Shoals Technologies Group Inc
For the period ended Mar 31, 2025. Filed May 6, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 6, 2025
SHLS$10.08+12.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001831651-24-000124
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-06.
0001831651-25-000060
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 95 previous paragraphs and 106 current paragraphs.
40 unchanged; 34 reworded; 31 added; 19 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 8 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (31)
Current report
Traditionally, and for the three months ended March 31, 2025, we primarily sold our EBOS solutions and components and OEM components to customers in the United States. Specifically, we primarily sold to engineering, procurement and construction firms (“EPCs”) for use in large solar projects designed to generate electricity and feed it directly into the electric grid, typically with a generation capacity of 1 megawatt (“MW”) or greater (“utility-scale solar”). These EPCs work with owners and developers of solar assets to build solar energy projects. However, given the mission critical nature of EBOS, the decision to use our products typically involves input from both the EPC and the owner/developer of the solar energy project. We are proud of the breadth of EPCs we have worked with. We believe that as of March 31, 2025, we have worked with 13 of the top 15 U.S. solar EPCs, per Wood Mackenzie data from 2022-2024.
Current report
In the third quarter of 2024, we announced our strategic decision to expand our reach and capitalize on international, BESS, data centers, and Commercial, Community, and Industrial (“CC&I”) markets, while also maintaining our focus on domestic utility-scale solar and OEM markets. This decision is aimed at capitalizing on the growing global demand for renewable energy solutions and diversifying our market presence. By entering new geographic regions, markets, and applications we aim to enhance our competitive position and drive long-term growth.
Current report
Trade Regulation and Import Tariffs
Current report
Our business activities are subject to numerous laws and regulations in the jurisdictions in which we operate. Particularly, our exports and imports are subject to complex trade and customs laws, tax requirements and tariffs set by governments through mutual agreements or unilateral actions. Changes in tax policies or trade regulations, the disallowance of tax deductions on imported merchandise, or the imposition of new tariffs on imported products, including reciprocal tariffs, could have an adverse effect on our business and results of operations.
Current report
On March 4, 2025, the current Presidential Administration (the “Administration”) imposed a 25% tariff on all goods imported from Canada and Mexico, with specific exemptions for certain products such as Canadian oil, natural gas, uranium, and other energy sources, which are subject to a lower 10% tariff. On April 2, 2025, the Administration imposed significant tariffs, including a 10% tariff on most imports from other trading partners, as well as additional reciprocal tariffs on specific countries. On April 9, 2025, the Administration imposed a 145% tariff on Chinese imports, effective immediately. Also on April 9, 2025, the Administration implemented a
Current report
90-day pause on tariffs for all other trading partners, including Canada and Mexico, and capped the reciprocal tariffs at 10% for countries that did not retaliate against the United States. Future changes in tariff policies are possible. As a result, the global trade environment has experienced extreme uncertainty and volatility, and is rapidly evolving. In recent years, we have expanded our domestic capabilities, supply chain resiliency, and manufacturing capacity, which helps offset some of the volatility we face due to trade policies and regulations.
Current report
To date, these tariff actions have not materially impacted our business or results of operations. However, as the implementation and scope of these proposed tariffs is still uncertain, any significant new tariffs or the threat thereof, which may last for an indefinite period of time, may make it more difficult for us to source raw materials and could result in increased prices for certain of our raw materials including steel, copper and aluminum. Retaliatory tariffs imposed by trading partners could impact the export of our manufactured projects and cause our customers to seek alternatives. The implementation of these proposed tariffs, any future increases in existing tariff rates, additional tariffs on other goods, or further retaliatory actions from other governments, or the threat thereof, may result in higher costs for us, and there can be no assurance we will be able to pass on any of the increases in raw material costs directly resulting from the tariffs to our customers. Such actions may also result in more difficulty or the inability to obtain needed materials. In addition, the threat of increased tariffs alone has caused market uncertainty.
Current report
Beyond the most recent tariffs, over the past few years, escalating trade tensions between the United States and China and other jurisdictions led to increased tariffs and trade restrictions, including tariffs applicable to some of our products. We have been assessing and monitoring the potential impact of tariffs on our supply chain and proactively seeking to mitigate the impact such may have on our operations, including working on alternative sourcing strategies and preparing our trade partners to absorb potential increases in their costs due to tariffs. However, we cannot be certain that we would not experience negative effects in the remainder of 2025, particularly given the Administration’s positions concerning trade and tariffs and the fluctuating nature of such actions to date.
Current report
Federal, state, local and foreign government bodies provide incentives to owners, end users, distributors and manufacturers of solar energy systems to promote the development of solar electricity. The range and duration of these incentives varies widely by geographic market.
Current report
The 2022 Inflation Reduction Act (“IRA”) in the U.S. made significant changes to the U.S. tax code to incentivize the development and use of solar-generated electricity to meet the country’s growing demand for power. The IRA offered tax incentives to companies who provide goods connected to the development and use of solar energy. The IRA allowed U.S. taxpayers making capital investments in solar projects to claim certain Investment Tax Credits (“TC”) for the installation of these solar projects. The IRA also generally allowed U.S. taxpayers to elect to receive a production tax credit (“PTC”) in lieu of the TC for qualified solar facilities if the construction began before January 1, 2025, among other requirements. While the IRA increased incentives for solar energy, some of those incentives have already begun to decrease and phase out. Additionally, given the change in U.S. presidential administrations, the future of the IRA and any federal solar incentives remains uncertain. If the IRA is repealed or significantly altered, it could have several adverse effects on our business. The removal of the incentives that drive demand for solar energy production could reduce the financial attractiveness of solar projects, leading to decreased demand for our products. Additionally, the uncertainty surrounding the future of these incentives could cause delays in project financing and execution, further impacting our sales volume and growth rate.
