Shoals Technologies Group, Inc 10-Q for FY2022 Q2

Shoals Technologies Group, Inc. (SHLS)

10-Q 2022-08-16 For: 2022-06-30

Added on April 10, 2026

About this 10-Q

Shoals Technologies Group, Inc filed this 10-Q on August 16, 2022, covering the quarter ended June 30, 2022 (FY2022 Q2).

Headline figures

Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $73.49M; up 23.1% from $59.72M a year earlier
Net income: $4.4M; down 3.4% from net income of $4.56M a year earlier
Diluted EPS: $0.04; down 20.0% from $0.05 a year earlier

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ITEM		PAGE
PART I
Item 1.	Financial Statements (Unaudited)	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38

PART II
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41

	SIGNATURES	43


	June 30, 2022		December 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	10,094	$	5,006
Accounts receivable, net	57,827		31,499
Unbilled receivables	14,580		13,533
Inventory, net	64,961		38,368
Other current assets	8,827		5,042
Total Current Assets	156,289		93,448
Property, plant and equipment, net	16,830		15,574
Goodwill	69,941		69,436
Other intangible assets, net	60,727		65,236
Deferred tax assets	175,059		176,958
Other assets	17,771		5,762
Total Assets	$	496,617	$	426,414

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable	$	24,258	$	19,985
Accrued expenses and other	25,297		9,569
Current portion of payable pursuant to the tax receivable agreement	3,583		—
Long-term debt—current portion	2,000		2,000
Total Current Liabilities	55,138		31,554
Revolving line of credit	85,140		55,140
Long-term debt, less current portion	189,515		189,913
Payable pursuant to the tax receivable agreement, less current portion	153,591		156,374
Other long-term liabilities	4,793		931
Total Liabilities	488,177		433,912
Commitments and Contingencies (Note 15)
Stockholders’ Equity (Deficit)
Preferred stock, $0.00001 par value - 5,000,000 shares authorized; none issued and outstanding as of June 30, 2022 and December 31, 2021	—		—
Class A common stock, $0.00001 par value - 1,000,000,000 shares authorized; 112,667,006 and 112,049,981 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	1		1
Class B common stock, $0.00001 par value - 195,000,000 shares authorized; 54,534,591 and 54,794,479 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	1		1
Additional paid-in capital	101,243		95,684
Accumulated deficit	(86,091)		(93,133)
Total stockholders’ equity attributable to Shoals Technologies Group, Inc.	15,154		2,553
Non-controlling interests	(6,714)		(10,051)
Total stockholders' equity (deficit)	8,440		(7,498)
Total Liabilities and Stockholders’ Equity (Deficit)	$	496,617	$	426,414


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenue	$	73,490	$	59,722	$	141,466	$	105,326
Cost of revenue	44,897		33,543		86,581		60,373
Gross profit	28,593		26,179		54,885		44,953
Operating Expenses
General and administrative expenses	13,265		10,018		27,184		16,834
Depreciation and amortization	2,344		2,062		4,710		4,130
Total Operating Expenses	15,609		12,080		31,894		20,964
Income from Operations	12,984		14,099		22,991		23,989
Interest expense, net	(4,170)		(3,620)		(8,006)		(7,329)
Payable pursuant to the tax receivable agreement adjustment	—		(1,664)		—		(1,664)
Loss on debt repayment	—		—		—		(15,990)
Income (loss) before income taxes	8,814		8,815		14,985		(994)
Income tax benefit (expense)	(1,511)		339		(3,033)		1,814
Net income	7,303		9,154		11,952		820
Less: net income (loss) attributable to non-controlling interests	2,901		4,596		4,910		(879)
Net income attributable to Shoals Technologies Group, Inc.	$	4,402	$	4,558	$	7,042	$	1,699

	Three Months Ended June 30,				Six Months Ended June 30, 2022		Period from January 27, 2021 to June 30, 2021
	2022		2021
Earnings (loss) per share of Class A common stock:
Basic	$	0.04	$	0.05	$	0.06	$	(0.01)
Diluted	$	0.04	$	0.05	$	0.06	$	(0.01)
Weighted average shares of Class A common stock outstanding:
Basic	112,489		93,544		112,350		93,542
Diluted	112,616		166,827		112,428		93,542


	Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Accumulated Deficit		Non-Controlling Interest		Total Stockholders' Equity (Deficit)

	Shares	Amount		Shares	Amount
Balance at December 31, 2021	112,049,981	$	1	54,794,479	$	1	$	95,684	$	(93,133)	$	(10,051)	$	(7,498)
Equity-based compensation	—	—		—	—		5,636		—		—		5,636
Activity under equity-based compensation plan	—	—		—	—		(2,944)		—		1,647		(1,297)
Vesting of restricted share units	308,416	—		—	—		—		—		—		—
Distributions to non-controlling interest	—	—		—	—		—		—		(2,938)		(2,938)
Net income	—	—		—	—		—		2,640		2,009		4,649
Balance at March 31, 2022	112,358,397	1		54,794,479	1		98,376		(90,493)		(9,333)		(1,448)
Deferred tax adjustments related to Tax Receivable Agreement	—	—		—	—		148		—		—		148
Exchange of Class B to Class A common stock	259,888	—		(259,888)	—		—		—		—		—
Equity-based compensation	—	—		—	—		4,065		—		—		4,065
Activity under equity-based compensation plan	—	—		—	—		(1,326)		—		1,326		—
Vesting of restricted share units	48,721	—		—	—		—		—		—		—
Distributions to non-controlling interest	—	—		—	—		—		—		(1,628)		(1,628)
Reallocation of non-controlling interest	—	—		—	—		(20)		—		20		—
Net income	—	—		—	—		—		4,402		2,901		7,303
Balance at June 30, 2022	112,667,006	$	1	54,534,591	$	1	$	101,243	$	(86,091)	$	(6,714)	$	8,440


