Shoals Technologies Group, Inc. Q2 FY2025 earnings call

• Second quarter revenue of $110.8 million was above the high end of the expected range, with an 11.7% year-over-year increase and 37.9% sequential increase.
• Bookings were strong at approximately $137.1 million, resulting in a record backlog and BLAO of $671.3 million with a book-to-bill of 1.2.
• Adjusted gross profit percentage was 37.2%, with gross profit dollars at $41.2 million, the highest since 2023.
• Adjusted EBITDA was $24.5 million, at the high end of the expected range.
• Remediation work to replace defective Prysmian wire on known customer sites is nearing completion, with some remaining work due to weather and logistical constraints.
• Long-term underlying drivers of markets remain positive, with solar being a clear winner in LCOE analysis.
• International markets have a pipeline exceeding 20 gigawatts, with projects in Latin America, EMEA, and Asia-Pacific; CC&I business gaining momentum with over $10 million expected revenue this year; OEM business tracking ahead of expectations; BESS has significant opportunities including serving data centers.

Revenue for the second quarter was $110.8 million, an 11.7% increase over the prior year period and a 37.9% sequential increase. Bookings were approximately $137.1 million, resulting in a company record backlog and awarded orders (BLAO) of $671.3 million with a book-to-bill of 1.2. As of June 30, 2025, approximately $540.3 million of the BLAO has shipment dates in the upcoming 4 quarters. For product segments: Domestic utility scale solar saw revenue growth driven by new and returning customers. The CC&I business is expected to have in excess of $10 million in revenue this year, with June seeing the highest month of bookings since tracking began. The OEM business is tracking ahead of expectations. BESS is a key area of investment with significant opportunities, including serving data centers where data center power demand is surging.

• Third quarter 2025 revenue expected to be in the range of $125 million to $135 million, with adjusted EBITDA in the range of $30 million to $35 million.
• Full year 2025 revenue expected to be in the range of $450 million to $470 million, with adjusted EBITDA remaining in the range of $100 million to $115 million.
• Full year 2025 cash flow from operations expected to be in the range of $15 million to $25 million.
• Capital expenditures for full year 2025 expected to be in the range of $30 million to $40 million, and interest expense in the range of $8 million to $12 million.

• Political landscape driving debate around tariffs, tax subsidies, and FEOC restrictions, though long-term underlying drivers of markets remain positive.
• Some components must be sourced from non-U.S. vendors, and determining how to price projects appropriately for those cases.
• Policy debates in D.C. regarding energy sources introduce uncertainty, though many projects through 2027 have components secured or can meet construction requirements.

Q: Julien Dumoulin-Smith asked about order activity and customer willingness to move forward, and specifically on BESS order activity.

A: Brandon Moss stated the market backdrop is strong with projects moving forward, core business growing, backlog and awarded orders strong, and BESS has significant market opportunity with interest in data center AI applications.

Q: Philip Shen asked about 2026 outlook based on backlog and awarded orders and on full year free cash flow guide.

A: Brandon Moss mentioned backlog and awarded orders in the following 4 quarters are $540 million, and Dominic Bardos said cash flow is growth-driven with working capital investment needed for growth and reductions in warranty remediation and CapEx expected by year end.

Q: Brian Lee asked about revenue guidance update drivers and why EBITDA guidance stayed intact.

A: Brandon Moss said top line growth is due to execution and winning in the marketplace, and Dominic Bardos explained diverse customer mix, promotional pricing, elevated legal expense, and new products with reduced gross margin impact EBITDA.

Q: Colin Rusch asked about competing around power quality issues.

A: Brandon Moss said Shoal's BLA product line is durable and they are working on a 2 KV line to be spec'd in sites in 2026.

Q: Jon Windham asked about reaffirmed EBITDA guidance.

A: Brandon Moss said top line strength due to execution, promotional pricing impacting margins, and significant new product growth with some new products having reduced gross margin; Dominic Bardos added about relocation of operations and not yet realizing operational efficiencies.

Q: Dimple Gosai asked about BESS OEM partnership opportunity.

A: Brandon Moss said there are domestic battery energy storage suppliers with alternative technology to avoid tariffs, and Dominic Bardos mentioned alternative technologies for data center demands.

Q: Dylan Nassano asked about stickiness of newer relationships and long-term ROI of volume discounts.

A: Brandon Moss said goal is to move customers to higher-value labor-saving products, and Dominic Bardos added about new products like long-tail BLA and learning to produce efficiently for margins to improve.

Q: Maheep Mandloi asked about revenue contribution from international markets.

A: Brandon Moss said revenue contribution thus far in 2025 has been minimal, but international business is expected to accelerate in 2026 with a 13% portion of BLAO for international projects and tracking in line with projections from Investor Day last September