Shoals Technologies Group Q2 2025 Earnings Report

Shoals Technologies Group EPS Results

• Actual EPS: $0.10
• Consensus EPS: $0.08
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.10

Shoals Technologies Group Revenue Results

• Actual Revenue: $110.84 million
• Expected Revenue: $104.87 million
• Beat/Miss: Beat by +$5.97 million
• YoY Revenue Growth: +11.70%

Shoals Technologies Group Announcement Details

• Quarter: Q2 2025
• Date: 8/5/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 8:00AM ET

Shoals Technologies Group (NASDAQ:SHLS) provides electrical balance of system (EBOS) solutions and components for solar, battery energy, and electric vehicle (EV) charging applications in the United States and internationally. The company designs, manufactures, and sells system solutions for both homerun and combine-as-you-go wiring architectures, as well as offers technical support services. It provides EBOS components, including combiners; plug-n-play branch connectors and inline fuses; AC disconnects; recombiners; wireless monitoring; junction boxes; wire management; EV power cabinets; and battery energy storage systems cabinets, as well as cable assemblies, transition enclosures, and splice boxes. In addition, the company offers eMobility solutions, such as a power center, which combines equipment needed to protect the charging equipment and transform voltage levels from the electric utility to those needed on the respective site; quick connect solutions for chargers to connect to the Shoals system; big lead assembly (BLA) technology in the EV space to connect multiple chargers to a single power center; and a raceway system that protects the above ground EV BLAs in walk over and drive over applications. Further, it provides Snapshot IV, a solar operations and maintenance solution that monitors the specific voltage and current of individual solar panels and compares the results against the manufacturer's projected performance. The company sells its products to engineering, procurement, and construction firms that build solar energy projects; utilities; solar developers, independent power producers; solar module manufacturers; and charge point operators. Shoals Technologies Group, Inc. was founded in 1996 and is headquartered in Portland, Tennessee.

Shoals Technologies Group Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Shoals delivered Q2 revenue of $110.8M, beating guidance with an 11.7% year-over-year rise and a record backlog of $671.3M, and raised its full-year revenue outlook to $450–470M.
• Positive Sentiment: The company expects to complete warranty remediation for defective Prismian wire soon, preserving customer trust and reinforcing its reputation for quality service.
• Positive Sentiment: Growth pillars—international markets, CC&I, OEM partnerships and BESS—are on track with a 20 GW international pipeline and CC&I revenue exceeding $10 M year-to-date.
• Negative Sentiment: Ongoing litigation against Prismian and in a new ITC case with Voltage has kept legal expenses elevated, pressuring SG&A costs into the second half.
• Negative Sentiment: Free cash flow was negative $26 M in Q2 due to warranty remediation and increased CapEx for facility consolidation, suggesting continued cash consumption before year-end improvements.

Presentation

[Operator]

Good morning, and welcome to the Shoals Technologies Group Second Quarter twenty twenty five Earnings Conference Call. Today's call is being recorded. We have allocated one hour for prepared remarks and Q and A. At this time, I'd like to turn the conference over to Matt Trachtenberg, Vice President of Finance and Investor Relations for Scholl's Technologies Group. Thank you. You may now begin.

[Matthew Tractenberg, VP - Finance & IR at Shoals Technologies Group]

Thank you, Charlie, and thank you, everyone, for joining us today. Hosting the call with me is our CEO, Brendan Moss and our CFO, Dominic Bartos. On this call, management will be making projections or other forward looking statements based on current expectations and assumptions, which are subject to risks and uncertainties and should not be considered guarantees of performance or results. Actual results could differ materially. Those risks and uncertainties are listed for interested investors in our most recent SEC filings.

[Matthew Tractenberg, VP - Finance & IR at Shoals Technologies Group]

Today's presentation also includes references to non GAAP financial measures. You should refer to the information contained in the company's second quarter press release for definitional information and reconciliations of historical non GAAP measures to the nearest comparable GAAP financial measures. Please note that the slides you see here are available for download from the Investor Relations section of our website at investors.shoals.com. With that, let me turn the call over to Brandon.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Thank you, Matt, and good morning, everyone. I'll begin by sharing some thoughts on the most recent quarter. We'll discuss the current demand environment for U. S. Utility scale solar, and I'll review progress on our strategic growth initiatives.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Dominic will dive deeper into the second quarter results and provide our outlook on third quarter and full year 2025. We'll then close it out with questions from our analysts. Congratulations to the Schulz team for delivering revenue of $110,800,000 which was above the high end of our expected range provided last quarter and represents an 11.7% increase over the prior year period and a 37.9% sequential increase. Bookings were also very strong in the period as the momentum we've seen all year continued, driving approximately $137,100,000 in new orders. This resulted in a company record backlog and awarded orders, or BLAO, of $671,300,000 and a book to bill of 1.2, supporting the growth we see for the remainder of the year and into 2026.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

