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Shoals Technologies Group, Inc. Reports Financial Results for Fourth Quarter 2021

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Shoals Technologies Group
Shoals Technologies Group

– Record Revenue and Gross Profit for Full Year 2021 –

– System Solutions Revenue Increased 29% Year-Over-Year in the Fourth Quarter –

– Gross Margin of 38.8% for the Full Year 2021 –

– Backlog and Awarded Orders Nearly Doubled Year-Over-Year to a Record $299.0 million –

– Revenue Growth Expected to Accelerate in 2022 –

PORTLAND, Tenn., March 10, 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 fourth quarter ended December 31, 2021.

“Despite the challenges posed by the COVID-19 pandemic and unprecedented supply chain disruptions, Shoals delivered record revenue and gross profit in 2021. Revenue and gross profit grew 21% and 24%, respectively, and gross margin increased to 38.8%. Adjusted EBITDA increased modestly year-over-year as a result of investments we made in human capital infrastructure to support our growth initiatives, including international expansion, our new EV business unit, expanded storage offerings, and new product development, as well as public company costs,” said Jason Whitaker, Chief Executive Officer of Shoals.

Mr. Whitaker added, “The hard work we did in 2021 to convert more customers to BLA, introduce new products, establish a presence in Europe and launch our EV business is going to accelerate our growth in 2022. We now have four times as many BLA customers as we did twelve months ago. Last month we received our IEC certification in Europe, which was the last regulatory hurdle before we could sell our products across the EU. We began shipping our Phase 1 wire management solutions last year, started manufacturing the first order of our Phase 2 IV curve benchmarking product in the fourth quarter, and remain on schedule to introduce BLA 2.0 and high capacity plug-and-play wire harnesses later this year. Lastly, we have made tremendous progress over the past six months in our new EV business, including commercializing our first products, signing our first MSA with a charge point operator and opening our eMobility Innovation Center, which serves as a showcase to demonstrate our technology to prospective customers.”

“Our backlog and awarded orders of $299.0 million at year end 2021 is nearly twice what it was at the end of 2020 and underscores the momentum that is building across our business. To support our growth, we continue to expand our engineering and sales teams and will be opening an additional manufacturing facility which will more than double our production capacity,” said Mr. Whitaker.

“While demand for our products is accelerating, the current environment is dynamic and we are closely monitoring our supply chain, labor costs, materials costs and logistics availability,” concluded Mr. Whitaker.

Fourth Quarter 2021 Financial Results
Revenue was $48.0 million, compared to $38.8 million for the prior-year period, an increase of 24%, driven by an increase of 29% in System Solution revenue and a 15% increase in Components revenue.

The growth in System Solutions reflects strong demand for the Company’s combine-as-you-go system. System Solutions represented 68% of revenue in the quarter versus 65% in the prior-year period.

Gross profit increased 7% to $15.9 million, compared to $14.8 million in the prior-year period. Gross profit as a percentage of revenue was 33.1% compared to 38.3% in the prior-year period, due to approximately $1.0 million of higher material and logistics costs. The Company expects additional costs of approximately $3.0 million in the first half of 2022, with gross margin expected to normalize at levels in line with what the Company has achieved historically.

General and administrative expenses were $11.0 million, compared to $5.6 million during the same period in the prior year. This change was primarily a result of higher non-cash stock-based compensation, planned increases in payroll expense due to higher headcount to support growth and new product initiatives, and new public company costs.

Income from operations was $2.7 million, compared to $7.2 million during the same period in the prior year.

Net loss was $2.2 million, compared to net income of $4.2 million during the same period in the prior year. This change was primarily due to higher general and administrative expenses and higher interest expense partially offset by a tax benefit. Net income 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 $(0.04).

Adjusted EBITDA was $11.3 million, compared to $14.1 million for the prior-year period.

Adjusted net income was $0.9 million, compared to $9.0 million during the same period in the prior year. Adjusted diluted earnings per share was $0.01.

Backlog and Awarded Orders
The Company’s backlog and awarded orders on December 31, 2021 were $299.0 million, representing a new record for the company and an increase of 94% and 10% versus the same time last year and September 30, 2021, respectively. The increase in backlog and awarded orders reflects continued robust demand for the company’s products.

