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spk12: Good afternoon, and welcome to Shoals Technologies Group's third quarter 2022 earnings conference call. Today's 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 Megan Peets, General Counsel for Shoals Technologies Group. Thank you. You may begin.
spk00: Thank you, Operator, and thank you, everyone, for joining us today. Hosting the call with me are CEO Jason Whitaker and CFO Dominic Bardos. 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 included, among other things, The risk factors described in our filings with the Securities and Exchange Commission, as well as economic and market circumstances, decreased demand for our products, policies and regulatory changes, industry conditions, current macroeconomic events, supply chain disruptions, and availability and price of our components and materials. 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 can be no assurance that the results contemplated in the forward-looking statements will be realized. We caution that any forward-looking statements 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 third 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.
spk09: Thank you very much, Megan, and good afternoon, everyone. I'd like to start off by welcoming Shoal's new CFO, Dominic Bardos, who we're very excited to have on board. Dominic brings over 30 years of global finance and accounting experience across multiple industries, including automotive, retail, and industrial services. Prior to joining us, Dominic was the CFO of Holley, a publicly traded designer, marketer, and manufacturer of high-performance products for car and truck enthusiasts. I would also like to thank Kevin Hubbard for the tremendous job he did as our interim CFO and his willingness to stay with us for an extended period, which gave us the time we needed to find the best fit for the CFO position. We are honored to have Kevin's continued support as we transition leadership of our finance team to Dominic. Now turning to our results for the quarter. I'll start off by providing a snapshot of our Q3 performance, followed by an update on our core product lines, and then wrap up with an assessment of current business conditions in the U.S. solar market and how we see them benefiting our business. I'll then turn it over to Dominic, who will provide an overview of our financial results. Shoals had a phenomenal third quarter, delivering record revenue, gross profit, and adjusted EBITDA. Revenue and gross profit grew 52% and 66% year-over-year, respectively. Gross margin in the quarter was 39.7% compared to 36.4% in the prior year period, driven primarily by a higher proportion of revenue from the company's combined-as-you-go system solutions, which carry higher margins, and increased leverage on fixed costs as a result of higher sales volumes. Adjusted EBITDA on the quarter was $26.6 million. increasing both sequentially and year-over-year, even with sustained investment in SG&A to support our growth initiatives. Demand for our products continues to grow, and we entered the third quarter with record backlog and awarded orders of $471.2 million, an increase of 74% year-over-year and 44% sequentially. System Solutions revenue increased 80%, while components were up slightly relative to last year, consistent with our expectations. The growth in System Solutions revenues reflects continued strong demand for our combined-as-you-go system. System Solutions represented 77% of revenue versus 65% in the prior year period. During the quarter, we converted four additional EPCs and developers, bringing the total number of BLA customers to 33 at the end of 3Q. New products also contributed to revenue growth in the quarter with storage, wire management, and EV solutions experiencing particularly strong demand. Earlier this month, we announced that Shoals have been awarded a one gigawatt contract to supply BLA and storage solutions on a project that will be one of the largest solar plus storage projects in the U.S. when complete. Deliveries for the project are underway and expected to continue throughout 2023. We're continuing to ramp production to fulfill customer orders of our new wire management products. Relative to a year ago, the opportunity for wire management has increased more than five times. We remain on track to complete the certification process for BLA 2.0 and high-capacity plug-and-play harnesses by the end of the year. Initial customer feedback from previewing both products at RE Plus was very positive, and we're excited to begin shipments once certification is complete. As we touched on last quarter, we expect these products to further accelerate our growth, as BLA 2.0 will have a higher average selling price for megawatt than our current product, and the high-capacity plug-and-play harness will allow us to serve a new and fast-growing application where we do not currently have an offering. We also continue making progress in our international expansion. Our sales team is having a number of advanced conversations now that our products are fully qualified and we look forward to providing further updates in 2023. Turning to our EV business, we made significant progress during the quarter, receiving certification to UL standards on our phase one above ground e-mobility charging solution and completing our first deliveries of our full EV system solutions. Importantly, margins on these sales are at or above our corporate average as expected. Our EV solutions have now been deployed in more than 15 states in the US. Based on customer experience from these deployments, we're now able to validate that our solution offers a 20% to 30% time and cost savings over traditional installation methods. Much like we've done in solar, we can leverage this data to establish the superior value proposition that our products offer and migrate customers from competitors' products to ours. We believe that the certification to UL standards