As of 06/30/2025, approximately $540,300,000 of that BLAO has shipment dates in the upcoming four quarters running through 2026. As a reminder, given recent uncertainty and volatility, we continue to allow for potential project timeline changes from our customers this year and next. With that said, 2025 is shaping up to be a very strong year. Our value proposition and expanded product offering combined with improving industry fundamentals and underlying demand growth are driving strong sales. While we all read the headlines regarding rapidly shifting clean energy policy, our customers continue to move projects forward and look for ways to further increase their project capacity.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Shoals' value proposition, reducing the need for skilled labor, speeding deployment, and improving quality, all from a trusted domestic manufacturing partner, is resonating with both legacy and new customers. For these reasons, in combination with solid underlying industry fundamentals, we have increased the range of anticipated revenue for the full year 2025, representing between 1318% growth year over year. Adjusted gross profit percentage remained in the expected range for the quarter, landing at 37.2%, driven largely by strategic pricing initiatives and product mix. Gross profit dollars were 41,200,000.0 the highest result since 2023. As we've discussed, we occasionally identify projects as having strategic relevance, whether that be the EPC, developer, geography or to displace a competitor.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

This strategy has enabled us to engage with new customers and win projects that have led to increased sales. We continue to believe that the benefits of our high quality solutions, industry leading engineering support and exceptional customer service are winning customers over. While we are still in the early days, it appears the strategy is working. Additionally, when we settle into our new facility, we will begin to see the impact of productivity initiatives that we've communicated to you, automation, lean manufacturing principles and a centralized and collaborative workforce. We're eager to step on the gas and show you the benefit of those investments.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

We also delivered a second quarter adjusted EBITDA at the high end of our expected range at 24,500,000 or 22.1% of revenue. And finally, I'm very pleased to announce that the remediation work to replace defective prismian wire on known customer sites is nearing completion. There will be some remaining work needed in the coming quarters due to some weather and logistical constraints we encountered this quarter, but we'll continue to service customers as we've committed. The feedback has been overwhelmingly positive, ensuring our reputation for quality and service remains intact, and in some cases, improved. The relationships we've established with EPCs and developers are the most valuable asset we have and delivering on our promise to make things right no matter where the fault lies is critical.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Congratulations to the warranty remediation and customer support teams, and thank you to our customers for their continued trust and patience. While the current political landscape has driven debate around tariffs, tax subsidies and FIOC restrictions, the long term underlying drivers of our markets remain positive and compelling. Many of you have performed your own analysis regarding LCOE across various sources of energy. And whether we include or exclude IRA tax provisions, solar remains the clear winner. When coupled with the speed of deployment, this positions us well to be able to meet the widely anticipated low growth in coming years.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Tariffs are top of mind for many of you as well, and we've been working hard to remain agile with our supply chain. While the majority of our components have domestic options for customers, there will be specific items that must be sourced from non U. S. Vendors. In those cases, we will determine when and how to price those projects appropriately.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

The policy debates in DC regarding energy sources do not materially change the competitive position of solar. Many projects through 2027 have components secured or can meet the requirements to commence construction in the coming year. In some cases, there may be PPA renegotiations needed, but the developers we've spoken with have confidence they can effectively navigate these changes and remain committed to the project pipelines through the coming years. Some of you have asked if it has changed the velocity of our pipeline or how it may impact future periods, but it's too early to make that prediction today, especially as it pertains to EVOS. Developers continue to wait for guidance from treasury on some of the elements required to qualify for tax incentives.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Clarity will be sought as we make our way through August, and we'll continue to work hard to help our EPCs and developers adapt as needed. In summary, this is a dynamic and rapidly shifting environment, but we are operating from a position of strength. Our portfolio has never been more complete, solving real business problems with innovative new product solutions. The commercial team is executing our strategy and driving share gains. Our new facility will enable visible and meaningful operational improvements.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Our growth opportunities are beginning to contribute meaningfully and our position as a domestic manufacturer gives us a competitive advantage. The second quarter was another solid period of growth within our core utility scale solar market. Industry research estimates first half twenty twenty five construction was up 20% year over year, an encouraging 2025. Site prep and tracker installation activity appears to be gaining momentum, which supports the strong back half of the year we expect at Shoals. I want to note that we have not experienced the elevated number of project delays that we saw in 2024.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

That's encouraging to see. Project calendars remain tight with little excess capacity to move things around. Labor availability is a focus for the industry and will remain so. While distracting and disruptive, we believe the recent changes to IRA provisions are unlikely to negatively impact most project timelines in the next several years. By our estimate, most projects have secured components through 2027 and as a result, the next two to three years appear relatively secure.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

I wanna remind you what is driving demand today. It's AI and data centers. It's onshoring of industry. It's basic household consumption of an aging infrastructure. Those are not going to be solved in the coming three years and may, in fact, become more critical.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

The lead time for gas turbines is surpassing three years and timelines to bring nuclear online appears to be stretching into the next decade. Solar remains the best option. So the market will ensure that the economics work. The demand is there and will help our customers meet that demand. Scholl's additional growth opportunities as laid out in our strategic plan, including international, CC and I, OEM and BESS are all meeting or exceeding our expectations.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

