– Reports Record First Quarter Revenue of $45.6 million –
– System Solutions Revenue Increased 46% to $33.4 million –
– First Quarter Gross Margin Expands 635 bps Year-Over-Year –
– Backlog and Awarded Orders at March 31, 2021 up 42% Versus Last Year –
– Reaffirms 2021 Outlook –
PORTLAND, Tenn., May 03, 2021 (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 financial results for its first quarter ended March 31, 2021.
“Shoals continues to deliver strong financial results, with record first quarter revenues and gross margin improving 635 basis points year-over-year. System solutions grew 46% year-over-year and contributed 73% of revenues in the quarter. Our performance reflects continued strong customer demand for our products and we expect growth to accelerate as we progress through the remainder of the year,” said Jason Whitaker, Chief Executive Officer of Shoals.
Mr. Whitaker added, “We are making steady progress on our growth initiatives of converting more customers to our BLA solution, broadening our product offering into complementary categories of EBOS, expanding internationally and introducing new products for EV charging infrastructure. When we went public in January, we had converted four major solar EPCs and developers to our system. As of the end of the first quarter, there were eight major EPCs and developers using BLA and we have a dozen new customers that we are currently in the process of converting to our system. We installed our new IV curve benchmarking products on two projects earlier this year and are on track to meet our goal of commercial sales in the fourth quarter. We shipped pre-production samples of our first wire management products to a customer in April, ahead of schedule, and we expect first commercial sales in the fourth quarter as well. We now have our sales team in place in Europe and expect to see orders from that region this year. Lastly, we have made significant progress on our new products for EV charging and are planning to accelerate the launch of our first product from 2022 to the second half of 2021. We see a tremendous opportunity for Shoals in EV infrastructure and we are moving rapidly to capitalize it.”
First Quarter 2021 Financial Results
Revenues were $45.6 million, compared to $40.7 million for the prior-year period, an increase of 12%, driven by a 46% year-over-year increase in System Solutions revenues which was partly offset by a decline in Components revenues. The growth in System Solutions revenues reflects strong demand for the Company’s combine-as-you-go system. The decline in Components revenues was in line with plan and reflected an expected change in the timing of orders from certain customers relative to last year and the conversion of other customers from buyers of components to buyers of system solutions. The sale of system solutions represented 73% of revenues versus 56% in the prior-year period.
Gross profit increased 32% to $18.8 million, compared to $14.2 million in the prior year period, driven primarily by a higher proportion of revenue from combine-as-you-go system solutions, purchasing efficiencies from increased volumes, improved material planning which reduced logistics costs, enhancements to product design that lowered manufacturing costs, and other manufacturing efficiencies resulting from higher production volume. Gross margin increased by 635 bps to 41.2% from 34.8% in the prior-year period.
Operating expenses were $8.9 million compared to $4.6 million during the same period in the prior year. This increase was primarily a result of higher equity-based compensation, planned increased payroll expense due to higher headcount to support our growth and product initiatives, COVID-19 related costs, new public company costs and non-recurring expenses related to our IPO.
Income from operations was $9.9 million, compared to $9.6 million during the same period in the prior year, an increase of 3%.
Net loss was $8.3 million, compared to net income of $9.3 million during the same period in the prior year. The decrease in net income was primarily the result of a $16.0 million charge the Company recorded in the first quarter related to the early repayment of a portion of its term loan facility. Net income and loss for 2021 is not directly comparable to 2020 because prior to its IPO, the Company was organized as a tax flow-through partnership rather than a corporation and did not record income taxes. Basic and diluted loss per share was $0.06.
Adjusted EBITDA increased 17% to $14.1 million, compared to $12.1 million for the prior-year period.
Adjusted net income was $8.8 million, compared to $8.9 million during the same period in the prior year. Diluted adjusted net income per share was $0.05.
Backlog and Awarded Orders
The Company’s backlog and awarded orders at March 31, 2021 were $180.6 million, an increase of 42% year-over-year and 15% versus December 31, 2020. The increase in backlog and awarded orders reflects continued robust demand for the company’s products from customers in the U.S.
Full Year 2021 Outlook
Based on current business conditions, business trends and other factors, the Company reaffirms its previously announced outlook for the full year ending December 31, 2021 which calls for:
- Revenues to be in the range of $230 million to $240 million, up 31.0% to 36.7% year-over-year
- Adjusted EBITDA to be in the range of $75 million to $80 million
- Adjusted net income to be in the range of $47 to $51 million
Additionally, the Company currently expects approximately 45% of its revenues to be recorded in the first half of 2021, using the midpoint of guidance.
