SHLS - Earnings call transcript Q3 2021 | Shoals Technologies Group, Inc.

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Operator

At this time I would like to turn the conference call over to Mehgan Peetz, Chief Legal Officer. Ma'am, please go ahead.

Mehgan Peetz

Thank you, operator, and thank you, everyone, for joining us today. Hosting the call with me are CEO, Jason Whitaker; CFO, Philip Garton; and SVP of EE Solutions, Jeff Tolnar. On this call, management will be making injections or other forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainty.

of consider the you quarter guidance and first and these understand of listen guarantees the including not statements, regarding quarter you these or should comments, that XXXX of As performance are results. XXXX, the fourth differ could forward-looking our assumptions from of other factors. statements because incorrect or materially of any our results Actual if are and conditions, Exchange These decreased and our filings products with our performance factors described policy Commission well results, pandemic, factors as in the include, industry project of our among availability supply risk other components market as financial regulatory and chain cancellations, and economic Securities and for materials, company and things, and circumstances, our the COVID-XX demand the price disruptions changes.

believes any in duty to statements be the and realized. of Today's results do that assumptions financial assumptions any we undertake contemplated therefore, incorrect caution measures. of to this not the of assurance references this the may are any will any discussion prove can forward-looking statement forward-looking date includes that as forward-looking inaccurate could or the made that presentation in there update statements. and indicate underlying the no reasonable, be the We Although non-GAAP is and discussion forward-looking also included statements

to turn me historical measures let to non-GAAP over refer the company's financial definitional of reconciliations With third call contained that, should the You in to for the information and quarter press information release the measures. Jason. comparable

Jason Whitaker

acquisition it and wrap and the Phil then our progress provide quarter, me and the quarter for an off first business. update of outlook some for a the with on much, turn details ConnectPV, the report provide very start I'll Mehgan, fourth EV financial our over then an of for highlights to quarters you XXXX. afternoon, and good our with will back new on I'll everyone. Thank up overview from of

BLA. IPO of we see share our We customers quarter, and we time many don't year, to gains now have this successfully as continued as to down. our customers using earlier convert market Xx falling the system the During our we third at did

As quarter, be with additional and new system. pleased third customer our the XX the into end of we to customer transitioning couldn't more number customers our conversion I coming the prospects sales flow. of of had

made have We during also the growth more BLA us. outside new we good of quarter a of products for And lot ahead with solar. our progress

XX our our new in than Both end reflected so margins large about months. sold products gains management past our the as million that solution first As end of of our at their above manufacturing over new of solution, very more put are we're we XX% now our were the order BLA our backlog out in over new orders backlog revenues of of the we the perspective, in awarded and ramp in curve the or we wire have IV for overall number in of growth. The margins, benchmarking we system To we're have currently as was at quarter, awarded solar well record seeing gross product. products these excited generated of orders $XXX.X and of September.

Shoals. ConnectPV The acquisition third our products. is also several the acquisition, of EBOS accomplishes storage completed first solar During we ConnectPV. for California-based quarter, and a provider things

have that was the been of one some companies energy products. for systems, ConnectPV and cost storage of First, opportunity for line introduce area their their in very is our segment. manufacturing for introduce customer storage, AC specialized new ConnectPV growing specified structure. this a product our significantly with do strengthens leader utility-scale EBOS also we very in can an a first rapidly the another expertise market battery products, our about project and storage excited ConnectPV relationships and to has U.S. mention We're see strong we is to EBOS and stand-alone largest solutions, for leveraging the expertise offerings battery products I in what which should

customers solar gains. Second, Making of relationships customers we did to us sell will with. EBOS that accelerate ConnectPV offerings not have our and convert more to system Shoals part market historically these our to allow ConnectPV share rapidly

skilled significant will Third, to ConnectPV model has focus They excellent company's engineers with Tennessee their time to historical on on capability are support where in The our customization X business the more team required. Coast our our teams projects, was was and engineering a help talent across amount Having at product. very add zones. engineering specifying that of challenging growth. West designing with

with hours ConnectPV more to work for our stock combination have and purchase not was customers. material of in the cash to price day was The financials. and a We

share. expect per earnings to We transaction accretive the our be XXXX to

Now EV our turning to business.