The opportunity set across international markets continues to expand. Our pipeline exceeds 20 gigawatts and includes projects in Latin America, EMEA and Asia Pacific. Our relationships with large global developers tied to the U. S. Export Import Bank are opening doors.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

We expect to deliver on multiple international projects this year with an acceleration in twenty twenty six. Our Community Commercial and Industrial, or CC and I business, continues to gain momentum. To give you some context, we expect in excess of $10,000,000 in revenue this year. June also saw the highest month of bookings since we began tracking this segment. We've added new distribution partners who are helping us reach further into the market.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Remember, these projects are smaller in size with shorter lead times, so speed of order processing is key here. We continue to invest to build the capabilities customers require of us. Our OEM business is tracking ahead of expectations as our single customer continues to see strong demand of their panels. Our value proposition of providing a high quality domestic junction box to additional customers is resonating. We have meaningful opportunities for 2026 and beyond given the consistent onshoring of module production in The U.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

S. Battery energy storage solutions has been a key area of investment and innovation at Shoals. Attached storage is becoming an integral component of grid reliability in a renewable powered world, addressing the inherent fluctuations of solar power, supporting peak demand and enabling energy arbitrage. These complex systems store energy using rechargeable batteries offered by other providers, some of whom are domestic and whom we are working closely with today. Also remember that BESS is universally applicable to any energy source, solar, wind, gas, hydro.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Without BESS, it will be very difficult to meet the energy demands we see ahead. As discussed on the last earnings call, we have three market opportunities for our DC recombiner products for BESS. One in particular is to serve data centers. A significant portion of our pipeline for these products serve that growth from data centers and AI. The opportunity driven by this demand is quickly becoming a key area of focus.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Data center power demand in The U. S. Surged from 46 gigawatts in 2024 and is poised to more than double by 02/1930. That will require massive investment in both computing power and the energy needed to run those servers. Our offering in this market spans combiners and recombiners today and a more comprehensive offering in the future.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Our goal is to offer a more complete architecture of wiring solutions, combiners, and other critical components on our road map. Our quoting activity is up 100 times year over year with positive early feedback from our key stakeholders about the direction we're headed. We'll work to keep you updated on key commercial wins as we make our way through the year. In summary, we are executing our strategic framework of market penetration and diversification as anticipated. Customers are looking for a U.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

S. Source of high quality innovative solutions that allow them to manage labor costs, speed time of deployment and ensure their assets perform over a lifetime that spans not years, but decades. The balance between low material cost today versus total cost of ownership over the useful life of a project is why EPCs and developers are more engaged with Shoals than ever. With that, I'll now turn it over to Dominic, who will discuss our second quarter financial results in more detail and our outlook for 2025. Dominic?

[Dominic Bardos, CFO at Shoals Technologies Group]

Thanks, Brandon, and greetings to everyone on the call. Turning to our second quarter financial results. Revenue increased by 11.7% year over year to $110,800,000 The increase in revenue was primarily driven by higher domestic project volume from new and returning customers. In addition, as Brandon mentioned earlier, our strategic growth channels of CC and I and OEM contributed to year over year revenue growth in the quarter.

[Dominic Bardos, CFO at Shoals Technologies Group]

Gross profit increased to $41,200,000 compared to $40,000,000 in the prior year period. This resulted in GAAP gross profit percentage of 37.2% compared to 40.3% in the prior year period. The decline in margin was due to strategic pricing actions, customer mix and product mix. As we have communicated previously, the gross profit percentage in the quarter was in line with expectations of mid to upper 30s. General and administrative expenses were $23,100,000 which is $3,800,000 higher than the prior year period.

[Dominic Bardos, CFO at Shoals Technologies Group]

Our legal expenses remain elevated while we handle ongoing litigation matters. Approximately $2,500,000 of legal expense was specifically related to the ongoing wire installation shrink back litigation. Income from operations or operating profit was $16,000,000 compared to $18,600,000 during the prior year period. Operating profit margin was 14.4% compared to 18.7% a year ago, impacted by the reduced gross profit percentage we realized in the second quarter. Net income was $13,900,000 compared to net income of $11,800,000 during the prior year period.

[Dominic Bardos, CFO at Shoals Technologies Group]

Net income was aided by a $3,100,000 gain on the planned sale of one of our Portland facilities during the quarter as we prepare to consolidate operations. Adjusted net income was $16,900,000 compared to $17,800,000 in the prior year period. Adjusted EBITDA was $24,500,000 compared to $27,700,000 in the prior year period. And adjusted EBITDA margin was 22.1% compared to 27.9% a year ago, driven primarily by lower gross margin flow through. During the second quarter, we spent $11,200,000 on wire installation shrink back remediation and had a remaining warranty liability on our balance sheet of $19,200,000 as of June 30.

