Shoals reports record Q2 revenue, profit despite challenges

Despite the headwinds the US solar industry faced in the second quarter of 2022, following the Department of Commerce’s (DoC) announcement of a solar antidumping investigation in late March, balance-of-system (BoS) manufacturer Shoals has reported record revenue and gross profit, as well as a gross margin within its targeted range.

The US-based provider of BoS solutions for solar, battery storage, and electric vehicle charging infrastructure attributed the results to a significant number of new customers purchasing components, as well as strong demand for its combine-as-you-go system.

Earlier this year, Shoals adjusted its guidance for the year due to the “challenging environment” caused by the DoC’s March 28 decision to act on a petition filed by California-based solar module manufacturer Auxin Solar. It asked the DoC to review solar panel imports from Chinese companies in Cambodia, Malaysia, Thailand and Vietnam, resulting in an antidumping investigation. Despite this, Shoals reported robust growth across its business.

“Demand for our combine-as-you-go solution continues to grow,” said Jason Whitaker, chief executive officer of Shoals. “During the quarter we converted four additional customers, bringing the total BLA [Shoals' in-line fuse and wire manufacturing technology] customers to 29. Customer interest in our recently introduced products is strong, particularly within battery storage, wire management, and EV charging.”

Turning point

According to Whitaker, the White House's two-year tariff exemption for solar panels manufactured in Cambodia, Malaysia, Thailand and Vietnam was “a turning point in customer sentiment, and we have seen order patterns normalize as a result.” The company’s revenue grew 23% year 0n year to $73.5 million, driven by increases in its components and system solutions divisions.

The growth in components-related revenue was driven by increases in shipments of battery storage products and solar products to a significant number of new customers, the company said. It noted that new customers typically purchase components first, before transitioning to system solutions.

The company said the growth in system solutions revenue underscored strong demand for its combine-as-you-go system. Its system solutions division accounted for 77% of revenue in the quarter, from 86% a year earlier and 69% in the prior quarter.

Gross profit increased 9% to $28.6 million, compared to $26.2 million in the preceding year. Gross profit as a percentage of revenue was 38.9%, compared to 43.8% in the prior-year period. The company attributed this to a higher mix of components sales in the quarter, as they have lower margins than system solutions, as well as higher raw material prices and logistics costs.

For its full-year outlook, Shoals still expects revenues to be in the range of $300 million to $325 million, adjusted EBITDA between $77 million and $86 million, and adjusted net income between $45 million and $53 million.

Earlier this year, Shoals opened a new manufacturing facility in Tennessee. It is expected to double the company’s manufacturing capacity as demand continues to grow. It said that its BoS solutions have now been deployed on more than 20 GW of solar systems across the world.