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Shoals Technologies Group, Inc. (SHLS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $110.8M, up 11.7% year over year and above the high end of Q1 guidance; GAAP diluted EPS was $0.08 and Adjusted diluted EPS was $0.10, with Adjusted EBITDA of $24.5M and gross margin of 37.2% .
  • Street consensus was below actuals: revenue estimate $104.7M vs actual $110.8M, and Primary EPS estimate $0.084 vs actual $0.10 — a beat on both revenue and EPS (S&P Global)*.
  • Backlog and Awarded Orders reached a record $671.3M; bookings were ~$137.1M and book-to-bill was 1.2; following four quarters BLAO is ~$540.3M, supporting H2 strength .
  • Guidance raised: FY25 revenue to $450–$470M (from $410–$450M); Q3 revenue $125–$135M and Adjusted EBITDA $30–$35M; FY25 EBITDA maintained ($100–$115M), CFO lowered ($15–$25M), and capex raised ($30–$40M) .
  • Catalysts: improved demand narrative (AI/data centers, onshoring), record order book, and ongoing BESS/data center traction; near-term watch points include margin mix from promotional pricing, elevated legal costs, warranty remediation cash usage, and factory consolidation execution .

What Went Well and What Went Wrong

What Went Well

  • Revenue beat and guide raise: “We delivered revenue above the high end of our guided range… pleased to increase our revenue guidance for the full year 2025” .
  • Record pipeline and bookings: BLAO $671.3M with ~$137.1M new orders and book-to-bill 1.2; ~$540.3M scheduled for the next four quarters .
  • Strategic wins in BESS/data centers and international: increased traction in BESS combiners/recombiners with hyperscaler engagement; projects won in Chile and Australia; MOU for up to 12 GW with UGT/Sun Africa .

What Went Wrong

  • Margin compression: gross margin fell to 37.2% from 40.3% YoY due to strategic pricing, volume discounts, customer/product mix; EBITDA margin down to 22.1% .
  • Elevated legal/warranty costs: ~$2.5M Q2 legal expense tied to shrinkback litigation; $11.2M spent on remediation in Q2; remaining current warranty liability $14.5M (company estimate) and $15.1M on balance sheet .
  • Cash consumption and net debt: cash used in operations given AR build and remediation; cash ended at $4.7M, net debt rose to ~$127.1M; CFO lowered FY25 operating cash flow guidance .

Financial Results

Core Financials (actuals)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$106.987 $80.631 $110.841
Gross Profit ($USD Millions)$40.184 $28.140 $41.202
Gross Margin %37.6% 35.0% 37.2%
Operating Income ($USD Millions)$16.483 $4.312 $15.998
GAAP Diluted EPS ($)$0.05 $0.00 $0.08
Adjusted EBITDA ($USD Millions)$26.409 $12.789 $24.472
Adjusted EBITDA Margin %24.7% 15.9% 22.1%
Adjusted Diluted EPS ($)$0.08 $0.03 $0.10

Actual vs Consensus (S&P Global)*

MetricQ4 2024Q1 2025Q2 2025
Revenue Consensus Mean ($USD)$102.070M*$74.539M*$104.710M*
Revenue Actual ($USD)$106.987M $80.631M $110.841M
OutcomeBeatBeatBeat
Primary EPS Consensus Mean ($)$0.096*$0.0388*$0.0838*
Primary EPS Actual ($)$0.08 $0.03 $0.10*
OutcomeMissMissBeat

Values retrieved from S&P Global.*

KPIs and Balance Sheet Highlights

KPIQ4 2024Q1 2025Q2 2025
Backlog & Awarded Orders ($USD Millions)$634.7 $645.1 $671.3
Following 4 Quarters BLAO ($USD Millions)$440.0 ~$500.0 ~$540.3
Book-to-Bill1.4 1.13 1.2
New Orders/Bookings ($USD Millions)$145 ~$91 ~$137.1
Cash & Equivalents ($USD Millions)$23.511 $35.609 $4.686
Revolving Credit Facility ($USD Millions)$141.750 $141.750 $131.750
Net Debt / Adjusted EBITDA (x)1.2x 1.2x 1.4x
Warranty Liability – Current Portion ($USD Millions)$29.602 $25.956 $15.102

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$410M–$450M $450M–$470M Raised
Adjusted EBITDAFY 2025$100M–$115M $100M–$115M Maintained
Cash Flow from OperationsFY 2025$30M–$45M $15M–$25M Lowered
Capital ExpendituresFY 2025$25M–$35M $30M–$40M Raised
Interest ExpenseFY 2025$8M–$12M $8M–$12M Maintained
RevenueQ3 2025N/A$125M–$135M New
Adjusted EBITDAQ3 2025N/A$30M–$35M New
Revenue (Implied)Q4 2025N/A$135M–$145M (implied) New (implied)