[Dominic Bardos, CFO at Shoals Technologies Group]

The current portion of the remaining liability related to shrink back is now $14,500,000 which stands as our estimate for what is required to complete remediation for all sites with known issues. On the legal front, our case against Prismean is progressing as expected. At this time, we continue to expect written discovery and fact depositions to be completed in the third quarter. Our second international trade commission case against Voltage is also progressing as planned with a hearing scheduled for later this month. We continue to believe in the validity of our intellectual property and that it is in our shareholders' best interest to pursue this legal action.

[Dominic Bardos, CFO at Shoals Technologies Group]

Barring any delays, we believe an initial determination could be delivered by the end of the calendar year. Operationally, we consumed $13,800,000 in cash in the second quarter, driven by the sequential build in accounts receivable due to quarter over quarter growth and cash spent on warranty remediation. The increases in accounts receivable and warranty remediation were partially offset by a reduction in inventory and an increase in accounts payable. On a year to date basis, we have generated $1,700,000 in operating cash flow. Free cash flow was negative $26,000,000 in the second quarter, reflecting both the 11,200,000 impact of remediation costs and elevated capital expenditures related to our new facility.

[Dominic Bardos, CFO at Shoals Technologies Group]

These two items impacted free cash flow by a total of $23,400,000 in the quarter. The build out of our new consolidated facility in Portland, Tennessee is on schedule and we continue to expect to begin moving into the new facility at the end of the third quarter. Our balance sheet remains high quality and we ended the quarter with cash and equivalents of $4,700,000 and net debt to adjusted EBITDA of 1.4 times. Our net debt was $127,100,000 an increase over the prior quarter due to the cash consumption I described earlier. With all the necessary caveats, we would expect cash used in warranty remediation and CapEx to decrease by the end of the year.

[Dominic Bardos, CFO at Shoals Technologies Group]

Since free cash flow exceeded our expectations in the 2025, we also paid $10,000,000 down on our revolver during the quarter, which had an outstanding balance of $131,800,000 at the end of the period. With regards to capital allocation, given the number of competing priorities for our cash this year, including shrink back remediation and factory consolidation, we did not purchase any shares in the second quarter under our share repurchase program. We still have $125,000,000 remaining under the share repurchase authorization. Backlog and awarded orders ended the second quarter at $671,300,000 a sequential increase of $26,300,000 Backlog constitutes $260,900,000 of the total BLAO, providing us with confidence that the growth projections we have for the upcoming periods can be achieved. As of June 30, dollars 5 and 40,300,000.0 of our backlog and awarded orders have planned delivery dates in the coming four quarters with the remaining $131,000,000 beyond that.

[Dominic Bardos, CFO at Shoals Technologies Group]

Turning now to the outlook. Quarterly pacing within the year is expected to follow the strong back half we've been communicating since February. The production calendar is largely driven by when and where customers need us to deliver our solutions. And as you have likely seen from both industry data and peer reports, project calendars are very busy as we move through the next few quarters. Therefore, for the quarter ending 09/30/2025, the company expects revenue to be in the range of $125,000,000 to $135,000,000 representing 28% year over year growth at the midpoint and adjusted EBITDA to be in the range of $30,000,000 to $35,000,000 I'd like to point out that the implied fourth quarter revenue guidance of 135,000,000 to $145,000,000 represents 31% year over year growth at the midpoint.

[Dominic Bardos, CFO at Shoals Technologies Group]

For the full year 2025, the company now expects revenue to be in the range of $450,000,000 to $470,000,000 and adjusted EBITDA to remain in the range of 100,000,000 to $115,000,000 In addition, for the full year, we expect cash flow from operations now to be in the range of 15,000,000 to $25,000,000 as a result of higher growth expectations in the coming quarters. Capital expenditures now to be in the range of 30,000,000 to $40,000,000 and interest expense to remain in the range of 8,000,000 to $12,000,000 With that, I'll turn it back over to Brandon for closing remarks.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Thank you, Dominic. I want to remind our audience that although the news flow regarding changes within the regulatory landscape appear to be disruptive and distracting, the industry is no stranger to a rapidly shifting framework. Our customers and theirs are seasoned, sophisticated and proactive. They tell us that while they wait for improved clarity from their tax experts and guidance from the Treasury Department, they waste no time pushing forward. The power is in high demand from their end customers, utilities, hyperscalers, industrial expansion.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

It's not going to change the economics in the short run and in the long run will require adjustments, not drastic cuts. As we've said this year, our customers are constructive, fundamentals are solid and improving, and we are in a competitive position of strength. I'm very encouraged about what we see and hear and excited about the positive changes taking hold at Scholl's. We want to thank our shareholders and customers for their continued trust and our employees for their hard work and dedication. Operator, we're now ready to take questions.

[Operator]

Thank Our first question comes from Julien Dumoulin Smith of Jefferies. Julien, your line is open. Please go ahead.

[Julien Dumoulin-Smith, II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies]

Actually, Brad, let me kick it off just with your last comment there. I think that's probably apt. I mean, just in terms of engagement with clients here and your customers, what are you seeing just in terms of order activity and the willingness to move forward? And then specifically within that, you all have been very active on best of late. Obviously, you posted a separate deck here of late.

