Shoals Technologies Group Q1 Earnings Call Highlights

Key Points

• Q1 beat and backlog jump: Shoals reported revenue of $141 million (up 75% Y/Y), a record BLAO of $758 million with about $628 million scheduled to ship over the next four quarters, and raised full‑year 2026 guidance to $600–$640 million revenue and $118–$132 million adjusted EBITDA.
• Margins and liquidity under pressure: Adjusted gross margin fell to ~29.6% due to product mix, tariffs, freight and a facility move that management called a near‑term low point, while the company consumed $41.4 million of cash in the quarter (ending cash $1.9 million) and carries net debt of $179.9 million (net debt/adjusted EBITDA ~1.6x).
• Product momentum and diversification: Strong demand in U.S. utility‑scale solar continued, BESS BLAO rose to about $75 million with initial revenue from an ON.energy partnership, international BLAO is nearly $100 million, and a data‑center product is being developed but unlikely to contribute revenue in 2026.

Shoals Technologies Group NASDAQ: SHLS reported first-quarter fiscal 2026 results that came in above the company’s guidance, as management cited strong demand in its core U.S. utility-scale solar market and continued momentum in new products, including battery energy storage-related offerings.

First-quarter results exceed guidance as backlog reaches record

Chief Executive Officer Brandon Moss said first-quarter revenue was $141 million, up 75% from the prior-year period and above guidance. CFO Dominic Bardos reported revenue of $140.6 million, attributing the increase “largely” to demand from new and existing customers in U.S. utility-scale solar.

Commercial activity remained strong, with Moss saying the company added approximately $151 million of new orders in the quarter. That helped drive a record backlog and awarded orders, or BLAO, of $758 million, up nearly 18% year-over-year. Bardos said backlog represents $390.3 million of the total BLAO.

Management highlighted near-term visibility within the order book. Moss said that as of quarter end, about $628 million of BLAO had shipment dates in the upcoming four quarters through the first quarter of 2027. Bardos put that figure at $627.6 million, with the remaining $130.4 million slated beyond that time frame.

Margins pressured by mix, tariffs, freight, and facility transition

Gross margins came in below management’s expected range. Moss said adjusted gross profit percentage was 29.6%, “driven by product mix, tariffs, increased freight costs, and some temporary labor inefficiencies” tied to training employees as the company expands new business lines. Bardos said GAAP gross profit percentage was 29.2% and confirmed adjusted gross profit percentage of 29.6%.

Bardos said product mix, freight and tariffs contributed about 200 basis points of margin compression versus expectations. During the Q&A, Moss described disruption from moving production into the company’s new facility, noting Shoals moved “about 250 pieces of equipment or slightly more over a 60-day period in the quarter.”

Management repeatedly characterized the first quarter as a low point for gross margin this year. Bardos said the company expects margins to remain “a little bit lower” in the second quarter while the move continues, followed by sequential improvement as operations stabilize and efficiencies from the consolidated facility begin to materialize.

Operating expenses showed leverage despite higher legal spending. SG&A was $31 million, or 22% of revenue, according to Moss, representing a 500 basis point decline from 27% in the prior year. Bardos said SG&A increased $9.3 million year-over-year, driven by $6.2 million of legal expenses, including:

• $4.1 million related to International Trade Commission (ITC) litigation
• $1.2 million related to the Prysmian case
• Just under $1 million related to the shareholder class action suit

Bardos said the company announced a proposed settlement to the shareholder class action suit and that the “vast majority” is covered by insurance. He added that net loss of $297,000 reflected a class action settlement net impact of approximately $5 million.

Profitability and cash flow details

Adjusted EBITDA was approximately $21 million, which Moss said came in at the high end of the company’s guided range and increased 56% year-over-year. Bardos reported adjusted EBITDA of $21.1 million versus $13.5 million a year earlier. Adjusted net income was $12.1 million, up 112% from $5.7 million in the prior-year period, and adjusted diluted EPS was $0.07.

