SHLS - Earnings call 3 2023 | Shoals Technologies Group, Inc.

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Operator

Good afternoon, and welcome to Shoals Technologies Group Third Quarter 2023 Earnings Conference Call. Today's call is being recorded, and we have allocated 1 hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Mehgan Peetz, Chief Legal Officer for Shoals Technologies Group. Please go ahead.

Mehgan Peetz

Thank you, operator, and thank you, everyone, for joining us today. me Brandon with Dominic and call Bardos. the are Moss; CEO, CFO, Hosting management projections are be statements this will On call, making and current and risks based expectations or assumptions to which subject uncertainties. on forward-looking other

you and manufacturer, results market the the products understand these should shrinkback from could regulatory full-year are differ statements, wire economic, among availability comments, problems performance Exchange of matter insulation regarding that industry our and of not parts, factors. statements guidance are potential materially our performance losses and such guarantees these failure policy to things, decreased supply the or As or in or components demand listen XXXX, failure or because and chain you consider accurately to to those losses factors including any results. the and including other matter, in the our our disruptions include, our forward-looking of filings and products, related of estimate changes, These factors described conditions, recover incorrect assumptions other including risk Commission, from the with if to and defects price our for Securities Actual their materials. those related and

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

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

Brandon Moss

grew awarded orders. during production orders record ramped in takeaways strong with investment EBITDA revenue delivering we added has our Thank on highlights yet an team and and in $XXX and to like job the prior in results. orders early quarter. XX% added our of We XX afternoon, already gigawatts the record slightly investigation to gigawatts, much, our of up impacted our insulation quarter. capacity $XXX.X was wire also warranty initial who yields Backlog Compared my these approximately X good I'll third the call total Revenue key some year-over-year the Meghan, to some today's delivering execution I with year, XX start over wrap and remediation. had as you in from before new million. to by regarding I associates million our quarter, bringing very and commercial for up management follow to base business XX% gigawatts. up for it quarter shrinkback and $XXX.X XX% and production capacity want awarded income. Shoals net XXXX to XX lower capacity another Tennessee and overview results. more to adjusted of provide their in were update delivering an conditions, everyone. another quarter I'd the with I'll third team revenue, turn thank for great sequentially adjusted thank detail financial quarter record over will third million. backlog Dominic, which the I'll to of facility,

represents XX% now and our business, awarded see which to of our pleased international orders. also are in We strength backlog more than emerging

result we a growth years, believe continue our is interconnection rate. projects from large proposition last We utility them partner to market landscape. expect the penetration constraints but extremely the that solar Shoal's growth to growing rates, and Though scale still chain of we to complications. solution attractive the attractive smaller the with and uncertainty to will higher approximately lingering The targeted an currently and interest see business an to are domestic XX historically large growing at see the utility Shoals levels solar up, our now customers. to scale projects. few converting of industry-leading utility potential value rate domestic our experiencing decline current we opportunity of market IRA, megawatts as apply Shoals EPCs, Moving about slower supply scale has that high

penetrating Additionally, of solar grow we're wallet to markets in stages the the product space. in adjacent early share

international. now to Turning

to specific Australia. markets are combined targeting and, America Europe, X% We U.S. according double are XXXX. as data, higher-growth continue Africa, and we In than of more project proposition Latin value understand markets quarters, we CAGR product and industry These a recent growing America, within suite. in our the EPCs market are through international announced at Australia, major to wins entire growth the expect Latin

Force be science the their a and XXX% Air emissions by XXXX XX% Force work our Leidos, at achieve emissions pilot by reaching for electricity facilities carbon-free to U.S. our Department technology mentioned as charging-as-a-service charging of business, we EV Air XXX by the earlier, business. and support EV leader. orders Force, targets. backlog This is at project announced action international deploy the proud will the Air our Fuel they partner X more Shoals is net climate October an by Fortune than e-mobility in XXXX. Shoals end to we now supporting In plan of awarded As that the towards our with project provided I solution Force's Air attributable of will to to

EV EV construction we're about in accelerates which charging Although and it's days above-ground early deployments. infrastructure our e-mobility solution, business, minimizes our costs charging innovative excited

our capacity square XXXX feet manufacturing and growth. meet team an January, Shoals we've our focused increasing machines, Since execute a to installed almost XXX,XXX over added has demand. hired has now production The to continues XXX operators, strong support Turning our commercial on that to team XXX new in been operational and to footprint. update capacity. strong on