[Julien Dumoulin-Smith, II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies]

Can you comment a little bit more specifically on the order activity you're seeing there and perhaps more like structural customer engagement as you guys align into that end market as well? But again, emphasis first on just given the backdrop of the EO and the tax backdrop, the willingness to sign contracts in the current environment.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Absolutely, Julian. Good morning, and and thanks for the question. Yeah. We are, as we've communicated really all year, pretty excited about the market backdrop. We have a very strong market despite all all the noise with policy that is going on.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

You know, we we've gotta remember that the energy man demand is is off the charts. Right? Our customers, EPCs, our direct customers, their project calendars are loaded. Projects are moving forward. As we've seen, you know, market statistics, construction is up 20%.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Our peers in the tracker space have had great installation numbers in the first half of the year that supports our back half number and on in into 2026. It's too early to call call the ball on '26, but we are we are optimistic given the market backdrop. As excited as we are about the market, we are more excited about our execution and our ability here at Shoals to return to growth. You know, our core business, obviously, utility scale is growing and growing fast. That's evidenced by our our record backlog and awarded orders of 671,000,000.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

What is really exciting is our following four quarters backlog and awarded orders of five forty. For some perspective, we entered the year coming into '25 with a number of four fifty in following four quarters backlog and awarded orders. So we are really excited about how we're executing. Our order book is is as strong and diverse as ever. There's no doubt in my mind we are winning in the marketplace.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

As it relates specifically to BEST, you know, we're doing well across our our our four growth pillars. BEST is very exciting for us because we have such a significant market opportunity. These products are are used not only in our core utility scale solar applications, but we are seeing significant significant interest in data center AI applications for our combiner recombiner products. Still early days on this. These projects has have a long sales cycle, as you know, but we are really excited to see the engagement with our company and specifically the engagement with our engineering function to potentially provide future solutions.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Look. Everybody's got their own interesting stats and and tidbits about the growth of data center and and AI. I to maybe point out with something that was in the journal this week that that I found interesting. Meta, Microsoft, Google, and Amazon in the first half of the year basically have invested in data centers so much that it has the equivalent impact to GDP as consumer spending in the first half. So that amount of computing power, that level of investment is obviously gonna need power.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

That not only propels our our utility scale solar business, but gives us a a lot of opportunity in the battery energy storage space. So we're very excited about that.

[Matthew Tractenberg, VP - Finance & IR at Shoals Technologies Group]

Thanks, Julien. Charlie?

[Operator]

Thank you. Of course, next question comes from Philip Shen of Roth Capital Partners. Philip, your line is open. Please proceed.

[Philip Shen, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Hey, guys. Thanks for taking the questions. First one is on 2026. I know you don't guide to 2026, but your backlog and ordered orders are pretty healthy at $540,000,000 Can you give us some more color on how you might expect 2026 to play out? And then separately, as it relates to the full year guide, you have an implied negative free cash flow guide.

[Philip Shen, MD & Senior Research Analyst at Roth Capital Partners, LLC]

I wanted to see if you could provide some more context and color there as well. Thanks.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Yeah. Phil, thanks for the question, and good morning. Yeah. As as you noted, we we are not going to guide to 2026 yet. You know, I I will, again, lean back on on the backlog and awarded orders in in the following four quarters of being $5.40.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Again, strong book to bill, again, for us this quarter. As we have been all year, we're we're excited about the market. We're excited about how we're executing in our in our in our customer base. So, you know, you you saw that in the in the increase to our revenue guidance for for 2025. Right?

[Brandon Moss, Director & CEO at Shoals Technologies Group]

So we we are in a position of strength. We feel very good about the market and how we're executing. Dom, maybe you wanna take cash flow?

[Dominic Bardos, CFO at Shoals Technologies Group]

Yeah. Just a a quick bit on the cash flow, Phil. As you as you can imagine, as we're growing the business with significant growth and you see the numbers, the implied guide for q four with revenue, and also what's available for us as we go into '26, the first half, we have to make preparations, from a inventory standpoint. We have to invest in the working capital necessary to drive that growth. As you know, we've also talked about the fact that warranty remediation will be completing for everything that we know about right now, and that's gonna consume additional cash in the back half while we finish that effort.

[Dominic Bardos, CFO at Shoals Technologies Group]

So at this point in time, you know, it's really driven by growth of the business, which we're excited about the return to growth, but it does take working capital investment to get there. And then we'll be able to, you know, reap those benefits for a long time and reinvest those dollars when we collect. So this year, 2025, operating cash flow had more challenges. But as I also stated, as we get towards the end of the year, we'll be seeing the the reductions of CapEx for 2026 and also warranty remediation. So, yeah, we're just excited. It's really growth driven.

[Matthew Tractenberg, VP - Finance & IR at Shoals Technologies Group]

Thanks, Bill. Charlie?