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
AI/Data center demandFraming AI/onshoring as multi-year load growth driver Pipeline quoting extends into 2026; hyperscaler BESS custom solution won “Demand is off the charts… data center power poised to more than double by 2030” Strengthening
Supply chain/tariffsTariffs could benefit domestic makers; uncertain macro Limited direct exposure; robust domestic supply chain Agile sourcing/pricing; customers moving projects forward despite policy shifts Manageable
Product performance/new productsLong-tail BLA, Mini BLA, 2kV solutions highlighted New products in >15% of BLAO; OEM traction with First Solar New products ~10% of BLAO; moving customers up to BLA trunk bus Accretive mix over time
International expansionWins in Australia & Chile; ~$86M international BLAO MOU with UGT/Sun Africa for up to 12GW; EXIM-backed More projects in LatAm/APAC; Chile BLA project; Australia Maryvale DC-coupled project Building
Regulatory/legalITC appeal; new ITC case (375/376) Shrinkback litigation progressing; elevated legal costs Voltage ITC hearing; Prismian case progressing; legal expenses remain unusual Ongoing headwind
Manufacturing consolidationNew TN facility (635k sqft) to drive efficiency Move begins end of Q3; expect productivity gains Consolidation on schedule; operating leverage expected post-move Positive execution
MarginsGM 37.6% (pressure) GM 35%; EBITDA margin 15.9% GM 37.2%; EBITDA margin 22.1%; promotional pricing/mix weigh Improving QoQ, below long-term target

Management Commentary

  • CEO: “We delivered revenue above the high end of our guided range, and ended the period with record backlog and awarded orders of $671.3 million… pleased to increase our revenue guidance for the full year 2025” .
  • CEO on demand: “The underlying fundamentals of the energy transition markets remain very healthy and the power is in high demand… we are incrementally more constructive on the demand environment” .
  • CEO on strategy: “Our strategy of accelerating growth within our core domestic utility scale markets is yielding results… traction… within our four growth initiatives” .
  • CFO: “Adjusted EBITDA at the high end… $24.5M or 22.1% of revenue… net income aided by a $3.1M gain on sale of a facility” .
  • CFO on remediation/legal: “Spent $11.2M on wire installation shrinkback remediation… remaining current liability ~$14.5M; legal case against Prysmian progressing… ITC case against Voltage hearing scheduled” .

Q&A Highlights

  • Why revenue guide raised but EBITDA unchanged: Promotional pricing and customer/product mix are diluting margins; elevated legal costs persist; mix shift including lower-margin components/new products, with plan to migrate customers to higher-margin BLA solutions .
  • BESS/data center traction: Three go-to-market paths (EPC, OEM skid partners, direct to data centers); quoting up ~100x YoY; hyperscaler custom solution under way; BESS seen as accretive to margins longer term .
  • Backlog visibility and 2026: ~$540.3M scheduled for next four quarters; fewer delays than expected vs 2024; implied Q4 revenue $135–$145M .
  • Cash flow and net debt: H2 working capital build and remediation/capex drive near-term cash usage; net debt/Adj EBITDA rose to 1.4x; plan for improvements post factory consolidation and remediation wind-down .
  • International revenue contribution: Minimal in 2025 to date; projects won in LatAm and Australia; ~13% of BLAO international, ramp expected in 2026 .

Estimates Context

  • Q2 2025: Revenue $110.8M vs consensus $104.7M (Beat); Primary EPS $0.10 vs consensus $0.0838 (Beat) (S&P Global)*.
  • Trajectory: Last three quarters show Shoals beating consensus revenue each quarter; Primary EPS missed in Q4 and Q1 but beat in Q2 (S&P Global)*.
  • FY 2025 consensus: Revenue ~$472.0M; Primary EPS ~$0.39; EBITDA ~$106.8M (S&P Global). Management’s FY25 revenue guidance midpoint ($460M) is modestly below Street, EBITDA range brackets consensus (S&P Global) .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue and EPS beat vs consensus with raised FY25 revenue guidance; H2 set up remains strong with record BLAO and ~$540M scheduled deliveries .
  • Margin mix headwinds from promotional pricing and component-heavy wins are expected to persist near term; execution to migrate to higher-margin BLA and scale benefits post consolidation is key .
  • Cash flow will be pressured near term by remediation and capex; watch the cadence of AR collections and warranty outflows; CFO guide lowered for operating cash flow .
  • BESS/data center offers upside optionality; early hyperscaler engagement and OEM partnerships can diversify mix and support medium-term growth .
  • Legal overhang remains (Prismian litigation, ITC Voltage case); elevated legal spend likely through H2; monitor outcomes/timing .
  • International pipeline building (LatAm/APAC, EXIM-backed projects); contribution expected to accelerate in 2026; near-term revenue minimal .
  • Trading implication: Expect narrative to focus on H2 delivery and margin trajectory; any confirmation of Q3/Q4 revenue cadence and BESS wins could be positive; conversely, unexpected project delays or continued margin pressure may temper sentiment .