Nucor earnings beat by $0.08, revenue fell short of estimates
Shoals Technologies Group Inc (NASDAQ:SHLS) reported first-quarter 2025 revenue above its guidance range despite year-over-year declines across key financial metrics, according to the company’s Q1 earnings presentation released on May 6, 2025.
The solar electrical balance of systems provider posted revenue of $80.4 million, exceeding the high end of its Q1 guidance but representing an 11.5% decline from the $90.8 million reported in the same period last year. Adjusted EBITDA came in at $12.8 million, within the company’s guidance range but down 37.5% year-over-year.
Quarterly Performance Highlights
Shoals reported a book-to-bill ratio of 1.13 for the quarter, indicating healthy demand for its products. The company’s booked, logged, and awarded orders (BLAO) reached $645.1 million, with approximately $500 million scheduled for delivery in the next four quarters.
As shown in the following financial snapshot, profitability metrics declined compared to the prior year:
Gross profit for Q1 2025 was $28.1 million, representing a 22.8% decrease from $36.5 million in Q1 2024. The gross profit margin contracted to 35.0% from 40.2% in the prior-year period. Adjusted net income fell 58.9% to $5.2 million, with adjusted diluted earnings per share decreasing to $0.03 from $0.07 a year earlier.
Despite these declines, the company generated $15.6 million in cash flow from operations and $12.4 million in free cash flow during the quarter, which included $9.5 million of shrinkback remediation costs and $2.5 million in legal expenses.
Balance Sheet Improvements
A notable bright spot in Shoals’ Q1 results was its strengthened balance sheet. The company reported its lowest net debt level since becoming a public company, with net debt decreasing to $106.1 million from $118.2 million at the end of Q4 2024.
The following chart illustrates the company’s improved debt and liquidity position:
Cash and cash equivalents increased to $35.6 million at the end of Q1 2025, up from $23.5 million at the end of Q4 2024. Total (EPA:TTEF) long-term debt remained stable at $141.8 million. The company’s net debt-to-adjusted EBITDA ratio stood at 1.2x, significantly improved from 3.6x in Q3 2022.
Total liquidity, including cash and available credit, reached $93.9 million, providing Shoals with financial flexibility to fund its growth initiatives and capital expenditures.
Strategic Growth Initiatives
Shoals outlined several strategic initiatives aimed at diversifying its revenue streams and expanding its market presence. The company is pursuing growth opportunities in international markets, commercial and industrial segments, OEM partnerships, and battery energy storage systems (BESS).
The following slide details these growth initiatives:
In the international market, Shoals signed a Memorandum of Understanding with UGT Renewables/Sun Africa to help deliver up to 12GW of international solar power in the coming years. The company reported strong quoting activity in the commercial and industrial segment, with short sales cycles and attractive margin profiles.
Shoals also announced a continued partnership with First Solar (NASDAQ:FSLR), Inc., supporting the reshoring of U.S. domestic supply chains. In the battery energy storage systems market, the company secured projects with a large hyperscaler and a U.S. prefabricated storage solution provider.
U.S. Utility Scale Solar Market
Despite the year-over-year revenue decline, Shoals remains optimistic about the U.S. utility-scale solar market, which continues to be its core business segment. The company highlighted that customers’ 2025 construction calendars are full, with projects moving forward as scheduled.
The following slide provides an overview of the company’s position in the U.S. utility-scale solar market:
Shoals is investing in a new state-of-the-art manufacturing facility and has established a world-class customer care team. The company is also cultivating relationships with new Engineering, Procurement, and Construction (EPC) partners, with more than 15% of its backlog including projects with at least one new product.
2025 Financial Outlook
Looking ahead, Shoals provided guidance for both the second quarter and full year 2025. The company expects Q2 2025 revenue to range between $100-110 million and adjusted EBITDA between $20-25 million, indicating sequential improvement from Q1 results.
For the full year 2025, Shoals forecasts:
The company projects annual revenue of $410-450 million and adjusted EBITDA of $100-115 million. Operating cash flow is expected to be $30-45 million, with capital expenditures of $25-35 million. Interest expense is forecasted at $8-12 million for the year.
Management Perspective
In closing remarks, Shoals’ management expressed confidence in the company’s strategic direction, stating: "The changes we are making and the team we have in place positions us exceptionally well." The company is focusing on factors within its control, including improving supply chain resiliency, exceeding customer service requirements, meeting delivery timelines, providing exceptional quality, and solving business problems with new products.
The company’s backlog and awarded orders provide visibility into future revenue, with approximately $500 million scheduled for delivery in the next four quarters. This strong order book, combined with the company’s improved balance sheet and strategic growth initiatives, positions Shoals to navigate current market challenges while pursuing long-term growth opportunities.
Full presentation:
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