Current report
The Solar Market
Current report
Beginning in late 2023 and continuing in 2024, the domestic utility scale solar market experienced project delays that pushed and delayed projects beyond 2024. While there are inherent delays and pushouts with solar and construction projects in normal operating environments, the pushouts and delays experienced in late 2023 and into 2024 were significantly greater than we have historically experienced, and they impacted our results during 2024, lowering demand and sales volume. These trends were the result of several factors, including: permitting issues; supply chain disruptions; labor availability; project financing; anti-dumping and countervailing duties; interconnection complications; and uncertainty regarding changes in the U.S. trade environment. While we are currently experiencing a more normalized business environment, we expect these challenges to persist to a lesser degree in the near term. We continue to expect a modest amount of project delays when compared to historical levels. As a result, we believe the industry is poised for growth across both our core and new markets, driven by the continued and increasing need for energy around the world.
Current report
Other Macroeconomic Pressures
Current report
Cost of Revenue and Gross Profit
Current report
Operating Expenses
Current report
Interest Expense
Current report
Interest income
Current report
Interest income is related to interest on bank deposits.
Current report
Income Tax Expense
Current report
Revenue decreased by $10.4 million, or 11.5%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, driven by strategic pricing actions, volume discounts, and customer and product mix.
Current report
Cost of Revenue and Gross Profit
Current report
Operating Expenses
Current report
General and administrative expenses decreased $1.1 million, or 4.7%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The decrease in general and administrative expenses was the result of a $3.3 million decrease in general legal expenses for intellectual property and shareholder litigation matters, offset by a $1.7 million increase in legal expenses related to wire insulation shrinkback litigation.
Current report
Interest Expense
Current report
Income tax expense
Current report
The Company did not repurchase any shares of its common stock under the Repurchase Program during the three months ended March 31, 2025. As of March 31, 2025, the Company was authorized to repurchase up to $125 million of the Company's common stock under the Repurchase Program.
Current report
Goodwill Considerations
Current report
We perform an annual assessment of our goodwill during the fourth quarter of each calendar year or more frequently if indicators of potential impairment exist, such as an adverse change in business climate, declines in market capitalization or a decline in the overall industry demand, that would indicate it is more likely than not that the fair value of our single reporting unit is less than the carrying value. If we determine that it is more likely than not that the fair value of our single reporting unit is less than the carrying value, we measure the amount of impairment as the amount the carrying value of our single reporting unit exceeds the fair value, up to the carrying value of goodwill, by using a quantitative approach.
Current report
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual reporting units requires us to evaluate market indicators, such as stock price and market capitalization, and make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax rates, growth rates, and other market factors.
Current report
Although our market capitalization further declined in the first quarter of 2025, we do not believe that it is more likely than not that the fair value of our single reporting unit is less than the carrying value.
Current report
The estimated fair value of our single reporting unit is sensitive to the volatility in our stock price. If our market capitalization continues to decline or future performance falls below our current expectations, assumptions, or estimates, including assumptions related to current macroeconomic uncertainties, this may trigger a future material non-cash goodwill impairment charge, which could have a material adverse effect on our business, financial condition, and results of operations in the reporting period in which a charge would be necessary. We will continue to monitor developments, including updates to our forecasts and market capitalization. An update of our assessment and related estimates may be required in the future.
Removed paragraphs (19)
Previous report
Throughout the first three quarters of 2024, we have maintained focus on our growth strategy and continued strengthening our leadership position in the industry. We believe that as of September 30, 2024, we have worked with 13 of the top 15 U.S. solar EPCs, per Wood Mackenzie data from 2022-2024, and 11 of those EPCs used our combine-as-you-go system on their projects.
Previous report
During 2023 and continuing in the first three quarters in 2024, the domestic utility scale solar market experienced project delays that have pushed projects beyond 2024. Additionally, in 2023, the domestic utility scale solar market started experiencing slowing growth, which is expected to persist in the near term. These trends are the result of the costs of permitting issues; project financing; lingering uncertainty about the application of the Inflation Reduction Act of 2022 to solar projects; uncertainty regarding changes in the U.S. trade environment, including the imposition of trade restrictions, import tariffs, anti-dumping and countervailing duties; supply chain constraints; and interconnection complications. We expect these trends to persist beyond 2024 and reverse over time. These project slowdowns and delays have impacted our results, lowering demand and sales volume. However, even though we expect our growth rate to decline from the very high levels of the last few years, we believe that our domestic utility scale business will continue growing at an attractive rate.
Previous report
Income Tax Benefit (Expense)
Previous report
Revenue decreased by $32.0 million, or 24%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, driven by lower sales volumes primarily resulting from lower demand as a result of solar project delays that have pushed projects out from the first three quarters of 2024, and to a lesser extent, competitive dynamics, volume discounts, and customer mix in our key markets.
Previous report
General and administrative expenses decreased $3.8 million, or 17%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The decrease in general and administrative expenses was the result of a decrease in equity based compensation of $3.6 million due to a reduction in the probable outcome of PSU performance vesting conditions and forfeiture of RSUs and PSUs related to the resignation of a former officer, as well as a decrease in wages and related taxes of $0.8 million related to a decrease in bonus expense resulting from a decrease in estimated payouts under our annual incentive plan.
