Shoals Technologies Group, Inc. Reports Financial Results for Fourth Quarter 2023
Shoals Technologies Group, Inc. announced strong financial results for Q4 2023, with revenue up 38% YoY to $130.4 million. The company reported a gross margin of 42.5%, net income of $16.6 million, and adjusted EBITDA of $39.1 million. Backlog and awarded orders increased by 47% YoY to $631.3 million. The company provided guidance for Q1 and FY 2024, anticipating revenue of $90-100 million and $480-520 million, respectively.
Shoals Technologies Group's recent financial results indicate a robust year-over-year revenue growth of 38% in Q4 and an overall 50% for the full year 2023. This growth trajectory is primarily driven by the increased domestic demand for solar Electrical Balance of System (EBOS), which is a critical component in solar installations, encompassing all the ancillary equipment needed to support the functioning of solar panels. The company's backlog and awarded orders also saw a significant increase of 47%, suggesting a strong future demand for their products.
However, it's important to note the slight decline in gross margin percentage, which may be attributed to increased labor costs. This could indicate pressure on the company's cost structure, potentially impacting profitability if not managed effectively. Moreover, the report mentions a litigation issue with a supplier, Prysmian Cables and Systems USA, LLC, which could have financial and operational implications. While the company has a positive outlook for the second half of 2024, the first half faces headwinds due to higher interest rates causing project delays.
Investors should consider these factors, as they may influence the company's stock performance. The positive growth in revenue and orders could be weighed against the risks of increased costs and the uncertain outcomes of litigation. The company's proactive stance on international market growth and securing new agreements with top solar EPCs demonstrates strategic planning, which could mitigate some of the near-term challenges and contribute to long-term success.
The financial performance of Shoals Technologies Group, particularly the Adjusted EBITDA increase of 86% for the full year, reflects strong operational efficiency and the ability to translate revenue growth into earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is a widely used metric to assess a company's operating performance by excluding non-operating costs and revenue, providing a clearer picture of financial health.
Despite the impressive revenue and Adjusted EBITDA growth, the company's net income saw a significant decrease compared to the prior year, mainly due to a one-time gain in the prior year related to the termination of a tax receivable agreement. This one-off event should be taken into consideration when comparing year-over-year net income figures. The company's forward-looking statements, including expected revenue and Adjusted EBITDA for Q1 and full-year 2024, suggest management confidence in the company's business model and market position, albeit with a cautious stance on the near-term outlook.
From an investment perspective, the provided financial outlook, alongside the ongoing litigation and market headwinds, will require careful monitoring. The company's capital expenditure plans and cash flow projections are also critical for assessing future growth potential and financial stability.
The litigation against Prysmian Cables and Systems USA, LLC presents a notable risk factor for Shoals Technologies Group. The complaint filed seeks compensatory and punitive damages due to wire insulation shrinkback issues, which have already impacted the company's financials through reserve and expenses. The outcome of this litigation is uncertain and could have material effects on the company's financial results and operations.
Legal disputes such as this one can be protracted and costly, potentially diverting management's attention and resources. It is also important for stakeholders to consider the reputational risk associated with such disputes, especially in highly competitive markets. The company's transparency in disclosing this information is crucial, as it allows investors to factor in potential risks when making decisions.
02/28/2024 - 04:05 PM
– Quarterly Revenue of $130.4 million , up 38% Year-Over-Year –
– Gross Margin of 42.5% –
– Net Income of $16.6 million –
– Adjusted EBITDA of $39.1 million –
– Backlog and Awarded Orders Increased 47% Year-Over-Year to $631.3 million –
– Provides First Quarter and Full Year 2024 Outlook –
PORTLAND, Tenn., Feb. 28, 2024 (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 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 Results 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 Results 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 Orders $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 Outlook
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 Outlook
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 Information
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. https://www.shoals.com .
Investor Relations Contact investors@shoals.com
Forward-Looking Statements
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. (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, $0.00 001 par value - 5,000,000 shares authorized; none issued and outstanding as of December 31, 2023 and 2022 — — Class A common stock, $0.00 001 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, $0.00 001 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. (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. (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
What was Shoals Technologies Group's revenue for Q4 2023?
Shoals Technologies Group reported a revenue of $130.4 million for Q4 2023, reflecting a 38% increase year-over-year.
What was the gross margin reported by Shoals Technologies Group for Q4 2023?
Shoals Technologies Group reported a gross margin of 42.5% for Q4 2023.
What was the net income reported by Shoals Technologies Group for Q4 2023?
Shoals Technologies Group reported a net income of $16.6 million for Q4 2023.
What was the adjusted EBITDA reported by Shoals Technologies Group for Q4 2023?
Shoals Technologies Group reported an adjusted EBITDA of $39.1 million for Q4 2023.
How much did the backlog and awarded orders increase by for Shoals Technologies Group in Q4 2023?
The backlog and awarded orders for Shoals Technologies Group increased by 47% year-over-year to $631.3 million in Q4 2023.
What revenue range is Shoals Technologies Group expecting for Q1 2024?
Shoals Technologies Group expects revenue to be in the range of $90 million to $100 million for Q1 2024.
What revenue range is Shoals Technologies Group expecting for FY 2024?
Shoals Technologies Group expects revenue to be in the range of $480 million to $520 million for FY 2024.
