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New words:
abated, al, allegedly, anniversary, annum, April, benchmark, Codification, CODM, commitment, composition, consummated, deciding, description, evidence, explanation, false, February, fee, fewer, firm, foreseeable, Fund, geopolitical, half, hand, health, Heavy, Highway, inflationary, inside, instability, interconnection, Judge, leadership, lien, lingering, Mackenzie, maintenance, maker, maturity, merged, misleading, morale, motion, payoff, pipeline, preservation, Presidential, prevail, promulgated, PSU, purported, pushed, putative, Putnam, qualitative, quantitative, regularly, Regulation, relocation, remeasured, removal, remove, resolution, rest, reverse, risky, RSU, Rule, Ruling, segment, sensitive, shareholder, Simplification, site, Spain, speculative, spending, step, surviving, thereof, title, translate, trend, turnover, unamortized, unauthorized, unchanged, undrawn, unopposed, unsatisfactory, unspecified, vegetation, Vista, voluntary, war, weather, Westchester, Wood
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account, accrue, acquirer, advanced, advantage, afford, allege, allocable, antidumping, assert, assertion, attention, August, ban, bear, beneficially, border, brand, broad, burden, CAMT, challenged, choose, circumvent, circumvented, climate, closing, combination, compatible, compensate, conduct, confidentiality, conflict, confusion, Connect, ConnectPV, consisting, consuming, contested, controlling, conventional, converting, copyright, corporate, correction, counterfeit, create, Dean, declared, deem, defendant, deficit, degree, Department, developing, distribute, divert, documentation, enforcement, Enforcing, entering, equivalent, establish, established, exchanged, excise, expanding, expensive, exposed, fault, forcing, forecast, forgo, frequency, gaining, generation, generic, harming, heavily, highest, history, identity, immature, impede, impeding, imported, imposing, improper, independently, infringed, inherently, initiate, interpreted, introduced, introduction, invalidated, IPO, IRA, issuance, issuing, joined, lapsed, lesser, license, linked, Location, longer, loosening, lose, Magazine, making, marginal, measured, membership, mentioned, misappropriated, misappropriation, misuse, moisture, narrowly, natural, nondisclosure, occur, onsite, opposed, originated, ownership, passed, people, permit, plaintiff, poor, President, presumption, prevent, previously, pro, program, prohibitively, projected, protection, prove, provoke, publicity, pull, pursue, rata, rebrand, recall, reconciling, redesign, registered, registration, rejection, released, remain, rendered, replace, reputation, Reserve, revised, scope, secondary, secret, seeking, shown, situation, slightly, Solon, specific, specifically, standard, statutory, stringent, subchapter, substantial, successful, sued, sufficiently, superior, taxed, thermal, TRA, trademark, transitioning, Ukraine, unanticipated, undetected, unenforceable, unexpected, unfair, unfavorable, unpatented, unregistered, unsuccessful, validity, vesting, violated, wiring, withdrawal, workmanship, world, yield
Financial report summary
?Risks
- If demand for solar energy projects does not continue to grow or grows at a slower rate than we anticipate, we may not be able to achieve our anticipated level of growth and our business will suffer.
- If we fail to accurately estimate the potential losses related to the wire insulation shrinkback matter, or fail to recover the costs and expenses incurred by us from the supplier, our profit margins, financial results, business and prospects could be materially adversely impacted.
- Defects or performance problems in our products or their parts, including those related to the wire insulation shrinkback matter, could result in loss of customers, reputational damage and decreased revenue, and may have a material adverse effect on our business, financial condition and results of operations.
- We may experience delays, disruptions, quality control or reputational problems in our manufacturing operations in part due to our vendor concentration.
- If we or our suppliers face disputes with labor unions, we may not be able to achieve our anticipated level of growth and our business could suffer.
- If we fail to retain our key personnel and attract additional qualified personnel, or successfully integrate our new Chief Executive Officer, our business strategy and prospects could suffer.
- Our products are primarily manufactured and shipped from our production facilities in Tennessee, and any damage or disruption at these facilities may harm our business.