and growing number of successful deployments of our solutions will result in broader adoption of our technology and create sales opportunities in public projects because our solution simplifies the permitting process for customers. Border growth for EV solutions continues to exceed our expectations, particularly in the fleet and school bus segments. And looking ahead, UL testing and certification of our drive-over raceway e-mobility charging solution is in progress, and we expect to be completed by year-end. Now turning to solar market conditions. The two-year tariff exemption for Chinese panels, the recently passed Inflation Reduction Act, and higher energy prices have given our customers and end users the confidence to reinitiate previously delayed projects, make multi-year commitments to invest in solar generation, and prioritize product availability and performance over price. As a result of the improving solar market conditions in our recent performance, we are raising the low end of our 2022 outlook, which Dominic will discuss in further detail. While we're still waiting on further guidance from the Treasury on certain aspects of the IRA, the bill provides many demand drivers for Shoals and the industry. First, as we discussed in our last call, we believe the increase and extension of the investment tax credit, coupled with new incentives for storage and EVs, will accelerate demand for our products. While we still don't know just how significant the effect on demand will be, initial reactions suggest that the IRA is the most significant piece of legislation for the solar industry to date. In addition, The prevailing wage provision of the IRA is expected to compound wage pressure in the U.S. market, which further reinforces the value proposition of our combine-as-you-go system. From day one, we set out to create products that could be installed by anyone as a response to the disproportionately high cost of installing EVOS, which can be equal to or in excess of the cost of the product itself. In environments where labor is more expensive, our solutions are especially attractive. as they take less time to install and are installable by general labor. We anticipate the prevailing wage provision will provide a significant sell-in for years to come. Finally, the significant investments we made this year, including the build-out of our new facility and expansion of engineering, sales and HR headcount, we are confident we can meet accelerating demand and continue our strong growth trajectory. I'll now turn it over to Dominic who will discuss our third quarter 2022 financial results. Dominic?
spk06: Thank you, Jason. I'm very excited to be here today, and I look forward to working with you and the entire team at Shoals during our next chapter of growth. Turning to the financials, for the third quarter, revenue grew 52% versus the prior year period to $90.8 million. driven by a higher sales volume as a result of increased demand for solar EBOS generally, and specifically our combined YouGo system solutions. Our third quarter revenue growth was also aided by the launch of our EV solutions. System solutions revenue increased 80% year over year, and components revenue increased 1% compared to the prior year period. System solutions represented 77% of revenue versus 65% in the prior year period. Gross profit increased 66% to $36.0 million compared to $21.8 million in the prior year period. Gross profit as a percentage of revenue grew 330 basis points to 39.7% compared to 36.4% in the prior year period, driven primarily by increased revenue and a higher proportion of revenue from system solutions. Third quarter general and administrative expenses were $13.9 million compared to $10.0 million during the same period in the prior year. This change was primarily a result of higher stock-based compensation, planned increased payroll due to higher headcount supporting our growth and product initiatives, and public company costs. Adjusted EBITDA increased 57% to $26.6 million compared to $16.9 million for the prior year period. We are beginning to realize leverage on SG&A as planned, and during the quarter, adjusted EBITDA margin expanded more than 100 basis points year-over-year to 29.3%. As discussed earlier this year, we expected to gain leverage on operating expenses exiting the year, which you've now achieved one quarter ahead of schedule. Adjusted net income grew 43% to $16.6 million in the third quarter compared to $11.6 million in the prior year period. As always, we included a reconciliation of non-GAAP measures of adjusted EBITDA and adjusted net income in our press release. Please refer to that for a bridge to our GAAP net income. Moving to our balance sheet, having dug into the numbers, we have opportunities to optimize working capital, particularly inventory and accounts receivable in the coming quarters. As of September 30th, 2022, backlog and awarded orders were $471.2 million, representing a new record for the company and an increase of 74% and 44% versus the same time last year, and June 30, 2022, respectively. The growth in backlog and awarded orders reflects continued robust customer demand for Shoals products. Turning to our full-year outlook, based on current market conditions and input from our customers and team, we are raising the low end of our previous outlook. We now expect 2022 revenue to be in the range of $310 million to $325 million. up 45% to 52% year over year. On the back of our strong third quarter results and expectation of continued leverage on operating expenses, we now expect adjusted EBITDA to be in the range of $80 million to $86 million and adjusted net income to be in the range of $48 million to $53 million. As we move forward, we generally expect adjusted EBITDA margin will increase on a year over year basis though the increase will not be linear due to the timing of spend and the potential for mix to shift from quarter to quarter. Now back to Jason for closing remarks.
