Shoals Technologies Group Q2 Earnings Call Highlights

Key Points

• Strong growth and record demand: Q2 2026 revenue rose 47% year over year to $163.4 million, supported by utility-scale solar and BESS demand. New orders totaled approximately $207 million, lifting backlog and awarded orders to a record $801 million.
• Profitability improved despite lower GAAP net income: Adjusted EBITDA increased 27.9% to $31.6 million, while adjusted net income rose 15% to $19.7 million. Shoals expects margin gains from product mix, productivity improvements and factory consolidation, with inventory investments expected to support second-half cash generation.
• 2026 outlook reaffirmed: Management maintained full-year revenue guidance of $600 million to $640 million and adjusted EBITDA guidance of $118 million to $132 million. The company also highlighted future growth opportunities in long-duration storage through its TerraFlow partnership and in data-center power delivery through its AirLink product.

Shoals Technologies Group NASDAQ: SHLS reported second-quarter 2026 revenue of $163.4 million, up 47% from the prior-year period, as demand from its U.S. utility-scale solar customers and battery energy storage system, or BESS, business supported growth. The company said results were within its previously guided range and reaffirmed its full-year outlook.

CEO Brandon Moss said the company added approximately $207 million in new orders during the quarter, producing a book-to-bill ratio of 1.3. Backlog and awarded orders, which Shoals refers to as BLAO, reached a company record of $801 million, up 19% year over year. Of that total, approximately $699.7 million has planned delivery dates over the next four quarters through the second quarter of 2027.

“The U.S. market continues to be robust,” Moss said, adding that the company is focused on improving productivity as it expands capacity at its new facility in Portland, Tennessee.

Profitability and Cash Position

Gross profit increased 20% year over year to $49.5 million. GAAP gross margin was 30.3%, while adjusted gross margin was 30.6%. Shoals said it expects further margin improvement from favorable product mix, productivity gains and efficiencies from its factory consolidation.

Selling, general and administrative expense was $28.5 million, or 17% of revenue, compared with 21% of revenue in the prior-year quarter. CFO Dominic Bardos said the year-over-year increase in SG&A dollars was largely driven by payroll and employee expenses associated with higher headcount and variable compensation. Legal expenses declined slightly from the prior year as certain litigation matters concluded.

Operating income rose 17% to $18.7 million, representing 11.5% of revenue. GAAP net income was $12.1 million, compared with $13.9 million a year earlier; the prior-year period included a $3.1 million gain from the sale of a manufacturing facility. Adjusted net income increased 15% to $19.7 million, while adjusted EBITDA rose 27.9% to $31.6 million. Adjusted diluted earnings per share was $0.12, up $0.02 from the prior-year period.

Shoals generated $6.8 million in operating cash flow during the quarter, aided by increases in deferred revenue and accrued liabilities. It ended the period with $15.7 million in cash and equivalents and net debt of $181.1 million, or 1.6 times adjusted EBITDA. The company also temporarily expanded its revolving credit facility by $50 million.

Bardos said Shoals invested heavily in inventory during the first half to support its record order book and secure materials ahead of cost increases. The company expects those inventory investments to contribute to cash generation in the second half, with cash flow available to reduce borrowings under its revolver.

BESS, International Activity and New Partnerships

The company generated approximately $20 million in BESS revenue during the second quarter and secured about $10 million in additional BESS orders. BESS BLAO stood at $65 million at quarter-end. Moss said BESS orders are expected to remain episodic because they depend on customers’ construction schedules.

Shoals also announced an agreement with TerraFlow, a developer of long-duration energy storage infrastructure. Under a memorandum of understanding, Shoals plans to support TerraFlow’s utility-scale and data-center energy storage portfolio with its PowerHub Recombiner solution. The MOU is intended to support future TerraFlow deployment plans of up to 5 gigawatts annually.

Moss said Shoals has begun engineering work with TerraFlow and expects revenue from the partnership to begin in 2027, with no expected effect on 2026 results. He said TerraFlow’s approach uses vanadium technology and is intended to support both short- and long-duration battery applications.

International BLAO reached $102 million, with the company citing increased quote activity and customer engagement in markets including Australia. Moss said international project margins can vary based on geography, product mix and whether products are manufactured domestically and exported or produced for more local market opportunities.

Factory Transition, Products and Litigation

Shoals completed its move into its new facility during the quarter and said it is continuing to implement lean manufacturing processes. Management said the consolidation of three facilities into one larger site is complex but should provide greater fixed-cost leverage as production volumes increase. Bardos said a remaining redundant facility is expected to be exited in mid-2027.

Management said product mix is expected to be more favorable in the second half as traditional BLA products account for a higher share of production relative to Long Tail BLA products. The company expects gross margins to improve sequentially overall, though it noted fourth-quarter production days and the timing of BESS deliveries could affect quarterly results.

Shoals also highlighted its AirLink product for data-center power delivery. Moss said the company expects to have the product installed and operational for testing in 2026, with internal and third-party testing underway. He said the product is expected to carry a premium price relative to other market options, though pricing has not been finalized.

On litigation, Moss said Shoals prevailed in its 2025 International Trade Commission case against Voltage. The company expects its district court case concerning damages against Voltage to conclude in the third quarter. Management said legal costs related to that trial would weigh on third-quarter EBITDA but should no longer affect fourth-quarter results after the case is completed.

Guidance Reaffirmed

For the third quarter, Shoals expects revenue of $150 million to $170 million and adjusted EBITDA of $32 million to $37 million. At the midpoint, the outlook represents 18% year-over-year revenue growth and 8% adjusted EBITDA growth.

For full-year 2026, the company reaffirmed projected revenue of $600 million to $640 million and adjusted EBITDA of $118 million to $132 million. Shoals continues to expect operating cash flow of $65 million to $85 million, capital expenditures of $20 million to $30 million and interest expense of $8 million to $12 million.

Management said it sees continued demand across utility-scale solar, BESS and data-center-related opportunities, while monitoring policy developments including tariffs and inverter-related changes. Moss said the company does not currently expect those developments to have a near-term effect on demand.

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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