
|
|
2,687 |
|
Adjustment to the provision for income tax (d) |
|
|
— |
|
|
|
(653 |
) |
Tax effected net income |
|
|
4,774 |
|
|
|
16,330 |
|
Amortization of intangibles |
|
|
1,896 |
|
|
|
2,022 |
|
Amortization / write-off of deferred financing costs |
|
|
2,626 |
|
|
|
350 |
|
Equity-based compensation |
|
|
5,023 |
|
|
|
7,523 |
|
Wire insulation shrinkback expenses (a) |
|
|
— |
|
|
|
2,006 |
|
Wire insulation shrinkback litigation expenses (b) |
|
|
849 |
|
|
|
— |
|
Tax impact of adjustments (e) |
|
|
(2,547 |
) |
|
|
(2,892 |
) |
Adjusted Net Income |
|
$ |
12,621 |
|
|
$ |
25,339 |
|
(a) |
For the three months ended March 31, 2023, represents $2.0 million
of inventory write-downs of defective wire in connection with the
identification, repair and replacement of a subset of wire
harnesses presenting unacceptable levels of wire insulation
shrinkback. We consider expenses incurred in connection with the
identification, repair and replacement of the impacted wire
harnesses distinct from normal, ongoing service identification,
repair and replacement expenses that would be reflected under
ongoing warranty expenses within the operation of our business,
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. |
(b) |
For the three months ended March 31, 2024, represents $0.8 million
of expenses incurred in connection with the lawsuit initiated by
the Company against the supplier of the defective 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. |
(c) |
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. |
(d) |
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 March 31, |
|
|
2024 |
|
2023 |
Statutory U.S. Federal income tax rate |
|
21.0 |
% |
|
21.0 |
% |
Permanent adjustments |
|
0.8 |
% |
|
0.3 |
% |
State and local taxes (net of federal benefit) |
|
2.7 |
% |
|
3.0 |
% |
Effective income tax rate for Adjusted Net Income |
|
24.5 |
% |
|
24.3 |
% |
(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, |
|
|
|
2024 |
|
|
|
2023 |
|
Diluted weighted average shares of Class A common stock
outstanding, excluding Class B common stock |
|
|
170,514 |
|
|
|
147,107 |
|
Assumed exchange of Class B common stock to Class A common
stock |
|
|
— |
|
|
|
23,110 |
|
Adjusted diluted weighted average shares outstanding |
|
|
170,514 |
|
|
|
170,217 |
|
|
|
|
|
|
Adjusted Net Income |
|
$ |
12,621 |
|
|
$ |
25,339 |
|
Adjusted Diluted EPS |
|
$ |
0.07 |
|
|
$ |
0.15 |
|
Shoals Technologies (NASDAQ:SHLS)
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