Shoals Technologies Q3/2021 Financial Results

Fluid Delivery Schedules & Project Delays Hampering Shoals’ Business
Despite on-the-ground issues it faced during Q3/2021, Shoals is optimistic about the future as its annual backlog and awarded orders grew 101% to around $271 million at the end of September 2021. (Source: Shoals Technologies Group, Inc.)
Despite on-the-ground issues it faced during Q3/2021, Shoals is optimistic about the future as its annual backlog and awarded orders grew 101% to around $271 million at the end of September 2021. (Source: Shoals Technologies Group, Inc.)
  • Shoals' Q3/2021 revenues did not increase as expected due to its end customers changing product delivery schedules and specifications owing to supply chain challenges
  • Management sees the situation as temporary and also boasts of all-time record high of backlog and awarded orders
  • It has provided forecast for next 2 quarters in the light of present supply chain disruptions faced by its customers and estimated project delivery timeline impact

US based electrical balance of system (BOS) system solutions provider Shoals Technologies Group, Inc. improved Q3/2021 revenues of $59.8 million by 14% YoY due to higher component and system solution sales. But this was still less than expected as some of its customers, facing supply chain challenges, changed product specifications or delayed their shipments.

Shoals CEO Jason Whitaker explained that even though its business model has insulated it from most of the margin pressure due to high commodity prices in the market as well as the shipping and logistics shortages so far, its customers continue to battle these out. The 'fluid delivery schedules' impact the product specifications and timing of delivery on site.

"Recently some of our customers' projects have been delayed to accommodate design updates as a result of panel changes or because other materials or components needed are not available," shared Whitaker. "In both cases, the impact to us is to delay when we can produce and ship product which will have the effect of shifting revenues that we expected to recognize in the 4th quarter of this year into the beginning of next year."

Commenting on this situation for Shoals, Jeffrey Osborne of Cowen commented, "This seemingly simple shift requires Shoals to change the type of connector type its uses which further delays the projects. Fortunately, Shoals' customers are responsible for the expenses related to the order changes and any increased pricing resulting from modifications."

Optimistic for the future

However, the company sees these conditions as temporary and reports it has not got any order cancellations so far. Its confidence also stems from the 'all-time record' backlog and awarded orders of $270.7 million till September 30, 2021. It is an increase of 101% YoY and 35% QoQ in Q3/2021. According to the company, this reflects continued robust demand for its products from customers in the US. The acquisition of ConnectPV did not contribute materially to the year-over-year increase in backlog, it added.


In Q3/2021, 65% of revenues came from System Solutions, compared to 70% contribution it made last year due to higher components sales. Gross profit went up 5% annually to $21.8 million while net income declined to $5.3 million compared to $15 million in the previous year. Adjusted EBITDA was $16.9 million, down from $19.9 million in Q3/2020.

Philip Shen of Roth Capital Partners is cautious when he says that even though Shoals is growing faster than the market with a $270 million backlog, there is a growing risk of project delays as long as the US Withhold Release Order (WRO) challenge remains in sight. After JinkoSolar, LONGi Solar's 40 MW shipment was recently stopped from entering the US by the customs. The WRO matter may be resolved within next 6 weeks by Biden administration, according to Shen, but till then the 'challenging development and construction situation for utility scale projects will likely continue to deteriorate'.


Considering the impacts of changes some of its customers have made to their orders as well as continued supply chain disruption, Shoals' management has provided guidance for the next 2 quarters.

For Q4/2021, it expects revenues to fall within $40 million to $50 million range, with adjusted EBITDA of $11 million to $15 million, and adjusted net income of $3 million to $7 million.

For Q1/2022, revenues are guided within $71 million to $76 million and adjusted EBITDA between $22 million to $24 million. Adjusted net income is anticipated to be between $14 million to $17 million for the quarter.

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