Shoals Technologies Group, Inc. Q3 FY2025 earnings call

• Third quarter results: Record revenue of $135.8 million, up 32.9% year-over-year and 22.5% sequentially; added $185.4 million in new orders, achieving a company record for backlog and BLAO at $720.9 million, a 21% year-over-year increase. - U.S. market: Customers remain busy, developers have safe harbor projects through 2030, solar well-positioned to meet energy needs. - Strategic growth initiatives: International business with pipeline over 20 gigawatts, hiring in Australia; CC&I business with quote volume increases; OEM business tracking ahead; BESS business with 2 MSAs signed and $18 million in backlog, exploring data center and grid firming use cases; remediation work for shrinkback issues progressing as expected but additional work may be needed in coming quarters.

In the third quarter, revenue reached $135.8 million, a 32.9% year-over-year increase and a 22.5% sequential increase from the second quarter. New orders added were approximately $185.4 million, and backlog and awarded orders (BLAO) were $720.9 million, a 21% year-over-year increase, resulting in a book-to-bill of 1.4. The core utility scale solar market saw strong growth with quote volume exceeding $900 million in the third quarter, a sequential increase of over 20%. International business recognized over $6 million in revenue from 2 ongoing projects in LatAm and Australia in Q3, with the pipeline exceeding 20 gigawatts. CC&I business is performing well with meaningful quote volume increases. OEM business is tracking ahead of expectations. BESS business has signed 2 MSAs and had approximately $18 million in backlog and awarded orders at the end of Q3. Adjusted gross profit percentage was 37%, with gross profit at $50.3 million. Adjusted EBITDA was $32 million, 23.5% of revenue.

• Adjusted the full-year 2025 revenue range to between 17% and 20% year-over-year growth. - Fourth quarter 2025 expected revenue range: $140 million to $150 million, adjusted EBITDA range: $35 million to $40 million. - Full-year 2025 revenue expected: $467 million to $477 million, adjusted EBITDA expected: $105 million to $110 million. - Cash flow from operations expected: $15 million to $25 million; capital expenditures expected: $30 million to $40 million; interest expense expected: $8 million to $12 million.

• Tariffs: Trade policy changes can undo margin-enhancing savings as seen this year. - Shrinkback issues: Probability of additional work needed in coming quarters remains, but current estimated expense range remains unchanged.

Q: Christine Cho asked about the data center opportunity, including how it will materialize, booking consistency, and details on MSAs.

A: Brandon Moss said the channel to market for data centers can be with system integrators, EPCs, or hyperscalers, backlog and awarded orders may be lumpy, and specific MSA details are limited due to confidentiality.

Q: Julien Dumoulin-Smith inquired about how the company is doing against longer-term metrics from Analyst Day.

A: Brandon Moss and Dominic Bardos stated revenue generation is exceeding plan, core business is strong, diversification pillars are performing at or above expected ranges, including CC&I, OEM, international, and BESS businesses.

Q: Philip Shen asked about tariffs, their impact, and margin improvement outlook.

A: Dominic Bardos said tariffs impacted margin lift expectations, can pass tariffs to customers, and margins are within expected range, with material cost savings initiatives important.

Q: Brian Lee questioned the BESS opportunity TAM, data center sizing, and margin implications.

A: Brandon Moss said BESS market has expanded to include data centers and grid firming, sizing varies, and margins depend on architecture; Dominic Bardos added sales cycle varies by project size.

Q: Jonathan Windham asked about international business progress.

A: Brandon Moss said international business has 13% of backlog in international, export projects have margin profiles like domestic, and Australia is a focus with a strong pipeline.

Q: Dimple Gosai asked about Shoals' BESS differentiation and conversation partners.

A: Brandon Moss and Dominic Bardos said Shoals partners with inverter companies in system architecture, is agnostic to chemistry, and has conversations with those using alternative chemistry technologies.

Q: Praneeth Satish asked about data center BESS sizing, competition, and TAM expansion.

A: Brandon Moss said sizing ranges from 50-100 megawatts to gigawatts, competitive landscape varies, and there's opportunity to displace diesel generators.