For a reconciliation of a non-GAAP figure to the applicable GAAP figure please see page 10 of this release. These expectations do not consider, or give effect for, material acquisitions that may be completed by the Company during 2021 or other unforeseen events, including changes in global economic conditions.
Webcast and Conference Call Information
Company management will host a webcast and conference call on May 3, 2021, at 5:00 p.m. Eastern Time, to discuss the Company’s financial results.
Interested investors and other parties can listen to a webcast of the live conference call and access the Company’s first quarter update presentation by logging onto the Investor Relations section of the Company’s website at https://investors.shoals.com.
The conference call can be accessed live over the phone by dialing 1-877-407-0789 (domestic) or +1-201-689-8562 (international). A telephonic replay will be available approximately two hours after the call by dialing 1-844-512-2921, or for international callers, +1-412-317-6671. The conference ID for the live call and pin number for the replay is 13719340. The replay will be available until 11:59 p.m. Eastern Time on May 17, 2021.
About Shoals Technologies Group, Inc.
Shoals Technologies Group, Inc. is a leading provider of electrical balance of system (“EBOS”) solutions for solar, battery storage and electric vehicle charging infrastructure. The Company’s mission is to provide innovative products that reduce the cost of installation while improving system performance, reliability and safety. At least one Shoals’ product was used on more than half of the solar energy projects installed in the U.S. in 2020. To learn more about Shoals Technologies, please visit the company’s website at https://www.shoals.com.
Investor Relations Contact
Shoals Technologies Group, Inc.
Email: [email protected]
Phone: 615-323-9836
Non-GAAP Financial Information
(1) A reconciliation of projected adjusted EBITDA, adjusted net income, and adjusted diluted earnings per share, which are forward-looking measures that are not prepared in accordance with GAAP, to the most directly comparable GAAP financial measures, is not provided because we are unable to provide such reconciliation without unreasonable effort. The inability to provide a quantitative reconciliation is due to the uncertainty and inherent difficulty in predicting the occurrence, the financial impact and the periods in which the components of the applicable GAAP measures and non-GAAP adjustments may be recognized. The GAAP measures may include the impact of such items as non-cash share-based compensation, amortization of intangible assets and the tax effect of such items, in addition to other items we have historically excluded from adjusted EBITDA and adjusted net income per share. We expect to continue to exclude these items in future disclosures of these non-GAAP measures and may also exclude other similar items that may arise in the future (collectively, “non-GAAP adjustments”).
Forward-Looking 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 projected future results of operations, business strategies, and industry and regulatory environment. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report with the understanding that our actual future results may be materially different from what we expect.
Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted Net Income
We define Adjusted EBITDA as net income (loss) plus (i) interest expense, (ii) income taxes, (iii) depreciation expense, (iv) amortization of intangibles, (v) loss on debt repayment, (vi) equity-based compensation, (vii) COVID-19 expenses and (viii) non-recurring and other expenses. We define Adjusted Net Income as net income (loss) plus (i) amortization of intangibles, (ii) loss on debt repayment, (iii) amortization of deferred finance costs, (iv) equity-based compensation, (v) COVID-19 expenses and (vi) non-recurring and other expenses, all net of applicable income taxes. We define Adjusted Diluted EPS as Adjusted Net Income divided by the diluted weighted average shares of Class A common shares outstanding for the applicable period, which assumes the pro forma exchange of all outstanding Class B common shares for Class A common shares.
Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS are intended as supplemental measures of performance that are neither required by, nor presented in accordance with, GAAP. We present Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS because we believe they assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS: (i) as factors in evaluating management’s performance when determining incentive compensation; (ii) to evaluate the effectiveness of our business strategies; and (iii) because our credit agreement uses measures similar to Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS to measure our compliance with certain covenants.
Among other limitations, Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; in the case of Adjusted EBITDA, does not reflect income tax expense or benefit for periods prior to the reorganization; and may be calculated by other companies in our industry differently than we do or not at all, which may limit their usefulness as comparative measures.
Because of these limitations, Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. You should review the reconciliation of net income to Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS below and not rely on any single financial measure to evaluate our business.
Shoals Technologies Group, Inc.
