Shoals Technologies Sees Q3 2023 Financial Setback with $9.8 Million Net Loss

The company's revenue increased by 48% YoY to reach $134.2 million


Shoals Technologies Group, a manufacturer of electrical balance of systems (EBOS) for solar, energy storage, and eMobility reported a net loss of $9.8 million for the third quarter (Q3) of 2023, a year-over-year (YoY) decline of 176.5% from the net income of $12.8 million, primarily due to increased expenses.

The company’s revenue increased by 48% to reach $134.2 million, in contrast to the $90.8 million reported in the prior-year period. The growth was mainly driven by higher sales volumes from increased domestic demand for solar EBOS.

Despite the revenue growth, the company’s gross profit declined to $14.2 million from the prior-year period’s $36 million. The gross profit as a percentage of revenue decreased from 39.7% to 10.5%.

This reduction was primarily due to $50.2 million in wire insulation shrinkback expenses, partially offset by lower raw material costs, increased leverage on fixed costs, and operational efficiencies.

On October 31, 2023, the company initiated legal action against Prysmian Cables and Systems, the supplier of the problematic wire insulation, seeking various forms of compensation and relief. The outcome of this litigation and its potential impact on the company’s business and financial results remains uncertain.

General and administrative expenses were $22.6 million, an increase of 62.5% YoY from $13.9 million. This increase was mainly attributed to higher non-cash stock-based compensation, legal fees related to patent infringement and wire insulation complaints, and planned payroll expense increases due to a larger workforce supporting the company’s growth.

The company reported a loss of $10.6 million from operations, a reversal from the prior year when it had an income of $20 million from operations.

Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increased by 81% YoY to $48 million, up from $26.6 million.

As of September 30, 2023, the company’s backlog and awarded orders amounted to $633.3 million,a 34% YoY increase and a 16% quarter-over-quarter increase.

The growth in backlog and awarded orders reflected the demand for the company’s solar products, with expansion in international markets constituting more than 10% of the orders.

Brandon Moss, CEO of Shoals, said, “Backlog and awarded orders increased 34% year-over-year and 16% sequentially to a record of $633.3 million as the Company added over $220 million in orders in the quarter. While the domestic utility-scale solar market is experiencing slower growth, we believe our strong value proposition and the emerging strength from our international business will continue to drive order growth. We are pleased that international represents over 10% of our backlog and awarded orders.”

The company said it completed the ramp-up of its third Tennessee facility, adding 15 GW of new capacity to its 2022 base of 20 GW. With all shifts active at all facilities, Shoals’ capacity is now 35 GW, with the ability to scale the existing site footprint to 42 GW.

This increased capacity is expected to enable Shoals to meet growing demand well into 2025, enhance production efficiency, and maintain attractive margins.

9M 2023

For the first nine months (9M) of the year, Shoals recorded a net income of $26.08 million, a 5.5% increase YoY.

The company’s revenue for 9M stood at $358.5 million, a 54.3% YoY increase.

Adjusted EBITDA for the period was recorded at $134.27 million, a 113.5% YoY increase.

The company recorded a net income of $18.92 million during the second quarter of 2023, a YoY increase of 159% from $7.3 million.

The company’s net income jumped over five-fold YoY to $14.3 million in Q1 2023 due to increased demand for solar EBOS generally and the company’s system solutions specifically.