(Registrant’s telephone number, including area code)			(615)			451-1400


	Members’ Deficit		Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Accumulated Deficit		Non-Controlling Interest		Total Members'/Stockholders’ Deficit

			Shares	Amount		Shares	Amount
Balance at December 31, 2020	$	(184,123)	—	$	—	—	$	—	$	—	$	—	$	—	$	(184,123)
Net income prior to the Organizational Transactions	2,675		—	—		—	—		—		—		—		2,675
Effect of Organizational Transactions	181,448		81,977,751	1		78,300,817	1		—		(92,806)		(88,644)		—
Issuance of Class A common stock sold in IPO, net of underwriting discounts and commissions and offering costs	—		11,550,000	—		(5,234,210)	—		70,188		—		70,976		141,164
Net loss subsequent to the Organizational Transactions	—		—	—		—	—		—		(5,534)		(5,475)		(11,009)
Equity-based compensation recognized subsequent to the Organizational Transactions	—		—	—		—	—		1,392		—		—		1,392
Activity under equity-based compensation plan	—		11,941	—		—	—		(687)		—		550		(137)
Deferred tax adjustment related to Tax Receivable Agreement	—		—	—		—	—		7,180		—		—		7,180
Balance at March 31, 2021	—		93,539,692	1		73,066,607	1		78,073		(98,340)		(22,593)		(42,858)
Net income	—		—	—		—	—		—		4,558		4,596		9,154
Equity-based compensation	—		—	—		—	—		1,955		—		—		1,955
Activity under equity-based compensation plan	—		5,872	—		—	—		(857)		—		857		—
Distributions to Non-controlling interest	—		—	—		—	—		—		—		(2,973)		(2,973)
Reallocation of non-controlling interest	—		—	—		—	—		(288)		—		288		—
Balance at June 30, 2021	$	—	93,545,564	$	1	73,066,607	$	1	$	78,883	$	(93,782)	$	(19,825)	$	(34,722)


	2022				2021
	Revenue %		Accounts Receivable %		Revenue %		Accounts Receivable %
Customer A	12.3	%	11.2	%	25.5	%	15.8	%
Customer B	10.0	%	5.0	%	3.6	%	1.2	%
Customer C	9.7	%	11.3	%	6.5	%	23.7	%
Customer D	7.4	%	2.7	%	13.2	%	4.6	%


Purchase Price Allocation
Cash and cash equivalents	$	849
Accounts receivable	5,382
Inventory	4,273
Other current assets	1,583
Total current assets	12,087
Property, plant and equipment	438
Goodwill	19,765
Other intangible assets	1,600
Total Assets	33,890
Accounts payable	9,440
Accrued expenses	2,655
Debt	1,537
Total liabilities	13,632
Net assets acquired	$	20,258


	June 30, 2022		December 31, 2021
Raw materials	$	66,301	$	39,265
Allowance for obsolete or slow-moving inventory	(1,340)		(897)
Inventory, net	$	64,961	$	38,368


	Estimated Useful Lives (Years)

		June 30, 2022		December 31, 2021
Land	N/A	$	840	$	840
Building and land improvements	5-40	9,070		7,801
Machinery and equipment	3-5	11,664		10,693
Furniture and fixtures	3-7	1,684		1,775
Vehicles	5	65		65
		23,323		21,174
Less: accumulated depreciation		(6,493)		(5,600)
Property, plant and equipment, net		$	16,830	$	15,574


	Goodwill
Beginning Balance	$	69,436
Adjustments related to finalization of working capital in the acquisition of ConnectPV	505
Ending Balance	$	69,941


	June 30, 2022		December 31, 2021
Accrued compensation	$	2,910	$	2,882
Deferred revenue	13,871		1,841
Accrued interest	5,149		3,095
Accrued professional fees	694		548
Lease liability	1,117		—


	June 30, 2022		December 31, 2021
Other accrued expenses	1,556		1,203
Total accrued expenses and other	$	25,297	$	9,569


	June 30, 2022		December 31, 2021
Term Loan Facility	$	196,250	$	197,250
Revolving Credit Facility	85,140		55,140
Less: deferred financing costs	(4,735)		(5,337)
Total debt, net of deferred financing costs	276,655		247,053
Less: current portion	(2,000)		(2,000)
Long-term debt, less current portion	$	274,655	$	245,053


