Shoals Technologies Group, Inc 10-Q for FY2023 Q1

Shoals Technologies Group, Inc. (SHLS)

10-Q 2023-05-08 For: 2023-03-31

Added on April 10, 2026

About this 10-Q

Shoals Technologies Group, Inc filed this 10-Q on May 8, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

Headline figures

Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $105.09M; up 54.6% from $67.98M a year earlier
Net income: $14.3M; up 441.5% from net income of $2.64M a year earlier
Diluted EPS: $0.10; up 400.0% from $0.02 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	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27

PART II
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	32
Item 6.	Exhibits	32

	SIGNATURES	34


	March 31, 2023		December 31, 2022
Assets
Current Assets
Cash and cash equivalents	$	6,460	$	8,766
Accounts receivable, net	75,415		50,575
Unbilled receivables	19,661		16,713
Inventory, net	73,729		72,854
Other current assets	8,094		4,632
Total Current Assets	183,359		153,540
Property, plant and equipment, net	18,388		16,870
Goodwill	69,941		69,941
Other intangible assets, net	54,563		56,585
Deferred tax assets	476,283		291,634
Other assets	6,067		6,325
Total Assets	$	808,601	$	594,895

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	21,936	$	9,481
Accrued expenses and other	17,382		17,882
Deferred revenue	23,450		23,259
Long-term debt—current portion	2,000		2,000
Total Current Liabilities	64,768		52,622
Revolving line of credit	45,000		48,000
Long-term debt, less current portion	188,836		189,063
Other long-term liabilities	3,917		4,221
Total Liabilities	302,521		293,906
Commitments and Contingencies (Note 13)
Stockholders’ Equity
Preferred stock, $0.00001 par value - 5,000,000 shares authorized; none issued and outstanding as of March 31, 2023 and December 31, 2022	—		—
Class A common stock, $0.00001 par value - 1,000,000,000 shares authorized; 169,820,407 and 137,904,663 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	2		1
Class B common stock, $0.00001 par value - 195,000,000 shares authorized; none and 31,419,913 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	—		1
Additional paid-in capital	457,304		256,894
Accumulated earnings	48,774		34,478
Total stockholders’ equity attributable to Shoals Technologies Group, Inc.	506,080		291,374
Non-controlling interests	—		9,615
Total stockholders' equity	506,080		300,989
Total Liabilities and Stockholders’ Equity	$	808,601	$	594,895


	Three Months Ended March 31,
		2023		2022
Revenue		$	105,086	$	67,976
Cost of revenue		56,829		41,684
Gross profit		48,257		26,292
Operating expenses
General and administrative expenses		19,992		13,919
Depreciation and amortization		2,165		2,366
Total operating expenses		22,157		16,285
Income from operations		26,100		10,007
Interest expense, net		(5,996)		(3,836)


Income before income taxes		20,104		6,171
Income tax expense		(3,121)		(1,522)
Net income		16,983		4,649
Less: net income attributable to non-controlling interests		2,687		2,009
Net income attributable to Shoals Technologies Group, Inc.		$	14,296	$	2,640

	Three Months Ended March 31,
		2023		2022
Earnings per share of Class A common stock:
Basic		$	0.10	$	0.02
Diluted		$	0.10	$	0.02
Weighted average shares of Class A common stock outstanding:
Basic		146,409		112,211
Diluted		147,107		112,240


	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Earnings		Non-Controlling Interests		Total Stockholders' Equity

	Shares	Amount		Shares	Amount
Balance at December 31, 2022	137,904,663	$	1	31,419,913	$	1	$	256,894	$	34,478	$	9,615	$	300,989
Net income	—	—		—	—		—		14,296		2,687		16,983
Equity-based compensation	—	—		—	—		7,523		—		—		7,523
Activity under equity-based compensation plan	—	—		—	—		(4,219)		—		687		(3,532)
Distributions to non-controlling interests	—	—		—	—		—		—		(2,628)		(2,628)
Vesting of restricted stock units	495,831	—		—	—		—		—		—		—
Exchange of Class B to Class A common stock, net	31,419,913	1		(31,419,913)	(1)		186,745		—		—		186,745
Reallocation of non-controlling interests	—	—		—	—		10,361		—		(10,361)		—
Balance at March 31, 2023	169,820,407	$	2	—	$	—	$	457,304	$	48,774	$	—	$	506,080


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


Supplemental Cash Flows Information:
Cash paid for interest	$	5,193	$	2,710
Cash paid for taxes	$	181	$	37
Non-cash investing and financing activities:
Recording of deferred tax assets and capital contribution related to exchanges of Class B common stock to Class A common stock	$	187,648	$	—


	March 31, 2023		March 31, 2022
Cash and cash equivalents	$	6,460	$	2,534
Restricted cash included in other current asset	—		4,222
Restricted cash included in other assets	—		6,325
Total cash, cash equivalents and restricted cash	$	6,460	$	13,081


	2023				2022
	Revenue %		Accounts Receivable %		Revenue %		Accounts Receivable %
Customer A	19.0	%	20.7	%	16.4	%	8.4	%
Customer B	0.5	%	8.3	%	12.2	%	12.6	%
Customer C	0.1	%	1.1	%	10.5	%	1.6	%
Customer D	6.6	%	7.3	%	10.0	%	0.1	%