First Quarter 2022 and Full Year 2022 Outlook
The Company is updating its outlook for the quarter ended March 31, 2022. It is not the Company’s intention to provide quarterly guidance on an ongoing basis. Based on current market conditions, business trends and other factors, for the quarter ended March 31, 2022, the Company expects:

  • Revenues to be in the range of $68 million to $74 million

  • Adjusted EBITDA to be in the range of $16 million to $20 million

  • Adjusted net income to be in the range of $10 to $13 million

Based on current business conditions, business trends and other factors, for the full year 2022 ending December 31, 2022, the Company expects:

  • Revenues to be in the range of $300 million to $350 million

  • Adjusted EBITDA to be in the range of $79 million to $97 million

  • Adjusted net income to be in the range of $54 to $69 million

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 March 10, 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 10018280. The replay will be available until 11:59 p.m. Eastern Time on March 24, 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: 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 EPS
We define Adjusted EBITDA as net income (loss) plus (i) interest expense, net, (ii) income taxes expense, (iii) depreciation expense, (iv) amortization of intangibles, (v) payable pursuant to the tax receivable agreement liability 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 liability 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)

December 31,

2021

2020

Assets

Current Assets

Cash and cash equivalents

$

5,006

$

10,073

Accounts receivable, net

31,499

27,004

Unbilled receivables

13,533

3,794

Inventory, net

38,368

15,121

Other current assets

5,042

155

Total Current Assets

93,448

56,147

Property, plant and equipment, net

15,574

12,763

Goodwill

69,436

50,176

Other intangible assets, net

65,236

71,988

Deferred tax assets

176,958

Other assets

5,762

4,236

Total Assets

$

426,414

$

195,310

Liabilities and Stockholders’ Deficit / Members’ Deficit

Current Liabilities

Accounts payable

$

19,985

$

14,634

Accrued expenses

9,569

5,967

Long-term debt—current portion

2,000

3,500

Total Current Liabilities

31,554

24,101

Revolving line of credit

55,140

20,000

Long-term debt, less current portion

189,913

335,332

Payable pursuant to the tax receivable agreement

156,374

Other long-term liabilities

931

Total Liabilities

433,912

379,433

Commitments and Contingencies

Stockholders’ Deficit / Members’ Deficit

Members’ deficit

(184,123

)

Preferred stock, $0.00001 par value - 5,000,000 shares authorized; none issued and outstanding as of December 31, 2021

Class A common stock, $0.00001 par value - 1,000,000,000 shares authorized; 112,049,981 shares issued and outstanding as of December 31, 2021

1

Class B common stock, $0.00001 par value - 195,000,000 shares authorized; 54,794,479 shares issued and outstanding as of December 31, 2021

1

Additional paid-in capital

95,684

Accumulated deficit

(93,133

)

Total stockholders’ equity attributable to Shoals Technologies Group, Inc. / members' equity (deficit)

2,553

(184,123

)

Non-controlling interests

(10,051

)

Total stockholders’ deficit / members’ deficit

(7,498

)

(184,123

)

Total Liabilities and Stockholders’ Deficit / Members’ Deficit

$

426,414

$

195,310


Shoals Technologies Group, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)

Three Months Ended
December 31,

Twelve Months Ended
December 31,

2021

2020

2021

2020

Revenue

$

48,046

38,753

$

213,912

$

175,518

Cost of revenue

32,123

23,911

130,567

108,972

Gross profit

15,923

14,842

82,645

66,546

Operating Expenses

General and administrative expenses

11,028

5,618

37,893

21,008

Depreciation and amortization

2,215

2,068

8,520

8,262

Total Operating Expenses

13,243

7,686

46,413

29,270

Income from Operations

2,680

7,156

36,232

37,276

Interest expense, net

(3,638

)

(2,909

)

(14,549

)

(3,510

)

Payable pursuant to the tax receivable agreement adjustment

2,015

(1,663

)

Loss on debt repayment

(15,990

)

Income before income taxes

1,057

4,247

4,030

33,766

Income tax expense

(3,209

)

(86

)

Net income (loss)

(2,152

)

4,247

3,944

33,766

Less: net income (loss) attributable to non-controlling interests

(315

)

1,596

Net income (loss) attributable to Shoals Technologies Group, Inc.

$

(1,837

)

4,247

$

2,348

$

33,766

Three Months
Ended

December 31,
2021

Period from
January 27,
2021 to

December 31,
2021

Loss per share of Class A common stock:

Basic

$

(0.04

)

$

0.00

Diluted

$

(0.04

)

$

0.00

Weighted average shares of Class A common stock outstanding:

Basic

106,233

99,269

Diluted

106,233

99,269


Shoals Technologies Group, Inc.
Consolidated Statements of Cash Flows
(in thousands)

Twelve Months Ended
December 31,

2021

2020

Cash Flows from Operating Activities

Net income

$

3,944

$

33,766

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

10,053

9,405

Amortization/write off of deferred financing costs

5,969

351

Equity-based compensation

11,286

8,251

Provision for slow-moving inventory

(1,418

)

188

Deferred taxes

(1,476

)

Payable pursuant to the TRA adjustment

1,663

Gain on sale of assets

52

Changes in assets and liabilities, net of business acquisition:

Accounts receivable

818

288

Unbilled receivables

(9,739

)

(1,289

)

Inventory

(17,188

)

(6,475

)