and During the our outside of stations, solution headquarters. third demonstration quarter, a charger, full quad Raceway EV-BLA charging at deployed we our set, EV site skidded

We are from for products our for and orders network have orders an more charging or one a customers. of and, date, We've from taking to begun operator, using site prospective received charging large a EPC the our to utility showcase EV products. customers investor-owned

to We during products expect fourth to shipping our begin the customers quarter.

charging the will become opportunity using results. of our very the EV it in of excited Phil, year, hundreds over focused rollout are basis now will core business creating prospect turn it to our complement our if solar could use EV who financial to this and business. more we equipment. discuss quarter station the charging I will about to the public third on significant our it that a remain of the for be and in We solution end first expect of well, performs The installed stations

Philip Garton

Thank you, Jason.

immaterial. a during versus revenue the the components EBOS system year third in significant due Prices components products of with prior in have our across purchases. addition periods. contribution year August revenue The margins was mix the an ConnectPV's historical in line from of Components comparable the with change demand component as we and in prior year primarily typically during in period. expected for closed by in from well quarter, products. historical margin an the of during $XX.X they its Solution to in increased Solutions XX well and quarter quarter solutions to quarter pay as are third customers Shoals. smaller solar XX.X% results on of new strength XX% the due were ConnectPV in lower than quarter total XX.X% the ConnectPV driven with components, was revenues prior during as compared to the were gross the by solar component prices a This XX% represented impact Solutions of as to For the start quarter. million acquisition their our the sales, Gross System product combined prior mix period prior number Shoals' The higher generally driven and revenue than margins Sales on lower consistent was size versus lines Gross period the increase increase to the of margin System specifically. in year. of to-go XX% which margins the used the for relative higher System gross to third

would margins have of been higher quarter. the impact ConnectPV, Excluding in the gross

we in Shoals' margin bring gross to We line expect average PV's margins as Connect with them our migrate to suppliers.

period. public to prior in stock-based result $XX prior nonrecurring income million period. headcount to company EBITDA see the the initiatives, expense third prior public growth for quarter acquisition-related the and were and the compared Third year planned higher third adjusted costs ConnectPV in increase quarter our GAAP increased million to the and to payroll expenses higher results. to offering a tables of was was This in million million due new million Please support for $X.X adjusted net our $XX.X year and million $XX.X income primarily quarter general expenses in Adjusted release Adjusted press period. was third EBITDA a $XX.X for in quarter compared compared compensation, to our net reconciliation product the expenses. year $XX.X bridge administrative

and million, XXXX. for versus of backlog increase of we orders orders and XX% As XX, our customers. XX, $XXX.X June products backlog XXXX, and of increase demand The robust continued September XXX% from had an reflects year-over-year Shoals' awarded awarded in

Jason Whitaker

Phil. Thanks,

an it The key is supply to market is results. our our the provide growth current on I'll near-term the challenge current and impacting Now how solar environment in chain update environment.

customers customers the our when projects. on unfortunately, result shortages contend schedules Our business with product logistics business. that is delivery changes, accommodate is where this the our we of have progress us impact quarter pressure some shifting products most margin peers of of insulated fourth they as year ship which first a from the factor materials product, model to prices, of the want not experiencing shipping both of has needed limited been rising a effect that updates has cases, and we design issues of or and making available. our very and recognize the other are expected the their as many have commodity produce panel to still result frequent because our as to on projects have can of they of these are But effectively us revenues result product In the the of our fluid form and changes The delay will components impact of quarter the both Recently, in specifications with next. the site. to or into delayed

I him, why make I'd we guidance, shareholders you Phil it have points. we're is which the providing next While important that final before felt X our for like for but customers impact our to take our will provide to the our outlook changes was our quarterly turn the to to not quantify quarters. on through numbers, results X of the it practice made, is

a timing First, issue. is this truly

seeing single capacity a business. tremendous now making demand our deliver not order have sure have to focus And right our is that we across the We cancel. we're candidly, on had primary the

Second, our any margins. we're not pressure seeing on

is to gross solely lower mix. profit QX margin related Our in

call. book and based expected we have feel ability it last to I margins good about order in our expand the talked our to on hand about very our upon continue We it today.

