Shoals Technologies Group, Inc. ((SHLS)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Shoals Technologies Group’s recent earnings call painted a picture of mixed sentiment, highlighting both significant achievements and notable challenges. The company reported strong revenue growth and increased guidance, with positive developments in international markets. However, challenges such as elevated legal expenses, negative free cash flow, and declining gross margins tempered the overall optimism.
Record Revenue and Strong Bookings
Shoals Technologies Group reported a record revenue of $110.8 million for Q2 2025, surpassing the high end of their expected range. This represents an 11.7% increase year-over-year and a 37.9% sequential increase. The company also achieved strong bookings, with approximately $137.1 million in new orders, contributing to a record backlog and awarded orders (BLAO) of $671.3 million.
Increased Revenue Guidance
For the full year 2025, Shoals Technologies has increased its revenue guidance to a range of $450 million to $470 million, indicating a growth of 13% to 18% year-over-year. This upward revision reflects the company’s confidence in its growth trajectory.
Completion of Remediation Work
The company is nearing the completion of remediation work to replace defective Prysmian wire on known customer sites. This effort has received positive feedback from customers, reinforcing Shoals’ reputation for quality and service.
Expansion in International Markets
Shoals’ international pipeline now exceeds 20 gigawatts, with projects in Latin America, EMEA, and Asia-Pacific. The company anticipates delivering on multiple international projects this year, with acceleration expected in 2026.
Legal Expenses Impact Profitability
General and administrative expenses totaled $23.1 million, with $2.5 million attributed to ongoing wire insulation shrinkback litigation. These elevated legal expenses are impacting the company’s profitability.
Negative Free Cash Flow
Shoals Technologies reported a negative free cash flow of $26.0 million in Q2, primarily due to remediation costs and elevated capital expenditures related to their new facility.
Gross Margin Decline
The company’s gross profit percentage declined to 37.2% from 40.3% in the prior year period. This decrease was attributed to strategic pricing actions, customer mix, and product mix.
Challenges with Warranty Liability
As of June 30, 2025, Shoals had a remaining warranty liability of $19.2 million related to shrinkback issues, which continues to impact cash flow.
Forward-Looking Guidance
Shoals Technologies Group remains optimistic about its strategic growth initiatives despite ongoing challenges. The company raised its full-year 2025 revenue guidance to between $450 million and $470 million, anticipating year-over-year growth of 13% to 18%. For the third quarter, Shoals expects revenue to range between $125 million to $135 million, with adjusted EBITDA between $30 million and $35 million. The company is also focusing on international expansion and battery energy storage solutions (BESS) as key growth opportunities.
In summary, Shoals Technologies Group’s earnings call highlighted a mix of positive growth indicators and ongoing challenges. While the company achieved record revenue and increased guidance, issues such as elevated legal expenses and declining gross margins remain concerns. Nevertheless, Shoals is optimistic about its future growth prospects, particularly in international markets and new technology solutions.