Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Shoals Technologies Group Inc (SHLS, Financial) reported a strong backlog and awarded orders totaling $615.2 million, indicating robust future revenue potential.
- The company is expanding its focus on the Community Commercial and Industrial (CC&I) market, which is expected to grow faster than utility-scale solar.
- Shoals Technologies Group Inc (SHLS) is making significant inroads in international markets, with $77.9 million of backlog and awarded orders from projects outside the US.
- Despite near-term challenges, the company remains optimistic about long-term growth driven by increasing electricity demand and higher power prices.
- Shoals Technologies Group Inc (SHLS) has a strong balance sheet with net debt to adjusted EBITDA of one times, improved from two times a year ago.
Negative Points
- First quarter net revenue declined by 14% year-over-year due to project pushouts and lower demand in domestic utility-scale solar projects.
- Gross profit decreased to $36.5 million from $48.3 million in the prior year, with a lower gross margin primarily due to higher labor costs and lower fixed cost absorption.
- The solar industry is facing near-term headwinds such as project delays due to permitting issues, higher financing costs, and extended equipment lead times.
- Shoals Technologies Group Inc (SHLS) is experiencing challenges with shrink back on wire purchased from a vendor, with ongoing legal proceedings and remediation efforts.
- The company's e-mobility and energy storage solutions segments have not yet achieved significant revenue, indicating slower progress in these areas.
Q & A Highlights
Q: Can you discuss the visibility into the second half ramp and if the guidance has been sensitized for a potential AD/CVD case?
A: (Brandon Moss, CEO) We have visibility on every project and have accounted for potential delays in our guidance, which we believe is reasonable and achievable. Regarding panels potentially affected by tariffs, we understand there may be significant panel inventory already in the U.S., and we do not anticipate major disruptions from tariffs in the second half of the year.
Q: What are you observing about your market share of orders in the industry over the last quarters?
A: (Brandon Moss, CEO) Our growth was 50% last year, outpacing the market growth expectation of 26%. We have consistently outpaced the market since our IPO and see opportunities to grow our wallet share with large EPC customers. We've reorganized our sales team to target what we consider low-hanging fruit, which should help us continue to increase our market share.
Q: How might the AD/CVD case impact bookings in Q2 and Q3, and what is the trend for bookings?
A: (Brandon Moss, CEO) Module availability and pricing have not been significant concerns from our customers. Most projects we are involved with have already procured modules. The main delays we hear about are related to interconnections and site permitting, not module availability.
Q: Can you provide insights into the revenue pacing for Q3 and Q4, and any expected developments in the C&I segment by year-end?
A: (Dominic Bardos, CFO) We haven't provided specific guidance for Q3 and Q4 yet, expecting a relatively even distribution. (Brandon Moss, CEO) For the C&I market, we're developing a dedicated team and product set, expecting some market traction by late 2024, with more significant progress in 2025.
Q: Can you discuss the first quarter bookings and the nature of project pushouts?
A: (Brandon Moss, CEO) Our total backlog and awarded orders increased, but we experienced some unusual project cancellations and delays, which is atypical for us. Despite these challenges, our quote volume and demand remain strong.
Q: Could you clarify the $60 million referenced in relation to orders that went back into the sales funnel or were canceled?
A: (Brandon Moss, CEO) We had a project cancel and several projects that moved back up into the sales funnel, totaling about $60 million. This adjustment is unusual for us but reflects the current market volatility.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