[Operator]

Thank you. Our next question comes from Brian Lee of Goldman Sachs. Brian, your line is open. Please go ahead.

[Brian Lee, Vice President at Goldman Sachs]

Thank you. Hey, guys. Good morning. Thanks for taking the questions. I had two here.

[Brian Lee, Vice President at Goldman Sachs]

First on the revenue guidance update, it's 7% increase in the midpoint of the range. All second half since Q2 came in just a bit above your guidance range. So just curious what are the main drivers there? Are you seeing projects pull in? Is it more book and burn business, maybe projects even being pulled from other vendors coming to you post OBBBA and Fiat?

[Brian Lee, Vice President at Goldman Sachs]

Just a bit of color around where the strength is coming from. And then secondly, on the guidance, when it comes to margins or EBITDA guidance not implying any uptick despite the $30,000,000 raise in revenue guidance for the year. So is that a reflection of weaker mix and gross margins or something on the OpEx line? Maybe give us some of the puts and takes around why EBITDA guidance range is staying intact despite the higher revenue numbers? Thanks, guys.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Yes, Brian. Thanks for the call or for the question. The strength of our business, you know, as mentioned, pulling pulling some orders in from from other vendors. As as I mentioned, to to Julian's question, we have a hugely diverse mix of of customers now in a way that we have not had before. We are winning, with new customers, and we are winning with customers that, you know, maybe we hadn't done a lot of business with in the last couple years.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

So that is you know, it's that in the market strength that that you're seeing that's driving, you know, the growth above the the top side for us. As it relates to pull in, you know, we have not we have not seen significant changes in our order pattern for for pull in due due to o b three. As you know, we fall late in the construction cycle. Our products really, from a safe harboring standpoint, don't don't give much of an ability for for developers or EPCs to to use our products as as everything is designed, built specific to the solar field. So the the top line growth is is really our execution or winning in the marketplace and and and market driven.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

As it relates to the the revenue guide versus versus EBITDA, Dom, you wanna maybe chime in there?

[Dominic Bardos, CFO at Shoals Technologies Group]

Yeah. So a couple things, Brian. One is as we talked about all year, you know, our guide, we started the year with a $450,000,000 backlog in word orders, but we did guide lower because we just didn't know the nature of how many projects would delay. And what we're seeing is fewer are delaying than expected. Now there have been project push outs and delays.

[Dominic Bardos, CFO at Shoals Technologies Group]

There always are in the in the business, and our book and turn business remained very strong and strong enough to offset it. Some of the margin that you're seeing is the fact that we have a diverse customer mix, we've used some promotional pricing to attract folks back into the Schulz family. In that process, not everybody is using our high margin solutions. We still have some of the combiner box, home run solutions, and and things like that. So gross margin is gonna be lower than you know, in the range that we talked about, the up you know, high thirties, mid to high thirties.

[Dominic Bardos, CFO at Shoals Technologies Group]

But that's really what's driving the margin all the way down to EBITDA. In terms of operating expense, we are still running a bit of an elevated legal expense, for the back half. You know, as we've talked about for several quarters now, our legal expenses, continue to be, I would characterize them as unusually high, for a company of our size based on the issues that we're dealing with. And some of that will continue into the back half as we continue to push forward on the, Voltage and Prismium, issues. So for the most part, it's not really OpEx driven.

[Dominic Bardos, CFO at Shoals Technologies Group]

It is really the promotional pricing and some of the things that we've done from our product and customer mix at the top line.

[Matthew Tractenberg, VP - Finance & IR at Shoals Technologies Group]

Thanks, Brian. Charlie?

[Operator]

Thank you. Our next question comes from Colin Rusch of Oppenheimer. Colin, your line is open. Please go ahead.

[Colin Rusch, MD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.]

Thanks so much, guys.

[Colin Rusch, MD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.]

We can see the opportunity with power demand growing, but I'm just curious about how you're competing around power quality issues and your ability to deliver more power than other folks in a similar configuration from a you know, power plant perspective, and how you see that opportunity evolving for the company over the next couple of years.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Yeah. So good good morning, Colin. Look. I think, you know, first and foremost, developers, EPCs are concerned with product quality to make sure that we have the ability to to keep plants up and operating with our products and solutions. I think our BLA product line has has proven over time to be that solution for electrical balance of systems.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

You know, as we say around here, we we don't measure our our product quality in in years. We measure our product quality in decades. Our our products are are built to stand the test of time and and and the elements that these power plants see. I think, you know, we've got the best solution in the industry versus other alternatives out there, and there there are some that are that are out there and being installed today, but but ours is the best for durability. As it relates to the future, you know, we we do have our two kV line that we are working on, still driving that through UL, and we we hope to see that begin getting spec in the sites in 2026.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

So we're very excited about continuing to push forward with with higher generation capability for these sites.

[Matthew Tractenberg, VP - Finance & IR at Shoals Technologies Group]

Thanks, Colin. Charlie? Charlie? Give us just a minute, folks. We seem to be having some audio issues on the operating line.

