Shoals Technologies Group, Inc.

Good morning and welcome to the Scholz Technologies Group's second quarter 2025 earnings conference call. Today's call is being recorded. We have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Matt Trachtenberg, Vice President of Finance and Investor Relations for Scholz Technologies Group. Thank you. You may now begin.

Thank you, Charlie. And thank you, everyone, for joining us today. Hosting the call with me is our CEO, Brandon Moss, and our CFO, Dominic Bartos. 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 and should not be considered guarantees of performance or results. Actual results could differ materially. Those risks and uncertainties are listed for interested investors in our most recent SEC filings. 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 the nearest 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 most recent quarter. We'll discuss the current demand environment for U.S. utility-scale solar, and I'll review progress on our strategic growth initiatives. Dominic will dive deeper into the second quarter results and provide our outlook on third quarter and full year 2025. We'll then close it out with questions from our analysts. Congratulations to the Scholz team for delivering revenue of $110.8 million. which was above the high end of our expected range provided last quarter and represents an 11.7% increase over the prior year period and a 37.9% sequential increase. Bookings were also very strong in the period as the momentum we've seen all year continued, driving approximately $137.1 million in new orders. This resulted in a company record backlog in awarded orders, or BLAO, $671.3 million in a book to bill of 1.2, supporting the growth we see for the remainder of the year and into 2026. As of June 30th, 2025, approximately $540.3 million of that BLAO has shipment dates in the upcoming four quarters running through Q2 of 2026. As a reminder, given recent uncertainty and volatility, we continue to allow for potential project timeline changes from our customers this year and next. With that said, 2025 is shaping up to be a very strong year. Our value proposition and expanded product offering, combined with improving industry fundamentals and underlying demand growth, are driving strong sales. While we all read the headlines regarding rapidly shifting clean energy policy, our customers continue to move projects forward and look for ways to further increase their project capacity. Scholl's value proposition, reducing the need for skilled labor, speeding deployment, and improving quality, all from a trusted domestic manufacturing partner, is resonating with both legacy and new customers. For these reasons, in combination with solid underlying industry fundamentals, we have increased the range of anticipated revenue for the full year 2025, representing between 13 and 18% growth year over year. Adjusted gross profit percentage remained in the expected range for the quarter, landing at 37.2, driven largely by strategic pricing initiatives and product mix. Gross profit dollars were 41.2 million, the highest results since 2023. As we've discussed, we occasionally identify projects as having strategic relevance, whether that be the EPC, developer, geography, or to displace a competitor. This strategy has enabled us to engage with new customers and win projects that have led to increased sales. We continue to believe that the benefits of our high-quality solutions, industry-leading engineering support, and exceptional customer service or winning customers over. While we are still in the early days, it appears the strategy is working. Additionally, when we settle into our new facility, we will begin to see the impact of productivity initiatives that we've communicated to you, automation, lean manufacturing principles, and a centralized and collaborative workforce. We're eager to step on the gas and show you the benefit of those investments. We also delivered a second quarter adjusted EBITDA at the high end of our expected range at $24.5 million, or 22.1% of revenue. And finally, I'm very pleased to announce that the remediation work to replace defective Prismian wire on known customer sites is nearing completion. There will be some remaining work needed in the coming quarters due to some weather and logistical constraints we encountered this quarter, but we'll continue to service customers as we've committed. The feedback has been overwhelmingly positive, ensuring our reputation for quality and service remains intact, and in some cases improved. The relationships we've established with EPCs and developers are the most valuable asset we have in delivering on our promise to make things right, no matter where the fault lies, is critical. Congratulations to the warranty remediation and customer support teams, and thank you to our customers for their continued trust and patience. While the current political landscape has driven debate around tariffs, tax subsidies, and fiat restrictions, the long-term underlying drivers of our markets remain positive and compelling. Many of you have performed your own analysis regarding LCOE across various sources of energy, and whether we include or exclude IRA tax provisions, solar remains the clear winner. When coupled with the speed of deployment, this positions us well to be able to meet the widely anticipated low growth in coming years. Tariffs are top of mind for many of you as well, and we've been working hard to remain agile with our supply chain. While the majority of our components have domestic options for customers, there will be specific items that must be sourced from non-US vendors. In those cases, we will determine when and how to price those projects appropriately. The policy debates in DC regarding energy sources do not materially change the competitive position of solar. Many projects through 2027 have components secured or can meet the requirements to commence construction in the coming year. In some cases, there may be PPA renegotiations needed, but the developers we've spoken with have confidence they can effectively navigate these changes and remain committed to the project pipelines