Previous report
Income tax benefit (expense)
Previous report
Income tax expense totaled $1.7 million for the three months ended September 30, 2024, as compared to income tax benefit of $6.6 million for the three months ended September 30, 2023. Our effective income tax rate for the three months ended September 30, 2024 and 2023 was 118.6% and 40.3%, respectively. The change in our effective income tax rate was due to various discrete items, particularly RSU and PSU shortfalls and return to provision adjustments, during the three months ended September 30, 2024. Additionally, during the three months ended September 30, 2023 we recorded an income tax benefit of $5.1 million in connection with termination of the Up-C structure on July 1, 2023, which increased our effective income tax rate when considered in relation to the net loss recorded during the three months ended September 30, 2023 .
Previous report
Comparison of the Nine Months Ended September 30, 2024 and 2023
Previous report
Revenue
Previous report
Revenue decreased by $66.3 million, or 18%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, driven by lower sales volumes resulting from solar project delays that have pushed projects out from the first three quarters of 2024, and to a lesser extent, competitive dynamics, volume discounts, and customer mix in our key markets.
Previous report
Cost of revenue decreased by $55.2 million, or 22%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, driven by the decrease in revenue. Gross profit as a percentage of revenue increased during the nine months ended September 30, 2024 to 34.8%, as compared to 31.5% during the nine months ended September 30, 2023. The increase in gross profit as a percentage of revenue was driven by a decrease in wire insulation shrinkback expenses recorded during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. This increase in gross profit as a percentage of revenue was offset by an increase in labor costs, competitive dynamics, volume discounts, and customer mix in our key markets, and a reduction in leverage on fixed costs.
Previous report
General and Administrative
Previous report
General and administrative expenses increased $1.5 million, or 2%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The increase in general and administrative expenses was the result of an increase in professional fees of $5.2 million primarily related to legal fees incurred in connection with the ongoing patent infringement, wire insulation shrinkback litigation, and securities litigation, as well as an increase in wages and related taxes of $1.4 million due to increased employee headcount to support our future growth. These increases are offset by a decrease in equity-based compensation of $6.3 million related to a reduction in the probable outcome of PSU performance vesting conditions and forfeiture of RSUs and PSUs related to the resignation of a former officer during the nine months ended September 30, 2024, as well as termination of our former Chief Executive Officer’s employment for disability in March 2023, which resulted in acceleration of equity based compensation during the nine months ended September 30, 2023.
Previous report
Depreciation and Amortization
Previous report
Depreciation and amortization expense decreased by less than $0.1 million, or 1.3%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The decrease was due to definite lived intangible assets that became fully amortized during 2023. The decrease in depreciation and amortization is offset by an increase in depreciation expense related to additional purchases of PP&E to support our growth initiatives.
Previous report
Interest expense, net decreased by $7.9 million, or 43%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. This decrease was due to a write-off of $2.5 million of unamortized deferred interest as a result of voluntary prepayments made on, and the payoff of, the Term Loan Facility during the nine months ended September 30, 2024, as well as a decrease in the total weighted average outstanding balance of the Term Loan Facility and Revolving Credit Facility during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, and a decrease in borrowing rates applicable to the Senior Secured Credit Agreement. The decrease was offset by a write-off of $2.3 million of unamortized deferred financing costs as a result of voluntary prepayments made on, and the payoff of, the Term Loan Facility during the nine months ended September 30, 2024.
Previous report
Income tax benefit (expense)
Previous report
(c)Reflects net income to Class A common stock from assumed exchange of corresponding shares of our Class B common stock formerly held by our founder and management.
Previous report
In connection with the Repurchase Program, on June 11, 2024, the Company entered into an ASR with Jefferies LLC to repurchase $25.0 million of the Company’s Class A common stock. Under the terms of the ASR, the Company paid $25.0 million to Jefferies LLC on June 12, 2024, and received a total of 3,908,387 shares of the Company’s Class A common stock upon final settlement. Final settlement was based on a repurchase price of $6.40 per share, which was based on the average of the daily volume weighted average price per share of the Company’s Class A common stock during the term of the ASR, less a discount.
Reworded paragraphs (34)
Previous wording
This MD&A contains the presentation of Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share, which are not presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share are being presented because management believes they provide investors and readers of this Form 10-Q with additional insight into our operational performance relative to earlier periods and relative to our competitors. We do not intend Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share to be substitutes for any GAAP financial information. Readers of this Form 10-Q should use Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share only in conjunction with Gross Profit, Net Income, and Net Income Attributable to Shoals Technologies Group, Inc., the most closely comparable GAAP financial measures, as applicable. Reconciliations of Adjusted Gross Profit, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share to the respective most closely comparable GAAP measure, as well as a calculation of Adjusted Gross Profit Percentage and Adjusted Diluted Weighted Average Shares Outstanding, are provided below, in “—Non-GAAP Financial Measures.”
Current wording
This MD&A contains the presentation of Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share, which are not presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share are being presented because management believes they provide investors and readers of this Form 10-Q with additional insight into our operational performance relative to earlier periods and relative to our competitors. We do not intend Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share to be substitutes for any GAAP financial information. Readers of this Form 10-Q should use Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share only in conjunction with Gross Profit, and Net Income (Loss), the most closely comparable GAAP financial measures, as applicable. Reconciliations of Adjusted Gross Profit, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share to the respective most closely comparable GAAP measure, as well as a calculation of Adjusted Gross Profit Percentage and Adjusted Diluted Weighted Average Shares Outstanding, are provided below, in “—Non-GAAP Financial Measures.”