temporary this Third, a situation. is

specifics supply extraordinary adapting. about of in to global forever. the We is that normalize. won't beginning the us amount This have are seen it talk we Suppliers customers to And for Phil what last market adapting, I'll providers an it to see QX and the disruption clear logistics turn slowly but now are back are chains, QX. to is adapting, of

Philip Garton

are in currently and customers, in to be $XX what revenues feedback from Based of million $XX quarter range expect to the on fourth the market our we we seeing million.

to $XX We be of expect million $X range in and to net million the million. in be to million adjusted $XX the range adjusted of $X income EBITDA to

the to of range first the of be in million for to expect $XX revenues million. quarter As XXXX, we $XX

adjusted net the and in to to adjusted EBITDA be million. $XX million $XX the million be of $XX expect in to income million to of We range $XX range

While quarter, to the to component Jason, that sales expect of we margin consistent the in you. the fourth in gross XXXX, adjusted back for quarter in which outlook mix will quarter, to with of first reverse our expected is remain our high EBITDA. the reduce

Jason Whitaker

thanking their everyone, employees our of questions. our I'd the I'd company's customers today. to and line you, contributions by continuous their like your like operator to for the With all to shareholders for appreciate open to their Shoals, ask for for to thank our and our I time close commitment support. that, success

Operator

Instructions]. [Operator

comes today from Goldman Our from first Sachs. Brian question Lee

Brian Lee

cost XQ, here. I a that around the and gross then Can and view kind the the have XQ I you was impacting mix side into what of inside to and supply margins. the additional any or of impact. outside things margins I more the of that And of talk I one had guidance mix of the questions chain on would in margins for know had not had follow-up. seeing a gross appreciate you And telegraphed XQ? is you're guess whether

Jason Whitaker

I'll talk again. to Brian, that question. take is Good speaking. this Jason to you

the especially when margin look working those foremost, you mix process talked team uncommon transition, in those profile, when at to of BLA, with the our product. it's is ultimately system into them the them about first in converting full going component category function at it not has customers our are that that look had success fall over and you when So transition And from converting before, offerings shift product over. strictly prospects the we're and to customers while to initial sales of we a and as for

Brian Lee

Okay. Fair enough.

near So term, then I ConnectPV, immaterial did And impact quarter. you the here mentioned think it's related. it all in the in mix it's but margins

to basis? become acquisition. the basis margins next When there have headwind be point you're higher start of you Your some had do And see in been what made to line a more on of of in we that would if that impact ConnectPV maybe not was targeting? the Any as is that going average corporate then magnitude couple quarters? sense margin with

Philip Garton

Brian...

Jason Whitaker

ahead, please. Go Phil,

Philip Garton

ahead. Go

-- was was that basis approximately XXX Brian, it Okay. points.

working We QX. those integrating will bit higher of we there course, now. But suppliers to -- are are -- suppliers. be manufacturing own through cost, our be and their much will immaterial, once but overall in there'll are sales we're into process Shoals' some impact, the impact and little the rolling we're a -- The into again, quickly QX them transitioning

And so first completely quarter. it as will hopefully, the be through we mitigated, get

Brian Lee

Okay. one I'll pass last for it maybe Fair And enough. and then me on.

of is to the the sense any $XX slipping saying, the Phil, orders here $XX I next canceled, know million On Jason year that end what's into part that haven't had QX there's supposed captured revenue seen would know year. guidance of be we still the revenue. this I us you're million maybe give maybe you or timing the some that isn't It across been and X of that and quarters early of from anticipating. that getting of the seem

it? 'XX? part the move of your QX some just project risk see you through kind in following quarters, to captured are QX? the to Or And would all is early the capture characterize of into the the that of being additional going several we we how slip just So of next slippage as not of into ability pushout quarters

Jason Whitaker

Yes. No problem, Brian.

take that. I'll So

QX, XXX%, look when like we you of are, you strong. to from for activity our QX, pushouts. when There's over all, But quoting and our to XXXX. a related demand have When So and ahead. size out XXX% point customer backlog up were level consider and that lot of QX orders, high at I'd first and award back into very where even QX prepared a respectively. XXX% look and is of aside up book uniquely project at we at average opportunity year-end remarks, go and you And XX% looking rolling demand over the

with potential So included numbers. particular in forecast, and comfortable for industry we're extremely particular headwinds actually those our incremental we've

Operator

from comes next Colin Our from Rusch question Oppenheimer.

