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    SHLS
    Earnings call· Jun 2026(Q2 FY26)

    Shoals Technologies Group Q2 FY26 earnings call SHLS

    Aug 4, 2026 Source

    Executive summary

    Shoals Technologies Group Q2 FY26 — Record Backlog and Strong Demand

    Shoals Technologies Group delivered a strong second quarter, meeting revenue and adjusted EBITDA guidance, driven by robust demand in the U.S. utility-scale solar market and significant new orders. The company achieved a record backlog and awarded orders, reinforcing its competitive stance following a favorable ITC case outcome. Management is focused on optimizing new manufacturing facilities and expanding into new markets like energy storage and data centers, with new product introductions expected to drive future margin accretion.

    Highlights

    5

    • Second quarter revenue reached $163 million, up 47% year-over-year, within guided range.

    • New orders totaled approximately $207 million, driving a book-to-bill ratio of 1.3.

    • Backlog and awarded orders (BLAO) hit a company record of $801 million, an increase of 19% year-over-year.

    • Adjusted EBITDA grew approximately 28% year-over-year to $31.6 million, within guided range.

    • Prevailed in the 2025 ITC case against Voltage, strengthening competitive position.

    Concerns

    4

    • GAAP net income declined to $12.1 million compared to $13.9 million in the prior year, partly due to a prior-year gain on asset sale.

    • Net debt increased over the prior quarter, with net debt to adjusted EBITDA at 1.6 times.

    • Factory consolidations and lean manufacturing processes still require work to optimize efficiency.

    • Q4 revenue is implied to be slightly down from Q3, potentially impacting gross margins due to fewer production days and product mix.

    Guidance & targets

    8
    CategoryTargetConfidence
    Q3 FY26 Revenue
    $150M-$170M
    high materiality
    High
    Q3 FY26 Adjusted EBITDA
    $32M-$37M
    high materiality
    High
    FY26 Revenue
    $600M-$640M
    high materiality
    High
    FY26 Adjusted EBITDA
    $118M-$132M
    high materiality
    High
    FY26 Cash flow from operations
    $65M-$85M
    medium materiality
    High
    FY26 Capital expenditures
    $20M-$30M
    medium materiality
    High
    FY26 Interest expense
    $8M-$12M
    low materiality
    High
    TerraFlow MOU Revenue Impact
    No impact in 2026
    low materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Utility Scale Solar
    Core market, strong period of growth. Quote volume exceeded $1 billion of unique projects in the quarter.
    Quote volume: >$1B (unique projects in Q2)
    		————
    OEM
    Providing a stable and visible revenue stream, growing 51% year-over-year.
    		—51%——
    BEST (Battery Energy Storage)
    Produced $20 million in revenue and secured $10 million in additional orders. BEST orders are episodic and dependent on customer construction schedules.
    Additional orders secured: $10MBLAO: $65M
    		$20M———
    International
    Increased quote activity and customer engagement, particularly in Australia. Driving continued growth and diversification in 2027 and beyond. Pricing may not be as strong as export markets for organic opportunities.
    BLAO: $102M
    		————

    Operational metrics

    21
    Adjusted Gross Profit Percentage
    30.6%
    Q2 FY26

    Within expected range. Expected to continue making progress in margin improvement driven by positive mix and productivity gains.

    SG&A as % of Revenue
    17%400 bps decline vs 21% prior year
    Q2 FY26

    SG&A was $28 million, representing 17% of revenue, a 400 basis point decline compared to 21% last year.

    Adjusted EBITDA
    $31.6M27.9% growth YoY vs $24.7M prior year
    Q2 FY26

    Came in within guided range.

    GAAP Gross Profit Percentage
    30.3%
    Q2 FY26

    Within expectations.

    Gross Profit
    $49.5M20% increase vs $41.2M prior year
    Q2 FY26

    Compared to $41.2 million in the prior year period.

    SG&A Expenses
    $28.5M$5.4M higher than prior year
    Q2 FY26

    Driven by increased headcount and achievement of variable compensation targets.

    Operating Profit as % of Revenue
    11.5%
    Q2 FY26

    Income from operations was $18.7 million.

