Shoals Technologies Group, Inc.

Hello, and welcome to the Scholz Technologies Group Inc. Third Quarter 2024 Earnings Call. My name is Alex, and I'll be coordinating the call today. If you'd like to ask a question once the presentation has finished, please press star, followed by one on your telephone keypad. If you'd like to remove your question, you may press star, followed by two. I'll now hand it over to our host, Matt Trachtenberg, to begin. Please go ahead.

Thank you, Alex, and thank you everyone for joining us today. Hosting the call with me is our CEO, Brandon Moss, and our 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, which should not be considered guarantees of performance or results. Actual results could differ materially from our forward-looking statement. Risk factors include, among other things, those described in our filings with the Securities and Exchange Commission including economic market and industry conditions, project delays, the effects of competitive dynamics, volume discounts and other customer mix in our key markets, 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. 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 GAAP financial measures. Please note that the slides you see here are available for download from the investor relations section of our website at investors.scholes.com. With that, let me turn the call over to Brandon.

Thank you, Matt, and good morning, everyone. I'll begin by sharing some thoughts on the current events that we're all navigating and provide some color on markets we operate in. I'll then spend some time discussing the progress we're making with customers, new products, and growth opportunities. Dominic will then review our financial results for the quarter and provide our outlook on the remainder of 2024. Like many of you, I'm pleased that the election uncertainty is behind us. While we've seen recent volatility in solar equities, we believe the outlook for US utility-scale solar remains bright. While some have expressed concern the new administration will enact policies that harm the domestic solar industry, It is important to remember that there are almost a half a million jobs tied to solar and storage. Those jobs are in both red and blue states and have support from both parties. In fact, almost three times more clean energy investment occurred in Republican congressional districts than in Democratic districts since the IRA was enacted. Of the top 10 congressional districts that have attracted the most clean energy investments, nine are led by Republican lawmakers. The IRA has not only advanced clean energy, but has had meaningful impact on the local and national economy, regardless of political affiliation. While we may see some elements of the clean energy tax credits look different in the coming four years, we believe solar will fare well. Recall that Shoals does not receive any 45X credits and employs over a thousand people across the U.S. As a member of the Solar Energy Industries Association, We're proud of the bipartisan work we've done to advance the solar industry in America. In our opinion, the clean energy transition is more important now than ever before and is crucial to meeting the increasing need for more power, both in the U.S. and globally. While nuclear power will play a role in future energy needs, the extended timelines and costs associated with nuclear projects reinforce our belief in solar's position as the most efficient near-term solution for addressing immediate power needs. The recent FERC ruling rejecting the Amazon and talent agreement is telling. We continue to believe that solar is positioned to deliver the power we need today, and we will help our customers deploy it as quickly and efficiently as possible. There will always be macro headwinds of some form to navigate, this much we know. But we remain focused on creating value for our customers and shareholders over the long term. And from where I'm standing, there's a lot to celebrate. In the near term, as we've shared with you all year, the timing of when projects are awarded to the EPC by developers and in turn to us by the EPC has been lengthening. Delays are a curve reality for us and others and are seen across project size, geography, and choice of panel or trackers. In addition, they are independent of the depth and scope of our relationship with the EPC. We remain close to our customers, and that color is in turn offered here to you. In some cases, the developer is renegotiating the PPA, given the ever-shifting financial assumptions, and others, permitting is taken longer than planned. In some, the project's place in the interconnection queue remains too distant to continue construction or financing without adjustment, and yet in others, rapidly increasing labor costs have required another review of the project's economics. These projects are not canceled, and neither are agreements with customers related to these projects. The industry is at a unique point. On one hand, our power needs are off the charts, fueled by AI, onshoring, and volatile weather. On the other hand, solar is among the lowest LCOE and quickest time to deploy, but is currently challenged by regulatory and supply chain issues. There are more than 2,600 gigawatts of generation and storage capacity actively seeking grid interconnection. It's increased eightfold in the last decade and is now more than twice the total installed capacity of the existing U.S. power plant fleet. Solar, battery storage, and wind accounted for 95% of the active capacity in the queue at the end of 2023. Simply put, it's been a clear bottleneck, but I'm confident these issues will ease in time. Based on EIA data, as of July of this year, only 40% of utility-scale solar projects are on schedule. 