Colin Rusch

your Is start to the prices your for labor? level own you labor have is these where at displace an at inflation terms savings opportunity wage and With you pricing relative in inflation, strategy high-cost labor your guys on value projects and as here? there in some looked more you of increasing

Jason Whitaker

that's labor. real when key great labor, question, especially the in to our solution abroad, amount only Yes, our the but of and you offering being with consider a provide classification is system aspects not offering form Colin, the savings labor, full value one able of the of of

you evaluating in when So focusing that. really point in we're we this at look constantly are at on mind, But we're time, growth. where keep

So in a that from keeping perspective, pricing project particular standpoint. our we're line from

Colin Rusch

clip systems? chain, understand Certainly, just of basic materials, resilient you how to your over base. to a about but some talk the potential in just can these the have, diversify that the design with in all And guys terms or customer on the not of little shortages metals, of global of or a suppliers hit coatings then just some of to seeing wires full want right. but serve to the of All the chain smaller supply you elements supply I we're some you're bit

Jason Whitaker

great question. Colin, Yes,

to happen we that of have be we that could the operate one So particular to To that approved something constantly doing from, is list vast we that itself. constantly were over we're vendor things particular supplier, with pivot to immediately a adding one make AVL another. we're sure to list able and

working years many, that X something many is we've that ago, many, to we day been and So on continue over since time. build that

Operator

question next Our Kashy Energy. comes from Harrison Simmons from

Kashy Harrison

mean in closer you your that are supply you delivery a beginning then things bit chain? And schedules detail you're seeing adjust. to by get supply more indicated you to in maybe bit chains eventually what expect a normal? you into actually you do that? on little expect back remarks, you when Where said already maybe to Jason, little And normalize. to the improvements seeing Can you prepared go

Jason Whitaker

That's a question. great

actual look exact when hard facilities, inputs starting we've material to to But the sure a raw chain think definitely I you expectations upon the actually to itself. can the need changes of to predict out normalize. just built changes get we working let's customers. they thing those and they those upon, make our ultimately, it that is are what so at up, that able we're so going that actually more make commitments the it's supply longer material particular make key those we understand be again, and -- takes, you can So the that to any it our themselves are counteract a logistics utilizing come somewhere you ABL their the from additional to derisk the timing. our And make the If into based and take accordingly ABLs see vendors of with receive supporting can to inputs be actually to say, so closely able days with But your orders that that, based X when perspective.

Kashy Harrison

And more capabilities? they -- was are to perspective? more manufacturing now able components starting into seeing Have than -- from inputs before? customers' -- to reference to you what Are Or that about are they readjust? get in did them your statement they you your

Jason Whitaker

general. items a more particular really in were speak hard perspective. from our customer We to It's inputs the speaking to all to exact Yes. just mainly

Kashy Harrison

quite implied the you've Got question, customers it. increased bookings increase from these And just going the into quarter-over-quarter quarter-over-quarter. was backlog? my such increase there next about and several And Is the on XX% growth implied years? Makes that in backlog able meaningful next to -- the then pronounced. that bookings several been coming that's sense. bookings is growth a over backlog on how or quarters in should Or something revenue the we think next else And then driving add? converting and the

Jason Whitaker

very supporting that we that great [Technical those When take we've but a as of customers, as a customers you to pipeline particular from working more question. well as look That's win begin Difficulty] and about backlog been the with, also look backlog we've particular past. similar orders. and it's our the awarded is when talked also at that you accretive timing to our of orders, And in awarded what very to

at further projects than some take on that's or average but spend that, looking good backlog particular may roughly, that [Technical You're like. actually all Difficulty] give a rough looks

Operator

Our Mark next from JPMorgan. Strouse from question comes

Mark Strouse

Jason, handful can is a issues just kind Or how comment of are issue? Are broader distributed about of it timing of the that are? near-term you kind widely air projects larger a just bubble? these project causing this