Previous wording
We are a leading provider of electrical balance of systems (“EBOS”) solutions for the energy transition market. EBOS encompasses all of the components that are necessary to carry the electric current produced by solar panels to an inverter and ultimately to the power grid. EBOS components are mission-critical products that have a high consequence of failure, including lost revenue, equipment damage, fire damage, and even serious injury or death. As a result, we generally believe customers prioritize reliability and safety over price when selecting EBOS solutions.
Current wording
We are a leading provider of electrical balance of system (“EBOS”) solutions and components, including battery energy storage solutions (“BESS”) and Original Equipment Manufacturer (“OEM”) components, for the global energy transition market. EBOS encompasses all of the components that are necessary to carry the electric current produced by solar panels to an inverter and ultimately to the power grid. EBOS components are mission-critical products that have a high consequence of failure, including lost revenue, equipment damage, fire damage, and even serious injury or death. As a result, we generally believe customers prioritize reliability and safety over price when selecting EBOS solutions.
Previous wording
EBOS components that we produce include cable assemblies, inline fuses, combiners, disconnects, recombiners, wireless monitoring systems, junction boxes, transition enclosures, splice boxes, and battery energy storage cabinets. We derive the majority of our revenue from selling “system solutions” which are complete EBOS systems that include several of our products, many of which are customized for the customer’s project. We believe our system solutions are unique in our industry because they integrate design and engineering support, proprietary components and innovative installation methods into a single offering that would otherwise be challenging for a customer to obtain from a single provider or at all.
Current wording
We design, manufacture and sell a variety of products used by the solar and battery storage industries, including Solar BLA Solutions; Homeruns, Interconnection and Extension Solutions; Combiners and Re-Combiners; Load Break Disconnects and Transition Solutions; Wireless Performance Monitoring; and BESS. We refer to complete EBOS solutions that use products manufactured by us, typically in connection with the design and specification of an entire EBOS system, as “system solutions”. When we sell a system solution, we work with our customers to design, specify and engineer their system solution to provide a complete customized EBOS solution consisting of individualized products that maximizes reliability and energy production while minimizing cost. We also provide technical support during installation and the transition to operations and maintenance. We refer to individual, often custom and proprietary, products we sell as “components”. We believe our system solutions are unique in our industry because they integrate design and engineering support, proprietary components and innovative installation methods into a single offering that would otherwise be challenging for a customer to obtain from a single provider or at all. The custom nature of our system solutions and the long development cycle for solar energy projects typically gives us 12 months or more of lead time to quote, engineer, produce and ship each order we receive, and we do not stock large amounts of finished goods.
Previous wording
We derived 76.3% of our revenue from the sale of system solutions for the nine months ended September 30, 2024. For the same period, we derived substantially all of our revenue from customers in the U.S. As of September 30, 2024, we had $596.6 million of backlog and awarded orders, backlog of $153.4 million represents signed purchase orders or contractual minimum purchase commitments with take-or-pay provisions and awarded orders of $443.2 million are orders we are in the process of documenting a contract for but for which a contract has not yet been signed. As of September 30, 2024, we believe approximately $144.4 million of backlog and $310.8 million of awarded orders have delivery dates in the next twelve months. Additionally, more than 13% of our September 30, 2024 backlog and awarded orders related to international projects. As of September 30, 2024, backlog and awarded orders decreased by 5.8% relative to the same date last year and decreased by 7.1% relative to June 30, 2024, as a result of previously disclosed project delays.
Current wording
We derived 71.4% of our revenue from the sale of system solutions for the three months ended March 31, 2025. For the same period, we derived substantially all of our revenue from customers in the U.S. As of March 31, 2025, we had $645.1 million of backlog and awarded orders, backlog of $202.2 million represents signed purchase orders or contractual minimum purchase commitments with take-or-pay provisions and awarded orders of $442.9 million are orders we are in the process of documenting a contract for but for which a contract has not yet been signed. As of March 31, 2025, we believe approximately $197.7 million of backlog and $301.7 million of awarded orders have delivery dates in the next twelve months. Additionally, more than 13% of our March 31, 2025 backlog and awarded orders related to international projects. As of March 31, 2025, backlog and awarded orders increased by 5% relative to the same date last year and increased by 2% relative to December 31, 2024.
Previous wording
In addition, changes over the last few years in the international relations and tariff regimes between the U.S. and China in response to various political issues and heightened uncertainty regarding China-Taiwan relations could significantly adversely impact the availability of parts and components to us, and, correspondingly, our ability to produce our components at targeted levels, although we did not materially experience such negative effects during the first three quarters of 2024. We continue to monitor the condition of our supply chain and evaluate our procurement strategy to reduce any negative impact on our business, financial condition, and results of operations. During the three and nine months ended September 30, 2024 we continued to monitor and optimize our inventory levels.
Current wording
We also continue to monitor the condition of our supply chain and evaluate our procurement strategy to reduce any negative impact on our business, financial condition, and results of operations. During the period ended March 31, 2025, we continued to monitor and optimize our inventory levels.
Previous wording
Our company continues to navigate the uncertainties relating to project delays. Additionally, we are experiencing competitive dynamics, volume discounts, and customer mix in our key markets, which so far have immaterially impacted our results of operations.
Current wording
We will continue to navigate the uncertainties in our industry, including those relating to project delays, as well as strategic pricing actions, volume discounts, and impacts to customer mix in our key markets, which so far have immaterially impacted our results of operations.
