Warranty Liability

6 Months Ended

Jun. 30, 2024

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 June 30, 2024 and December 31, 2023 our estimated general warranty liability was approximately $1.4 million and zero, respectively. The Company recorded total warranty expense related to general warranty matters of $0.8 million and $1.4 million for the three and six months ended June 30, 2024, respectively, and $0.5 million for the three and six months ended June 30, 2023.

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 contraction of wire insulation (“wire insulation shrinkback”). Based upon the Company’s ongoing assessment, the Company currently believes the wire insulation shrinkback is related to defective wire manufactured by Prysmian Cables and Systems USA, LLC (“Prysmian”). Based on the Company’s continued analysis of information available as of the date of this Quarterly Report, the Company determined that a potential range of loss was both probable and reasonably estimable. As of June 30, 2024, the estimate of potential losses remains unchanged from the estimate provided as of December 31, 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 recorded. As of June 30, 2024 and December 31, 2023 our recorded warranty liability related to this matter was $46.0 million and $54.9 million, respectively.

The estimated range is based on several assumptions, including the potential magnitude of engineering, procurement and construction firm’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. While our wire insulation shrinkback warranty liability represents our best estimate of the range of expected losses at any given time, the Company remains in the early stages of the identification, repair and replacement process and may increase or decrease its estimated warranty liability from its current estimate as additional information becomes available, including with respect to experience relating to weather delays, site access, vegetation management or other factors. Such increase or decrease may be material. The Company does not maintain insurance for product warranty issues and has commenced a lawsuit against Prysmian, as discussed in more detail under Wire Insulation Shrinkback Litigation section of Note 13 - 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 June 30, 2024.

The Company recorded total warranty expense related to this matter of zero for the three and six months ended June 30, 2024 and $8.9 million three and six months ended June 30, 2023.

Warranty liability, which includes both general warranty and wire insulation shrinkback warranty, is estimated as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Warranty liability, beginning of period	$	51,799	$	400	$	54,914	$	560
Warranty expense	829		9,386		1,394		9,386
Payments	(5,298)		(152)		(8,978)		(312)
Warranty liability, end of period	47,330		9,634		47,330		9,634
Less: current portion	31,148		9,634		31,148		9,634
Warranty liability, net current portion	$	16,182	$	—	$	16,182	$	—