Shoals Technologies Group, Inc. Q1 FY2025 earnings call

• The business performed well in Q1 with revenue slightly above the expected range and strong bookings, resulting in a robust backlog.
• Adjusted gross profit percentage was softer due to product mix, strategic pricing, and lower volume, but productivity initiatives are expected to take hold.
• Focus on domestic manufacturing investments, including a new state-of-the-art factory and an innovation field for testing products.
• International growth with a 12 gigawatt MOU with UGT Renewables, progress in the BESS product line across three channels (solar EPCs, industrial market, OEM partnerships), and growth in the C&I business.
• Construction resumed a healthy pace in 2025, with customers' 2025 construction calendars full and projects moving forward as scheduled.

Net revenue for the first quarter was $80.4 million, a 11.5% year-over-year decline driven by product mix, strategic pricing actions, and customer mix. Gross profit decreased to $28.1 million, resulting in a GAAP gross profit percentage of 35.0% compared to 40.2% in the prior year. Adjusted EBITDA was $12.8 million. Backlog and awarded orders ended the quarter at $645.1 million, with approximately $500 million of that having shipment dates in the upcoming four quarters.

• For Q2 2025, the company expects revenue in the range of $100 million to $110 million and adjusted EBITDA in the range of $20 million to $25 million.
• Full year 2025 guidance includes revenue of $410 million to $450 million, adjusted EBITDA of $100 million to $115 million, cash flow from operations of $30 million to $45 million, capital expenditures of $25 million to $35 million, and interest expense of $8 million to $12 million.
• Guidance accounts for potential market volatility but is reasonable and achievable.

• Geopolitical uncertainty and tariffs pose potential risks.
• Litigation related to wire insulation shrinkback, with ongoing legal expenses and a trial expected in 2026.

Q: How has the competitive landscape shifted given tariff uncertainty?

A: Conversations with customers are centered around quality, service, and capabilities, not primarily tariffs.

Q: Details on the two big wins in the BESS product line?

A: BESS has three channels to market, with wins across core solar EPCs, industrial markets, and OEM partnerships, and potential for significant growth in the future.

Q: How does the portfolio evolve in international business?

A: International projects have longer lead times but products are similar to U.S. offerings, leveraging domestic content requirements.

Q: Thoughts on the margin profile and path to 40%+ gross margin?

A: Short-term margins affected by product and customer mix, but visibility into future quotes and new products provides a path to higher margins.

Q: Impact of shrinkback litigation on financials?

A: Legal expenses will continue, with depositions ongoing and a trial expected in 2026.

Q: International supply chain and margin profile of large-scale agreements?

A: International projects have specific considerations, but EXIM Bank-funded projects require domestic content, positioning Shoals well.

Q: Book and ship assumptions and delay trends?

A: Book and ship is strong, and delays are better than expected relative to prior guidance, with no abnormal project timeline changes.