the coming years some of you have asked if it has changed the velocity of our pipeline or how it may impact future periods but it's too early to make that prediction today especially as it pertains to evos developers continue to wait for guidance from treasury on some of the elements required to qualify for tax incentives clarity will be sought as we make our way through august and we'll continue to work hard to help our epcs and developers adapt as needed In summary, this is a dynamic and rapidly shifting environment, but we are operating from a position of strength. Our portfolio has never been more complete solving real business problems with innovative new product solutions. The commercial team is executing our strategy and driving share gains. Our new facility will enable visible and meaningful operational improvements. Our growth opportunities are beginning to contribute meaningfully, and our position as a domestic manufacturer gives us a competitive advantage. The second quarter was another solid period of growth within our core utility scale solar market. Industry research estimates first half 2025 construction was up 20% year over year and encouraging first half of 2025. Site prep and tracker installation activity appears to be gaining momentum, which supports the strong back half of the year we expected shoals. I want to note that we have not experienced the elevated number of project delays that we saw in 2024. That's encouraging to see. Project calendars remain tight with little excess capacity to move things around. Labor availability is a focus for the industry and will remain so. While distracting and disruptive, we believe the recent changes to IRA provisions are unlikely to negatively impact most project timelines in the next several years. By our estimate, most projects have secured components through 2027, and as a result, the next two to three years appear relatively secure. I want to remind you what is driving demand today. It's AI and data centers. It's onshoring of industry. It's basic household consumption of an aging infrastructure. Those are not going to be solved in the coming three years and may, in fact, become more critical. The lead time for gas turbines is surpassing three years, Timelines to bring nuclear online appears to be stretching into the next decade. Solar remains the best option, so the market will ensure that the economics work. The demand is there, and we'll help our customers meet that demand. Shoal's additional growth opportunities as laid out in our strategic plan, including international, CCNI, OEM, and BESS, are all meeting or exceeding our expectations. The opportunity set across international markets continues to expand. Our pipeline exceeds 20 gigawatts and includes projects in Latin America, EMEA, and Asia Pacific. Our relationships with large global developers tied to the U.S. Export-Import Bank are opening doors. We expect to deliver on multiple international projects this year with an acceleration in 2026. Our community, commercial and industrial, or CC&I business continues to gain momentum. To give you some context, we expect an excess of $10 million in revenue this year. June also saw the highest month of bookings since we began tracking this segment. We've added new distribution partners who are helping us reach further into the market. Remember, these projects are smaller in size with shorter lead times, so speed of order processing is key here. We continue to invest to build the capabilities customers require of us. Our OEM business is tracking ahead of expectations as our single customer continues to see strong demand of their panels. Our value proposition of providing a high-quality domestic junction box to additional customers is resonating. We have meaningful opportunities for 2026 and beyond, given the consistent onshoring of module production in the U.S. Battery energy storage solutions has been a key area of investment and innovation at Shoals. Attached storage is becoming an integral component of grid reliability in a renewable powered world, addressing the inherent fluctuations of solar power, supporting peak demand, and enabling energy arbitrage. These complex systems store energy using rechargeable batteries offered by other providers, some of whom are domestic and whom we are working closely with today. Also remember that BESS is universally applicable to any energy source, solar, wind, gas, hydro, Without BESS, it will be very difficult to meet the energy demands we see ahead. As discussed on the last earnings call, we have three market opportunities for our DC recombiner products for BESS. One in particular is to serve data centers. A significant portion of our pipeline for these products serve that growth from data centers and AI. The opportunity driven by this demand is quickly becoming a key area of focus. Data center power demand in the U.S. surged from 46 gigawatts in 2024 and is poised to more than double by 2030. That will require massive investment in both computing power and the energy needed to run those servers. Our offering in this market spans combiners and recombiners today and a more comprehensive offering in the future. Our goal is to offer a more complete architecture of wiring solutions, combiners, and other critical components on our roadmap. Our quoting activity is up 100 times year over year with positive early feedback from our key stakeholders about the direction we're headed. We'll work to keep you updated on key commercial wins as we make our way through the year. In summary, we are executing our strategic framework of market penetration and diversification as anticipated. Customers are looking for a U.S. source of high-quality, innovative solutions that allow them to manage labor costs, speed time of deployment, and ensure their assets perform over a lifetime that spans not years, but decades. The balance between low material cost today versus total cost of ownership over the useful life of a project is why EPCs and developers are more engaged with Shoals than ever. With that, I'll now turn it over to Dominic, who will discuss our second quarter financial results in more detail in our outlook for 2025.