Consolidated Balance Sheets
(in thousands, except shares)
| |
March 31,
2021
|
|
December 31,
2020
|
|
Assets
|
|
|
|
| Current Assets |
|
|
|
| Cash and cash equivalents |
$ |
4,227 |
|
|
$ |
10,073 |
|
| Accounts receivable, net |
28,138 |
|
|
27,004 |
|
| Unbilled receivables |
9,995 |
|
|
3,794 |
|
| Inventory, net |
21,092 |
|
|
15,121 |
|
| Other current assets |
6,512 |
|
|
155 |
|
| Total Current Assets |
69,964 |
|
|
56,147 |
|
| Property, plant and equipment, net |
13,160 |
|
|
12,763 |
|
| Goodwill |
50,176 |
|
|
50,176 |
|
| Other intangible assets, net |
69,992 |
|
|
71,988 |
|
| Deferred tax asset |
48,492 |
|
|
— |
|
| Other assets |
475 |
|
|
4,236 |
|
|
Total Assets
|
$ |
252,259 |
|
|
$ |
195,310 |
|
| |
|
|
|
|
Liabilities and Stockholders’ Deficit / Members’ Deficit
|
|
|
|
| Current Liabilities |
|
|
|
| Accounts payable |
$ |
12,941 |
|
|
$ |
14,634 |
|
| Accrued expenses |
8,534 |
|
|
5,967 |
|
| Long-term debt—current portion |
3,500 |
|
|
3,500 |
|
| Total Current Liabilities |
24,975 |
|
|
24,101 |
|
| Revolving line of credit |
39,000 |
|
|
20,000 |
|
| Long-term debt, less current portion |
189,450 |
|
|
335,332 |
|
| Payable Pursuant to the Tax Receivable Agreement |
41,692 |
|
|
— |
|
| Total Liabilities |
295,117 |
|
|
379,433 |
|
| Commitments and Contingencies (Note 12) |
|
|
|
| Stockholders’ Deficit / Members’ Deficit |
|
|
|
| Members’ deficit |
— |
|
|
(184,123 |
) |
| Preferred stock, no par value – 5,000,000 shares authorized; none issued and outstanding as of March 31, 2021 |
— |
|
|
— |
|
| Class A common stock, $0.00001 par value – 1,000,000,000 shares authorized; 93,539,692 shares issued and outstanding as of March 31, 2021 |
1 |
|
|
— |
|
| Class B common stock, $0.00001 par value – 195,000,000 shares authorized; 73,066,607 shares issued and outstanding as of March 31, 2021 |
1 |
|
|
— |
|
| Additional paid-in capital |
78,073 |
|
|
— |
|
| Accumulated deficit |
(98,340 |
) |
|
— |
|
| Total stockholders’ deficit attributable to Shoals Technologies Group, Inc. / members’ deficit |
(20,265 |
) |
|
(184,123 |
) |
| Non-controlling interests |
(22,593 |
) |
|
— |
|
| Total stockholders’ deficit / members’ deficit |
(42,858 |
) |
|
(184,123 |
) |
|
Total Liabilities and Stockholders’ Deficit / Members’ Deficit
|
$ |
252,259 |
|
|
$ |
195,310 |
|
| |
|
|
|
|
|
|
|
Shoals Technologies Group, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
| |
Three Months Ended March 31,
|
| |
2021
|
|
2020
|
|
Revenue
|
$ |
45,604 |
|
|
$ |
40,740 |
|
|
Cost of revenue
|
26,830 |
|
|
26,554 |
|
|
Gross profit
|
18,774 |
|
|
14,186 |
|
|
Operating Expenses
|
|
|
|
| General and administrative expenses |
6,816 |
|
|
2,558 |
|
| Depreciation and amortization |
2,068 |
|
|
2,061 |
|
|
Total Operating Expenses
|
8,884 |
|
|
4,619 |
|
|
Income from Operations
|
9,890 |
|
|
9,567 |
|
| Interest expense, net |
(3,709 |
) |
|
(272 |
) |
| Loss on debt repayment |
(15,990 |
) |
|
— |
|
|
Income (loss) before income taxes
|
(9,809 |
) |
|
9,295 |
|
| Income tax expense |
1,475 |
|
|
— |
|
|
Net income (loss)
|
(8,334 |
) |
|
9,295 |
|
| Less: net loss attributable to non-controlling interests |
(5,475 |
) |
|
— |
|
|
Net income (loss) attributable to Shoals Technologies Group, Inc.
