Shoals Technologies Group, Inc. Reports Financial Results for First Quarter 2022
Shoals Technologies Group (SHLS) reported a record first-quarter revenue of $68.0 million, marking a 49% increase year-over-year. System Solutions revenue rose 40%, contributing to a gross margin expansion of 550 basis points to 38.7%. The company’s backlog and awarded orders hit $302.3 million, up 67% year-over-year. Despite robust performance, Shoals reaffirmed its low revenue guidance due to ongoing supply chain disruptions and an investigation into import duties that could pose significant challenges. Adjusted EBITDA rose 17% to $16.5 million.
- First quarter revenue increased 49% year-over-year to $68.0 million.
- Gross margin expanded by 550 basis points sequentially to 38.7%.
- Backlog and awarded orders grew by 67% year-over-year to $302.3 million.
- Reaffirmed low end of revenue outlook due to industry challenges.
- Supply chain disruptions continue to pose significant challenges.
- Investigation by Department of Commerce may result in project delays.
– First Quarter Revenue Increased
– System Solutions Revenue Grew
– Gross Margin Expanded More Than 550 bps Sequentially to
– Backlog and Awarded Orders Up
– Reaffirms Low End of Revenue Outlook Despite Industry Challenges –
PORTLAND, Tenn., May 16, 2022 (GLOBE NEWSWIRE) -- 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, 2022.
“Our results for the first quarter were in line with the outlook we provided earlier in the quarter despite an increasingly challenging environment for solar. Revenues and gross profit grew
Mr. Whitaker added, “We are continuing to see strong growth across our business with our backlog and awarded orders up
“Demand for the new products we introduced recently continues to grow with customer orders for our battery storage and wire management offerings being particularly strong. We remain on track to ship BLA 2.0 and high-capacity plug-and-play wire harnesses later this year. The former will have a higher average selling price per megawatt than our current product and the latter will allow us to serve a new and fast-growing application. Finally, our EV charging products are generating a lot of interest from charge point operators and fleet owners and we are anticipating significant growth in our EV order book in the near-term,” said Mr. Whitaker.
“While our products continue to win over new customers and we take share from our competitors, our business is not immune to the macro environment. Continued supply chain disruption and the recently announced Department of Commerce investigation into whether some module manufacturers are skirting import duties remain significant challenges for the industry and are resulting in project delays. The outlook we provided earlier this year reflected our expectation of continued industry headwinds which is why we continue to be comfortable with the low end of our revenue outlook, but the uncertainty posed by the Commerce Department investigation in particular, has caused us to lower the high end of our outlook,” concluded Mr. Whitaker.
First Quarter 2022 Financial Results
Revenue was
Gross profit increased
General and administrative expenses were
Income from operations was
Net income was
Adjusted EBITDA increased
Adjusted net income was
Backlog and Awarded Orders
The Company’s backlog and awarded orders on March 31, 2022 were
Full Year 2022 Outlook
Based on current business conditions, business trends and other factors, for the year ending December 31, 2022, the Company expects:
- Revenues to be in the range of
$300 million to$325 million - Adjusted EBITDA to be in the range of
$77 million to$86 million - Adjusted net income to be in the range of
$45 million to$53 million
The change in the Company’s adjusted net income outlook is larger than the change in the Adjusted EBITDA outlook as a result of updated expectations for the 2022 book tax rate and interest expense for the remainder of the year to support growth and working capital requirements. A reconciliation of the Company’s non-GAAP measures to the applicable GAAP measures are found within this release.
Webcast and Conference Call Information
Company management will host a webcast and conference call on May 16, 2022, 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 1-855-327-6837 (domestic) or + 1-631-891-4304 (international). A telephonic replay will be available approximately two hours after the call by dialing 1-844-512-2921 or for international callers, + 1-412-317-6671. The conference ID for the live call and pin number for the replay is 10018862. The replay will be available until 11:59 p.m. Eastern Time on May 30, 2022.
About Shoals Technologies Group, Inc.
Shoals Technologies Group, Inc. is a leading provider of electrical balance of system (“EBOS”) solutions for solar, battery storage and electric vehicle charging infrastructure. The Company’s mission is to provide innovative products that reduce the cost of installation while improving system performance, reliability and safety. At least one Shoals product was used on more than half of the solar energy projects installed in the U.S. in 2020. To learn more about Shoals, please visit the Company's website at https://www.shoals.com.
Investor Relations Contact
Shoals Technologies Group, Inc.