spk02: Thanks, Dominic.
spk09: I'd like to close by thanking all of our customers for their commitment to Shoals, our employees for their contributions to our company's success, and our shareholders for their continued support. 2022 is shaping up to be a huge year for Shoals, despite the headwinds we confronted during the first half of the year. With strong demand for solar and EV, successful new product and sales initiatives, and a tremendous strength of our core BLA product, I'm incredibly optimistic about what we can achieve in the coming quarters. And with that, thank you, everyone. I appreciate your time today. And we'll now open the line for questions.
spk12: Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. The first question comes from Mark Strauss of JP Morgan. Please go ahead.
spk03: Yes, good afternoon. Thank you very much for taking our questions. Congrats on the strong backlog. I wanted to start with that if I could. Are you seeing any change in your order activity as far as kind of the timeline of deliveries? If we kind of look back over the last, well, since you've been public and kind of the ratio of what your backlog implies for the next 12 months or so, is there any reason to believe that that that general ratio should maintain going forward? Or are you seeing an elongation of any of your order activity?
spk09: Yeah. Hey, Mark. Jason here. Good to speak with you again. Appreciate the compliments. Definitely a team effort here. Yeah. As we've talked about in the past, our backlog and award orders generally represents that, I would say, time period over the next nine to 12 months. I mean, obviously, it's kind of like a bell curve, right? You're going to have some
spk03: know some spillover um you know from time to time but you know generally speaking still in that same nine to twelve month period okay good to hear uh and then just a follow-up i understand the the gross margins can can fluctuate quite a bit with mix but just any commentary dominic you can you can provide on sgna going forward just some of the the investments that you've made year to date and kind of leverage going forward
spk06: Sure. Thanks, Mark. From a margin standpoint, one of the things that we've looked at is some of the growth that we've had from positions, the investments that we've made in incremental positions and some of the public company expenses, including our readiness for our Sarbanes-Oxley controls this year. So from that standpoint, we did get some good leverage in Q3 from higher sales volume. And the guidance range that we've projected out there does anticipate fewer production days in Q4. So, you know, the margins will fluctuate. But as we've guided to previously, you know, that 38% to 40% gross margin is a great target for us to have there. And then we should see, as we mentioned in the prepared remarks, some continued expansion in EBITDA margin over time.
spk02: Okay. I'll take the rest offline. Thank you. The next question comes from Philip Shen of Rock Capital Partners.
spk12: Please go ahead.
spk01: Hey guys, thanks for taking my questions and congrats on a strong quarter. Wanted to check in with the strength in Q3 and Q4 and to see how much of that volume may have come from projects that you're serving that don't have modules but that do have tracker and you were able to install the eBoss on despite the lack of modules.
spk02: Good to talk to you again, Phil.
