Shoals Technologies Group, Inc.

We incurred $22.8 million of G&A expense compared to $20 million during the same period in the prior year. The year-over-year increase in general and administrative expenses was primarily related to legal fees for the patent infringement and wire installation shrink-back matters and planned increases in payroll expenses due to higher headcount supporting growth, all of which was partially offset by lower stock-based compensation. Approximately $850,000 of G&A expense was specifically related to the wire insulation shrinkback litigation. Net income was $4.8 million in the first quarter compared to $17.0 million during the same period in the prior year. Adjusted EBITDA in the first quarter was $20.5 million compared to $38.1 million in the prior year period. Adjusted EBITDA margin was 22.5% compared to 36.3% a year ago, largely a result of lower gross margin. Adjusted net income was $12.6 million in the first quarter compared to $25.3 million in the prior year period. Cash flow from operations was $12.9 million, while capital expenditures were $2.5 million. Our balance sheet remains very strong, and we ended the quarter with net debt to adjusted EBITDA of one time, which is down from two times a year ago and a significant improvement from the 4.4 times as of Q1 2022. During the quarter, we amended and extended our revolving credit facility for five years and retired our term loans. The new revolving credit facility has been upsized from $150 million to $200 million and carries a lower interest rate compared to the old term loan. We appreciate the support of our new and existing bank partners. Equally important to our strong cash flow generation is how that capital is allocated. As I've shared with you on past calls, our focus will remain on driving sustainable long-term organic growth. However, other opportunities that create shareholder value may present themselves, and we are in regular discussion with our board. Those may include inorganic opportunities that expand our presence in underrepresented markets or broaden our offering to existing customers. Another might be repurchasing our own shares, given what we believe may be a disconnect between our current valuation and the long-term value we are creating. Our commitment is that we will deploy our capital to the activities that generate the highest return for shareholders. Turning to backlog, as of March 31st, 2024, we had $615.2 million in backlog and awarded orders, an increase of 17% year over year as the company added $75 million in orders during the period. As we discussed last quarter, Some of our international orders have longer lead times than domestic orders, and we are also winning domestic jobs that extend beyond our historical revenue cycle of 9 to 13 months to realize revenue from those awarded orders. As of March 31st, approximately $204.4 million of our backlog and awarded orders had delivery dates beyond 2024. Turning now to the outlook. Given the current headwinds in the utility-scale solar market, Some of our customers have experienced project delays. As a result of the current macro uncertainty, we will continue to provide quarterly guidance for the remainder of the year. Based on current business conditions, business trends, and other factors, for the quarter ending June 30, 2024, the company expects revenue to be in the range of $85 million to $95 million and adjusted EBITDA to be in the range of $20 million to $25 million. Based on current business conditions, business trends, and other factors for the full year 2024, the company now expects revenue to be in the range of $440 million to $490 million. This change is reflective of the industry delays we are experiencing and sharing with you today. Our goal is to provide you with a reasonable and achievable range given the uncertainty we believe exists. I want to stress that we believe these changes reflect the timing of our revenues, not lost projects. We expect most projects that had been delayed from 2024 to be completed in 2025. Adjusted EBITDA is now expected to be in the range of $130 million to $150 million. Adjusted net income to be in the range of $85 million to $100 million. Cash flow from operations to be in the range of $100 million to $115 million. Capital expenditures to be in the range of $15 million to $20 million. Interest expense to be in the range of $15 million to $20 million. And with that, I'll turn it back over to Brandon for closing remarks.

Thanks, Dominic. I would like to close by thanking all of our customers for their confidence in Shoals, our employees for enabling us to effectively serve our customers, and our shareholders for their continuous support. I'm excited about the long-term macro trends that will drive the solar market for years to come, and I am even more excited about Shoals' competitive position in the marketplace. We are an innovation leader with strong product development capability and an outstanding customer list. As we move past this period of volatility, we expect to continue our industry-leading growth, driven by further market share gains in the domestic utility scale market, expand our presence in the CC&I market, and extend our leading position into key international markets. Over the last nine months, I've heard a consistent message from our customers that they want to expand their relationship with Shoals. They've provided candid feedback on how we can be more flexible and responsive, And that's extremely encouraging because it's entirely within our control and influence. As a result, we've made meaningful changes to our sales structure and operations, which we believe will improve our flexibility and increase touch points with each customer. Ensuring that doing business with Shoals is as simple and efficient as possible is top of mind for all of us, and we believe you'll begin to see the benefits over time. And finally, as conditions improve, we expect Shoals will be well-positioned to produce strong profitability and cash flow driven by our Capital Light model. To that end, we will continue to make investments in talent and our operational footprint that will position us for many years to come. Thoughtful and disciplined capital allocation is a key strategic imperative going forward, and as Dominic mentioned, may include types of activities you haven't seen from us before. Remaining flexible yet opportunistic while operating within a framework that prioritizes shareholder returns will allow us to create value and reward investors. And with that, we thank you for your time today. Operator, we can now open the line for questions.

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