Previous wording
Global inflationary pressures are expected to persist to a lesser extent during the remainder of 2024. As a result of such inflationary pressures, increased energy prices, freight premiums, and other operating costs continued in the first three quarters of 2024 and are expected to persist during the rest of 2024. Increased interest rates also continued to result in generally higher interest rates associated with our Senior Secured Credit Agreement in the three and nine months ended September 30, 2024. The eventual implications of higher government deficits and debt, tighter monetary policy, and continued high interest rates may drive a higher cost of capital during our forecasted period.
Current wording
Global inflationary pressures persisted during the first quarter of 2025 and are expected to persist to a lesser extent during the remainder of 2025; however, the impact of inflation remains uncertain for the rest of 2025. Interest rates have remained generally higher when compared to historical rates, causing the interest rates associated with our Senior Secured Credit Agreement to be generally higher; however, interest rates did decline from their historically high levels during the course of 2024. Should interest rates rise, when combined with the implications of higher government deficits and debt, tighter monetary policy, political instability, and volatility and uncertainty in global trade, the Company’s costs for accessing capital are uncertain and may rise during our forecasted period.
Previous wording
Our ability to obtain raw materials required to manufacture our components and system solutions from domestic and international suppliers, as well as our ability to secure inbound logistics to and from our facilities, were still impacted in 2023 and the first three quarters of 2024. The Company does not directly source a significant amount of raw materials from Europe. However, the Russia-Ukraine war has reduced the availability of certain materials that can be sourced in Europe and, as a result, increased global logistics costs for the procurement of some inputs and materials used in our products. We expect these trends to persist throughout the remainder of 2024.
Current wording
Our ability to obtain the raw materials required to manufacture our components and system solutions from domestic and international suppliers, as well as our ability to secure inbound logistics to and from our facilities, remained challenging during the first quarter of 2025, complicated by volatility in government policies and regulation concerning trade and ongoing political conflict. While the Company does not directly source a significant amount of raw materials from Europe, the Russia-Ukraine war has reduced the availability of certain materials that can be sourced in Europe and, as a result, increased global logistics costs for the procurement of some inputs and materials used in our products. We expect these trends to persist as challenges and conflicts remain in 2025.
Previous wording
We generate revenue from the sale of EBOS systems and components for homerun and combine-as-you-go architectures, battery storage, and operations and maintenance offerings. Our customers include EPCs, utilities, solar developers, independent power producers, and solar module manufacturers. We derive the majority of our revenue from selling solar system solutions. When we sell a solar system solution, we enter into a contract with our customers covering the price, specifications, delivery dates and warranty for the products being purchased, among other things. Our contractual delivery period for solar system solutions can vary from one to three months whereas manufacturing typically requires a shorter time frame. Contracts for solar system solutions can range in value from several hundred thousand to several million dollars.
Current wording
We generate revenue from the sale of EBOS solutions and components for homerun and plug-and-play architectures, battery storage, and OEM offerings. Our customers include EPCs, utilities, solar developers, independent power producers, and solar module manufacturers. We derive the majority of our revenue from selling solar system solutions. When we sell a solar system solution, we enter into a contract with our customers covering the price, specifications, delivery dates and warranty for the products being purchased, among other things. Our contractual delivery period for solar system solutions can vary from one to three months whereas manufacturing typically requires a shorter time frame. Contracts for solar system solutions can range in value from several hundred thousand to several million dollars.
Previous wording
Our revenue is affected by changes in the price, volume and mix of solar system solutions and components purchased by our customers. The price and volume of our system solutions and components is driven by the demand for our solar system solutions and components, changes in product mix between homerun and combine-as-you-go EBOS, geographic mix of our customers, strength of competitors’ product offerings, and availability of government incentives to the end-users of our products.
Current wording
Our revenue is affected by changes in the geography, price, volume and mix of EBOS system solutions and components purchased by our customers. The price and volume of our EBOS system solutions and components is driven by the demand for our solar system solutions and components, volume based discounts and rebate incentives, changes in product mix between homerun and plug-and-play EBOS, geographic mix of our customers, strength of competitors’ product offerings, and availability of government incentives to the end-users of our products.
Previous wording
Our revenue growth is dependent on continued growth in the amount of solar energy projects constructed each year and our ability to increase our share of demand in the geographies where we currently compete and plan to compete in the future, as well as our ability to continue to develop and commercialize new and innovative products that address the changing technology and performance requirements of our customers.
Current wording
Our revenue growth is dependent on continued growth in the number of solar energy projects constructed each year and our ability to increase our share of demand in the geographies where we currently compete and plan to compete in the future, as well as our ability to continue to develop and commercialize new and innovative products that address the changing technology and performance requirements of our customers.
Previous wording
Cost of revenue consists primarily of system solutions and components costs, including purchased raw materials, as well as costs related to shipping, customer support, product warranty, personnel and depreciation of manufacturing and testing equipment. Personnel costs in cost of revenue include both direct labor costs as well as costs attributable to any individuals whose activities relate to the transformation of raw materials or component parts into finished goods or the transportation of materials to the customer. Our product costs are affected by the underlying cost of raw materials, including copper and aluminum; component costs, including fuses, resin, enclosures, and cable; technological innovation; economies of scale resulting in lower component costs; and improvements in production processes and automation. We do not currently hedge against changes in the price of raw materials. Some of these costs, primarily indirect personnel and depreciation of manufacturing and testing equipment, are not directly affected by sales volume. Gross profit may vary from year to year and is primarily affected by our sales volume, product prices, product costs, product mix, customer mix, geographical mix, shipping method and warranty expense.