spk09: I think it's kind of a two-part question. You know, I'll kind of take the Q3, Q4 first. You know, first of all, as we talked about during our Q2 call, you know, our expectation was that, you know, Q4 would be slightly stronger than Q3, but it turned out, you know, Q3 was, you know, exceptionally strong as we just talked about. You know, one thing I do want to talk about from a Q4, you know, perspective, because I think it's very important, When you look at the midpoint of guidance that we have for the year, it calls for nearly an 80% year-over-year revenue growth. So still have a very strong Q4 itself. And as Dominic also mentioned, as we move throughout Q4 because of the holiday season, there are definitely fewer working days as we go through the quarter and the year. But specifically regarding the projects from a panel perspective, You know, there are projects that we will be serving. I don't know that there are projects that we're currently serving, but I know there's projects that we will be serving or close to it that are going to be moving forward, you know, based upon, you know, UFLPA or just based on panel availability in general, Phil. You know, there's not that many out there that I can think of, but there are quite a few, and the ones that I know that do have panels that are affected are moving forward, you know, I guess you could say as planned with construction, you know, based on any potential panel delays.
spk01: Great. Thanks for the call, Jason. And then I'll follow up here on the backlog question and awarded orders as well. It looks like when you parse out the difference, most of the increase in that category in the backlog and awarded orders came from awarded orders as opposed to backlog. I think backlog increased from 195 to 199 million and awarded orders went to 272 million from 133 million. So just wanted to confirm, do you expect those awarded orders to be delivered in the next nine to 12 months? I think I heard you say that. And then also in your queue, it looks like you have $200 million worth of contracts that have take or pay provisions. And so wanted to see if you could talk through, and you mentioned just now, Jason, kind of a distribution of contracting type, but going forward, would you expect to have more longer-term contracts with the same customer, similar to, you know, maybe a First Solar or something like that ahead? Thanks.
spk09: Yeah, so quite a bit there, Phil. Maybe I'll try to knock off a few of those. You know, one of the things that I can say is, you know, during RE Plus, you know, we definitely saw a pretty big change in sentiment, you know, regarding, you know, customers wanting to have more long-term conversations. You know, obviously, you know, it takes a while to have, you know, those conversations and get things complete. But, you know, just wanting to make sure that customers have, you know, the ability to, you know, access our capacity was one of the key topics that we had. You know, so who knows where that goes, but, you know, definitely great conversations that spawned, you know, out of RE Plus, you know, directly along those lines, you know, for what does that opportunity look like further out. But yeah, you know, specific on backlog and awarded orders, you know, kind of referring back to Q2, you know, if everyone recalls, one of the things that we said was we really didn't have a lot of coverage or a lot of spillover, you know, less than a quarter, you know, based upon the, you know, the extension or, I'm sorry, the moratorium on the two-year panel tariffs. So, you know, when you look at where we are, you know, from Q2, Q3, obviously, you know, having the full quarter, you know, with that in play, obviously having some, you know, some strong support from our perspective, you know, definitely allowed us to realize very strong, you know, growth in backlog and awarded orders. But I think, you know, over time, Phil, and this may not always be the case, but, you know, if you go back and you look, you know, specifically, you know, you'll find that, you know, you'll get a pretty decent jump in awarded orders, and then obviously the backlog starts eating away at that, and then you'll get a big jump again. So, you know, definitely, you know, very excited about where we are and very excited for what the future holds.
spk02: Thank you.
spk12: We would also like to remind all analysts to limit themselves to one question and one follow-up. The next question comes from Mahib Van Loy of Credit Suisse.
spk11: Please go ahead. Mahib Van Loy Hey, good evening. Thanks for taking the questions. Could you talk about the EV charging business, how much of the revenues in the quarter or the year coming from that business? How should it take me about its contribution to the backlog and awarded orders here? Thanks.
spk02: Yeah. Hey, Maheep.
spk09: Jason here. So, you know, at the moment, we're not providing breakout of, you know, e-mobility or new products, you know, storage or international. But, you know, from an e-mobility perspective, you know, obviously very excited about what we've been able to accomplish, you know, launching that product out. What I can tell you is, you know, it is contributing to our backlog and awarded orders and expect that will continue to be the case and grow over time. You know, feedback from customers has been nothing short of amazing and very excited that we've been able to accomplish, you know, not only a successful launch, but, you know, a launch over 15 different states, you know, with, you know, validating that value proposition that we're able to bring with that 20 to 30% savings on, you know, on installation time and costs. while also maintaining our average corporate margin profile. So, you know, very, very, very exciting times, you know, from that perspective. And I want to see that continue to grow.
