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 fourth quarter and full year ended December 31, 2020.
“2020 was another record year for Shoals. We grew revenues 21%, expanded adjusted EBITDA margins more than 900 basis points, increased the percentage of our revenues from system solutions to 66% and successfully navigated the unique challenges created by the coronavirus pandemic. Our results reflect the tremendous efforts of our team members and the passion they have for our technology and its important role in the energy transition,” said Jason Whitaker, Chief Executive Officer of Shoals.
Mr. Whitaker continued, “Our focus for 2021 is executing on the growth strategies that we described during our initial public offering which include 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. We are on or ahead of plan for each of these initiatives. BLA is continuing to take share from conventional homerun solutions and we are on track to convert several new EPCs and developers to our system in 2021. We are on schedule to launch wire management and IV curve benchmarking products in Q2 to complement the BLA and we expect both products to begin generating revenues in Q4. We recently hired our head of EMEA sales to continue building our international sales pipeline. We are taking steps to accelerate the development of our EV infrastructure business because we see an opportunity to bring game changing innovation to that market similar to what we did in solar. As part of that effort, we hired Jeff Tolnar to head our newly formed EV infrastructure business. Jeff previously served as Chief Commercial Officer of Greenlots, a leading provider of turnkey EV charging solutions that was acquired by Shell.”
“The entire Shoals organization contributes to the Company’s success and we are proud that all of our employees became shareholders through our recent initial public offering. The energy transition is a global megatrend that is in the very early innings. We see tremendous opportunity ahead for our employees and shareholders,” concluded Mr. Whitaker.
Results Three Months Ended December 31, 2020
Revenues were $38.8 million, compared to $37.9 million for the prior-year period. Year-over-year growth was more modest in the fourth quarter due to extended downtime we took in December while we expanded capacity, as well as an extraordinarily strong fourth quarter of 2019.
Gross profit increased 19.0% to $14.8 million, compared to $12.5 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 more than 530 bps to 38.3% from 32.9% in the prior year.
Operating expenses were $7.7 million compared to $4.3 million during the same period in the prior year primarily as a result of higher equity-based compensation, increased payroll expense due to higher headcount, and non-recurring expenses related to our IPO.
Income from operations was $7.2 million, compared to $8.1 million during the same period in the prior year.
Net income was $4.2 million, compared to $7.8 million during the same period in the prior year. Adjusted net income increased 10.6% to $11.1 million, compared to $10.1 million during the same period in the prior year.
Adjusted EBITDA increased 32.0% to $14.1 million, compared to $10.7 million for the prior-year period.
Results Full Year Ended December 31, 2020
Revenues grew 21.5% to $175.5 million in 2020, compared to $144.5 million in the prior year driven by significantly higher sales volumes as a result of increased demand for solar EBOS generally and our combine-as-you-go products specifically. The sale of system solutions represented 66% of revenues versus 51% in the prior year.
Gross profit increased 50.5% to $66.5 million in 2020, compared to $44.2 million in the prior year, primarily driven by 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 volumes. Gross margin increased to 37.9% from 30.6% in the prior year, in part due to changes in product mix, with sales of higher-margin products such as system solutions for combine-as-you-go EBOS increasing as a percentage of total revenues.
Operating expense was $29.3 million compared to $17.3 million in the prior year primarily as a result of higher general and administrative expense. Operating expense for the year includes $8.3 million for non-cash equity-based compensation and $2.9 million for COVID-19 related costs, as well as professional fees related to the company’s IPO and additional staffing compensation, offset by a reduction in marketing related expenses.
Income from operations increased 38.4% to $37.3 million, compared to $26.9 million in the prior year.
Net income grew 34.3% to $33.8 million, compared to $25.1 million in the prior year. Adjusted net income increased 66.4% to $56.3 million, compared to $33.9 million in the prior year.
Adjusted EBITDA grew 65.6% to $60.9 million, compared to $36.8 million in the prior year.
Backlog and Awarded Orders
The Company’s backlog and awarded orders at December 31, 2020 were $157 million, an increase of 46% year-over-year. 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, for the full year 2021 ending December 31, 2021, the Company expects:
- 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
For a reconciliation of a non-GAAP figure to the applicable GAAP figure please see page 9 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.