Current wording
Cost of revenue consists primarily of EBOS system solutions and components costs, including purchased raw materials, as well as costs related to shipping, customer support, product warranty, personnel and depreciation of manufacturing and testing equipment. Personnel costs in cost of revenue include both direct labor costs as well as costs attributable to any individuals whose activities relate to the transformation of raw materials or component parts into finished goods or the transportation of materials to the customer. Our product costs are affected by the underlying cost of raw materials, including copper and aluminum; component costs, including fuses, resin, enclosures, and cable; technological innovation; economies of scale resulting in lower component costs; and improvements in production processes and automation. We do not currently hedge against changes in the price of raw materials. Some of these costs, primarily indirect personnel and depreciation of manufacturing and testing equipment, are not directly affected by sales volume. Gross profit may vary from year to year and is primarily affected by our sales volume, product prices, product costs, product mix, customer mix, geographical mix, shipping method and warranty expense.
Previous wording
Operating expenses consist of general and administrative expenses as well as depreciation and amortization expense. Personnel-related costs are the most significant component of our operating expenses and include salaries, equity-based compensation, benefits, payroll taxes and commissions. The number of full- time employees in our general and administrative departments increased from 139 to 165 from September 30, 2023 to September 30, 2024, and we expect to hire new employees in the future to support our future growth. The timing of these additional hires could materially affect our operating expenses in any particular period, both in absolute dollars and as a percentage of revenue.
Current wording
Operating expenses consist of general and administrative expenses as well as depreciation and amortization expense. Personnel-related costs are the most significant component of our operating expenses and include salaries, equity-based compensation, benefits, payroll taxes and commissions. The number of full-time employees in our general and administrative departments increased from 159 to 171 from March 31, 2024 to March 31, 2025, and we expect to hire new employees in the future to support our future growth. The timing of these additional hires could materially affect our operating expenses in any particular period, both in absolute dollars and as a percentage of revenue.
Previous wording
Amortization of intangibles consists of amortization of customer relationships, developed technology, and trade names over their expected period of use.
Current wording
Amortization of intangibles consists of amortization of customer relationships, developed technology, trade names, backlog and noncompete agreements over their expected period of use.
Previous wording
Shoals Technologies Group, Inc. is subject to U.S. federal and state income tax in multiple jurisdictions. Prior to the July 1, 2023 contribution described in Note 1 - Organization and Business, Shoals Parent LLC was a pass-through entity for federal income tax purposes but incurred income tax in certain state jurisdictions. On July 1, 2023, the Company contributed 100% of its limited liability interests of Shoals Parent LLC to its wholly-owned subsidiary, Shoals Intermediate Parent, Inc., and following the contribution, Shoals Parent LLC became a disregarded single member limited liability company, eliminating the umbrella-partnership C corporation structure.
Current wording
Shoals Technologies Group, Inc. is subject to U.S. federal and state income tax in multiple jurisdictions.
Previous wording
Cost of revenue decreased by $43.3 million, or 36%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, driven by the decrease in revenue. Gross profit as a percentage of revenue was 24.8% during three months ended September 30, 2024, and 10.5% during the three months ended September 30, 2023. The increase in gross profit as a percentage of revenue was driven by a decrease in wire insulation shrinkback expenses recorded during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. This increase in gross profit as a percentage of revenue was offset by an increase in labor costs, non-recurring operational charges, competitive dynamics, volume discounts, and customer mix in our key markets, and a reduction in leverage on fixed costs.
Current wording
Cost of revenue decreased by $2.1 million, or 3.9%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, driven by the decrease in revenue. Gross profit as a percentage of revenue was 35.0% during the three months ended March 31, 2025, and 40.2% during the three months ended March 31, 2024. The decrease in gross profit as a percentage of revenue was driven by strategic pricing actions, volume discounts, customer and product mix, and reduced fixed cost absorption due to lower revenues.
Previous wording
Depreciation and amortization expenses decreased by less than $0.1 million, or 3%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The decrease was due to definite lived intangible assets that became fully amortized during 2023.
Current wording
Depreciation and amortization expenses increased by less than $0.1 million, or 1.5%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The increase was due to acquisitions of property, plant, and equipment in between the periods of comparison.
Previous wording
Interest expense, net decreased by $2.8 million, or 48%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. This decrease was due to a decrease in the total weighted average outstanding balance of the Term Loan Facility and Revolving Credit Facility during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, as well as a decrease in borrowing rates applicable to the Senior Secured Credit Agreement as a result of the amendment to the Senior Secured Credit Agreement and decreases in the federal funds effective rate.
Current wording
Interest expense, decreased by $2.1 million, or 46.0%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. This decrease was due to a decrease in the total weighted average outstanding balance of the Term Loan Facility and Revolving Credit Facility during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, as well as a decrease in borrowing rates applicable to the Senior Secured Credit Agreement and decreases in the federal funds effective rate as compared to the prior period.
Previous wording
Income tax expense was $7.9 million for the nine months ended September 30, 2024 as compared to income tax expense of $2.7 million for the nine months ended September 30, 2023. Our effective income tax rate for the nine months ended September 30, 2024 and 2023 was 32.5% and 9.3%, respectively. The increase in our effective income tax rate was due to an income tax benefit of $5.1 million recorded in connection with termination of the Up-C structure on July 1, 2023, as discussed in more detail in Note 14 - Income Taxes. The effective tax rate was further increased by various discrete items, particularly RSU and PSU shortfalls, during the nine months ended September 30, 2024.