spk02: Got it.
spk11: And maybe just like one housekeeping, one of the slides where you talk about the product roadmap, you show why a hardness product probably has been pushed out by a quarter. Just want to check what's driving that and does that impact any product revenues for 22 or 23 for you guys?
spk09: Yeah, when you look at the backlog and award orders that we have, a large portion of that is going to be based upon current products that we have released out. So when we talk about our wire management product and our BLA 2.0, we're still tracking out to have certification complete on both of those particular products, which will allow us to finish up that commercialization phase. So we've already previewed those at RE+. And, you know, those two products do work very well together, and they're also very complementary. So looking forward to finalizing the certification process on both sides of those particular products and the opportunity we have in front of us as we move into 2023 with those.
spk11: Thanks. And just a clarification, is that certification for U.S. or Europe? That's all from my end. Thanks.
spk02: Yeah, good question, Mahit.
spk09: So right out of the gate, we're looking at, you know, our high-impact product and our BLA 2.0. So the initial certification that we're going after is going to be, you know, UL certification, which is for North America. And then, you know, based upon that, you know, we will branch out accordingly, much like we've done with all of our other product lines. So we'll definitely, you know, keep you informed, you know, as we progress throughout that timeline.
spk02: Great. Thanks for the question.
spk12: The next question comes from Brian Lee of Goldman Sachs. Please go ahead.
spk04: Hey, guys. Good afternoon. Thanks for taking the questions. Sorry if I missed this one, but I think you were talking about how 3Q ended up being stronger than expected and hence why there's a little bit of a sequential downtick into 4Q when we back out the new revised guidance for the year. I thought it was a little noticeable that that the EBITDA margin seems to be declining quite significantly from the EBITDA margin you just posted in 3Q. It seems like much more so than the EPS and revenue declines that are inferred here. So can you kind of talk about whether that's mixed, whether there's some incremental costs, like what's happening with the EBITDA line that it's such a more pronounced quarter-on-quarter downtick versus the other metrics you're guiding to here?
spk06: Sure, Brian. Hey, it's Dominic here. First of all, we're absolutely very pleased with the 3Q performance and some of that revenue pull forward did help us from a leverage perspective in the quarter, you know, aiding the margins. A couple things. Yeah, we do expect with less revenue in Q4 to lose a little bit of that leverage. And then we also have modeled in some of the public company expenses and some of the incremental expenses such as myself and other staff positions that we have coming online. to be increased in Q4 as well. And so we're very pleased with the margins where we are. We do think that it's very important to recognize that it is a slightly lower revenue period for us. We do lose some leverage back off that. And as we've got it to early in the year, we do expect some SG&A expenses and investments to continue to grow quarter over quarter sequentially.
spk04: Okay, thank you. That's helpful. And then just going back to Phil's question about the mix of backlog and awarded orders, I mean, the overall performance there was quite impressive, so kudos to you guys. But could you remind us, Jason, as to kind of what takes an awarded order into official backlog status and then, you know, whether or not – you mentioned during the prepared remarks you're seeing a lot of customer demand for, like, multi-year investments and what have you. Are you seeing – sales cycles or delivery cycles sort of elongate to any degree. Just trying to understand whether, you know, some of this is forward booking, you know, out-year opportunities, which I know there's a lot of happening in the utility scale environment when you look at, you know, some of your peers, particularly in the panel space that are booking, you know, multi-years in advance. Thank you.