I'd exhibiting those shrinkback sold we XX, of sold range Prysmian of caused complaint As ramp-up third-party investigation low gigawatts. in the production potential XXXX. for of & a results. wire our when range available we to at XX shrinkback damages approximately on recover have to issue litigation, labor this of made he related Shoals is Prysmian serve dollars remediation XXXX facility take and to reviews to Based of analysis attractive insulation issue. insulation is ability and that measures, approximately already of recovery the This and into gigawatts, start warranty Prysmian millions reflects can at million information for purchased including XXXX, future to This replacement the stand maintain is insulation With with loss any wire facility our through USA is discuss time investigation now Based year-over-year. of Prysmian amounts LLC of of include to unacceptable information own Shoal's occurring can of QX. our XXXX capacity the we by by provide to seeking Based least to of completed will the defective demand wire the like financial our is harness wire remedial October we're on unique On on period. efficiency, XXXX. apparent Shoals discuss has quality. estimated the represents on and scale that what to Systems in expenses call, between repair the this wire or same shrinkback we I testing, not increases further manufactured and XX% harnesses timeframe. this the defective estimate we well at full the end. to and to total more Shoals $XXX.X limited capacity, mentioned Cables suppliers. where wire wire were added our defective the are seeking XX% issue. well margins. from total the our defective the Prysmian some enhance and cost in on date, wire of today, growing and gigawatts Shoals determined committed from that the that filed damages it updated continuing brings identification, XXX insulation breakdown pending XX to we sites we granularity This publicly. potential as for to other the million The as as we from high end amount capacity gathered at shrinkback third during at with XX and Shoals Tennessee of Because related our about expended $XX.X the X Dominic wire on

our the remedy which we defective the As of wire our to and continue X as solar top because people this to we can care priority we underlying to wire Identifying We assets, time-consuming efficiently doing strong, our issue. it we're to the working is as as effective of want business technology. as be Prysmian customers, of issue, fields, expect very strongest by our our size work on large which of [where] is resolution leveraging through miles, square the remains flourish possible. and are taking emphasize focused our that

with I'll proposition, and sustain update a on in our and an XXXX. robust have initial continue stated In Shoals organizational company execution. our I'm my why I'm recent the in build study provide to infringement Now more a current emphasized model environment May scheduled industry-leading shortage there's this filed of ITC continuing I'll take quarter our and A quarters, prior hearing strong now of where Shoals And we've my third-party to The value to defend to some capacity the particularly we'll of year. continue to to operating takeaways systems tenure workforce work electricians. by solutions licensed implementing a done by about be on the as to must of installation property. evidentiary utility-scale vigorously short brief who Conventional in our protect patent from CEO, March for that focused moment expensive by refining so be XX% highlighting intellectual in of the XXXX. electricians, is supply. a continue complaints of first excited strategy, decreased and the by wrap are as Shoals. of solar license time-consuming and to EBOS XXXX install, most

material labor reduces Our system costs. both and

providers in and built assembly to are providing growth EPC have to to like also and manufacturing Additionally, our a constructed large accelerate market field focus confident rate, product piercing and in in is are power with with that high adjacent projects. believe have as devices ample the innovation quality-controlled our internationally. markets smaller and development value failure owners use leader of with partners a products environment product connectors. I'm room an grow Shoals We domestic such new ability insulation methods our strong we and versus in solar traditional core last, a on to capability.

We have markets well-positioned that are domestic to growing chain on due been global support in tax our electrification the provides supply that in and onshore legislation for are skilled better successful to ability solutions. we innovate by federal impacted and manufacturing. needs manufacturing And that incentives constraints. U.S. footprint Shoals with U.S., will our capitalize on the labor to other share focus

Dominic gross over competency core we detail. these third strong By margin we aligns scale delivering to margins, engineering cover solutions it and discuss turn will which are quarter well plug-and-play at financial needs. of our generate continue who now to expect market XXXX I'll target, to prefabricated results. with in Our greater moving Dominic, solutions, prefabricated will up quality,

Dominic Bardos

everyone call. good and the to on Brandon, Thanks, afternoon

higher costs compared of result pricing, expense grew a from was of period, production driven the by input XX.X% year net insulation The raw year in significant efficiencies quarter XX.X% expense in period. volumes XX% EBOS. for and wire to partially shrinkback revenue as demand improved profit to lower Third profit driven costs, $XX.X in solar decreased increased slightly increased in a fixed $XX.X as the prior of to $XX.X on Gross operations. million Gross million gained offset by $XXX.X warranty revenue was domestic prior million percentage materials leverage recorded by warranty the period. million,

liability wire, Prysmian high as an million information potential have and XX, at range we which analysis The related defective analysis, earlier, today. in of wire We end, as low the the for our statements have addressing Prysmian's loss updated represented financial the through at $XX.X is September Prysmian. available $XXX.X end. this to Brandon our based the on defective related not from continued expenses booked million XXXX, any offsetting Based of of recovery on noted is and

