Shoals Technologies (SHLS) - 2025 Q2 - Quarterly Results

Shoals Technologies Group, Inc. Q2 2025 Earnings Release Financial & Operational Highlights Shoals Technologies Group reported strong financial results for the second quarter of 2025, with revenue increasing 11.7% year-over-year to $110.8 million, achieving a record backlog and awarded orders of $671.3 million, and increasing its full-year 2025 revenue guidance Q2 2025 Key Metrics | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Revenue | $110.8 million | +11.7% | | Gross Margin | 37.2% | -3.1 p.p. | | Operating Profit | $16.0 million | -14.0% | | Adjusted EBITDA | $24.5 million | -11.6% | | Backlog & Awarded Orders | $671.3 million | +4.4% | - The company raised its revenue outlook for the full year 2025, signaling confidence in future performance[3][5] Management Commentary CEO Brandon Moss highlighted a strong start to the year, with revenue exceeding guidance and a record backlog, noting that despite a shifting regulatory environment, underlying market fundamentals for energy transition remain healthy, prompting an increase in full-year revenue guidance - The company's strategy of accelerating growth in core domestic utility-scale markets is proving effective[2] - Management observes that experienced customers are navigating regulatory uncertainty and remain committed to project timelines, leading to a more constructive view on the demand environment[3] - The company is seeing encouraging traction within its four growth initiatives, which are expanding its exposure to new markets, customers, and applications[2] Second Quarter 2025 Financial Results In Q2 2025, revenue grew 11.7% YoY to $110.8 million, driven by strong product demand, though gross margin decreased to 37.2% from 40.3% due to strategic pricing, volume discounts, and mix changes, resulting in operating income falling to $16.0 million and Adjusted EBITDA declining to $24.5 million Q2 2025 vs. Q2 2024 Performance (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $110.8 | $99.2 | | Gross Profit | $41.2 | $40.0 | | Gross Margin | 37.2% | 40.3% | | Income from Operations | $16.0 | $18.6 | | Net Income | $13.9 | $11.8 | | Adjusted EBITDA | $24.5 | $27.7 | | Adjusted Net Income | $16.9 | $17.8 | | Diluted EPS | $0.08 | $0.07 | | Adjusted Diluted EPS | $0.10 | $0.10 | - General and administrative expenses increased to $23.1 million from $19.2 million, primarily due to a $3.0 million rise in legal expenses related to wire insulation shrinkback, intellectual property, and shareholder litigation[8] Backlog and Awarded Orders As of June 30, 2025, the company's backlog and awarded orders reached a record high of $671.3 million, representing a 4.4% increase year-over-year and a 4.1% sequential increase, reflecting consistent product demand and significant growth in international markets - Backlog and awarded orders increased 4.4% compared to the prior-year period and 4.1% sequentially from March 31, 2025[10] - Growth in international markets is a key driver, with these markets now comprising over 13.2% of the total backlog and awarded orders[10] Business Outlook The company issued guidance for the third quarter of 2025 and raised its full-year 2025 revenue outlook, reflecting a positive view of current business conditions and trends Third Quarter 2025 Outlook For the third quarter ending September 30, 2025, Shoals anticipates revenue to be in the range of $125.0 million to $135.0 million and Adjusted EBITDA between $30.0 million and $35.0 million Q3 2025 Guidance | Metric | Guidance Range (in millions) | | :--- | :--- | | Revenue | $125.0M - $135.0M | | Adjusted EBITDA | $30.0M - $35.0M | Full Year 2025 Outlook The company increased its full-year 2025 revenue guidance and provided expectations for other key financial metrics, including Adjusted EBITDA, cash flow from operations, and capital expenditures Full Year 2025 Guidance | Metric | Guidance Range (in millions) | | :--- | :--- | | Revenue | $450.0M - $470.0M | | Adjusted EBITDA | $100.0M - $115.0M | | Cash Flow from Operations | $15.0M - $25.0M | | Capital Expenditures | $30.0M - $40.0M | | Interest Expense | $8.0M - $12.0M | Financial Statements This section provides the unaudited condensed consolidated financial statements as of and for the periods ended June 30, 2025, including the Balance Sheets, Statements of Operations, and Statements of Cash Flows Condensed Consolidated Balance Sheets As of June 30, 2025, total assets stood at $795.0 million, with total liabilities of $219.6 million, while cash and cash equivalents decreased significantly to $4.7 million from $23.5 million at the end of 2024, and accounts receivable increased Key Balance Sheet Items (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $4,686 | $23,511 | | Total Current Assets | $190,073 | $188,352 | | Total Assets | $794,964 | $793,080 | | Total Current Liabilities | $81,346 | $80,912 | | Total Liabilities | $219,557 | $236,280 | | Total Stockholders' Equity | $575,407 | $556,800 | Condensed Consolidated Statements of Operations For the three months ended June 30, 2025, the company generated $110.8 million in revenue and $13.9 million in net income, with six-month revenue at $191.2 million and net income of $13.6 million Q2 Statement of Operations Highlights (in thousands) | Account | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Revenue | $110,841 | $99,249 | | Gross Profit | $41,202 | $39,997 | | Income from Operations | $15,998 | $18,581 | | Net Income | $13,855 | $11,802 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $1.7 million, a sharp decline from $50.7 million in the same period of 2024, while net cash used in investing activities was $10.3 million and financing activities used $10.2 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $1,737 | $50,701 | | Net Cash Used in Investing Activities | ($10,342) | ($4,485) | | Net Cash Used in Financing Activities | ($10,220) | ($65,734) | | Net Decrease in Cash | ($18,825) | ($19,518) | Reconciliation of GAAP to Non-GAAP Measures The company provides detailed reconciliations of GAAP to non-GAAP financial measures, such as Adjusted EBITDA and Adjusted Net Income, by excluding items like interest, taxes, depreciation, amortization, equity-based compensation, and specific litigation expenses related to wire insulation shrinkback to offer a clearer view of core operating performance, with Q2 2025 net income of $13.9 million reconciled to an Adjusted EBITDA of $24.5 million - Non-GAAP measures are used by management to compare performance across periods on a consistent basis by excluding items not considered indicative of core operating performance, such as wire insulation shrinkback expenses and related litigation costs[25][26] Q2 2025 Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Description | Amount | | :--- | :--- | | Net Income | $13,855 | | Interest expense | $2,236 | | Interest income | ($76) | | Income tax expense | $3,117 | | Depreciation expense | $1,439 | | Amortization of intangibles | $1,896 | | Equity-based compensation | $2,593 | | Gain on sale of asset | ($3,134) | | Wire insulation shrinkback litigation expenses | $2,546 | | Adjusted EBITDA | $24,472 | Forward-Looking Statements and Risk Factors This section details forward-looking statements concerning future results and operations and outlines significant risks that could impact the business, including fluctuations in demand for solar energy, potential losses from the wire insulation shrinkback issue, supply chain disruptions, product defects, competition, and macroeconomic pressures - The company identifies several key risk factors that could materially affect future performance, including[20][21] - Diminished demand for solar energy projects[20][21] - Failure to accurately estimate or recover costs related to the wire insulation shrinkback matter[20][21] - Supply chain disruptions and trade restrictions[20][21] - Defects or performance problems in products[20][21] - Increased competition in the EBOS market[20][21] - Adverse macroeconomic conditions[20][21]