Warranty Liability

12 Months Ended

Dec. 31, 2023

Guarantees and Product Warranties [Abstract]

General Warranty

The Company offers an assurance type warranty for its products against manufacturer defects which does not contain a service element. For these assurance type warranties, a provision for estimated future costs related to warranty expense is recorded when they are probable and reasonably estimable. As of December 31, 2023 and December 31, 2022 our estimated general warranty liability was approximately zero and $0.1 million, respectively. The Company recorded total warranty expense related to general warranty matters of $0.4 million, $0.1 million, and zero for the years ended December 31, 2023, 2022 and 2021, respectively.

Wire Insulation Shrinkback Warranty

The Company has been notified by certain customers that a subset of wire harnesses used in its EBOS solutions is presenting unacceptable levels of pull back of wire insulation at connection points (“wire insulation shrinkback”). Based upon the Company’s ongoing assessment, the Company currently believes the wire insulation shrinkback is related to defective red wire manufactured by Prysmian Cables and Systems USA, LLC (“Prysmian”). As of December 31, 2023, based on the Company’s continued analysis, which included better visibility into the scope of affected sites and potential solutions, including identification, repair and replacement of harnesses, the Company determined that a potential range of loss was both probable and reasonably estimable and updated its estimate of potential losses from previously provided estimates. Based on the Company’s continued analysis of information available as of the date of this Annual Report, the estimate of potential losses remains unchanged from the estimate provided as of September 30, 2023. As no amount within the current range of loss appears to be a better estimate than any other amount, the Company recorded a warranty liability and related expense representing the low end of the range of potential loss of $59.7 million. The high-end of the range of potential loss is $184.9 million, which is $125.2 million higher than the amount we have recorded. As of December 31, 2023, our recorded warranty liability related to this matter was $54.9 million.

The estimated range is based on several assumptions, including the potential magnitude of EPC’s labor cost to identify and perform the repair and replacement of impacted harnesses, estimated failure rates, materials replacement cost, planned remediation method, inspection costs, and other various assumptions, and as additional information becomes available, the Company may increase or decrease its estimated warranty liability from its current estimate, and such increase or decrease may be material. The Company does not maintain insurance for product warranty and has commenced a lawsuit against Prysmian, as discussed in more detail under Wire Insulation Shrinkback Litigation section of Note 16 - Commitments and Contingencies. Because the lawsuit against Prysmian is ongoing, potential recovery from Prysmian is not considered probable as defined in ASC 450, and has not been considered in our estimate of the warranty liability as of December 31, 2023.

The Company recorded total warranty expense related to this matter of $59.2 million, $0.5 million, and zero for the years ended December 31, 2023, 2022 and 2021, respectively.

Warranty liability, which includes both general warranty and wire insulation shrinkback warranty, consists of the following (in thousands):


	Year Ended December 31,
	2023		2022		2021
Warranty liability, beginning of period	$	560	$	60	$	—
Warranty expense	59,556		500		60
Payments	(5,202)		—		—
Warranty liability, end of period	54,914		560		60
Less: current portion	31,099		560		60
Warranty liability, net current portion	$	23,815	$	—	$	—