Cash flow was pressured by working capital. Bardos said Shoals consumed $41.4 million of cash in the quarter, driven by higher inventory levels taken to meet strong demand signals and protect customer delivery timelines for the next two quarters. He said the company intends to reduce inventory in the back half of the year.

Liquidity also tightened as inventories rose. Bardos said the company ended the quarter with $1.9 million in cash and equivalents, net debt of $179.9 million, and net debt to adjusted EBITDA of 1.6x. He said Shoals plans to “moderately expand the capacity” on its revolving credit facility and intends to keep leverage below 2x adjusted EBITDA over time.

On supply chain risks, Bardos said management does not currently anticipate interruptions to project delivery schedules due to the conflict in the Middle East or projected trade policies, citing the company’s inventory positioning.

Business update: solar strength, international progress, and BESS ramp

Moss said Shoals continued to see strong growth in its core utility-scale solar market, with quote volume exceeding $1 billion of unique projects in the quarter. He also pointed to progress internationally, particularly in Australia, and said international BLAO totaled almost $100 million, supporting diversification into 2027 and beyond.

In other end markets, Moss said the company’s community, commercial and industrial (CC&I) business remains a small portion of overall mix but “continues to perform well.” Bardos said the OEM business was the second-largest revenue contributor after domestic utility-scale solar and grew 33% year-over-year.

Battery energy storage system (BESS) activity also advanced. Moss said Shoals added about $9 million to BESS BLAO during the quarter, ending at $75 million. He noted the company produced the first units in its new facility tied to a partnership with ON.energy and recognized “more than $1 million in revenue,” setting up a ramp through the second quarter.

On BESS bookings mix, Moss told Jefferies analyst Julien Dumoulin-Smith that roughly two-thirds or more of BESS bookings in the quarter came from grid firming and solar-plus-storage applications, while management continues to view AI data centers as “probably the strongest and largest driver” longer term.

Separately, Moss provided an update on a data center product discussed on prior calls, saying the company does not expect to recognize revenue in calendar year 2026 and is working toward a proof-of-concept installation this year. He said bookings in 2026 could be “minimal” as the company begins to ramp in 2027.

Guidance raised; tariff environment remains dynamic

Management raised full-year 2026 revenue and adjusted EBITDA guidance. Bardos said Shoals now expects:

• Second quarter 2026 revenue: $150 million to $170 million
• Second quarter 2026 adjusted EBITDA: $28 million to $33 million
• Full-year 2026 revenue: $600 million to $640 million
• Full-year 2026 adjusted EBITDA: $118 million to $132 million

For the full year, Bardos said the company maintained expectations for cash flow from operations of $65 million to $85 million, capital expenditures of $20 million to $30 million, and interest expense of $8 million to $12 million.

Management also discussed tariffs and freight. Moss said freight costs have risen alongside oil price pressures and acknowledged that rapid changes in input costs can be difficult to fully recover once pricing is contractually set. On tariffs, Bardos said IEEPA tariffs were “stop collected” late February and described the evolving Section 232 framework as dynamic, adding that, on balance, changes “should be slightly favorable” in how tariffs are calculated. Moss added that the company views the tariff changes as “a net neutral to positive impact” in the back half of the year, while cautioning that the environment could change again.

Moss also said the company has seen “positive movement” in its IP infringement case against Voltage, noting the ITC declined to review contested issues in the administrative law judge’s initial ruling and that a final determination is expected in early June.

About Shoals Technologies Group NASDAQ: SHLS

Shoals Technologies Group, Inc is a leading provider of electrical balance-of-system (BOS) solutions for the solar energy industry. The company designs, engineers and manufactures a comprehensive portfolio of products, including junction boxes, combiner boxes, cable assemblies, power distribution units and monitoring systems. These components are critical to interconnecting photovoltaic modules, optimizing energy output and ensuring safe, reliable performance across solar installations.

Founded in 1996 and headquartered in Portland, Tennessee, Shoals has grown its manufacturing and operations footprint to serve customers around the globe.

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