Shoals Technologies Group blames lower sales volumes owing to fewer production days and project delays for the 14% Year-over-Year (YoY) drop in its Q1/2024 revenues, a phenomenon that it expects to continue impacting its business in the short term.
Referring to data from the Energy Information Administration (EIA), as of February 2024, there are several GWs of projects experiencing delays due to macro and industry-specific issues.
"Despite additional project delays in the period, the team's continued strong execution allowed Shoals to meet our first quarter outlook. While some industry and supply chain disruptions persist, including extended equipment lead times and long interconnection queues, we remain confident in the long-term fundamental drivers of the industry and our ability to execute our strategic plan," said Shoals CEO Brandon Moss.
Its $90.8 million Q1 revenues were accompanied by a more than 24% YoY decline in gross profit that settled at $36.46 million.
Adjusted EBITDA of $20.5 million decreased by $17.6 million, while net income went down from $26.1 million in Q1/2023 to $4.8 million in the reporting quarter.
The management reported the company's backlog and awarded orders to have increased by 17% YoY, but declined 3% sequentially to $615.2 million, thanks to the increase in demand from international markets. The global markets represent over 12% of the backlog and awarded orders.
Moving forward, Shoals says it sees continued growth for the company's electrical balance of system (EBOS) solutions with the increase in data centers, reshoring of manufacturing, electric vehicles (EV) and increased weather volatility leading to more heating and cooling. It expects load growth over the next 5 years.
Moss added, "In the short term, our results will continue to be impacted by project timing, but the medium- and long-term outlook for domestic utility scale solar remains bright, as reflected in robust quoting activity and pipeline levels."
The management guides to achieve between $85 million and $95 million in Q2/2024 revenues along with adjusted EBITDA of $20 million to $25 million.
Annual revenues for 2024 are forecast between $440 million and $490 million with an adjusted net income range of $85 million to $100 million. It says this guidance factors in the near-term uncertainty in the utility-scale solar market that has led to shifting order patterns.
Earlier this year, Shoals was sued by some of its investors through law firm Bernstein Liebhard as they accused the company of downplaying its wire shrinkback issue that the company revealed in Q3/2023 (see Investors Launch Lawsuit Against US Solar EBOS Manufacturer).
However Philip Shen of Roth MKM, in a company note before Shoals released its Q1/2024 financial results, observed that customers continue to prefer doing business with the company despite the shrinkback warranty challenges.