liability As and within September XX, our on sheet, is million. of loss current balance, remains down our as no of the long-term than balance face of amount XXXX, other, liabilities the between likely $XX.X range broken more any

we from of amount well as the continue as That not second refining damages of our publicly third becomes be $X.X less used Brandon In margin the range be shrinkback are the will have our profit of provide seeking insight and litigation, being manufacturing estimate of our percentage the we are amount we quarter. labor. performance, field the additional course percentage may available loss Adjusted our of Shoals damages gross of press installation time Because filing potential damages as litigation on filed million. As installation was to and as sold. of disclosures, quarter. filing. gross profit XX introduced and different into gross most management, The accrued gross profit the third expenses to expenses in make of was adjusted before at known. additional complaint than the release non-GAAP remove Reconciliations the amended losses be remediation, had are of recurring the noted, which accrued the quarter metrics cost will adjusted was reflects we metrics damages. adjusted of XX-Q that in costs GAAP this time amount and XX-Q, updated provided and we that accrued goods additional sought from the proceeds To and gross Board, profit of assessing and for our October non-GAAP wire been including time current range ordinary information of our of higher as include the initial to amount or required quarter

XX.X% both percentage profit gross profit Prysmian's wire our excludes adjusted a profit defective was the for cost of percentage. million, quarter adjusted and second XX.X% of expenses adjusted third quarter. in reflecting the of Year-to-date, Our gross $XX.X remediation gross of the

For the income expenses metrics reconciliations section installations wire insulation our income of release sold back be and and net from expenses as non-GAAP SG&A normal XX-Q as filing. the the of clarity, the shrinkback our again, adjusted statement. well may from wire press of adjusted litigation EBITDA add also our found cost in goods shrinkback Once

and impact third points million million Adjusted the was higher increase year-over-year same million in Third compared to payroll quarter stock-based EBITDA related noncash prior add million Net quarter million and legal the in general administrative compared period. complaints, margin year. to were income million growth. expenses prior defective Once year prior the period. reflecting expenses in adjusted to $XX.X the million to period. expense of patent to million Adjusted net primarily income infringement fees supporting defective third EBITDA and higher the back year compensation, expenses. again, and prior quarter $XX.X administrative in to increased period achieved The during to year warranty this Prysmian both related of $XX.X in to XXX XX% wire $XX.X EBITDA increased basis in due adjusted the to $XX.X net profit headcount to wire compared was grew net gross $X.X XX.X%, and the planned loss the the in income, adjusted $XX.X increases quarter. in Adjusted higher the XXX% compared general $XX.X year-over-year

the During quarter, generated to pay cash operations million. the of we the cash down from fully $XX.X quarter, we excess In used revolver.

on driving business we continue prioritize and calls, in shareholder value. to stated have I As will investments multiple the

times jobs realize lead orders, are orders. an have period. of awarded million XX, to awarded is It company and and domestic orders than $XXX.X have year-over-year revenue September as that Approximately important from longer booking historical backlog note increase million extend X of XX% orders beyond backlog XX% over some XXXX. cycle international the we the to dates that our orders beyond months our of of XXXX, orders, of in $XXX to and delivery revenue we in added XX As had awarded

outlook year net conditions narrowing into fourth our revenue to production, current adjusted now adjusted income. EBITDA anticipated and full and and are our outlook. Based Turning our market for quarter outlook we on visibility for raising

interest Our expenditures outlook and capital for expense remain unchanged.

in the capital be of to expect range be the $XX million. expenditures year ending million; $XXX million the million we to million to adjusted the XX, of December to to million range XXXX, $XXX be the $XXX range For $XXX $XXX to million, $XXX million net and range to $XX to in of in range of in revenues for interest of full $XX million, adjusted year be expense EBITDA the to the income million, $X in

it Brandon believe operating want for our remarks. by I and percentage remarks, to that, for price, target we note closing going over turn XX%, XX% leverage. back turn the I in I'll sustain, to is Brandon to range now which for forward, profit closing to operational can Before long-term we it gross back of over that With adjusted managing efficiencies

Brandon Moss

the to confidence I to of close for for our Dominic. their us Shoals, industry-leading support. and to would ahead. serve great continues the opportunities shareholders enabling market. domestic opportunity by excited thanking has effectively customers customers, employees our all their solar Shoals I'm continued incredibly like the growth proposition for have continuous space about for in Thanks, our our an EBOS value with in in Shoals

markets strategic enable capitalize will Our to on growth years. international the that sustained on in us higher-growth focus expansion international coming positions

cash thank Shoals and developing its product your our and in can generation, I quarters flow With keep ahead. the could for with its you, industry-leading I asset-light that, model will core team, products achieve by on appreciate leading significant everyone. excited and the time strong business both that today, And opportunity world-class development be we not line markets. to more what our about coming margins am now we allow the adjacent open incredibly will innovative in building with Additionally, capability, questions. optimistic and position about has