[Operator]

Our next question comes from John Wyndham of UBS. John, your line is open. Please go ahead.

[Jon Windham, Head - Alternative Energy & Environmental Services Equity Research at UBS Group]

Perfect. Thanks for taking the questions. Can you just talk to a little bit also raised the revenue guidance by about $30,000,000 at the midpoint, but EBITDA remained the same. Can you just talk to what's driving that? Thanks so much.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Thanks, John, for the question. Yeah. As mentioned, we've seen a strength in business on the top line due to our execution in the marketplace, you know, continue to to grow our share with the development of new products and execution with current and new EPCs. You know, some of the attraction of new EPCs, we are leveraging promotional pricing, you know, that may be lower than historical norms to to overcome the switching cost from one vendor to a particular vendor to Shoals. So that is impacting margins.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Again, our margins grew quarter over quarter, and we are operating about, you know, the the mid to high thirties range. It is important to mention as well, we've got a a significant new product growth. If you look at our backlog and awarded orders today, we are approaching 10% of that backlog and awarded orders with new products. Some of those new products have a a reduced gross margin versus our our our typical product line. One of one of those is a long tail BLA product that is starting to become prevalent in the marketplace.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

While that that provides wallet share expansion, it does impact, our gross margin levels. So we're excited about the growth. And we are excited that we're we're operating at, as we did in this quarter, at the upper 30% range of gross margin. As as Dominic mentioned in the the previous question, we do have elevated legal spend right now that that is not typical for a company our size. But as what is important to note, as we move forward in the back half of the year and on into the future, our working our our operating expense, our s g and a investment will not change materially.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

This business can support a much higher sales level than we are operating at today with with our current investment in s g and a, and we will see operating leverage in the future.

[Dominic Bardos, CFO at Shoals Technologies Group]

The last thing, if I if I may add, John, is that we've got, the back half of the year, we're still planning a significant relocation of all of our operations here in Portland into one facility. And we have yet to, be able to realize some of the things that Brandon mentioned in the prepared remarks about the efficiencies of operations. So while margins are less than our long term target this year, it's within our expectations as we've been communicating. So more to come. We look forward to the growth that we have and and being able to share more about 2026 in the future, but, those are some of the reasons why, you see the guidance that you we've provided today.

[Matthew Tractenberg, VP - Finance & IR at Shoals Technologies Group]

Thanks, John. Charlie?

[Operator]

Thank you. Our next question comes from Dimple Gosai of Bank of America. Dimple, your line is open. Please go ahead.

[Dimple Gosai, Head - U.S. Environmental, Social & Governance Research at Bank of America]

Good morning. I appreciate all the comments here. Just one question on the battery energy storage systems opportunity here. I know you've kind of spoken about an unnamed PSS OEM partnership opportunity. Can you share a little bit more about the opportunity exactly, especially as Fiat restrictions are expected to get a little stronger?

[Dimple Gosai, Head - U.S. Environmental, Social & Governance Research at Bank of America]

What does that look like? Do they have a self sourcing strategy and so forth? Thank you.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Good morning, Dippel. Great question. As we read about FIAC restrictions, potential tariffs, obviously, there are a lot of questions about lithium based battery energy storage solutions. While I won't comment about our specific, you know, engagement, I will say that, you know, there are a number of domestic battery energy storage suppliers that are that are bringing to market alternative technology to to lithium to, you know, avoid tariffs and and and BIAC restrictions. So, you know, I I I understand the thesis that that these restrictions may weigh down the battery energy storage market a bit.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

It's a new market for us, so ample ample upside for growth. And and, again, we're working with with a lot of different partners on alternative solutions.

[Dominic Bardos, CFO at Shoals Technologies Group]

Yeah. I think one of the things from a technology standpoint is we're looking for those that can best support some of the data center demands, which is long discharge times and slower. And some of the technologies that are out there all as alternatives to those metals out of China are really pretty exciting. So more to come in that space.

[Matthew Tractenberg, VP - Finance & IR at Shoals Technologies Group]

Thanks, Danfel. Charlie, next question.

[Operator]

Our next question comes from Dylan Nassano of Wolfe Research. Dylan, your line is open. Please go ahead.

[Dylan Nassano, Vice President at Wolfe Research, LLC]

Hey, good morning everyone. Thanks for taking my question. So I just wanted to follow-up on the prior questions on the reaffirmed EBITDA guidance. I appreciate the color you've given on the promotional pricing to drive market share gains. I guess I'm just wondering if you could talk through kind of how sticky do you expect these kind of newer relationships to be?