Other assets

341

643

Accounts payable

(3,877

)

4,251

Accrued expenses

(4,511

)

4,703

Net Cash Provided by (Used in) Operating Activities

(4,083

)

54,082

Cash Flows Used In Investing Activities

Purchases of property, plant and equipment

(4,126

)

(3,236

)

Acquisition of a business, net of cash acquired

(12,909

)

Net Cash Used in Investing Activities

(17,035

)

(3,236

)

Cash Flows from Financing Activities

Member / non-controlling interest distributions

(4,837

)

(376,046

)

Employee withholding taxes related to net settled equity awards

(137

)

Deferred financing costs

(94

)

(11,821

)

Proceeds from term loan facility

350,000

Payments on term loan facility

(152,750

)

Proceeds from revolving credit facility

49,140

20,000

Repayments of revolving credit facility

(14,000

)

Proceeds from issuance of Class A common stock sold in an IPO

278,833

Purchase of LLC Interests with proceeds from IPO

(124,312

)

Proceeds from issuance of Class A common stock in follow-on offering, net of underwriting discounts and commissions

281,064

Purchase of LLC Interests with proceeds from follow-on offering

(281,064

)

Payment of debt assumed in acquisition

(1,537

)

Deferred offering costs

(9,704

)

(3,738

)

Payments on senior debt - term loan

(26,250

)

Proceeds from senior debt - revolving line of credit

Payments on senior debt - revolving line of credit

Proceeds from delayed draw term loan facility

20,000

Payments on delayed draw term loan facility

(20,000

)

Net Cash Provided by (Used in) Financing Activities

20,602

(47,855

)

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash

(516

)

2,991

Cash, Cash Equivalents and Restricted Cash—Beginning of Period

10,073

7,082

Cash, Cash Equivalents and Restricted Cash—End of Period

$

9,557

$

10,073


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
December 31,

Twelve Months Ended
December 31,

2021

2020

2021

2020

Net income (loss)

$

(2,152

)

$

4,247

$

3,944

$

33,766

Interest expense, net

3,638

2,909

14,549

3,510

Income tax expense

3,209

86

Depreciation expense

436

391

1,701

1,420

Amortization of intangibles

2,272

1,997

8,352

7,985

Payable pursuant to the TRA adjustment (a)

(2,015

)

1,663

Loss on debt repayment

15,990

Equity-based compensation

4,382

1,032

11,286

8,251

Acquisition-related expenses

652

2,349

COVID-19 expenses(b)

70

884

339

2,890

Non-recurring and other expenses(c)

777

2,633

2,598

3,077

Adjusted EBITDA

$

11,269

$

14,093

$

62,857

$

60,899

(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
December 31,

Twelve Months Ended
December 31,

2021

2020

2021

2020

Net income (loss) attributable to Shoals Technologies Group, Inc.

$

(1,837

)

$

4,247

$

2,348

$

33,766

Net income (loss) impact from pro forma conversion of Class B common stock to Class A common stock (a)

(315

)

1,596

Adjustment to the provision for income tax (b)

20

(862

)

(456

)

(7,327

)

Tax effected net income (loss)

(2,132

)

3,385

3,488

26,439

Amortization of intangibles

2,272

1,997

8,352

7,985

Amortization of deferred financing costs

277

320

1,230

351

Payable pursuant to TRA adjustment(c)

(2,015

)

1,663

Loss on debt repayment

15,990

Equity-based compensation

4,382

1,032

11,286

8,251

Acquisition-related expenses

652

2,349

COVID-19 expenses (d)

70

884

339

2,890

Non-recurring and other expenses (e)

777

2,633

2,598

3,077

Tax impact of adjustments (f)

(3,409

)

(1,266

)

(11,381

)

(3,104

)

Adjusted Net Income

$

874

$

8,985

$

35,914

$

45,889

(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 100% of the units in Shoals Parent LLC.

Twelve Months Ended
December 31,

2021

2020

Statutory U.S. Federal income tax rate

21.0

%

21.0

%

State and local taxes (net of federal benefit)

6.4

%

0.7

%

Permanent items, including valuation adjustment

1.2

%

%

Effective income tax rate for Adjusted Net Income

28.6

%

21.7

%

(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
December 31,

Twelve Months Ended
December 31,

2021

2020

2021

2020

Diluted weighted average shares of Class A common shares outstanding, excluding Class B common shares

106,606

N/A (b)

99,507

N/A (b)

Assumed pro forma conversion of Class B common shares to Class A common shares

60,611

N/A (b)

67,429

N/A (b)

Adjusted diluted weighted average shares outstanding

167,217

N/A (b)

166,936

N/A (b)

Adjusted Net Income (a)

$

874

N/A (b)

$

35,914

N/A (b)

Adjusted Diluted EPS

$

0.01

N/A (b)

$

0.22

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.