Operator

[Operator Goldman Instructions] Lee Sachs. Your first question Brian from comes from

Brian Lee

over, I it million if of potentially looks the of like give had a into impact up potential off, warranty, but a of look remediate or as quarters at based all and then the into as cash how how booking it what ultimate is into us kind the these already what that. I a have early couple questions process? continuously [represented] Can timeframe look I an remediation a turns you it's you're today. noncash OpEx on have cash close you're a on you then the statement, whether Maybe I first this and many show sense impact you've are might know you're And of liability, that cash COGS? you of flow $XX fact that. more of anticipating follow-up. regarding that Maybe as to over the

Dominic Bardos

of greater liability we will million on saying, Equity This Yes, the next in face do warranty estimated expense, XX current Stockholders' me by than be is which portion, our sheet, the our let estimate be months; we've section, which expense. current would XX of just the warranty in Dominic. would quarters we've to the within portion therefore, and, sheet, our long-term between $XX the remediation months start tried currently of and and our tried got Liabilities and balance believe the out. multiple balance that.So take liability breakdown We

the noncash sheet be of balance to the $XX manufacturing, the field. labor is majority most As can portion with that expense. the the it these remediation, And It's the quarter. to $XX the in the this is of imagine, things charge you to portion, we install really vast as warranty current million expense related it's you have a going as noted, that was COGS. of long-term the it's on million

manifest. would expenses warranty the where there that's as this And happen will some clearly during with litigation timeframe associated So be expenses that well.

It's So well. in in of that's our release, the as can balance on press sheet. the provide. Q, face I our clarification It's the

Brian Lee

million a backdrop, your quarter of plus bit correctly. the this And bookings best of printed seeing, heard is one metrics $XXX demand posted. a you're quarterly you've slowdown there's on But I if domestic, of guys the then you you in noted U.S. little bookings you

to starting trying slow either or wind, to just sort commentary of move Just of expansion, kind to kind to maybe with but as just Shoals international fits bookings Or bit. are of So year-end understand your a precursor the of some the you're results reconcile trying through commentary domestic throwing into share market to into you gain caution and a that high-level Is the QX? nonsolar there or offsetting of both? here. where dynamic U.S. slowing we that around

Brandon Moss

Brandon. you it pointed Look, Brian, it's out.

excited and First quarter in of the about bookings foremost, the seen. we're terms we've

backlog noted, point quarter awarded the up is XX%. $XXX backlog $XXX.X international in and thing the a bookings business. our orders as And volume orders.I million of you record and to quote of XX% us of Our at out, awarded gave million think, really, total is

that Some business is international of pushed XXXX. out into

Our awarded XX%. and is XXXX about orders total is backlog for that delivery

remarks. same indicated in seeing connections, the So my choppiness obviously, that about chain some in There's look, that seeing still issues. lingering marketplace complexities, some prepared [the] rates, we're supply the interest everybody's in fear I

in are seeing and we're overwhelmingly seeing really pushouts. there. there's changes business, significance but I of We mean, know, product this as move not things quarter-to-quarter, you big nothing

the bookings look, couple a into business grown perpetuity. to CAGR forward-looking this has of major then company I a think XX-plus at is percent for years. last impossible IPO. that into It's And XXXX. great thing on since the We've the executed do

the continue compete. market ability do that a about our growth, goal continue to outpace and marketplace the company. feel good We our is very to we'll And to to as and

Operator

from Your from - Shell Philip MKM. Shen) question ROTH (sic comes next

Philip Shen

questions. Wanted the to some on follow up of warranty

your end of beyond then high go it there range? ultimately, still the is does that be more there?And but, to is would expense mix and potential cash of Specifically, then it of it were over be million of expect how become the think confident Prysmian could for My wire? how I do now are Are guess you you out that? this a pay maybe time, in time. to what it? $XXX a noncash could the over And cash you alluding comes you that the It's coming Is flow quarters. the the most buying cash cash,

curious for you of the well. it, source of you bit more as color give a could how in if Just little terms pay

Mehgan Peetz

This [Maybe] is Meghan. on this. talk you to

answer are question buying as that first that so no then, our has we can additional in far filed, Dominic. check I longer Prysmian for financial the That questions, that there are over wire. the been as that to free is So further feel some details.And to complaint I'll hand it

