Shoals Technologies (SHLS) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In the fourth quarter, net income was $118.3 million compared to a net loss of$ 2.2 million in the prior year, significantly benefiting from a $110.9 million noncash gain related to the termination of a tax receivable agreement [68] - Fourth quarter revenue grew 97% year-over-year to$ 94.7 million, driven by increased demand for solar and EV solutions [74][136] - Adjusted EBITDA increased 167% to $30.1 million, with an adjusted EBITDA margin of 31.8%, reflecting higher gross margins [148] Business Line Data and Key Metrics Changes - System Solutions revenue grew 150% year-over-year, representing 86% of total revenue, up from 68% in the prior year [136] - The new wire management product line contributed to growth, with an attach rate to BLA continuing to increase [60] - Battery storage products also contributed to growth, with shipments beginning for a 1 gigawatt DC storage project [61] Market Data and Key Metrics Changes - Quoting volumes for international markets, particularly in Latin America, Australia, and EMEA, are increasing, indicating strong demand [63] - The solar market conditions are favorable, with early benefits from the Inflation Reduction Act driving demand for solar and storage offerings [64] - The EV market is seeing increased quote volumes related to fast charging solutions, driven by infrastructure bill funds [64] Company Strategy and Development Direction - The company aims to reach the next$ 500 million in revenue by fulfilling orders where customers are located, with a focus on international expansion [6] - Investments are being made in sales infrastructure and customer care to support growth and improve customer satisfaction [66][67] - The company is targeting a gross margin in the 40% range for 2023, with expectations for modest margin expansion [70][87] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving strong growth in 2023, with a revenue target range of $470 million to$ 510 million, representing a year-over-year increase of 44% to 56% [87] - The company has not seen significant delays in projects or installations due to supply chain issues, maintaining a strong outlook for revenue realization from backlog [93][125] - Management is optimistic about the adoption of new products and the overall market demand, particularly in the EV sector [118] Other Important Information - The company is in the process of transitioning its CEO, with Jeff Tolnar appointed as Interim CEO [75][76] - The company plans to continue investing in SG&A to support scalable long-term growth, anticipating a sequential increase in expenses throughout 2023 [88] Q&A Session Summary Question: Is there any additional upside in the potential revenue guidance should UFLPA resolve faster than expected? - Management is comfortable with the current guidance range and has not seen significant delays affecting revenue [93] Question: Can you talk about the ramp-up in your manufacturing facility and long-term margin expectations? - Management indicated that they expect a 40% gross margin to be achievable and are looking to expand production capacity [109] Question: What percentage of your backlog might be impacted by UFLPA? - Management stated that they do not expect significant impacts from UFLPA and anticipate realizing the backlog within the expected timeframe [98][125] Question: Can you provide an update on the EV charging business and its contribution to 2023 revenues? - The EV charging business is seeing strong adoption, particularly in fleet and school bus electrification, with increased quoting volumes [164]