Email: investors@shoals.com
Phone: 615-323-9836
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, business strategies, technology developments, financing and investment plans, dividend policy, competitive position, industry and regulatory environment, potential growth opportunities 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. 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
(1) A reconciliation of projected adjusted EBITDA, adjusted net income, and adjusted diluted earnings per share, which are forward-looking measures that are not prepared in accordance with GAAP, to the most directly comparable GAAP financial measures, is not provided because we are unable to provide such reconciliation without unreasonable effort. The inability to provide a quantitative reconciliation is due to the uncertainty and inherent difficulty in predicting the occurrence, the financial impact and the periods in which the components of the applicable GAAP measures and non-GAAP adjustments may be recognized. The GAAP measures may include the impact of such items as non-cash share-based compensation, amortization of intangible assets and the tax effect of such items, in addition to other items we have historically excluded from adjusted EBITDA and adjusted net income per share. We expect to continue to exclude these items in future disclosures of these non-GAAP measures and may also exclude other similar items that may arise in the future (collectively, "non-GAAP adjustments").
Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted Earnings per Share (“EPS”)
We define Adjusted EBITDA as net income (loss) plus (i) interest expense, net, (ii) income tax expense, (iii) depreciation expense, (iv) amortization of intangibles, (v) payable pursuant to the tax receivable agreement adjustment, (vi) loss on debt repayment, (vii) equity-based compensation, (viii) acquisition-related expenses, (ix) COVID-19 expenses and (x) non-recurring and other expenses. We define Adjusted Net Income as net income (loss) plus (i) amortization of intangibles, (ii) payable pursuant to the tax receivable agreement adjustment, (iii) loss on debt repayment, (iv) amortization of deferred financing costs, (v) equity-based compensation, (vi) acquisition-related expenses, (vii) COVID-19 expenses and (viii) non-recurring and other expenses, all net of applicable income taxes. We define Adjusted Diluted EPS as Adjusted Net Income divided by the diluted weighted average shares of Class A common shares outstanding for the applicable period, which assumes the pro forma exchange of all outstanding Class B common shares for Class A common shares.
Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS are intended as supplemental measures of performance that are neither required by, nor presented in accordance with, GAAP. We present Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS because we believe they assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS: (i) as factors in evaluating management’s performance when determining incentive compensation; (ii) to evaluate the effectiveness of our business strategies; and (iii) because our credit agreement uses measures similar to Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS to measure our compliance with certain covenants.
Among other limitations, Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; in the case of Adjusted EBITDA, does not reflect income tax expense or benefit for periods prior to the reorganization; and may be calculated by other companies in our industry differently than we do or not at all, which may limit their usefulness as comparative measures.
Because of these limitations, Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. You should review the reconciliation of net income to Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS below and not rely on any single financial measure to evaluate our business.
Shoals Technologies Group, Inc. Consolidated Balance Sheets (in thousands, except shares) | |||||||
March 31, 2022 | December 31, 2021 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 2,534 | $ | 5,006 | |||
Accounts receivable, net | 56,887 | 31,499 | |||||
Unbilled receivables | 16,149 | 13,533 | |||||
Inventory, net | 49,479 | 38,368 | |||||
Other current assets | 12,651 | 5,042 | |||||
Total Current Assets | 137,700 | 93,448 | |||||
Property, plant and equipment, net | 16,032 | 15,574 | |||||
Goodwill | 69,436 | 69,436 | |||||
Other intangible assets, net | 62,966 | 65,236 | |||||
Deferred tax assets | 175,539 | 176,958 | |||||
Other assets | 12,799 | 5,762 | |||||
Total Assets | $ | 474,472 | $ | 426,414 | |||