    Adjusted Net Income
    $19.7M15% increase vs $17.1M prior year
    Q2 FY26

    Compared to $17.1 million in the prior year period.

    Adjusted Diluted EPS
    12 cents2 cents higher than prior year
    Q2 FY26

    Compared to prior year period.

    Cash Generated from Operations
    $6.8M
    Q2 FY26

    Driven by an increase in both deferred revenue and accrued liabilities.

    Cash and Equivalents
    $15.7M
    Q2 FY26

    Ended the quarter with this balance.

    Net Debt to Adjusted EBITDA
    1.6x
    Q2 FY26

    Considered a perfectly acceptable and fine leverage ratio, expected to improve in H2 FY26.

    Net Debt
    $181.1Mincrease over prior quarter
    Q2 FY26

    Increased over the prior quarter.

    Revolving Credit Facility Capacity
    $50Mexpanded
    Q2 FY26

    Temporarily expanded to provide flexibility for growth.

    IEPA Refunds
    some
    Q2 FY26

    Received some refunds in Q2, with remaining impact expected in Q3.

    Inventory Investment
    —
    H1 FY26

    Heavily invested in inventory in the first half of the year to support strong book of business and acquire materials in advance of cost step-up. Expected to provide positive cash flows in H2 as it burns down.

    Book and Turn Business
    strong
    FY26

    The book and turn business has been strong, with a good healthy business for the year.

    Backlog Conversion Window
    lengthening
    current

    The booking cycle has lengthened a little bit; in the past, backlog converted within a six-month window, but that is lengthening these days.

    Pricing Environment
    responding accordingly
    current

    The strong demand environment is leading to responsive pricing behavior.

    Gross Margin Sequential Improvement
    sequentially up
    H2 FY26

    Expected to continue sequentially improving as the new facility's efficiencies are maximized and product mix normalizes.

    Target Gross Margin Bandwidth
    low to mid-30s
    future

    The company's goal is to move gross margins into this bandwidth.

    Industry KPIs

    4
    MetricValueDetails
    Book to bill ratio1.3
    Orders bookings growthapproximately $207MUSD
    Gigawatts under contractup to 5 GWGW
    Backlog by segment end market$102MUSD

    Orderbook & backlog

    7
    New Orders$207MQ2 FY26
    Backlog and Awarded Orders (BLAO)$801MQ2 FY26

    19% YoY increase

    Company record.

    Backlog and Awarded Orders (BLAO)$801.4MQ2 FY26

    $43.4M sequential increase

    Record level.

    Backlog (constituent of BLAO)$425.1MQ2 FY26

    Constitutes part of the total BLAO.

    BLAO with shipment dates in upcoming four quarters$700MQ2 FY26

    Through Q2 of 2027.

    BLAO with planned delivery dates in coming four quarters$699.7M2026-06-30

    Through Q2 of 2027.

    BLAO with planned delivery dates beyond upcoming four quarters$101.7M2026-06-30

    Beyond Q2 of 2027.

    Product announcements

    2
    ProductTypeDetails
    PowerHub recombiner solutionexpansion
    AerLink productroadmap

    Deals & partnerships

    2
    TerraFlowMOU to support TerraFlow's energy storage portfolio with PowerHub recombiner solution for utility scale and data center applications.

    TerraFlow is a leading grid scale developer of long duration energy storage infrastructure. This partnership is a meaningful step for Shoals to diversify its customer base.

    On EnergyPartnership for battery energy storage solutions, with products landing and being installed on the largest battery paired AI data center site in the country.

    Shoals continues to be excited about this partnership. As On Energy's business grows, Shoals expects to be a big part of their solution. A handful of projects were booked after quarter close, potentially with this customer.

    Capital programs

    1
    New Mega Facility (Portland, TN)completed

    Benefit: Expanded capacity and capabilities

    Finished the move into the new facility. Focus on improving productivity and maximizing efficiency. One redundant facility will be exited mid-year 2027.

    Risks & headwinds

    6
    Factory consolidation and lean manufacturing optimizationongoing

    Still have work to do

    Mitigation: Deploying new lean manufacturing processes, consistent weekly and monthly improvement.