[Dylan Nassano, Vice President at Wolfe Research, LLC]

Can you speak to kind of your expectations around how long it might take to convert those into higher margin orders in the future? And I guess just said another way, how are you thinking about the long term ROI of these volume discounts? And what are you looking for as you kind of track how successful they are? Thanks.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Yeah. Dylan, thank you for the question. Good question. As as I've talked about in previous calls, some of some of the EPCs that we are targeting and and if you if you think back all the way to our investor day last year, that 30% of the market where we had not transacted a lot of business that we were going after. A lot of these particular customers use traditional methods of electrical balance of system where they, you know, pull pull strings and and run the combiner boxes, which are, in nature, lower margin, you know, lower margin projects for EBAs providers, not just Joel's, but but probably everybody.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

So our goal always is to move people up the value continuum and get them to use our top end solutions, which is BLA. And now we've got some new products out there that are that are very similar in labor savings and productivity enhancements for EPCs that that provide better margins for us and provide better value for our customer, quite frankly, from an install base. We're seeing that. We're seeing that start. You know, we've got some customers that we have either recently won or have not transacted business with in in years that are back in the fold with Shoals.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

And those, some of those particular customers are now using our BLA trunk bus solution, which is, which is fantastic to see. So, that's that's the goal for us is to to get these customers back in the fold and and appreciating our value and quality and service, our engineering, our customer support, and convince them to use our our higher value labor saving products.

[Dominic Bardos, CFO at Shoals Technologies Group]

And, Dylan, if I could add just a a little bit more color on some of that. With some of the new products, we've talked about increasing our share of wallet in the solar field. And something like our long tail BLA is a great example of that. It uses our patented BLA technology for a portion of a an extended length trunk feeder cable. And, basically, what that's doing is it's displacing some feeder cable that would just have been sourced out there in the solar field.

[Dominic Bardos, CFO at Shoals Technologies Group]

Now that product itself is a lower margin product. In terms of some of the new products that Brandon mentioned that we've developed, specifically for some of those new customers, as the our engineering team listens and we capture the voice of the customer, some of those, we're still learning how to produce as efficiently as possible. I'll be perfectly honest with you on that one. So as we look at the growth, with our new product offering, as we have, things like we're capturing additional share of wallet, we're very excited to see that growth and and providing solutions for our customers. And as we, mature in that space, we you will see margins improve.

[Matthew Tractenberg, VP - Finance & IR at Shoals Technologies Group]

Thanks, Dylan.

[Dylan Nassano, Vice President at Wolfe Research, LLC]

Great. Thank you. Thanks.

[Operator]

Thank you. Our next question comes from Maheep Mandloy of Mizuho. Maheep, your line is open. Please go ahead.

[Maheep Mandloi, Director at Mizuho Financial Group]

Hey, morning and thanks for taking my questions. On the international markets, could you provide some more color on the revenue contribution? I know you talked about this 20 gigawatt pipeline and more than 12% of the backlog, but how should we think about the revenue contribution for this year? Thanks.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Good morning, Mehit. Thanks for the question. Yeah. Revenue contribution thus far, you know, in 2025 has been been minimal. We are excited that we have won some projects this year in our focus markets.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

We announced one via press release maybe a few weeks ago, I believe, a win in in Chile. So we have we have been successful in LatAm and a couple projects this this year and also have have won a project in Australia that we are excited about. As it relates to, you know, to future backlog and awarded orders, I think roughly 13% of our our VLAO is is is for international projects. So we expect to see the contribution of our international business to accelerate in 2026. A lot of that is driven by, you know, our our export business in a in a previously announced press release for a partnership to to drive that export business with with Sun Africa UGTR.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

So it is a it is a growing business for us. It's one of our four pillars of growth. And I would say, at current date, it is it is tracking in line with our projections that we explained during our Investor Day last September.

[Matthew Tractenberg, VP - Finance & IR at Shoals Technologies Group]

Thanks, Mohit.

[Maheep Mandloi, Director at Mizuho Financial Group]

Yeah. I appreciate that. You.

[Brandon Moss, Director & CEO at Shoals Technologies Group]

Yeah. Sure. No.

[Matthew Tractenberg, VP - Finance & IR at Shoals Technologies Group]

Absolutely. Thank you for the question. I believe that that's the last question for today, everyone. So I wanna note that we have a very active IR calendar in September. If you are attending RE plus, please stop by.

[Matthew Tractenberg, VP - Finance & IR at Shoals Technologies Group]

We'd happy to we'd be happy to offer you a booth tour, and discuss new products driving our results. If we can help you further today, please reach out to investors@shoals.com with any question. We're happy to help. Thanks, everyone for joining us today. Have a great day. Thanks all.

[Operator]

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.

Participants

Executives

• Matthew Tractenberg, VP - Finance & IR
• Brandon Moss, Director & CEO
• Dominic Bardos, CFO

Analysts

• Julien Dumoulin-Smith, II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies
• Philip Shen, MD & Senior Research Analyst at Roth Capital Partners, LLC
• Brian Lee, Vice President at Goldman Sachs
• Colin Rusch, MD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.
• Jon Windham, Head - Alternative Energy & Environmental Services Equity Research at UBS Group
• Dimple Gosai, Head - U.S. Environmental, Social & Governance Research at Bank of America
• Dylan Nassano, Vice President at Wolfe Research, LLC
• Maheep Mandloi, Director at Mizuho Financial Group