Shoals Technologies (SHLS) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q4 2021 grew 24% year-over-year to $48 million, driven by a 29% increase in Systems Solutions and a 15% increase in components [21] - Gross margin in Q4 2021 was 33.1%, down from 38.3% in the prior year, primarily due to higher material and logistics costs [22] - Adjusted EBITDA for Q4 was $11.3 million compared to $14.1 million in the prior year [24] - Backlog and awarded orders reached $299 million at year-end 2021, a 94% increase year-over-year [25] - 2022 revenue guidance is projected to be between $300 million and $350 million, representing a year-over-year increase of 41% to 64% [26] Business Line Data and Key Metrics Changes - Systems Solutions accounted for 68% of total revenues in Q4 2021, up from 65% in the prior year [21] - The company has seen significant traction from new products, including wire management solutions, with over 300 megawatts of orders received [9] - The EV charging business launched in Q4 2021 has generated substantial market interest and initial orders [12] Market Data and Key Metrics Changes - The company reported strong demand in the solar market, with a notable increase in orders despite some customers experiencing delays due to supply chain issues [16] - The company received IEC certification for its BLA product, enabling sales throughout the EU, and is expanding into LATAM [11] Company Strategy and Development Direction - The company plans to expand its engineering and sales teams and open a new manufacturing facility to double production capacity [15] - The focus is on converting more customers to the BLA system and leveraging synergies between the solar and EV charging businesses [12][13] - The company aims to maintain a gross margin of 38% to 40% in the long term, despite short-term fluctuations [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in revenue growth for 2022, although predicting exact quarterly growth remains challenging due to supply chain dynamics [18] - The company is investing in human capital to support growth initiatives, which may lead to a modest decline in EBITDA margins in 2022 [20][29] - Management highlighted the importance of maintaining customer relationships by absorbing certain cost increases rather than passing them on [40] Other Important Information - General and administrative expenses increased to $11 million in Q4 2021, primarily due to higher stock-based compensation and increased payroll [23] - The company is not currently hedging commodity prices but adjusts project quotes based on current commodity pricing [70] Q&A Session Summary Question: Gross margin expectations for Q1 - Management indicated that Q1 gross margins would be the lowest, with expectations for improvement in Q2 and a return to historical levels in the second half of the year [35][40] Question: Backlog growth and revenue guidance - Management expressed confidence in the guidance provided, noting significant growth in backlog and awarded orders while acknowledging potential supply chain impacts [46][47] Question: Material costs and pricing strategy - Management stated that they have been able to pass on commodity cost increases to customers, except for specific vendor-related price increases [48][49] Question: EV charging business and customer familiarity - Management confirmed that they are leveraging existing relationships with utility developers and owners to expand their EV charging business [62] Question: Competitive landscape in the EBOS space - Management noted that the competitive landscape remains stable, with no significant new entrants reported [90] Question: Current capacity and future expansion - Management did not provide specific details on current capacity but confirmed that they are rapidly expanding their new facility to meet demand [98]