Dominic Bardos

there's Yes, just to Phil, a few that have cautious. be we things

need mentioned, hope we Brandon is that We what as I of As do to be be come say. with active forward plays multiple will believe mentioned this about there's question, We resolve. out, forthcoming from in there. forward we if Prysmian solutions this quarters take earlier litigation. to But very this that careful do as to how Brian's terms something comes

this booked revolver recovery that no our we us offsetting We financials terms full. from mentioned, I $XXX There's before, at million of pay we got how mentioned time.So down the as in liquidity available there. we it, was I've cash paid the operations. As there in revolver, point noted. in full to of we for have as in

We continue cash generate flows. strong to

in And through we a the our balance of show operations. sheet to current confident that so, handle feel all from on what ability liability, we portion our from

Philip Shen

capacity about to is you megawatts. over I the Shifting capacity, think time maybe talked first this

gigawatts earlier. wondering XX gigawatts. that like from utilization what was expect it, XX And might XX be Do it call seems to, be on And to what I and expand beyond you're missed to through at the gigawatts XXXX. the gigawatts? you utilization gigawatts that a going I be XX might if to Sorry thought But XX rate? high you the overall dictate catalyst the

Brandon Moss

not every The Brandon. in guide facility prepared won't getting right XX gigawatts BLA conference becoming XX is in out in each take that It's is we're 'XX we're efficient. plant in XXXX. harnesses, And we on probably sitting our room can in more that. looking on more our excited safer that remarks, scale to is ability mentioned the as We up I'm to we've current I I'll the floor. day. me efficient exciting we're getting footprint.What and gigawatts and most adding for capacity, specifically. I'm only our added each our produce And a now, product, safer and We're day,

excited team I'm So executing. is the operations about how

continue in as we do to probably continue that to XXXX, set for are But years in I to We come. my we'll in and through noted invest this capacity business, remarks.

Operator

comes Jordan Truist Your next question from Securities. from Levy

Unknown Analyst

is Jordan. [Mo] on actually This for

family products? you to and the could So into (indiscernible) about for please means initial maybe offering, Snapshot future this I your what product product reception a the talk gateway of And have follow-up.

Brandon Moss

we've RA Look, them very days. It's and very space. Snapshot, gotten we in has is very, was to for launched that for Plus Plus] got us out Plus taking gets investors And owners. product for we new product, feedback early The us. [RA that RA really that been a particular on at feedback from since days strong.Again, the that year. that it at it's early the monitoring product this product amazing, It and have been

it up market opens us exciting constructed, been for is product that plant has that had and we've sell to never solar something into a product I like about think a the opportunity already before. most

So monitoring this product continue a think I opens we suite. to that some windows the as It of off for and opens expand world, us. to can windows

again, So early but days very excited.

Unknown Analyst

real I allocation, quarter. So this your second the quick. question you mean, revolver capital down paid On

the market? And there natural products strategy how now M&A gateway sense thinking extensions any to EBOS are make your that in about are you So conceptually? current

Dominic Bardos

growth Dominic as as organically growth. here. looking is Yes, in This inorganic as well we've interested said are we very at before, driving

the to in very But to evaluating look are first in we're we about horizon. as an to talk of talking laid always strategically, that's to on organization Brandon's of might And an then we announcements With we've focusing margins.In of thing, When point we flow have how we're absolutely ready that, organic for the strong characteristics about and cash confident continue kind cash ability those drive on in time, we we'll ready at we as flow feel in growth make at the that quarter, out. our terms base opportunities. within, Day our business, when will. update start Analyst think focusing out strategy what the sort this when be you,

Operator

(indiscernible). question next from your And comes

Unknown Analyst

following the U.S. rising portion. there? for there bookings nicely. quite in EBOS international on that EV Any is question, Just charging book-to-bill specifically? ability material There's share up to any And backlog

Dominic Bardos

Yes.

I'm historically be I strength that next strong to for climb activity that lengthening talked that Brandon of We I we to imagine of I it of projects see in keep backlog international haven't international. the prepared and both That's we've mentioned, are said, for why between those the will the we percentage that's And domestic the in about specifically, the larger continue to but that if everyone broken book-to-bill as wanted my domestic that, shifting our international down lead-times as business.But alluded and longer, of mind glad pipeline, that a down We that and haven't international international. build taking XX% cycle point. currently awarded in understand is to quoting year. it the just because the as broken remarks, at piece. may echo revenue enthusiasm exact something and orders I we'll

Unknown Analyst

market a share past? Just where BLA, metric And view. if (indiscernible) you the was any that on sort a in today quoted curious have is of

Brandon Moss

to industry business that within we're specifically since There's that still we've issues far a there's but IPO, I are goes, penetration or and grow. that EPCs think still excited historical volatility about penetration a in deeper there's share are market new past, data XXx At by that's estimates about solution. going definitional of our that it can across we're EPCs to BLA product, the that using time, for this I target, we share market fantastic room as really that goes, product, market of mean EPCs we've had current speak particular caused to share also not some those the doing product. market as talked share far share and with.As in there's we have As we of as providers.