spk09: Yeah, great question, Brian. So, you know, a couple things. You know, it's nothing like what you would expect or what you're seeing on the panel side of things. Right now, when we look at backlog and awarded orders, you know, it still represents that roughly nine to 12 months period. What I was talking about earlier as far as conversations at RE Plus, I think there's probably an opportunity where that may start to elongate out, you know, based on initial conversations that we're having, you know, with customers that are out there that really want to understand, you know, what we're capable of performing for them, you know, not only in 2023 but, you know, even beyond. But again, that's not something that we're really talking about today. You know, it's just, there are conversations that are happening. Um, and if something like that were to transpire, we'll definitely update you accordingly. Uh, and to go back and answer the original question, I believe it was, you know, what, what does it take for, you know, a opportunity, um, to move into award orders and then ultimately, you know, flip over into backlog. So, you know, once you look at a opportunity that goes into backlog itself is when we have that, uh, PO itself with all T's and C's fully completed. you know, everything agreed to, and we are executing on that product. So when you look at awarded orders, that's a point at which, you know, we've been awarded that particular product. And there's multiple stages, right? You know, if we have an MSA in place, we may be looking at specific, you know, site nomenclature. We may be going through T's and C's with new customers. But, you know, really just buttoning up and going through those last-minute details on that particular project that allow us to, you know, execute that, you know, and turn that directly into backlog itself, right?
spk02: All right, appreciate that. Thank you. The next question comes from Colin Rush of Oppenheimer.
spk12: Please go ahead. Thanks so much, guys.
spk10: Can you talk a little bit about the content of the bookings from a perspective of international bookings as well as EV projects?
spk09: Yeah, Colin. Hey, great speaking with you again. Looking at the backlog and award orders, what I can say is that a meaningful portion of that you know, is coming through, you know, with our full system cells, specifically BLA itself. But as far as, you know, the definitive breakdown, you know, we're not breaking that down yet, whether you look at international side of things or whether you look at any mobility.
spk10: Okay. You know, and then the second one is really just around the urgency of, you know, shortage related to electricians out in the field. Are you seeing... that get more intense at this point for your customers? And how is that impacting the sales cycle for you guys?
spk09: It's hard to say exactly how that contributes, but as we've talked about a lot in the past, and from day one, what we've done is we've set out to create our products and system solutions that can be installed by anyone. And that really is a direct response to the disproportionately high cost of EVOS, because some of the EVOS, the cost of solid EVOS components can be, you know, at or even greater than the cost of product itself. So, you know, obviously when you're looking at the prevailing wage provision, you know, that's an inflationary condition, you know, and that just further reinforces our value proposition of our, you know, combined as you go or BLA product. So when you have environments like this where labor is more expensive, you know, our solutions will generally be more attractive. So, you know, pretty excited about that. What I can say is that, you know, even customers that have utilized BLA and understand that value, I've reached back out to really dive in in that much more detail to make sure that they're really capturing everything they can. So it's definitely contributing to that, but exactly how much that is, it's hard to say, Colin.
spk10: Great.
spk02: All right. I'll take it offline. Thanks, guys. The next question comes from Kashi Harrison of Piper Sandler. Please go ahead.
spk07: Good evening, all, and thank you for taking the questions. So my first question is on BLA 2.0. I was just wondering, do you think there's upside for projects that have already been signed and awarded? In other words, do you think that some of your customers that have already said, hey, we're going to give you this business today for BLA 1.0 may come around and say, actually, you know, we want to upgrade to BLA 2.0. Um, and then, um, you know, we could see that, that backlog and awarded, uh, move up, uh, uh, faster, uh, entering 2023. Yeah.
spk09: Hey Casey, maybe, maybe thinking about this a little bit different way. Um, I don't think that we have any customers out there that are holding off on orders waiting from BLA 2.0. Um, but you know, if things, if history repeats itself, um, when you look at the different generations of VLA we have, because as we've talked about in the past, our current generation VLA is not the original VLA that we brought to market. So what I can tell you in the past is, you know, customers have proceeded forward with the most optimal solution commercially available at that point in time. And then whenever anything became, you know, more viable, they would take a look at that and find out, is this really worth them making that change? And in cases in the past, you know, there were many cases in the past where customers were like, yeah, we can definitely do this.
spk07: know if it doesn't impact you know the material side of things so there's definitely an opportunity for that um you know how that looks is really hard to say but like i said i could foresee that happening on some projects um you know if history repeats itself um thank you that's that's helpful and then maybe just as my my follow-up um i think it was this quarter last year where you where you indicated that the policy uncertainty was resulting in a significant amount of project redesign I'm just curious, based on what you're seeing right now as of this call, how is the magnitude of redesign compared to last year? Is it about the same? Has it accelerated? Has it decelerated?