Current wording
Income tax expense totaled $2.3 million for the three months ended March 31, 2025, as compared to income tax expense of $2.4 million for the three months ended March 31, 2024. Our effective income tax rate for the three months ended March 31, 2025 and 2024 was 114.0% and 33.9%, respectively. The change in our effective income tax rate was due to various discrete items, particularly RSU and PSU shortfalls, during the three months ended March 31, 2025.
Previous wording
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 (loss) plus (i) interest expense, net, (ii) income tax benefit (expense), (iii) depreciation expense, (iv) amortization of intangibles, (v) equity-based compensation, (vi) wire insulation shrinkback expenses, and (vii) wire insulation shrinkback litigation expenses. We define Adjusted Net Income as net income (loss) attributable to Shoals Technologies Group, Inc. plus (i) net income (loss) 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 / write-off of deferred financing costs, (v) equity-based compensation, (vi) wire insulation shrinkback expenses, and (vii) 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.
Current wording
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 (loss) plus/(minus) (i) interest expense, (ii) interest income, (iii) income tax expense, (iv) depreciation expense, (v) amortization of intangibles, (vi) equity-based compensation, (vii) wire insulation shrinkback expenses, and (viii) wire insulation shrinkback litigation expenses. We define Adjusted Net Income as net income (loss) plus (i) amortization of intangibles, (ii) amortization / write-off of deferred financing costs,
Previous wording
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.
Current wording
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) to Adjusted Net Income and Adjusted Diluted EPS below and not rely on any single financial measure to evaluate our business.
Previous wording
Reconciliation of Net Income (Loss) Attributable to Shoals Technologies Group, Inc. to Adjusted Net Income (in thousands):
Current wording
Reconciliation of Net Income (Loss) to Adjusted Net Income (in thousands):
Previous wording
(a)For the three and nine months ended September 30, 2024, represents (i) $13.3 million of 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, (ii) zero and $0.5 million, respectively, of inventory write-downs of wire in connection with wire insulation shrinkback. For the three and nine months ended September 30, 2023 represents, (i) $50.2 million and $59.1 million, respectively, of 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) zero and $2.6 million, respectively, of inventory write-downs of wire in connection with the identification, repair and replacement of a subset of wire harnesses presenting unacceptable levels of wire insulation shrinkback. We consider expenses incurred in connection with the identification, repair and replacement of the impacted wire harnesses distinct from normal, ongoing service identification, repair and replacement expenses that would be reflected under ongoing warranty expenses within the operation of our business, 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 8 - Warranty Liability, in our condensed consolidated financial statements included in this Form 10-Q for more information.
Current wording
(a)For the three months ended March 31, 2025 and 2024, there were no expenses related to warranty for wire insulation shrinkback relating to the identification, repair and replacement of a subset of wire harnesses presenting unacceptable levels of wire insulation shrinkback. We consider expenses incurred in connection with the identification, repair and replacement of the impacted wire harnesses distinct from normal, ongoing service identification, repair and replacement expenses that would be reflected under ongoing warranty expenses within the operation of our business, 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 8 - Warranty Liability, in our condensed consolidated financial statements included in this Form 10-Q for more information.
Previous wording
(b)For the three and nine months ended September 30, 2024, represents $2.3 million and $4.5 million, respectively, of expenses incurred in connection with the lawsuit initiated by the Company against the supplier of the defective wire. For both the three and nine months ended September 30, 2023, represents $0.6 million of expenses incurred in connection with the lawsuit initiated by the Company against the supplier of the defective 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 13 - Commitments and Contingencies, in our condensed consolidated financial statements included in this Form 10-Q for more information.
Current wording
(b)For the three months ended March 31, 2025 and 2024, represents $2.5 million and $0.8 million, respectively, of expenses incurred in connection with the lawsuit initiated by the Company against the supplier of the defective 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 13 - Commitments and Contingencies, in our condensed consolidated financial statements included in this Form 10-Q for more information.
Previous wording
(d)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, and for the period prior to March 10, 2023, assumes Shoals Technologies Group, Inc. owned 100% of the units in Shoals Parent LLC.
Current wording
(c)Shoals Technologies Group, Inc. is subject to U.S. Federal income taxes, in addition to state and local taxes. Represents the estimated tax impact of all Adjusted Net Income add-backs, excluding those which represent permanent differences between book versus tax. The adjustment to the provision for income tax reflects the effective tax rates below.
Previous wording
We generated cash from operating activities of $66.4 million during the nine months ended September 30, 2024, as compared to cash provided by operating activities of $65.5 million during the nine months ended September 30, 2023. As of September 30, 2024, our cash and cash equivalents were $11.1 million, a decrease from $22.7 million as of December 31, 2023. As of September 30, 2024 we had outstanding borrowings of $141.8 million, a decrease from $183.8 million as of December 31, 2023. As of September 30, 2024, we also had $57.9 million available for additional borrowings under our $200.0 million Revolving Credit Facility.
Current wording
We generated cash from operating activities of $15.6 million during the three months ended March 31, 2025, as compared to cash provided by operating activities of $12.9 million during the three months ended March 31, 2024. As of March 31, 2025, our cash and cash equivalents were $35.6 million, an increase from $23.5 million as of December 31, 2024. As of March 31, 2025 we had outstanding borrowings of $141.8 million, consistent with outstanding borrowings of $141.8 million as of December 31, 2024. As of March 31, 2025, we also had $58.2 million available for additional borrowings under our $200.0 million Revolving Credit Facility.
Previous wording
During the nine months ended September 30, 2024, we also used approximately $15.2 million of cash to pay for expenses related to the identification, repair and replacement of the wire harnesses impacted in connection with the wire insulation shrinkback matter. We expect to continue spending significant amounts of cash in connection thereof. For more information, see Note 8 - Warranty Liability in our condensed consolidated financial statements.