- We may face difficulties with respect to the planned consolidation and relocation of our Tennessee-based manufacturing and distribution operations, and may not realize the benefits thereof.
- Unsatisfactory safety performance may subject us to penalties, negatively impact customer relationships, result in higher operating costs, and negatively impact employee morale and turnover.
- The market for our products is competitive, and we may face increased competition as new and existing competitors introduce EBOS system solutions and components, which could negatively affect our results of operations and market share.
- Current macroeconomic events, including high inflation, high interest rates, a potential recession and geopolitical instability could impact our business and financial results.
- Our industry has historically been cyclical and experienced periodic downturns.
- The interruption of the flow of raw materials from international vendors has disrupted our supply chain, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports.
- We are subject to risks associated with the patent infringement complaints that we filed with the U.S. International Trade Commission (“ITC”) and two District Courts.
- If we fail to, or incur significant costs in order to, obtain, maintain, protect, defend or enforce our intellectual property and other proprietary rights, including those that are subject to the patent infringement complaints we filed with the ITC and two District Courts, our business and results of operations could be materially harmed.
- Acquisitions, joint ventures and/or investments and the failure to integrate acquired businesses, could disrupt our business and/or dilute or adversely affect the price of our common stock.
- Our future growth in the EV charging market is highly dependent on the demand for, and consumers’ willingness to adopt, EVs, as well as on the actions of federal, foreign, state and local governments.
- A loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment could harm our business and negatively impact revenue, results of operations, and cash flow.
- A significant drop in the price of electricity sold may harm our business, financial condition, results of operations and prospects.
- A further increase in interest rates or a reduction in the availability of tax incentives or project debt capital in the global financial markets could make it difficult for end customers to finance the cost of a solar energy system and could reduce the demand for our products.
- Our results of operations may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our results of operations for a particular period to fall below expectations, resulting in a decline in the price of our Class A common stock.
- Failure to effectively utilize information technology systems or implement new technologies and the unauthorized disclosure of personal or sensitive data or confidential information, whether through a breach of our computer system or otherwise, could severely disrupt our business or reduce our sales or profitability.
- Compromises, interruptions or shutdowns of our information technology systems, including those managed by third parties, whether intentional or inadvertent, could lead to delays in our business operations and, if significant or extreme, affect our results of operations.
- Our expansion outside the U.S. could subject us to additional business, financial, regulatory and competitive risks.
- Our indebtedness could adversely affect our financial flexibility and our competitive position.
- Our indebtedness may restrict our current and future operations, which could adversely affect our ability to respond to changes in our business and to manage our operations.
- Developments in alternative technologies may have a material adverse effect on demand for our offerings.
- Amounts included in our backlog and awarded orders may not result in actual revenue or translate into profits.
- Existing electric utility industry, renewable energy and solar energy policies and regulations, and any subsequent changes, may present technical, regulatory and economic barriers to the purchase and use of solar energy systems that may significantly reduce demand for our products or harm our ability to compete.
- Changes in the U.S. trade environment, including the imposition of trade restrictions, import tariffs, anti-dumping and countervailing duties could adversely affect the amount or timing of our revenue, results of operations or cash flows.
- Changes in tax laws or regulations that are applied adversely to us or our customers could materially adversely affect our business, financial condition, results of operations and prospects.
- We cannot assure you that the price of our Class A common stock will not decline or not be subject to significant volatility.
- Future sales, or the perception of future sales, by us in the public market could cause the market price for our Class A common stock to decline.
- Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management.
- Our certificate of incorporation also provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
- We do not intend to pay any cash distributions or dividends on our Class A common stock in the foreseeable future.
- We face risks related to actual or threatened health epidemics or pandemics, such as the COVID-19 pandemic.
- If we fail to maintain effective internal controls over financial reporting, we may be unable to accurately or timely report our financial condition or results of operations, which may adversely affect our business.
Management Discussion
- Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
- This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our consolidated financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”) and this Quarterly Report on Form 10-Q (“Form 10-Q”). In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under the sections of our 2023 Form 10-K and this Form 10-Q captioned “Forward-Looking Statements” and “Risk Factors”.
- 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.”