Shoals Technologies Group, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Scholz Technology Group, Inc. Second Quarter 2022 Earnings Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Megan Peet's general counsel. Please go ahead.

Thank you, operator, and thank you, everyone, for joining us today. Hosting the call with me are CEO Jason Whitaker and interim CFO Kevin Hubbard. 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 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 the 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 cancellation, 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 second quarter press release for definitional information and reconciliations of historical non-GAAP measures to comparable financial measures. With that, let me turn the call over to Jason.

Thank you very much, Megan, and good afternoon, everyone. I'll start off by providing a snapshot of our second quarter performance, followed by an update of our growth initiatives, and then wrap up with our take on recent developments in the U.S. global market. I'll then turn it over to Kevin, who will provide an overview of our financial results. We delivered record revenue and gross profit in the second quarter, which grew 23% and 9% year-over-year, respectively, despite the significant challenges and uncertainty facing the industry. To put some perspective on that statement, this quarter represents the sixth consecutive quarter where Shoals has delivered record year-over-year quarterly revenue and gross profit. Gross margin in the quarter was 38.9%. Gross margin was lower this quarter than last year because the second quarter of 2021 benefited from an exceptionally high mix of BLA sales relative components, whereas this quarter was more in line with our historical mix. We also had higher raw material and logistics costs as a percentage of sales this quarter than in the prior year. Adjusted EBITDA increased sequentially but declined slightly year over year, reflecting our continued investment in SG&A to support our growth initiatives. We're beginning to see a return on these investments and expect the year over year rate of growth in our SG&A to slow and keep forward this year. Demand for our products remains very strong. and we ended the second quarter with record backlog and awarded orders of $327.2 million, an increase of 63% year-over-year and 8% sequentially. Backlog and awarded orders have grown even further in Q3 and are expected to continue expanding through the remainder of the year. Components revenue increased 97% year-over-year, driven by increases in shipments of battery storage products as well as shipments of solar products to a significant number of new customers. New customers' projects are typically designed as home run systems, and they generally start the relationship with Shoals by buying components that will work with these types of systems. Once they see the performance, quality, reliability, installation savings, and customer service that Shoals offers, they become open to trying our combine-as-you-go architecture and buy the BLE. Once customers make the transition, this usually marks the start of a long-term relationship. System Solutions revenue grew 11% year-over-year as a result of continued strong demand for BLA and market share gains. During the quarter, we converted four additional EPCs and developers to our system solutions and had 29 exits in Q2, representing a greater than seven-fold increase in the number of BLA customers since the time of our IPO last year. Customer interest in our recently introduced products continues to grow, with wire management, battery storage, and EV charging products experiencing the greatest demand. We continue to ramp our production with our new wire management products to meet customer demand. To provide more context, backlog and award orders for wire management products increased more than threefold since the beginning of the year. While these products are relatively small contributors to revenue, they carry high gross margins and add to our profitability. Some of our energy storage products also contributed to revenue growth in the quarter, and backlog in that part of our business continues to grow. We are on track to complete the certification process for our VLA 2.0 and high-capacity plug-and-play harnesses in the second half of the year. We expect these products to further accelerate our growth. as VLA 2.0 will have a higher average selling price per megawatt than our current product, and the high-capacity plug-and-play harness will allow us to serve a new and fast-growing application. We also continue to make strides in our international expansion. More recently, subsequent to quarter end, we announced that we had successfully transitioned a customer to VLA in Honduras. This is an excellent proof point, given Honduras is a low-cost labor market. and provide the powerful endorsement of the benefits that our system brings, even in areas where field labor is less expensive than in the U.S. and Europe. BLA can reduce labor costs, improve safety, increase reliability, and reduce maintenance expenses. In Europe, our products are fully qualified, and our sales team remains focused on building pipeline and converting that pipeline into backlog. We're also beginning to see further tracks in the international market, resulting from the Biden administration's support of export-import bank financing. Now, turning to our EV business, customer demand is exceeding our expectations, and we're seeing rapid order growth largely due to the team's progress with commercial fleets and school bus operators. We've recently completed UL certification for many of our products and expect the balance to be certified by the end of the year. During the quarter, we received orders for complete charging systems for commercial fleets that are transitioning to electric vehicles. Those orders represent our first sales of charging system solutions and a key milestone in the commercialization of our EV product line. Prior to this quarter, we had only sold components. We also received our first orders from school bus electrification customers who were attracted to the portability and ease of installation of our EV charging products. Demand from this segment is accelerating following the EPA's $5 billion Clean School Bus Program announced in May. Now I'll take a moment to talk about the recent positive developments in the solar market. The beginning of the quarter was marked by delays and uncertainty caused by the U.S. Department of Commerce's investigation of an ADCVD claim on solar cells and panels supplied from certain Southeast Asian countries. A significant portion of the uncertainty was alleviated when the White House announced a two-year tariff exemption for solar panels. Our conversations with customers indicate that the tariff safe harbor created by President Biden's executive action was an important turning point in customer sentiment. And we've seen projects that have been delayed or placed on hold pick back up. While we cannot quantify the full impact of the recently passed Inflation Reduction Act yet, we see it as a tremendous positive for the market. The increase and extension of the ITC, coupled with new incentives for storage and EVs, should accelerate demand for our products, although how much and how fast is something we don't know yet. We have done a lot of work since the beginning of 2021 to position shares to succeed in the challenging and uncertain landscape faced by the solar industry in the first half of this year. and we think the strong performance of the company reflects that. Now that many of those headwinds are abating, we see the potential for upside to our market expectations. The low capital intensity and flexibility of our manufacturing process allows us to adjust rapidly to changes in demand. We are well prepared to meet increases in demand as the production ramp at our new facility is ahead of schedule. And despite the tight labor market, We expanded our manufacturing headcount, adding more than 100 hourly teammates in the second quarter, who will be essential as we continue to scale our production. Finally, I'm excited to welcome Dominic Bardos as our new Chief Financial Officer. Dominic brings over 30 years of global finance and accounting experience across multiple industries, including automotive, retail, and industrial services. Dominic is currently the CFO of Holley, a publicly traded designer, marketer, and manufacturer of high-performance products for concert enthusiasts. Dominic will start in the beginning of the fourth quarter, and we're excited to have him on board. Kevin has done a tremendous job leading the finance team. Prior to stepping in as our interim CFO, Kevin was a long-time consultant to our company, and he will continue to support us in that capacity as Dominic transitions into our organization. I'm also pleased to announce the addition of Jeanette Mills and Robert Julian to our board of directors. Jeanette and Robert are both seasoned executives with a proven track record of successful corporate governance and leadership across a range of functions and industries. Jeanette will be replacing Peter Jonah, who resigned from our board concurrently with Jeanette Jordan. I want to thank Peter for his service and valuable contributions to show us as a director and welcome Jeanette and Robert to our board. We are excited about the benefits that Jeanette and Robert's significant experience can bring to our company. Now I'll turn it over to Kevin, who will discuss our second quarter 2022 financial results. Kevin?