Shoals Technologies Group, Inc.

Ladies and gentlemen, apologies for the delay. Welcome to the Shoals Technology Group fourth quarter 2021 earnings conference call. Today, the call is being recorded and we have allocated one hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Ashish Gupta. Thank you. You may now begin.

Thank you, operator, and thank you, everyone, for joining us today. Hosting the call with me are CEO Jason Whitaker and CFO Phillip Garten. On this call, management will be making projections or other forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. As you listen and consider these comments, you should understand that these statements, including the guidance regarding the first quarter of 22 and full year 2022, are not guarantees of performance or results. Actual results could differ materially from our forward-looking statements if any of our assumptions are incorrect or because of other factors. These factors include, among other things, the risk factors described in our filings with Securities and Exchange Commission, as well as economic and market circumstances, industry conditions, company performance and financial results, the COVID-19 pandemic, supply chain disruptions, availability and price of our components and materials, project cancellations, decreased demand for our products, and policy and regulatory changes. Although we may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and therefore there can be no assurance that the results contemplated in the forward-looking statements will be realized. We caution that any forward-looking statement included in this discussion is made as of the date of this discussion and do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company's fourth quarter press release for definitional information and reconciliations of historical non-GAAP measures to the comparable financial measures. With that, let me turn the call over to Jason.

Then I'll talk about current conditions in the solar market and wrap up with some commentary on how we see our margins evolving this year. Phil will then give an overview of our financial results for the fourth quarter and provide our outlook for 2022. During 2021, we continued to convert customers to BLA, and the number of EPCs and developers using our system has grown to 18, up more than fourfold from 12 months ago. We believe that eight of the top 10 solar EPCs use our combined-as-you-go system on a majority of their projects, and we're currently in the process of transitioning an additional 15 customers to our system. Outside of BLA, we're starting to see significant traction from the new products we introduced last year. Since launching our wire management solutions in the fourth quarter, we've received orders for more than 300 megawatts of solar projects. and the customer feedback received thus far has been incredibly positive. We plan to ship our first IV curve benchmarking products in the coming weeks and continue to expect first shipments of high-capacity plug-and-play harnesses and BLA 2.0 to begin in the second half of this year. We're also making strides in battery storage, leveraging products and expertise from our Connect PV acquisition. We took our first orders for dedicated storage products in the third quarter last year, generated revenue in the following quarter, and have several high-profile battery projects in advanced negotiations that we hope to announce in the coming quarters. We've made significant progress on our international expansion plan. Last month, we received IEC certification for our BLA, which was the last hurdle to selling our products throughout the EU. We have our sales team in place, and our products are now fully qualified. And as a result, we expect to see backlogs start to build this year. We're also looking at opportunities beyond Europe, and we've started building a sales team in LATAM. Turning to our newly formed EV charging business, we launched our products in the fourth quarter and have seen a tremendous level of market interest in quoting volume. We signed our first MSA with a charge point operator in November, shipped our first products in February, and we'll be ramping up production as planned through the second quarter of this year to meet our demand. We're also starting to see synergies between our EV business and our core solar business, as our customers are increasingly active in both solar and EV charging. A great example of that is the strategic agreement we recently signed with Lumina, the North American Decarbonization as a Service Business of Brookfield Renewable. Luminesce opted to collaborate with us to combine the best-in-class, high-quality distributed generation platform with our leading-edge e-mobility solutions to provide a comprehensive EV charging, solar, storage, and energy-efficient solutions. We are excited about this partnership and are honored to have been selected to be a vendor to an industry leader like Brookfield Renewable. Finally, earlier this year, we unveiled The Shoals E-Mobility Innovation Center, a living lab that enables customers to experience Shoals' best-in-class electric vehicle charging solutions. We're bringing innovation to how EV charging is deployed and installed, just like we did in solar. And having the center to demonstrate our products is an important tool to win new customers. The hard work we did in 2021 to convert more customers to BLA, introduce new products, enter the European market, and launch our EV business is going to accelerate our growth in 2022. And to put that in perspective, we had backlog and awarded orders of $299 million a year in 2021, which was nearly twice what it was at the end of 2020. That number has continued to grow in Q1 and underscores the momentum that is building across our business. To support our growth, we're expanding our engineering and sales team, and we'll be opening an additional manufacturing facility that will more than double our production capacity. Now turning to current market conditions. Last quarter, we disclosed that several of our customers had pushed out the delivery dates of their orders, primarily as a result of delays they were experiencing in receiving modules or other equipment required for their projects from other vendors. We know that those pushouts would call some of our revenues to share from the fourth quarter of 2021 into 2022. And that shift is played out largely as we expected with only the timing of revenue being impacted and no revenue being lost. What we didn't expect is that the same time as we were seeing pushouts from some customers, we saw tremendous growth in orders from others. So much so that we've had to add manufacturing capacity to meet the demand. And we think our experience reflects the overall solar market right now. Demand is incredible, but the exact timing of projects remains very dynamic because customers are contending with so many moving pieces within their supply chain. What that means for us in 2022 is that while we know our revenue growth rate is going to increase significantly compared to last year, it's challenging to predict exactly how significantly and which quarters will see the greatest growth. And because of that uncertainty, we've tried to capture a wide range of potential outcomes in our 2022 revenue outlook. I'll wrap up by making some comments on our margins. Many of you have asked us about the sustainability of our margins, particularly given the year-over-year compression in gross margin that we experienced in Q3 and Q4. We expect to deliver gross margins on average that is in the range of 38 to 40%. We will have blips along the way related to mix or supplier issues in any given quarter, but we are in a situation where we are delivering significant value to our customers and are able to capture the increase in our product costs over time. Nearly all of the lower gross margin we saw in Q4 were related to a price increase from one of our suppliers that we chose not to pass on to our customers on a certain set of projects. That decision will continue to impact our gross margins in the first half of 2022, with a return to normalized levels in subsequent quarters. The story on EBITDA margins will be a little bit different. We are investing heavily in our human capital infrastructure to support our growth initiatives, including EV and international, which means we are adding SG&A ahead of when we have the revenue to absorb it. That will result in even on margins that will decline modestly year over year in 2022, even as gross margin increases. However, we believe that's a small price to pay to support the significant demand we have today and accelerate our growth. I'll now turn it over to Phil, who will discuss our fourth quarter 2021 financial results and our first quarter and four year 2022 guidance. Phil.