• Revenue: $102.2 million, a decline of 23.9% year-over-year, but a 2.9% increase sequentially.
• Gross Profit: $25.4 million, with a GAAP gross profit percentage of 24.8%.
• Adjusted Gross Profit Percentage: 37.9%, targeting 42% over the longer term.
• Adjusted EBITDA: $24.5 million, with an adjusted EBITDA margin of 24.0%.
• Net Loss: $0.3 million, compared to a net loss of $9.8 million in the prior year period.
• Adjusted Net Income: $13.9 million, compared to $33.4 million in the prior year period.
• Cash Flow from Operations: $15.7 million.
• Capital Expenditures: $2.4 million.
• Backlog and Awarded Orders: $596.6 million, with $455.2 million planned for delivery in the coming four quarters.
• Fourth Quarter Revenue Guidance: $97 million to $107 million.
• Full Year 2024 Revenue Guidance: $390 million to $400 million.
• Full Year 2024 Adjusted EBITDA Guidance: $96 million to $101 million.
• Full Year 2024 Adjusted Net Income Guidance: $58 million to $62 million.
• Full Year 2024 Cash Flow from Operations Guidance: $70 million to $80 million.
• Full Year 2024 Capital Expenditures Guidance: $8 million to $12 million.

• Warning! GuruFocus has detected 4 Warning Sign with SHLS.

Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Shoals Technologies Group Inc (NASDAQ:SHLS) reported revenue within their guided range at $102.2 million, demonstrating solid execution despite market challenges.
• The company received a favorable initial determination from the ITC regarding their patent infringement case against Voltage, which is seen as a significant step in protecting their intellectual property.
• Shoals Technologies Group Inc (NASDAQ:SHLS) has signed up four new EPC customers following the initial ITC ruling, indicating strong commercial momentum.
• The company has quoted almost $2 billion worth of projects this year, reflecting increased customer engagement and potential future growth.
• Shoals Technologies Group Inc (NASDAQ:SHLS) is investing heavily in Battery Energy Storage Solutions, with positive feedback from customers on new standardized configurations introduced at RE+.

Negative Points

• Third quarter net revenue declined 23.9% year-over-year, primarily due to project delays and competitive dynamics.
• The company recorded a $13.3 million charge related to wire insulation shrinkback remediation, impacting gross profit.
• Adjusted EBITDA margin decreased to 24.0% from 35.8% a year ago, driven by lower sales and adjusted gross profit percentage.
• Project delays are a significant issue, with 60% of utility scale solar projects delayed, impacting revenue recognition.
• The company faces ongoing challenges with supply chain disruptions and increased labor costs, affecting operational efficiency.

Q & A Highlights

Q: Can you provide an update on the ITC decision regarding the patent infringement case against Voltage? A: Brandon Moss, CEO: The deadline for review is either today or tomorrow. We haven't heard any updates, which is common. We're looking for a final determination at the end of December. The initial determination was a win for Shoals, and we plan to protect our new BLA patent portfolio and pursue the case in District Court following the ITC outcome.

Q: Can you comment on the bookings activity and its outlook for Q4? A: Dominic Bardos, CFO: We've seen good strength at the start of Q4, with a healthy pipeline and record quoting activity. Some projects are coming back online, contributing to both 2025 and 2026 revenue. We are pleased with the commercial gains and customer engagement, and we expect strong bookings.

Q: Gross margins in Q3 were below the target range. Can you explain the factors affecting this and the outlook for margins? A: Dominic Bardos, CFO: Elevated labor costs, supply chain issues, and expedited freight impacted margins. These are not long-term issues, and we remain confident in our 40% to 45% target range. We expect higher EBITDA margins in Q4, indicating improved gross margins.

Q: With the election results, do you anticipate any impact on the solar industry and Shoals' business? A: Brandon Moss, CEO: We expect the new administration to support solar due to the US's power needs and investments in red states. Solar remains the lowest LCOE and quickest to deploy. We are optimistic about continued support for solar and US manufacturing.

Q: Can you discuss the competitive environment and any emerging competitors? A: Brandon Moss, CEO: We are focused on customer needs and product innovation, such as the 2kV product. We are improving our competitiveness by enhancing product delivery and packaging. While competition exists, we are confident in maintaining and growing our market share.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.