60% are delayed. That is 10 percentage points higher than the same time last year and double the percentage of 2022. We do not believe these delays will continue in the long term, and so we remain flexible and stay close to our customers. This quarter was very busy for us. Revenue came in within our guided range at $102.2 million, driven by our team's solid execution. In August, Scholz received a favorable initial determination from the ITC regarding our patent infringement case against Voltage. We view this victory as an extremely important step in protecting our intellectual property. The target date for completion of the ITC investigation is scheduled for late December and final resolution following a potential presidential review in February 2025. As previously stated, We plan on pursuing damages in our pending district court case. We are also committed to ensuring a new, expanded BLA patent portfolio receives the same level of protection. In September, we held our first Investor Day, which is available for replay on our website. We presented a comprehensive strategy and product roadmap, our key growth opportunities, introduced lots of new faces on our leadership team, and shared our three-year financial objectives. We continue to believe our strategy is sound and we will win in the marketplace and operational improvements will drive increased shareholder value. We also came away from customer conversations at REplus in September increasingly optimistic. Most agree that the industry is poised for growth again and that if some of the transitory issues can be alleviated, current industry forecasts could prove conservative. Our compelling value proposition, new innovative products, and investment in our commercial organization are beginning to deliver results as evidenced by our updated revenue guidance, which is near the high end of our prior outlook. We are improving relationships with existing customers, establishing relationships with new customers, and increasing the agility and flexibility in how we deliver our products. The proof points appear not only in the 70% of the market we've traditionally addressed, but in the incremental 30 that we are now pursuing. We've built a strong and experienced team that is purely focused on taking exceptional care of our customers. It's exciting to watch and even more encouraging to hear the feedback. We've quoted almost $2 billion worth of projects this year alone. Following the initial ITC rolling, we signed up four new EPC customers. In 2023, a record revenue year, there were four top 10 EPCs in the US that combined contributed less than $1 million of revenue to Schultz. Those same four customers have driven more than $25 million of revenue this year so far and have a combined four gigawatts in backlog and awarded orders. We've shipped our first project to the new very large EPC we signed an MSA with earlier this year. They have potential to be one of our largest customers going forward. We are very pleased with the quality and diversity of our order book. Wallet share amongst our largest customers remain steady, as evidenced by the 12 gigawatt MSA we signed this summer. It's worth noting that no portion of that 12 gigawatt MSA is in our backlog. The investments we've made in our commercial plan are yielding results, and I'm very proud of the progress that we've made. Some of the success we are seeing on the commercial front is driven by a renewed commitment to product innovation. 2KV is a great example. This is an advanced electrical system designed to increase the voltage in solar projects to 2000 volts, improving the efficiency, sustainability, and cost effectiveness of solar installations. Scholz is uniquely positioned to drive this change. Previous transitions to higher voltage have been a game changer, especially for utility scale solar, because they've dramatically reduced the cost per watt of energy production, and we expect the transition to 2kV to have a similar impact. We have an exciting pilot plan with industry leaders like GE Brnova, and we're looking forward to showing customers how 2kV can change their business. One of the growth initiatives we presented at our investor day in September was CCNI. This market is approximately 10% of the size of utility-scale solar in the U.S., but growing at an attractive pace. Additionally, we believe it leverages our current strengths and application expertise and utilizes many of our current products and manufacturing capabilities. Our value proposition is compelling to these customers as well, so we believe it's a natural fit. Our focus on the CC&I market and the investments made to address this opportunity in 2024 have been significant. We've built an experienced commercial and product development team to focus specifically on this market. In 2024 so far, we've quoted 64 projects and have already begun shipping product. We've also signed an agreement with one of the largest distributors in the space. In summary, we're stepping on the gas. And while we're proud of how far we've come so quickly, I'm even more excited about what 2025 will bring. Battery Energy Storage Solutions is another exciting opportunity, and one we're investing in heavily. We've hired an experienced industry veteran to lead the business unit, increased our marketing efforts, and heard very positive feedback from customers on the new standardized configurations we introduced at RE+. We understand where we fit in the market, and we believe that we have the right products today. recombiners, and disconnects. The market is expected to experience significant growth in the coming years to more than double in size by 2027. We believe our strategy is sound and our core value proposition is compelling. I look forward to sharing more project wins as this business builds momentum through 2025. In summary, there are always going to be market disruptions or macro issues to navigate, and today is no different. We recognize there are numerous and often conflicting views on the state of the sector within our economy. However, markets have historically overestimated the impact of macro disruptions on the downside and under appreciate the abilities of good companies to navigate those challenges. Shoals is a high quality company with a marquee customer list and leading market share and attractive markets with an experienced team. I'm very confident in where we are and the direction we're headed. With that, I'll now turn it over to Dominic, who will discuss our third quarter financial results and our outlook for the remainder of the year. Dominic?