Jason Whitaker

actually particular to I are from levels. shift customers think same projects, projects let's Mark, factor, take there. form look the example There's a a out panel larger good you manufacture when our And panel it's same panel so that of B, one several manufacturer say here, is manufacturer, power a at that A

simple into we're us a type that of seeing, themselves. with because projects ultimately connectors them projects. are the actually are fairly to a cause included project of a large are we a of large it's follow itself few put delays But that redesign and no that the could than several group Just there, shift panels other out reason what a connector that could like for the if have portion

Mark Strouse

last-minute you've that and kind -- least language out those me I remind orders? at Okay. you bearing door contract it's with already and produced is customer those of responsible ready mean cost? And get is for then the expenses the who's associated change, far to change can product as if the the as go what a you

Jason Whitaker

the is also look Yes, change one the things associated point change And want couple correct. at raw to inputs at a that. a with that out, COMEX particular current perspective point on other to whenever When material reflected margin for will customer price, the out that, a of a the the change based that's thing was actually of upon order copper you change initial deal. be that there I requires is different project, based orders for that upon and utilized itself, price responsible additional not if, COMEX like also example, receipt itself

Operator

comes Our Philip from ROTH question next Capital from Partners. Shen

Philip Shen

and provided is it official to your IPO XXXX think one EBITDA know now. first then haven't about your back I from guidance, view on and The think but XXXX. you I of revenue

what accelerating offset seen an growth project change since So we've by is these in and delays then part orders.

delta what the X.X concerned? years your between or incrementally on So are more versus positive saw as you you XXXX think see outlook you incrementally ago you about more now, what

Jason Whitaker

Yes. great question, That's a Phil.

obviously, date. converted can you when in we're of backlog see, that in number talk have we've QX accomplish, reflection to for tell excited And as you been orders number I quoting. and So our that outlook in and we're one thing you more solar able you see We're projects XXXX other awarded in you that I never a that been I prospects customers in as about offering been number and as as can't and, the only to But areas as know. information reflected the can that specifically general. QX, of specifically added is demand up we've what at of well I have that getting, over we've look can the direct the

Philip Shen

heard share your the how the And may there's new in products that potential XX% guys hit requirements Great. field. When -- your labor ITC ITC. for requirements more potentially prevailing There the you so the and actually but your is you about help forth, might then can business. as for view labor XX% in you the the be to if that I want Okay. your reconciliation reduce on customers, bill, the have it wage might what to able relates for think understand the to reduced you demand be I've if in impact you've because upcoming change pool the to labor

Jason Whitaker

Phil. Yes,

a cost right? and definitely labor the of Because look current at wage upon at themselves. extension whether look the labor license can in our it significantly or prevailing the classification profile down helps, wage, when or the that waver, change prevailing itself is it labor, you do ITC, electrician anything customers when to based So value to that general you we requirement non-prevailing provides

think provide additional will it in value. I even that So particular more case,

Philip Shen

one Okay. Great. if last I And then one may.

it checks a relates company, so done on and traditional few I've hours, also past As the it to like the in just they seems may EBOS. ConnectPV offer

their So it that was might one more than offering. be labor-intensive offering your

more understand? wondering might So give beyond those rationale a might missing customer then useful that I was Or on little something bit to something a base be along if color is to us part might you acquire is of the example, able just to lines? energy storage. And for be that be or it, we there

Jason Whitaker

No, question. that's a good

that about serve. a they've So look prepared you of not really, also the energy at there's when have teams perspective. have where at there. in manufacture, from as storage phenomenal we traditional actual of synergies customers overlap a the the They talked that look they an industry they remarks, comes is we that that overlap, serve value we EBOS don't. assimilated. respect is also Phil, there in offering lot that the manufacture The between we definitely our that They lot other the value That's in when you And really company. products

organization. product that for provide offerings definitely be to from value -- a have the and will the we industry definitely the merge to our combined able incremental a both support to PV continue together able will storage perspective to teams being be with So