|
$ |
(2,859 |
) |
|
$ |
9,295 |
|
| |
|
|
|
| |
Period from
January 27, 2021
to March 31, 2021
|
|
|
|
Earnings per share of Class A common stock:
|
|
|
|
| Basic |
$ |
(0.06 |
) |
|
|
| Diluted |
$ |
(0.06 |
) |
|
|
|
Weighted average shares of Class A common stock outstanding:
|
|
|
|
| Basic |
93,540 |
|
|
|
| Diluted |
93,540 |
|
|
|
| |
|
|
|
|
Shoals Technologies Group, Inc.
Consolidated Statements of Cash Flows
(in thousands)
| |
Three Months Ended March 31,
|
| |
2021
|
|
2020
|
|
Cash Flows from Operating Activities
|
|
|
|
| Net income (loss) |
$ |
(8,334 |
) |
|
$ |
9,295 |
|
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
| Depreciation and amortization |
2,401 |
|
|
2,322 |
|
| Amortization/write off of deferred finance costs |
5,110 |
|
|
9 |
|
| Equity-based compensation |
1,392 |
|
|
— |
|
| Deferred taxes |
557 |
|
|
— |
|
| Gain on sale of assets |
61 |
|
|
— |
|
| Changes in assets and liabilities: |
|
|
|
| Accounts receivable |
(1,134 |
) |
|
9,763 |
|
| Unbilled receivables |
(6,201 |
) |
|
(3,389 |
) |
| Inventory |
(5,971 |
) |
|
(3,167 |
) |
| Other current assets |
(3,465 |
) |
|
(32 |
) |
| Accounts payable |
(1,693 |
) |
|
2,208 |
|
| Accrued expenses |
(502 |
) |
|
929 |
|
|
Net Cash Provided by (Used in) Operating Activities
|
(17,779 |
) |
|
17,938 |
|
|
Cash Flows Used In Investing Activities
|
|
|
|
| Purchases of property, plant and equipment |
(863 |
) |
|
(795 |
) |
|
Net Cash Used in Investing Activities
|
(863 |
) |
|
(795 |
) |
|
Cash Flows from Financing Activities
|
|
|
|
| Member distributions |
— |
|
|
(214 |
) |
| Employee withholding taxes related to net settled equity awards |
(137 |
) |
|
— |
|
| Deferred financing costs |
(94 |
) |
|
— |
|
| Payment on term loan facility |
(150,875 |
) |
|
— |
|
| Proceeds from revolving credit facility |
19,000 |
|
|
— |
|
| Payments on senior debt – term loan |
— |
|
|
(875 |
) |
| Proceeds from senior debt – revolving line of credit |
— |
|
|
24,000 |
|
| Proceeds from issuance of Class A common stock sold in an IPO, net of underwriting discounts and commissions |
154,521 |
|
|
— |
|
| Deferred offering costs |
(9,619 |
) |
|
— |
|
|
Net Cash Provided By Financing Activities
|
12,796 |
|
|
22,911 |
|
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
(5,846 |
) |
|
40,054 |
|
|
Cash and Cash Equivalents—Beginning of Period
|
10,073 |
|
|
7,082 |
|
|
Cash and Cash Equivalents—End of Period
|
$ |
4,227 |
|
|
$ |
47,136 |
|
| |
|
|
|
|
|
|
|
Shoals Technologies Group, Inc.