spk09: As far as the number of project redesigns, I feel confident saying it's definitely decelerated. And I think there's several reasons for that, just to clarify what I mean there. For a lot of different projects, we still may carry multiple different designs. And that's something that what you found before would happen very early on in the project. And then as that project progresses, they would weed down into very finite selections. So those selections are not happening near as quick, but being carried much further through the design cycle, which I think allows customers more versatility without going through what I would call AKA redesign, you know, fire drill redesign. So, you know, I think it's really being smarter about, you know, where we've come from, but definitely hands down the number of redesigns, you know, have decreased from, you know, a year ago today.
spk02: That's helpful. Thank you.
spk12: The next question comes from Joseph Osha of Guggenheim Partners. Please go ahead.
spk13: Hi there. Yeah, just returning to this issue of backlog. Again, I heard you say nine to 12 months. I'm wondering, do you get the sense or can you tell yet whether projects are being maybe pulled into 2023 or is most of this Big increase in backlog, just people pulling the trigger on projects that had already been planned, but they weren't sure if they could get panels for.
spk09: Joe, it's hard to say what all the different levers are that are being pulled. I think obviously a couple of different things that I've talked about earlier. You have the two-year moratorium, obviously IRA, which has brought a lot more certainty to the industry itself. I don't know that I can say that there have been projects that have been pulled in from 24 to 23, but what I can say in general is that customers are trying to get projects back on track and completed as quick as they possibly can. So I wouldn't necessarily brush that on any particular time. It's just a general conversation is let's get these near-term projects completed and let's try to see if there were any projects that were derailed at some point in the past, how we can get them back on track.
spk13: Yeah, that makes sense. And then just a more general question, are you prepared to talk about, you know, from a capacity standpoint, you know, how much you could theoretically dip on, you know, a run rate basis now and, you know, looking into next year?
spk09: Yeah, we're not releasing anything out specifically on the capacity side of things, Joe, but, you know, how we operate, you know, we utilize, you know, very similar information, you know, as far as backlog and awarded orders. Then obviously you couple that with the pipeline that feeds into that, right, your funnel, you know, as well as, you know, some industry benchmarks. And we try to make sure that we understand exactly what our customers are asking of us. And we do our best to stay ahead of things from a capacity perspective. What I can tell you is I feel very comfortable right now from a capacity standpoint. And if something were to change and, you know, and customers were to reach out or were to have a swing in industry and, and actually increase demand even further, you know, then we would pivot accordingly, right, to be able to support our customers. But, you know, amongst many other things, you know, making sure that you're dependable, you know, is extremely, extremely important to Shoals, and we want to make sure that we're a very strong partner to our customers.
spk13: Okay, that's fine. I have a couple of follows, but we'll take them offline. Thanks.
spk02: The next question comes from Martin Malloy of Johnson Rice.
spk12: Please go ahead.
spk08: Good afternoon. I want to ask you about slide 27 in the new product introductions, the BLA 2.0, the high-capacity products. Can you maybe remind us of what the impact is on your addressable market relative to your existing addressable market with these new product introductions?
spk09: Yeah, so overall, not specifically the BLA 2.0. you know, our goal over time is, you know, for us to get to, you know, roughly three to three and a half cents per watt, right? So right now on average, you look at kind of where we were, we benchmarked that, that was coming off, you know, about two cents per watt. So add another penny to a penny and a half of additional opportunity, you know, through new products. You know, BLA 2.0 is definitely one of those contributors as well as the high capacity harness itself. And there's even many more outside of the four that we've mentioned on that page, AC products and the like, some of which we'll talk about in 2023 as we roll forward. But when I look at BLA 2.0 and I look at the high-impact harness, what I would say is out of the four that are on that page, those bottom two do carry a more meaningful position going towards that additional penny to a penny and a half. But we've not released out any exact specifics as to, you know, what bill a 2.0 carries or hot capacity harness.
spk02: Great. Thank you. I'll turn it back. Thank you.
spk12: This concludes the question and answer session and today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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