Liabilities and Stockholders' Deficit | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 17,879 | $ | 19,985 | |||
Accrued expenses | 14,764 | 9,569 | |||||
Current portion of payable pursuant to the tax receivable agreement | 4,065 | — | |||||
Long-term debt—current portion | 2,000 | 2,000 | |||||
Total Current Liabilities | 38,708 | 31,554 | |||||
Revolving line of credit | 90,140 | 55,140 | |||||
Long-term debt, less current portion | 189,689 | 189,913 | |||||
Payable pursuant to the tax receivable agreement, less current portion | 152,309 | 156,374 | |||||
Other long-term liabilities | 5,074 | 931 | |||||
Total Liabilities | 475,920 | 433,912 | |||||
Stockholders’ Deficit | |||||||
Preferred stock, | — | — | |||||
Class A common stock, | 1 | 1 | |||||
Class B common stock, | 1 | 1 | |||||
Additional paid-in capital | 98,376 | 95,684 | |||||
Accumulated deficit | (90,493 | ) | (93,133 | ) | |||
Total stockholders’ equity attributable to Shoals Technologies Group, Inc. | 7,885 | 2,553 | |||||
Non-controlling interests | (9,333 | ) | (10,051 | ) | |||
Total stockholders' deficit | (1,448 | ) | (7,498 | ) | |||
Total Liabilities and Stockholders’ Deficit | $ | 474,472 | $ | 426,414 |
Shoals Technologies Group, Inc. Consolidated Statements of Operations (in thousands, except per share amounts) | |||||||
Three Months Ended March 31, | |||||||
2022 | 2021 | ||||||
Revenue | $ | 67,976 | $ | 45,604 | |||
Cost of revenue | 41,684 | 26,830 | |||||
Gross profit | 26,292 | 18,774 | |||||
Operating Expenses | |||||||
General and administrative expenses | 13,919 | 6,816 | |||||
Depreciation and amortization | 2,366 | 2,068 | |||||
Total Operating Expenses | 16,285 | 8,884 | |||||
Income from Operations | 10,007 | 9,890 | |||||
Interest expense, net | (3,836 | ) | (3,709 | ) | |||
Loss on debt repayment | — | (15,990 | ) | ||||
Income (loss) before income taxes | 6,171 | (9,809 | ) | ||||
Income tax (expense) benefit | (1,522 | ) | 1,475 | ||||
Net income (loss) | 4,649 | (8,334 | ) | ||||
Less: net income (loss) attributable to non-controlling interests | 2,009 | (5,475 | ) | ||||
Net income (loss) attributable to Shoals Technologies Group, Inc. | $ | 2,640 | $ | (2,859 | ) | ||
Three Months Ended March 31, 2022 | Period from January 27, 2021 to March 31, 2021 | ||||||
Earnings (loss) per share of Class A common stock: | |||||||
Basic | $ | 0.02 | $ | (0.06 | ) | ||
Diluted | $ | 0.02 | $ | (0.06 | ) | ||
Weighted average shares of Class A common stock outstanding: | |||||||
Basic | 112,211 | 93,540 | |||||
Diluted | 112,240 | 93,540 |
Shoals Technologies Group, Inc. Consolidated Statements of Cash Flows (in thousands) | |||||||
Three Months Ended March 31, | |||||||
2022 | 2021 | ||||||
Cash Flows from Operating Activities | |||||||
Net income (loss) | $ | 4,649 | $ | (8,334 | ) | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||
Depreciation and amortization | 2,694 | 2,401 | |||||
Amortization/write off of deferred financing costs | 276 | 5,110 | |||||
Equity-based compensation | 3,831 | 1,392 | |||||
Deferred taxes | 1,419 | 557 | |||||
Gain on sale of assets | — | 61 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (25,388 | ) | (1,134 | ) | |||
Unbilled receivables | (2,616 | ) | (6,201 | ) | |||
Inventory | (11,111 | ) | (5,971 | ) | |||
Other assets | (3,421 | ) | (3,465 | ) | |||
Accounts payable | (2,106 | ) | (1,693 | ) | |||
Accrued expenses | 5,914 | (502 | ) | ||||
Net Cash Used in Operating Activities | (25,859 | ) | (17,779 | ) | |||
Cash Flows Used In Investing Activities | |||||||
Purchases of property, plant and equipment | (882 | ) | (863 | ) | |||
Net Cash Used in Investing Activities | (882 | ) | (863 | ) | |||
Cash Flows from Financing Activities | |||||||
Distributions to Non-controlling interest | (2,938 | ) | — | ||||
Employee withholding taxes related to net settled equity awards | (1,297 | ) | (137 | ) | |||
Deferred financing costs | — | (94 | ) | ||||
Payments on term loan facility | (500 | ) | (150,875 | ) | |||
Proceeds from revolving credit facility | 35,000 | 19,000 | |||||
Proceeds from issuance of Class A common stock sold in an IPO, net of underwriting discounts and commissions | — | 278,833 | |||||
Purchase of LLC Interests with proceeds from IPO | — | (124,312 | ) | ||||
Deferred offering costs | — | (9,619 | ) | ||||
Net Cash Provided By Financing Activities | 30,265 | 12,796 | |||||
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | 3,524 | (5,846 | ) | ||||
Cash, Cash Equivalents and Restricted Cash—Beginning of Period | 9,557 | 10,073 | |||||
Cash, Cash Equivalents and Restricted Cash—End of Period | $ | 13,081 | $ | 4,227 | |||
Shoals Technologies Group, Inc.