Adjusted EBITDA and Adjusted Net Income Reconciliation (Unaudited)
(in thousands)
Reconciliation of Net Income to Adjusted EBITDA (in thousands):
| |
Three Months Ended March 31,
|
| |
2021
|
|
2020
|
| Net income (loss) |
$ |
(8,334 |
) |
|
$ |
9,295 |
|
| Interest expense |
3,709 |
|
|
272 |
|
| Income tax benefit |
(1,475 |
) |
|
— |
|
| Depreciation expense |
405 |
|
|
326 |
|
| Amortization of intangibles |
1,996 |
|
|
1,996 |
|
| Loss on debt repayment |
15,990 |
|
|
— |
|
| Equity-based compensation |
1,392 |
|
|
— |
|
| COVID-19 expenses(a) |
55 |
|
|
— |
|
| Non-recurring and other expenses(b) |
339 |
|
|
182 |
|
| Adjusted EBITDA |
$ |
14,077 |
|
|
$ |
12,071 |
|
| |
|
|
|
|
|
|
|
|
(a)
|
Represents costs incurred as a direct impact from the COVID-19 pandemic, disinfecting and reconfiguration of facilities, medical professionals to conduct daily screenings of employees, premium pay during the pandemic to hourly workers and direct legal costs associated with the pandemic. |
| |
|
|
(b)
|
Represents certain costs associated with non-recurring professional services, Oaktree’s expenses and other costs. |
| |
|
Reconciliation of Net Income (Loss) Attributable to Shoals Technologies Group, Inc. to Adjusted Net Income (in thousands):
| |
Three Months Ended March 31,
|
| |
2021
|
|
2020
|
| Net income (loss) attributable to Shoals Technologies Group, Inc. |
$ |
(2,859 |
) |
|
$ |
9,295 |
|
| Net income (loss) impact from pro forma conversion of Class B common shares to Class A common shares (a) |
(5,475 |
) |
|
— |
|
| Adjustment to the provision for income tax (b) |
1,134 |
|
|
(2,072 |
) |
| Tax effected net income (loss) |
(7,200 |
) |
|
7,218 |
|
| Amortization of intangibles |
1,996 |
|
|
1,996 |
|
| Amortization of deferred finance fees |
370 |
|
|
9 |
|
| Loss on debt repayment |
15,990 |
|
|
— |
|
| Equity-based compensation |
1,392 |
|
|
— |
|
| COVID-19 expenses (c) |
55 |
|
|
— |
|
| Non-recurring and other expenses (d) |
339 |
|
|
182 |
|
| Tax impact of adjustments (e) |
(4,171 |
) |
|
(475 |
) |
| Adjusted Net Income |
$ |
8,771 |
|
|
$ |
8,930 |
|
| |
|
|
|
|
|
|
|
|
(a)
|
Reflects net income (loss) to Class A common shares from pro forma exchange of corresponding shares of our Class B common shares held by our founder and management. |
| |
|
|
(b)
|
Shoals Technologies Group, Inc. will be subject to U.S. Federal income taxes, in addition to state and local taxes with respect to its allocable share of any net taxable income of Shoals Parent, LLC. The adjustment to the provision for income tax reflects the effective tax rates below, assuming Shoals Technologies Group, Inc. owns 100% of the units in Shoals Parent, LLC. |
| |
|
| |
Three Months Ended March 31,
|
| |
2021
|
|
2020
|
| Statutory U.S. Federal income tax rate |
19.8 |
% |
|
21.0 |
% |
| State and local taxes (net of federal benefit) |
0.9 |
% |
|
0.7 |
% |
| Effective income tax rate for Adjusted Net Income |
20.7 |
% |
|
21.7 |
% |
| |
|
|
|
|
|
|
(c)
|
Represents costs incurred as a direct impact from the COVID-19 pandemic, disinfecting and reconfiguration of facilities, medical professionals to conduct daily screenings of employees, premium pay during the pandemic to hourly workers and direct legal costs associated with the pandemic. |
| |
|
|
(d)
|
Represents certain costs associated with non-recurring professional services, Oaktree’s expenses and other costs. |
| |
|
|
(e)
|
Represents the estimated tax impact of all Adjusted Net Income add-backs, excluding those which represent permanent differences between book versus tax. |
| |
|
Reconciliation of Diluted Weighted Average Shares Outstanding to Adjusted Diluted Weighted Average Shares Outstanding (in thousands, except per share):
| |
Three Months Ended March 31,
|
| |
2021
|
|
2020
|
| Diluted weighted average shares of Class A common shares outstanding |
93,540 |
|
|
N/A (b) |
| Assumed pro forma conversion of Class B common shares to Class A common shares |
73,067 |
|
|
N/A (b) |
| Adjusted diluted weighted average shares outstanding |
166,607 |
|
|
N/A (b) |
| |
|
|
|
| Adjusted Net Income (a) |
$ |
8,771 |
|
|
N/A (b) |
| Adjusted Diluted EPS |
$ |
0.05 |
|
|
N/A (b) |
| |
|
|
|
|
|
|
(a)
|
Represents Adjusted Net Income for the full period presented. |
| |
|
|
(b)
|
This Non-GAAP measure is not applicable for this period, as the reorganization transactions had not yet occurred. |
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