share than at is grow specifically but market this marketplace. the going not faster again, to I'm that time, So to reiterate speak our to plan

Unknown Analyst

of more quickly manufacturing And I XX just on the gigawatts. one guess capacity

is to across blend Run]? a [Home produce traditional BLA to the is and BLA-plus, or Just clarify, that that

Brandon Moss

our to That both would be produce ability products.

is that suite. product our So across

Operator

Colin Oppenheimer. comes from Rusch next your from And question

Colin Rusch

bit you backlog, kind through some of an about storage your backlog is the of of in and in a projects the not solar? and give stationary ability that to of how magnitude of, move much talk sense charging us a little Can your queue order the pipeline

Dominic Bardos

Yes.

international and detail. I awarded and The around reached question, hit awarded are The XX% did broken this it providing of of haven't our was but more was strength appropriate for down. that that product but that models, to want felt time that strength activity that that broken that of What that you haven't in point a international us We orders combined. include the the for appreciate backlog time this that. in rest show space types, the you level because us that. have not of we the and that's that of down. your does significance awarded backlog orders we all important we see now to see we at haven't you the is we the But level quoting orders that

Colin Rusch

of on consumption working of actually Can and continents and working multiple working be should balance here we nice are this into getting How inventory be have next start the about grow And as limited inventories levels thinking the you you about through (indiscernible). capital capital, and trending presumably? then done how you guys overall should usage? those talk thinking growing working year year and on a job we about shrinking that capital

Dominic Bardos

Yes.

X think earnings efficient are X said, our that intend signal to That we're there but to that as examining probably cause this, row possible. inventory, growth that a able I've strategic that. is pillars said plan this some might We in be in where I've I as from and room or investments I be said, as still optimization. calls we'll for now inventory there's So believe more

and volumes.Our now. be I where right will a get naturally with do growing our higher to more to room grow inventory, to want I think, optimize, receivables them than point business have then we are So still to some it have it'll just

are But payments with and invoicing sheet, at there work and efficient always to our balance process those more is timely of can customers absolutely. a receivables If growth, we you in be make things look sure we our more to factor get the hit that a that do cutoffs our in in fashion.

So as did noted. that's improvements of you've inventory, focus going in for the me. and see to accounts the be you an area payables But

me statement. the efficiencies anything the to everybody for is on capital as driving and working as important cash the yes, out as income So

Operator

question follow-up Ladies one to limit and reminder, and one please a gentlemen, question. as yourself

comes Your Morgan. from Strouse P. Mark next from question J.

Unknown Analyst

talk just project Mark. I I looking on market is new smaller This wondering could how projects if have get? you to [Michael] and how and sizes guys one focus you're that those was attack about the for just on small could question.

Dominic Bardos

data, many to is one is handle look utility do on just in we solar. This Mackenzie, included notice you Wood going probably bit that to give those for as Yes. I as one. scale want are of you of that. at Dominic. Brandon well smaller When projects many of

So in always included. those smaller space, scale utility the been have total projects

As And we've Brandon. hand and to predominantly it XX focus up. the before, megawatts mentioned over I'll been our then has

Brandon Moss

that to opportunity proposition our projects, the market products, be think is The product to we have applicable projects. a right? suite available our smaller about total think that those, larger this Look, those value market. The growth way of about we I smaller same to on can XX% many applied is

us. focus that So will for the be

with will efficiencies, capacity think, very going in markets have got commercially the XXXX, ignored those that we our into begin space. gear past. markets the now. may around to and Specifically competitive We've production focusing be can up we in we And attack that on those I smaller that

Operator

Andrew Percoco from your next from comes question And Morgan Stanley.

Andrew Percoco

Maybe Or just come maybe issue, from warranty swing important any Have offline of be issue. kind timeline customer projects pretty been this cash remediation been the campaign? have proactive tripped could just warranty discuss a wire It could that any feels that to has impacts like this there this? impact? back of a of and shrinkback kind to the factor in of terms you

Brandon Moss

then about Meghan, maybe specifically I can and the to customers. talk that you, I'll kick

Mehgan Peetz

I customers. our always think our top priority is

to are of important those through and we this us, will continue care relationships process. them to So take

the had as matter, we So a as our remediate we replace notify to and we investigate did doing have customers, we process and started been necessary, for they've issues and, that, that to had. working any with them identify,

Brandon Moss

to Just customers. we're proactively as said, to out our to reaching add that, Meghan

to issue. warranty seen specific not have any the project We movement

And is customers taking care top of a I issue. our this said, understand think Meghan as the supplier that priority. is them

So I is appreciative issue. everybody communicating think marketplace working the of and this we're in how around