	Estimated Useful Lives (Years)	June 30, 2022		December 31, 2021
Amortizable:
Costs:
Customer relationships	13	$	53,100	$	53,100
Developed technology	13	34,600		34,600
Trade names	13	11,900		11,900
Backlog	1	600		600
Noncompete agreements	5	2,000		2,000
Total amortizable intangibles		102,200		102,200
Accumulated amortization:
Customer relationships		20,777		18,629
Developed technology		13,530		12,199
Trade names		4,666		4,103
Backlog		500		200
Noncompete agreements		2,000		1,833
Total accumulated amortization		41,473		36,964
Total amortizable intangibles, net		$	60,727	$	65,236


	Restricted Stock Units	Weighted Average Price
Outstanding, December 31, 2021	1,632,844	$	27.58
Granted	640,736	$	12.82
Vested	(436,357)	$	24.40
Forfeited	(26,370)	$	31.17

Outstanding, June 30, 2022	1,810,853	$	23.05


	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Operating lease expense	$	296	$	576
Variable lease expense	33		64
Short-term lease expense	33		176
Total lease expense	$	362	$	816


Fiscal year ending December 31,	Operating Leases
2022	$	652
2023	1,339
2024	1,264
2025	960
2026	952
Thereafter	246
Total lease payments	5,413
Less: Imputed lease interest	(450)
Total lease liabilities	$	4,963


	Performance Stock Units	Weighted Average Price
Outstanding, December 31, 2021	—	$	—
Granted	242,907	$	11.41
Vested	—	$	—
Forfeited	—	$	—

Outstanding, June 30, 2022	242,907	$	11.41


	Six Months Ended June 30, 2022		Period from January 27, 2021 to June 30, 2021

Net income (loss) attributable to non-controlling interest	$	4,910	$	(879)
Transfers to non-controlling interests
Decrease as a result of the Organizational Transactions	—		(88,644)
Increase as a result of newly issued LLC Interests in IPO	—		70,976
Increase as a result of activity under equity-based compensation plan	2,973		1,407
Decrease from tax distributions to non-controlling interest	(4,566)		(2,973)
Reallocation of non-controlling interest	20		288
Change from net income attributable to/from non-controlling interest and transfers to non-controlling interest	$	3,337	$	(19,825)


	(*)	June 30, 2022
ROU asset	Other assets	$	4,655

Lease liability, current portion	Accrued expenses and other	$	1,117
Lease liability, long-term portion	Other long-term liabilities	3,846
Total lease liability		$	4,963


			Six Months Ended June 30, 2022
Weighted average remaining lease-term			4.3 years
Weighted average discount rate			4.5%


	Six Months Ended June 30, 2022
Operating cash flows from operating leases	$	320
Non cash investing activities:
Lease liabilities arising from obtaining right-of-use assets as of January 1, 2022	$	1,239
Lease liabilities arising from obtaining right-of-use assets during the six months ended June 30, 2022	$	3,990


	Three Months Ended June 30,				Increase / (Decrease)				Six Months Ended June 30,				Increase / (Decrease)
	2022		2021						2022		2021
Revenue	$	73,490	$	59,722	$	13,768	23	%	$	141,466	$	105,326	$	36,140	34	%
Cost of revenue	44,897		33,543		11,354		34	%	86,581		60,373		26,208		43	%
Gross profit	28,593		26,179		2,414		9	%	54,885		44,953		9,932		22	%
Operating Expenses
General and administrative expenses	13,265		10,018		3,247		32	%	27,184		16,834		10,350		61	%
Depreciation and amortization	2,344		2,062		282		14	%	4,710		4,130		580		14	%
Total Operating Expenses	15,609		12,080		3,529		29	%	31,894		20,964		10,930		52	%
Income from Operations	12,984		14,099		(1,115)		(8)	%	22,991		23,989		(998)		(4)	%
Interest expense, net	(4,170)		(3,620)		550		15	%	(8,006)		(7,329)		677		9	%
Payable pursuant to the tax receivable agreement adjustment	—		(1,664)		(1,664)		(100)	%	—		(1,664)		(1,664)		(100)	%
Loss on debt repayment	—		—		—		—	%	—		(15,990)		(15,990)		(100)	%
Income (loss) before income taxes	8,814		8,815		(1)		—	%	14,985		(994)		15,979		1608	%
Income tax benefit (expense)	(1,511)		339		1,850		546	%	(3,033)		1,814		4,847		267	%
Net income	7,303		9,154		(1,851)		(20)	%	11,952		820		11,132		(1358)	%
Less: net income (loss) attributable to non-controlling interests	2,901		4,596		(1,695)		(37)	%	4,910		(879)		5,789		659	%
Net income attributable to Shoals Technologies Group, Inc.	$	4,402	$	4,558	$	(156)	(3)	%	$	7,042	$	1,699	$	5,343	(314)	%


/s/ Kevin Hubbard
Kevin Hubbard
Interim Chief Financial Officer


/s/ Jason Whitaker
Jason Whitaker
President, Chief Executive Officer and Director (Principal Executive Officer)


/s/ Kevin Hubbard
Kevin Hubbard
Interim Chief Financial Officer (Principal Financial and Accounting Officer)