Shoals Reports Net Loss For Q3 2024 As Project Delays Impact Results

Leading supplier of electrical balance of system (EBOS) from the US Shoals Technologies Group says it continues to be impacted by project delays while reporting a year-on-year (YoY) revenue drop of 24% to $102.2 million in Q3 2024.  

Near-term problems continue to beset the group even though it says there has been strong interest from new customers.   

“Uncertainty and volatility driven by persistently high interest rates, a long interconnection queue, labor availability, and supply chain disruptions, have elongated our sales cycle all year,” explained Shoals CEO Brandon Moss. “And while the timing of project awards and construction is difficult to predict, we’re increasingly confident in our competitive position in the marketplace, especially as labor costs rise and quality is front and center.”  

Nonetheless, Robert Freeman of Roth MKM sees new headwinds brewing ahead for Shoals even though he believes the management is doing well with what it can control. Freeman noted, “We see potential for the likely Red Sweep to result in a modest pull forward of demand in the coming quarters, i.e. Q4 and Q1'25, limited by labor, while Q2'25 and beyond may have risk for project push-outs with construction starts being delayed on potential for uncertain project economics on the risk that the IRA incentives could change.” 

Q3 2024  

During the reporting quarter, Shoals reported an increase in its gross profit of $25.4 million thanks to the $13.3 million of wire insulation shrinkback expense, which was $50.2 million in the prior-year period. Since it was less, the increase in gross profit percentage YoY was partially offset by higher labor costs and reduced leverage on fixed costs.  

Shoals also registered a net loss of $0.3 million, compared to a loss of $9.8 million in Q3 2023. Adjusted EBITDA too declined to $24.5 million, compared to $48 million in the prior-year period (see Higher Sales Volumes Drive Shoals’ Q3/2023 Business).  

Its order book of backlog and awarded orders reduced by 5.8% YoY and 7.1% QoQ to $596.6 million, which the management attributed to the timing of orders received. International markets comprised more than 13% of the total orders.  

One significant development the company reported was having secured a favorable initial ruling in its patent infringement case against Voltage. Following this, it signed up 4 new EPC customers. It has also quoted almost $2 billion worth of projects this year. 

Guidance 

For Q4 2024, Shoals has provided a conservative guidance of $97 million to $107 million out of the $390 million to $400 million it expects in FY 2024 revenues.   

Adjusted EBITDA is expected to be within $96 million to $101 million for the entire year, out of which it projects $23 million to $28 million in Q4 this year.  

Moss added, “Customers remain cautious yet constructive as we head into the end of 2024 and look into 2025. Quoting volume across our customer base is at record levels, increasing almost 50% from the prior year period, and we are encouraged by strong interest from new customers.”