Andrew Percoco

delays, seeing geographies on the the as and follow-up for are or growth impact be permitting, IRA that there's in Just it if specific in environment And any utility a there you're of specific outsized an where are we financing, geographies from delays scale solar, of macro the maybe whether outlook project where terms on just should be occurring. uncertainty? ISOs wondering more focusing

Brandon Moss

a that that things due seeing quite reading no think understand And of closely. are in I don't month-to-month almost we what historically you're terms quarter-quarter, point the We these projects movement significant has I on specific again, geographies. business.Look, where the terms Nothing our very out typical falling we of could again, project in been in we're of movement basis. the days. seen to that we've think daily funnel delays about manage And

significant where today, and with no pleased pretty the sits pushouts. we're business So again,

Operator

from next Your from question Cho comes Barclays. Christine

Christine Cho

the to bulk also lead of is the correct before And components fair upgrading the solar. I were it longer But systems? going the international and think it start actually seen bookings just the chunk I would times would similar about this customers of some of appreciate U.S., big that quarter? say And the be the confirm that international then, for to to to be color that wanted a that, to projects. off using

Brandon Moss

one time we guess I the say that seeing at that are piece came here. this I in I don't that, yes, specifically projects. they think bookings quarter. a are would international solar

Since refine strategy, build be been XXXX.So investment big a it's our our business. us I answered got that to think a I've we going probably last big, Have international have with great for in to the resources business. for a pleased us growing again, joined, the you help into did think for strategy. We've build it's spot all one focus and over We're more? of direction adding continue on it'll I growth international I be big future. quarters. for the or going of couple And them, a to focus the

Christine Cho

system, to yes. Components

Brandon Moss

specific into you components a to great solutions. and our a that don't components product. business as We product our be opportunity at Shoals know, specific But think customer. Shoals, is whether It typically everything I virtually domestic somebody or bring Look, for an is solution. them as we make for it at international, engineered-to-order call here or site a look

for is and our BLA working to folks marketing exactly somebody get they're us them the and to do components with so, to what salespeople And then work. business, door convert how and system, do a supposed supposed us and in the to on it's

just approaching have market see the the I us domestic would as So market international yes, we

Christine Cho

remarks, specifically end you the lower I'm prepared narrowed the towards follow-up, I talk the And if delays? the Are systems. range? your And then in drove my sorry this could then what revenue also but being missed seeing about customers of

past strong, several the was it pretty saw quarters Over larger I but percentage total quarter. that declined a of of revenue kind is this

So what just as that. to curious drove

Dominic Bardos

range all, you we're and So I'm noted. that as of first year beginning refine peg to that, yes, pleased come of revenue very in at the the the and able right

down to think about QX. talked things. our actually So able of do the We I be a we're there's really to couple that.Yes, slowed capacity that pleased

where as issue wouldn't characterize why did. QX we I the it narrowed we So

I think, had liked bit little have have to internally, more. would we probably a

project we within We what give-and-take visibility range quarter, from have to the on nothing period-to-period. based We've have. the of capacity revenue. about moving do narrowed a more the abnormal There's

Sometimes the mix a bit different. little is

business our you where time. Q, our look see in components slightly if higher this think, you was a percentage I

year, very little a bit range. that we a so called the product And in beginning difference there's just revenue we're at the of and pleased mix, come to but of shot in the

Operator

Citi. Bagri Vikram from next comes from And your question

Unknown Analyst

the implied to still wanted on looks I XQ Vic. touch gross for on [Ted] It guide. It's margin healthy. pretty by

new or XX% Just the just And about curious, to XX% side target in to laid trying gross terms you there? mix the on square to call of to is anything there margin with out product how project out. that think that

any of you expect where be. Just us we margins gross directionally kind on give indication curious if to can should

Dominic Bardos

Yes.

that our things, still always to XX% target one is we'd kind we've inroads to Product area some down even There we the the margin. capacity, about. investments we mentioned, we just And we're XX% we've XX% the with gross of that as talked drive the of anticipate efficiencies does So space, as still we the a some gross as were margin looking to very EPCs be actually, that of can some attainable. mix, for the road. I to greater had making believe how look facilities, said happen in in that making component

guide, of what And the percentage kind see we've in quarters.So past so general would of had lower say, a as the mix this the is actually I we time but public margin couple and there's can are so over the at achieving, to that that of solutions record we've opposed take. from system pullback, you competitive company, in for that the we we're only sure a Being providing making customers. competition shoulder much been looking that gross our high constantly value margin a

our into think, over for that's parties, range that the be going XX% and to all time, to gross I desirable margin down is XX% back longer-term bringing So target.

