Shoals Technologies Group, Inc.

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 Megan Peets, Chief Legal Officer for Schultz Technologies Group. Please go ahead.

Thank you, Operator, and thank you, everyone, for joining us today. Hosting the call with me are CEO Brandon Moss 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 2023, 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, including economic, market, and industry conditions, defects or performance problems in our products or their parts, including those related to the wire insulation shrinkback matter, failure to accurately estimate the potential losses related to such matter, and failure to recover those losses from the manufacturer, decreased demand for our products, policy and regulatory changes, 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, 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 made as of the date of this discussion, and we 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 SHOLD's CEO, Brandon Moss.

Thank you very much, Megan, and good afternoon, everyone. I'll start today's call with some key highlights from the third quarter. I'll follow with an overview of business conditions, our investment and production capacity, and an update regarding the wire insulation shrink-back warranty investigation and remediation. I'll wrap up with some of my initial takeaways one quarter into the job before I turn it over to Dominic, who will provide more detail on our financial results. Scholz had another great quarter delivering record revenue, adjusted EBITDA, and adjusted net income. I'd like to thank the management team and associates for their strong execution in delivering these record results. Compared to prior year, third quarter revenue grew 48% to $134.2 million. Revenue was slightly impacted by lower production yields early in the quarter as we ramped up our third Tennessee facility, which has already added 15 gigawatts of new capacity to our 2022 base of 20 gigawatts, bringing total capacity to approximately 35 gigawatts. I also want to thank our commercial team for delivering yet another record for backlog and awarded orders. Backlog and awarded orders were up 34% year-over-year and 16% sequentially to $633.3 million. We added over $220 million in orders during the quarter. We are also pleased to see emerging strength in our international business, which now represents more than 10% of our backlog and awarded orders. Moving now to the solar market landscape. The domestic utility scale solar market is currently experiencing slower growth as a result of higher interest rates, lingering uncertainty about the IRA, supply chain constraints, and interconnection complications. Though we expect Shoal's growth rate to decline from the extremely high levels of the last few years, we believe that our domestic utility scale business will continue growing at an attractive rate. We still see potential to partner with large EPCs converting them to the Shoals solution, and growing our penetration of current customers. Shoals has historically targeted large utility-scale projects that are approximately 75 megawatts and up, but we see an attractive opportunity to apply our industry-leading value proposition to smaller projects. Additionally, we're in the early stages of penetrating adjacent product markets to grow wallet share in the solar space. Turning now to international. We are targeting specific higher growth markets within Europe, Africa, Latin America, and Australia. These markets combined are more than double the U.S. market, and according to industry data, are growing at a 9% CAGR through 2026. In recent quarters, we announced major project wins in Australia, Latin America, and we expect growth to continue as international EPCs understand the value proposition of our entire product suite. As I mentioned earlier, more than 10% of our backlog and awarded orders is now attributable to our international business. In our EV charging business, we announced at the end of October that we will deploy our Fuel by Shoals e-mobility solution for the U.S. Department of the Air Force, supporting an EV charging as a service pilot project to be provided by Leidos, a Fortune 500 science and technology leader. This project will support the Air Force's climate action plan to achieve 100% carbon-free electricity by 2030 and net zero emissions at Air Force facilities by 2046. Shoals is proud to partner with the Air Force as they work towards reaching their emissions targets. Although it's early days in our e-mobility business, we're excited about our innovative above-ground EV charging infrastructure solution. which minimizes construction costs and accelerates EV charging deployments. Turning now to an update on production capacity. Scholz has a strong operational team that continues to execute and support our commercial growth. The team has been focused on increasing capacity in 2023 to meet our strong demand. Since January, we've installed almost 100 new machines, hired over 200 operators, and added 225,000 square feet to our manufacturing footprint. As I mentioned at the start of the call, we completed the ramp up of our third Tennessee facility in Q3. This facility increases our capacity by 15 gigawatts or 75% year over year. This brings Shoals total capacity to 35 gigawatts with the ability to scale to 42 gigawatts. With this added capacity, we estimate Shoals can serve growing demand well into 2025 further enhance production efficiency and maintain our attractive margins. I'd like to take some time now to discuss where we stand on our investigation and remediation of the wire insulation shrink-back warranty issue. On October 31st, we filed a complaint to recover for damages caused by defective wire that Prismian Cables and Systems USA LLC sold to Shoals between 2020 and approximately 2022. Scholz has already expended millions of dollars in identification, repair, and replacement of defective wire and is seeking full recovery from Prismian for those as well as future expenses related to the issue. Because of the pending litigation, we're limited to what we can discuss publicly. Based on our continuing analysis of information available as of today, the updated estimated range for potential loss related to wire exhibiting insulation shrinkback is $59.7 million at the low end and $184.9 million at the high end. Dominic will provide more granularity on the breakdown when he reviews our financial results. Based on our own investigation and third-party testing, we determined that unacceptable amounts of insulation shrink-back were occurring on prismian wire purchased from 2020 through 2022. The range of damages we are seeking reflects potential costs of remedial measures, including wire and labor, at the approximately 300 sites that include at least one harness made with defective prismian wire sold during this period. This represents about 30% of the total amount of Scholz harnesses manufactured in the same timeframe. Scholz is committed to quality. Based on the information we have gathered to date, it is apparent that this insulation shrinkback issue is unique to the defective Prismian wire and not from any other wire suppliers. As we work to remedy the Prismian defective wire issue, our top priority is taking care of our customers, which we are doing by leveraging our strongest assets, our people and our technology. Identifying the effective wire is time consuming because of the size of solar fields, which can be as large as four square miles. We're focused on working as efficiently as possible. We want to emphasize that our underlying business remains very strong and we expect it to continue to flourish through the resolution of this issue. Now I'll take a moment to provide a brief update on the patent infringement complaints filed by Shoals with the ITC in May of this year. The evidentiary hearing is scheduled for March of 2024. And as we've emphasized in prior quarters, we'll continue to vigorously defend and protect our intellectual property. I'll now wrap by highlighting some of my initial takeaways and why I'm so excited about Shoals. In the first quarter of my tenure as CEO, I focused on refining our company strategy, continuing to build our organizational capacity, and implementing a more robust operating model to sustain our strong execution. Shoal solutions continue to have an industry-leading value proposition, particularly in the current environment where there's a shortage of licensed electricians. A recent third-party study stated that utility-scale solar installation workforce decreased by 18% from 2021 to 2022. Conventional EVOS systems are expensive and time-consuming to install, and most of the work must be done by licensed electricians who continue to be in short supply. Our system reduces both material and labor costs. Additionally, our products are constructed in a quality-controlled manufacturing environment and are built to last, providing value to owners and power providers versus traditional methods that have a high failure rate, such as field assembly and the use of devices like insulation piercing connectors. We believe we have ample room to grow in our core domestic solar market with large EPC partners and with a new focus on smaller projects. I'm also confident in our ability to accelerate growth in adjacent product markets and internationally. Scholz is an innovation leader with strong product development capability. We've been successful in growing share due to our ability to innovate better solutions. And with our domestic manufacturing footprint in the U.S., we are well positioned to capitalize on the U.S. federal legislation that provides tax and other incentives for onshore manufacturing. Shoals will focus on markets that support global electrification that are impacted by skilled labor needs and supply chain constraints. Our core competency of engineering quality prefabricated plug-and-play solutions at scale aligns well with market needs. By delivering these prefabricated solutions, we expect to continue to generate strong margins, and we are moving up our gross margin target, which Dominic will cover in greater detail. I'll now turn it over to Dominic, who will discuss third quarter 2023 financial results.