Operator

comes Our Joseph Osha JMP from next from Securities. question

Joseph Osha

with I'm for couple Just of A questions. the Guggenheim now. record,

that you we not reflects de should some that to First, how run I thinking But be are minimis. give from said rate QX sense their as you much on us the ConnectPV was able Or know outlook way? the contribution company? that to

Jason Whitaker

first But that already you combined at we've I I'm so and our it take distant collective about that we've look all, about, forward look that together think, have. to I reiterate, at But talked guidance, just further of the we question. leverage forces contribution capacity definitely very great of if Shoals. outlook, Well, orders integrating was a to begun when we ConnectPV the with the excited operations immaterial. our can want you like

Joseph Osha

is respecting Great. interesting. Okay. about your people comment And really really, things then secondly,

So sub-questions. I've kind of got X

The I or back component Colin a we as want a kind cost out, think, are opposed to and to in would of BLA doing seeing to maybe alluded looking to the get sale up of some say, think would if this, And second just projects. people to labor you do an first you're you people panel take effort is on -- I complete and come that, that are some that be of to to that to get tend then the if cost the would question that, out? the front, ends having thing hey, push

quarter seeing I going about or So suppliers also when people a out, talk is subbing assume panel you're by that is to -- pushing two. project the

Jason Whitaker

Yes.

order. so take in I'll these reverse questions, maybe great So

there you you If making module varies is obviously, looks the talk change a from that there delay to when panel about when a in. product potential that the And and delay, upon panel supply timing the are one depending a itself at customer doesn't delay what technology where really have actually look like. itself, delay further change when be some So out. timing, is that a just another, made could any and entities offering because is rolls they're right going it

hard an something mean the exact spot is savings amount exact talked are you proposition at a in itself, I you is that customers remarkable just average we've you're that amount the at prior at be specifically look of back which you're the mean upon and very a look labor, the look itself. is BLA quantify savings product about reported that changes on pointing we kind And And of brings when conversations looking delay the at to I So of would on. get. when XX% there's when you to made. BLA really it the depending combination,

Operator

from Next question Moses comes Sutton from Barclays.

Moses Sutton

to immaterial but back margin quarter's correctly, Connect basis this I points was going heard Just ConnectPV and on about margins. also sales. from impact the PV there XXX If

COGS affected from ConnectPV? So is margins? we points? at do sort there in How Are X bridge those negative that there something of they

Philip Garton

to Yes, and are negative bring this margins. than Their And positively ours, working just and in-house, our and was. out products. different contributing margins And quickly to No, to they structure going their -- at are be much margins. Philip. lot margins that their going They we we're were not is them line, though, contributed bottom previously better products but minimally. to is a cost to work their is subcontracted the of or structure, forward expect transitioning the there be approximately in we cost our Shoals' minimal

So accretive the to it be will business.

Moses Sutton

Got it. was stock mentioned some much I issued issued. it. was And that to it Got think was How ConnectPV? stock

Jason Whitaker

It was XXX,XXX chips.

Moses Sutton

And one shift the one that the there? of for XQ, transitions mix the So was than mix perfect. effect specifically EPC The of and XQ from anything just some in of systems other then Perfect, me. and that's initially, of last for how one affecting components of discrete quarter? is systems. get happened to that shift trying extended to from more then contract how there sense greater So than and back bought sort a percentage perhaps it they're and to just we thinking big a a just some

Jason Whitaker

on that small as shift we of contribution that shift out did we've were necessarily about contribution pointing took obviously, BLA call. mix was mix a something kind that a margin a one particular project. There that's QX. No, actually perspective. projects we saw with from kind And the talked not of talked of our question. just into about shift that last it out, that before, great handful a QX higher actually see in from Again, And it's continuing we

Operator

would Whitaker, CEO, conclude And for Shoals' now conference like back over today's to turn ladies and will Jason gentlemen, that I closing the remarks. call session. question-and-answer to

Jason Whitaker

I future Thank forward look appreciate very conversations. you today time much. to and everybody's having

Operator

conclude that Ladies very thank conference gentlemen, joining. you presentation. much and today's does and call for We

now may You disconnect your lines.

Shoals Technologies (SHLS) 10 Nov 212021 Q3 Earnings call transcript