Unknown Analyst

And follow-up. I have just one

down capital paid the On this revolver quarter. allocation the side, you

around curious thoughts if Just the have term any you paydown loan. of potential

prepayment I the penalty think this expires year.

on your curious just there. thoughts So

Dominic Bardos

expires this penalty away. prepayment does Yes, the The go month.

than would charge if the revolver a are or, lesser playing Even all the say, term just loan rate interest alternatives arbitrage, I carry at rate that interest smaller does. time. for does the look We exploring we

we are So that. time. We're we to all looking won't. lenders at the And announce, we talking until

Operator

from Capital Northland from Schafer Donovan next Instructions] [Operator question comes Markets. Your

Donovan Schafer

the I want to about talk market. international

BLA. to So stick am trenching maybe some curious, the some seems in it or in still backlog. way international guys it's bias limit looks there's see tendency the would it I part of to a of there, markets developers details good and and that you cables a like kind like with talking of a that (indiscernible), lot a in as shared nice of value-add to the underground

kind it is true can or something ground? that angle thing something overcome would regulatory my or it to your show they And run matter education of in and can code-driven that that so question you a Or of a push just And like you'd experience? is so them is, is that like then, while, or where take that? above it a regulatory to a from have convince

Brandon Moss

a that resonates. of now find open part there's international Shoals to of internationally. teach value way some some education we're electrical systems, most probably to and find mentioned, that think to to to In have working is trenching. going right we're our industry where other areas strategy the scenarios, it's applications handle what balance more I specific do process, that right? as an probably that are to Look, you and may situations, domestic proposition be in markets where had And areas above-ground than better

put [where] understanding on the to now, us play us sense focus some So big for that chips markets for really right on most specifically table. to make in and what

So the more on piece. international to come

it's of the moment. a focus Just at know big area for us

Donovan Schafer

in developers some And really, talking can having together review (indiscernible) one then And follow-up, the think designs to really in that (indiscernible) of table. of they all customers, and one overhead internal value the for that my all for wiring things (indiscernible) so kind forth. (indiscernible) of I the cases,

reliability, So a and you advantage significant execution, other things. some guys, been that's for

that help of more initiatives kind Do internationally. competitors? of companies I folks of the try help kind for working that the of engineering and you're do support in are of there to technology work do more to do (indiscernible) know (indiscernible), that to of support any projects? piece, teams role also need international then this just outside service lead the So some design you versus keep in some starting on or

Brandon Moss

of think the our call designing out a our, but of ability there, it, one shield. and question. the utility-scale bit and Look, advantages You're knowledge little institutional solar gist got cutting of in I is I our competitive

better in better think do function, continue I that. to get value understand of So and that the we and people

total got I think lower along patent-protected with to a the competitive Shoals their products. cost ownership. for of advantage ability we've our That is

relates So point. both to are to fantastic important us.As international, a it very

I we'll on time and operate think to the so that the zones, closer ground on. as operating wherever engineering We're on the customer. so internationally, can we capability have to so forth grow same region we put get a we in

manufacturing going as we we calls, in Additionally, chain in to are where on supply likely prior and we've those operate. regions invest mentioned

here of international think future state States. full similar So business the offering in United being would a the footprint would as I see you of more to our in what

answered I question your there. think I

Operator

next your Soderberg And question Fitzgerald. from from comes Derek Cantor

Derek Soderberg

question significant Is a here, of international specific to really are expand way inorganic criteria pursue what's TAM go about opportunities it Curious you targeting? products? just to I scale? just have it best of there. line around growth curious just one Is what for to accelerating get local manufacturing I'm internationally. sort that growth. to into the new It's growth pretty

Brandon Moss

a that scale in market Look, an forward-looking we're obviously, to way. and area mean, pretty pick has markets want evaluating international fantastic I growth. we comprehensive

to get hard and market.So in into granular the then, working or well easier our may other We not we're now, economic are value look, may than mentioned, political in operate areas, that and past, maybe quite so that proposition are than have refine again, areas honestly. plays more I maybe also obviously as for that; we in to part climate resonate looking strategy how that a

growth on looking specifically inorganic organic So market potentially in that table. the solar at I now. table, think on we're the right growth And applications

to outside for moment. they our EPCs, Shoal's brand The not of is these and drive would a EPCs, us value area the want it stick be that or about We to can news an name. and lot the global learn So good at proposition. solar solar space where we larger of

the areas us to working You're around other globe. domestically, and they take

So continue we in opportunity, think we've space. fantastic we'll that and invest got a to

Operator

joining, your may further now and thank disconnect for And We for today. call Ladies you today. concludes and your conference you. you there are Thank lines. for gentlemen, questions no this

Shoals Technologies (SHLS) 7 Nov 232023 Q3 Earnings call transcript