Current wording
During the three months ended March 31, 2025, we also used approximately $9.5 million of cash to pay for expenses related to the identification, repair and replacement of the wire harnesses impacted in connection with the wire insulation shrinkback matter. We expect to continue spending significant amounts of cash in connection thereof. For more information, see Note 8 - Warranty Liability in our condensed consolidated financial statements.
Previous wording
For the nine months ended September 30, 2024, cash provided by operating activities was $66.4 million, primarily due to operating results that included $16.3 million of net income, which included $47.6 million of non-cash expense, along with decreases in accounts receivable and unbilled receivables of $38.2 million. These cash inflows were offset by cash outflows of $15.4 million related to the warranty liability as well as an increase in inventory of $14.6 million, an increase in other assets of $2.7 million, a decrease in accounts payable and accrued expenses of $1.4 million, and a decrease of $1.7 million in deferred revenue.
Current wording
For the three months ended March 31, 2025, cash provided by operating activities was $15.6 million, primarily due to operating results that included $(0.3) million of net loss, which included $8.9 million of non-cash expense, along with cash inflows in accounts receivable and unbilled receivables of $20.9 million and accounts payable and accrued expenses of $6.3 million. These cash inflows were offset by cash outflows of $9.8 million related to the warranty liability as well as an increase in inventory of $5.4 million, an increase in other assets of $1.5 million, and a decrease of $3.5 million in deferred revenue.
Previous wording
For the nine months ended September 30, 2023, cash provided by operating activities was $65.5 million, primarily due to operating results that included $26.1 million of net income, which included $92.0 million of non-cash expense, along with an increase of $10.7 million in accounts payable and accrued expenses, a decrease of $8.3 million in inventory, and an increase of $3.8 million in deferred revenue. These cash inflows were offset by an increase in accounts receivable and unbilled receivables of $70.4 million and cash outflows of $3.7 million related to the warranty liability.
Current wording
For the three months ended March 31, 2024, cash provided by operating activities was $12.9 million, primarily due to operating results that included $4.8 million of net income, which included $13.7 million of non-cash expense, along with a decrease in accounts receivable and unbilled receivables of $20.4 million. These cash inflows were offset by a decrease of $12.1 million in accounts payable and accrued expenses, an increase of $6.8 million in inventory, cash outflows of $3.7 million related to the warranty liability, and a decrease of $0.4 million in deferred revenue.
Previous wording
For the nine months ended September 30, 2024, net cash used in investing activities was $6.9 million, which was primarily attributable to the purchase of property and equipment.
Current wording
For the three months ended March 31, 2025, net cash used in investing activities was $3.2 million, which was attributable to the purchase of property and equipment.
Previous wording
For the nine months ended September 30, 2023, net cash used in investing activities was $7.9 million, which was primarily attributable to the purchase of property and equipment.
Current wording
For the three months ended March 31, 2024, net cash used in investing activities was $2.5 million, all of which was attributable to the purchase of property and equipment.
Previous wording
For the nine months ended September 30, 2023, net cash used in financing activities was $57.1 million, primarily due to $3.9 million in taxes related to net share settled equity awards, $48.0 million in net payments on the Revolving Credit Facility, $1.5 million in principal payments on the Term Loan Facility, and $2.6 million in distributions to our non-controlling interest holders.
Current wording
For the three months ended March 31, 2025, net cash used in financing activities was $0.3 million, due to $20.0 million in payments on the Revolving Credit Facility, offset by $20.0 million in borrowings, and $0.3 million in taxes related to net share settled equity awards.
Previous wording
For the nine months ended September 30, 2024, net cash used in financing activities was $71.1 million, primarily due to $143.8 million in principal payments on the Term Loan Facility, $25.3 million paid to repurchase the Company’s Class A Common Stock under the ASR, $2.6 million of deferred financing costs paid in connection with the amendment to the Senior Secured Credit Agreement, and $1.2 million in taxes related to net share settled equity awards. These cash outflows are offset by $101.8 million in net proceeds on the Revolving Credit Facility.
Current wording
For the three months ended March 31, 2024, net cash used in financing activities was $17.8 million, primarily due to $143.8 million in voluntary prepayments on, and the payoff of, the Term Loan Facility, $2.0 million of deferred financing costs paid in connection with the amendment of the Senior Secured Credit Facility on March 19, 2024, and $0.8 million in taxes related to net share settled equity awards. These cash outflows were offset by $128.8 million in net borrowings on the Revolving Credit Facility.
Previous wording
For a description of the application of our critical accounting policies or estimation procedures, see our 2023 Form 10-K.
Current wording
For a description of the application of our critical accounting policies or estimation procedures, see our 2024 Form 10-K. There were no material changes to the information previously disclosed, with the exception of the item discussed below.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
(iii) equity-based compensation, (iv) wire insulation shrinkback expenses, and (v) 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.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
We sell our solar products principally to engineering, procurement and construction firms (“EPCs”) that build solar energy projects. However, given the mission-critical nature of EBOS, the decision to use our products typically involves input from both the EPC and the owner of the solar energy project. The custom nature of our system solutions and the long development cycle for solar energy projects typically gives us 12 months or more of lead time to quote, engineer, produce and ship each order we receive, and we do not stock large amounts of finished goods.
Previous report — wording carried elsewhere
(e)Represents the estimated tax impact of all Adjusted Net Income add-backs, excluding those which represent permanent differences between book versus tax.