Adjusted EBITDA and Adjusted Net Income Reconciliation (Unaudited)
(in thousands)
Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands):
Three Months Ended March 31, | ||||||
2022 | 2021 | |||||
Net income (loss) | $ | 4,649 | $ | (8,334 | ) | |
Interest expense, net | 3,836 | 3,709 | ||||
Income tax (expense) benefit | 1,522 | (1,475 | ) | |||
Depreciation expense | 424 | 405 | ||||
Amortization of intangibles | 2,270 | 1,996 | ||||
Payable pursuant to the TRA adjustment (a) | — | — | ||||
Loss on debt repayment | — | 15,990 | ||||
Equity-based compensation | 3,831 | 1,392 | ||||
Acquisition-related expenses | — | — | ||||
COVID-19 expenses (b) | — | 55 | ||||
Non-recurring and other expenses (c) | — | 339 | ||||
Adjusted EBITDA | $ | 16,532 | $ | 14,077 |
(a) Represents an adjustment to eliminate the remeasurement of the payable pursuant to the TRA.
(b) Represents costs incurred as a direct impact from the COVID-19 pandemic, disinfecting and reconfiguration of facilities, medical professionals to conduct daily screenings of employees, premium pay during the pandemic to hourly workers in 2020 and direct legal costs associated with the pandemic.
(c) Represents certain costs associated with non-recurring professional services, Oaktree’s expenses and other costs.
Reconciliation of Net Income (Loss) Attributable to Shoals Technologies Group, Inc. to Adjusted Net Income (in thousands):
Three Months Ended March 31, | |||||||
2022 | 2021 | ||||||
Net income (loss) attributable to Shoals Technologies Group, Inc. | $ | 2,640 | $ | (2,859 | ) | ||
Net income impact from pro forma conversion of Class B common stock to Class A common stock (a) | 2,009 | (5,475 | ) | ||||
Adjustment to the provision for income tax (b) | (475 | ) | 1,134 | ||||
Tax effected net income | 4,174 | (7,200 | ) | ||||
Amortization of intangibles | 2,270 | 1,996 | |||||
Amortization of deferred financing costs | 276 | 370 | |||||
Payable pursuant to the TRA adjustment (c) | — | — | |||||
Loss on debt repayment | — | 15,990 | |||||
Equity-based compensation | 3,831 | 1,392 | |||||
Acquisition-related expenses | — | — | |||||
COVID-19 expenses (d) | — | 55 | |||||
Non-recurring and other expenses (e) | — | 339 | |||||
Tax impact of adjustments (f) | (1,508 | ) | (4,171 | ) | |||
Adjusted Net Income | $ | 9,043 | $ | 8,771 |
(a) Reflects net income (loss) to Class A common shares from pro forma exchange of corresponding shares of our Class B common shares held by our Founder and management.
(b) Shoals Technologies Group, Inc. 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. owns
Three Months Ended March 31, | |||||||
2022 | 2021 | ||||||
Statutory U.S. Federal income tax rate | 21.0 | % | 21.0 | % | |||
Permanent adjustments | 0.1 | % | (1.2 | )% | |||
State and local taxes (net of federal benefit) | 2.5 | % | 0.9 | % | |||
Effective income tax rate for Adjusted Net Income | 23.6 | % | 20.7 | % |
(c) Represents an adjustment to eliminate the remeasurement of the payable pursuant to the TRA.
(d) Represents costs incurred as a direct impact from the COVID-19 pandemic, disinfecting and reconfiguration of facilities, medical professionals to conduct daily screenings of employees, premium pay during the pandemic to hourly workers in 2020 and direct legal costs associated with the pandemic.
(e) Represents certain costs associated with non-recurring professional services, Oaktree’s expenses and other costs.
(f) 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, | |||||
2022 | 2021 | ||||
Diluted weighted average shares of Class A common shares outstanding, excluding Class B common shares | 112,240 | 93,540 | |||
Assumed pro forma conversion of Class B common shares to Class A common shares | 54,794 | 73,067 | |||
Adjusted diluted weighted average shares outstanding | 167,034 | 166,607 | |||
Adjusted Net Income (a) | $ | 9,043 | $ | 8,771 | |
Adjusted Diluted EPS | $ | 0.05 | $ | 0.05 |
(a) Represents Adjusted Net Income for the full period presented.
FAQ
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