	March 31, 2023		December 31, 2022
Accounts receivable	$	76,191	$	51,061
Less: allowance for credit losses	(776)		(486)
Accounts receivable, net	$	75,415	$	50,575


	March 31, 2023		December 31, 2022
Raw materials	$	78,975	$	75,778
Allowance for obsolete or slow-moving inventory	(5,246)		(2,924)
Inventory, net	$	73,729	$	72,854


	Estimated Useful Lives (Years)

		March 31, 2023		December 31, 2022
Land	N/A	$	840	$	840
Building and land improvements	5-40	9,551		9,031
Machinery and equipment	3-5	13,670		12,371
Furniture and fixtures	3-7	1,948		1,787
Vehicles	5	125		125
		26,134		24,154
Less: accumulated depreciation		(7,746)		(7,284)
Property, plant and equipment, net		$	18,388	$	16,870


	March 31, 2023		December 31, 2022
Accrued compensation	$	2,791	$	4,917
Accrued interest	7,627		7,226
Other accrued expenses	6,964		5,739
Total accrued expenses and other	$	17,382	$	17,882


	March 31, 2023		December 31, 2022
Term Loan Facility	$	194,750	$	195,250
Revolving Credit Facility	45,000		48,000
Less: deferred financing costs	(3,914)		(4,187)
Total debt, net of deferred financing costs	235,836		239,063
Less: current portion	(2,000)		(2,000)
Long-term debt, net current portion	$	233,836	$	237,063


	Three Months Ended March 31, 2023

	Restricted Stock Units	Weighted Average Price
Outstanding, beginning of period	1,736,975	$	22.34
Granted	203,498	$	27.15
Forfeited	(29,863)	$	21.70
Vested	(592,160)	$	20.30
Outstanding, end of period	1,318,450	$	24.01


	Estimated Useful Lives (Years)	March 31, 2023		December 31, 2022
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		23,998		22,925
Developed technology		15,526		14,860
Trade names		5,513		5,230
Backlog		600		600
Noncompete agreements		2,000		2,000
Total accumulated amortization		47,637		45,615
Total other intangible assets, net		$	54,563	$	56,585


	Three Months Ended March 31,
		2023		2022
Statutory U.S. Federal income tax rate		21.0	%	21.0	%
Permanent adjustments		0.3	%	0.1	%
State and local taxes (net of federal benefit)		3.0	%	2.5	%
Effective income tax rate for Adjusted Net Income		24.3	%	23.6	%


Type of Award:			Restricted Stock Units
Participant:
Date of Grant:
Vesting Commencement Date:
Total Number of Restricted Stock Units:
Vesting Schedule:			Subject to Sections 3 and 6 of the Agreement, the Plan and the other terms and conditions set forth herein, the RSUs shall vest according to the following schedule, so long as you remain continuously employed by the Company or an Affiliate from the Date of Grant through each such vesting date (each, a “Vesting Date”): Vesting Date Percentage of RSUs That Vest


Type of Award:			Restricted Stock Units, granted pursuant to Article VIII of the Plan, which vest subject to performance-vesting conditions as set forth below.
Participant:
Date of Grant:
Target Number of Performance-Based Restricted Stock Units (“Target PSUs”):
Performance Period:			_________ (the “Performance Period”).
Vesting Schedule:			Subject to Sections 3 and 6 of the Agreement, the Plan and the other terms and conditions set forth herein, the PSUs shall vest based on achievement of the performance-vesting conditions set forth on Exhibit B attached hereto during the Performance Period, so long as you remain continuously employed by the Company or an Affiliate from the Date of Grant through the Certification Date (as defined on Exhibit B).


	Three Months Ended March 31, 2023

	Performance Stock Units	Weighted Average Price
Outstanding, beginning of period	256,305	$	11.89
Granted	143,810	$	28.19
Forfeited	(79,533)	$	10.42
Vested	(53,144)	$	10.42
Outstanding, end of period	267,438	$	21.38


	(*)	March 31, 2023		December 31, 2022
Billed accounts receivable	Accounts receivable, net	$	71,091	$	48,571
Retainage	Accounts receivable, net	$	4,324	$	2,004
Unbilled receivables	Unbilled receivables	$	19,661	$	16,713
Deferred revenue	Deferred revenue	$	23,450	$	23,259


	Three Months Ended March 31,				Increase / (Decrease)
		2023	2022
Revenue			$	105,086		$	67,976	$	37,110	55	%
Cost of revenue			56,829			41,684		15,145		36	%
Gross profit			48,257			26,292		21,965		84	%
Operating expenses
General and administrative expenses			19,992			13,919		6,073		44	%
Depreciation and amortization			2,165			2,366		(201)		(8)	%
Total operating expenses			22,157			16,285		5,872		36	%
Income from operations			26,100			10,007		16,093		161	%
Interest expense, net			(5,996)			(3,836)		2,160		56	%


Income before income taxes			20,104			6,171		13,933		226	%
Income tax expense			(3,121)			(1,522)		1,599		105	%
Net income			16,983			4,649		12,334		265	%
Less: net income attributable to non-controlling interests			2,687			2,009		678		34	%
Net income attributable to Shoals Technologies Group, Inc.			$	14,296		$	2,640	$	11,656	442	%


/s/ Jeffery Tolnar
Jeffery Tolnar
President, Interim Chief Executive Officer


/s/ Dominic Bardos
Dominic Bardos
Chief Financial Officer (Principal Financial and Accounting Officer)