    District court case for damages against VoltageQ3 FY26

    Expected to be completed in Q3 FY26

    Mitigation: Company prevailed in the ITC case, now pursuing damages.

    Impact of Q4 production days and product mix on marginsQ4 FY26

    Implied slight reduction in Q4 revenue, potential negative impact on gross margin

    Mitigation: Maximize efficiencies, push product, secure more short-term orders (BEST orders can be short-term).

    Rising leverage and free cash flow generationH1 FY26

    Net debt increased over prior quarter; net debt to adjusted EBITDA at 1.6x

    Mitigation: Expect positive cash flows in H2 FY26 from inventory burn-down to pay down revolver; leverage ratio expected to improve in H2 FY26.

    Tariff policy changes (Section 232, inverters)near-term

    No near-term impact whatsoever

    Mitigation: Monitoring landscape closely, underlying demand environment expected to remain strong.

    Lengthening booking cyclecurrent

    Backlog conversion window lengthening from 6 months

    Mitigation: Managing capacity within new facility, pleased with demand environment.

    What to watch in Q3 FY26

    5

    District Court Case Completion

    Q3 FY26
    CurrentExpected in Q3 FY26
    TargetCompletion of damages determination

    Why it matters

    Resolution of the Voltage ITC case's damages phase will provide clarity on potential financial inflows and legal expenses.

    Our district court case to determine damages against Voltage is expected to be completed in the third quarter.

    Q&A highlights

    7

    What is the expected timeline for meaningful revenue from the TerraFlow MOU, and how does this partnership compare to the On Energy relationship?

    Revenue from TerraFlow is expected to begin in 2027, with no impact in 2026. TerraFlow uses vanadium-based solutions for short and long-cycle battery storage, targeting renewable sites and data centers, similar to On Energy's goals of managing energy flow and reducing spikes. This partnership is a meaningful step for diversification.

    “I would probably model that revenue will begin in 2027. We will not see an impact in 2026.”

    asked by Unknown Speaker · answered by Brandon Moss

    2 min read6 chapters

    Detailed Narrative

    01

    ITC Case Victory and Market Position

    Shoals prevailed in its 2025 ITC case against Voltage, a critical outcome for shareholders and U.S. innovation. The company looks forward to resolving damages in the upcoming district court case, which is expected to be completed in Q3 FY26. This victory strengthens Shoals' competitive position and its optimism for market evolution.

    02

    New Manufacturing Facility and Productivity

    The company has finished the move into its new mega facility in Portland, Tennessee, and is expanding capacity and capabilities at a measured pace. While steady progress has been made in deploying lean manufacturing processes, management acknowledges there is still work to do to realize full operational improvements and efficiencies. The new facility is expected to drive value for stakeholders in future periods.

    03

    International Expansion and Diversification

    Shoals is making progress in key international markets, particularly Australia, evidenced by increased quote activity and customer engagement. International BLAO now stands at $102 million, contributing to continued growth and diversification beyond 2027. The company is also diversifying its customer portfolio to create a more resilient business.

    04

    TerraFlow Partnership and Energy Storage

    Shoals announced a partnership with TerraFlow, a grid-scale developer of long-duration energy storage. Under a Memorandum of Understanding (MOU), Shoals will support TerraFlow's deployment plan of up to 5 gigawatts annually with its PowerHub recombiner solution for utility-scale and data center applications. Revenue from this partnership is expected to begin in 2027.

    05

    AirLink Product Development and Market Disruption

    The company is excited about its AirLink product, which has received significant customer reception. AirLink is positioned as a disruptor in how power is delivered to the rack, and an educational period is anticipated for engineers, installers, and inspectors. Shoals aims to have a live test installation in 2026, with IP filed and third-party lab testing underway. AirLink is expected to command a price premium due to substantial value delivery.

    06

    Tariff Landscape and Demand Environment

    Management is closely monitoring the tariff landscape, including Section 232 and recent news on inverters, but does not foresee a near-term impact on the business. The underlying demand environment is expected to remain robust, with the market anticipated to be 'stronger for longer.' The company believes its diversified product portfolio and new facility investments position it well to handle continued growth.

    AI-generated summary of the company’s earnings call. Not investment advice.