Shoals Technologies at J.P. Morgan Conference: Strategic Insights and Future Growth

On Tuesday, 24 June 2025, Shoals Technologies Group (NASDAQ:SHLS) presented at the J.P. Morgan 2025 Energy, Power, Renewables & Mining Conference. The conference call, led by CFO Dominic Bartos, highlighted the company’s strong demand for solar solutions, while addressing challenges such as regulatory changes and supply chain constraints. Despite these hurdles, Shoals remains optimistic about its growth prospects, particularly with its domestic manufacturing focus.

Key Takeaways

• Shoals is optimistic about future growth, driven by strong demand for solar projects and opportunities in data centers and battery energy storage systems.
• The company highlighted the benefits of its eBOS solutions over competitors, emphasizing reliability and lifetime value.
• Shoals is addressing warranty issues with Prismean and is in the litigation phase.
• Strategic capital allocation focuses on organic growth, potential acquisitions, and share repurchases.
• Gross margins are expected to remain in the mid-30s to high-30s percentage range, with a long-term target of over 40%.

Financial Results

• Gross margins are projected to be in the mid-30s to high-30s percentage range in the near term.
• Shoals aims for a long-term gross margin target of over 40%.
• The company is focused on maintaining strong SG&A expenses while generating operating profits and cash flow.

Operational Updates

• Demand for solar projects remains robust due to lengthy lead times and ongoing projects.
• Shoals is navigating challenges such as labor availability and supply chain constraints, particularly in switch gear and transformers.
• Regulatory changes, including investment tax credits and Foreign Entity of Concern provisions, are creating uncertainty, but Shoals sees potential benefits from domestic content requirements.

Future Outlook

• Shoals is targeting growth in data centers and community commercial industrial projects, with optimism about battery energy storage systems.
• The company is exploring international markets, with a presence in Australia, Saudi Arabia, Spain, and Latin America.
• Shoals has established Master Supply Agreements with Blattner and UGT, providing predictability in project wins and better supply chain management.

Q&A Highlights

• CFO Dominic Bartos emphasized that the demand for solar projects remains strong, even if tax credits change.
• Shoals is working with developers to highlight the long-term benefits of its solutions over insulation piercing connectors.
• The company is in the fact discovery phase of litigation with Prismean, aiming to resolve warranty issues.

For more details, please refer to the full transcript.

Full transcript - J.P. Morgan 2025 Energy, Power, Renewables & Mining Conference:

Mark Strauss, Analyst: Welcome everybody. This is our tenth Annual Energy Conference. Thank you very much for joining.

My name is Mark Strauss. I cover clean energy here in The U. S. This next session is with Shoals. This is an overweight rated stock for us.

We’ve got Dominic Bartos, CFO. Dominic, thank you for joining.

Dominic Bartos, CFO, Shoals: Thanks so much, Mark. Appreciate you having us.

Mark Strauss, Analyst: So we’ll try and keep this open. If anybody has any questions, feel free to raise your hands. And I think we’ve got mics running around. I could be wrong on Yeah. Okay.

Thank you. But with that let’s just get stuck in. So Dom, can we talk about just kind of start with it’s been a very active is an understatement and active last few months or so in the space. Can we I want to come back to talking about tariffs and IRA rabbit holes wherever we’re going with that. Can you just kind of talk about demand and bookings kind of activity pipeline activity that you’re seeing since your last update on the 1Q call?

Dominic Bartos, CFO, Shoals: Sure. Well, as we said on the last call, demand in the near term has remained very strong. Projects are moving forward. You have a lot of our EPC customers have very full slates because as you know, but maybe perhaps some of the listeners may not, the lead times, the length of time for solar projects is relatively lengthy. And a lot of these projects have taken flight and are well underway.

They’ve been permitted. They know their interconnection dates. And so demand has remained very strong.

Mark Strauss, Analyst: Okay. All right. Can you talk about the pain points in development today for your customers? You mentioned the EPC customers and their full slates. But I mean, it’s been a pretty volatile last couple of years with interconnections, with supply chain, with policy uncertainty, financing.

Kind of where do we stand with some of that? And can you talk about your expectations anyway of some when these headwinds might potentially go away?

Dominic Bartos, CFO, Shoals: Yes. So let’s set aside the regulatory environment for a minute that’s huge right now. That’s created a lot of turmoil and we’ll talk about that I’m sure here in a minute. But some of the other things are very consistent. Right now in the solar industry it’s similar constraints that have been there but the industry has learned to deal with them.

Things like labor availability for both skilled and unskilled labor in remote often remote locations. The supply chain elements of large switch gear and transformer equipment and those sorts of things is still lengthy lead times on getting those things fulfilled, but the industry has learned how to work those into timelines. Permitting and interconnection still remain challenges. Like anything, we talked about, I was just joking outside about getting permitting for nuclear. I imagine that’s going be a little bit harder than getting solar permitted.

But those are the kinds of things that are still, you know, abounding in the industry. Recently, I would say, unpredictability of administrative change, either with tariffs or the regulatory policy, has introduced a new slate of issues and I’m sure we’ll talk about some of that.

Mark Strauss, Analyst: Okay. Yeah, so let’s pivot to that. So I mean we’ve got the House bill that’s been approved. We’ve seen the Senate Finance Committee, whenever that was, a week ago now. This could be we could find out something today.

Who knows? Again, kind of going down the different rabbit holes here, but I mean kind of comparing contrasting the House bill versus the Senate bill, can you just kind of talk about what you see as kind of demand trends, I guess, term? I mean, if you’ve got to begin construction in sixty days or begin by year end ’27 to get a partial credit, I mean just kind of how do you think the shape of everything looks here?

Dominic Bartos, CFO, Shoals: Well I think you’ve caveated this well. It is very premature and everything is still in flight. Clearly we were pleased to see some of the changes that the Senate Commission would like to put into it, which is extending and perhaps easing some of the reductions that you would see for tax credits in the IRA, the investment tax credits. But it’s still early for that. So I think folks are still trying to figure that out.

The administration has targeted the July 4. We’ll see how that does if that comes through. But fundamentally, with regards to the industry, it appears that the availability of investment tax credits will be phased out. Okay? I think that’s a given at this point, but we have to see the timing of that.

Whether or not construction on these projects can be accelerated is a difficult question simply because if you know you have a lead time, you’re not permitted yet. If you have interconnection that could be years away, it’s hard to pull things forward just to safe harbor. So the definitions of what means you’re started, investment, have you purchased panels, those are the sorts of things that we’ll flesh out with the guidance here coming up in the next few weeks. We’ll have a much better understanding of that. But fundamentally, folks are just going have to deal with an inflationary cost of new solar.

If tax credits go away, then things will just become more expensive. There will be some off take agreements, some power purchase agreements that will have to be renegotiated or perhaps negotiated with a different starting point. But none of that fundamentally changes demand. We still need energy. We still need electrons on the grid.

And so if solar in the near term, would say the next few years, is still the fastest way to get things on the grid, I don’t think that the changes are going to be that devastating for the industry. I think the good news I think for Shoals is it’s very much the same business for us right now. There was nothing in these things that really directly impact us. We don’t participate in the 45X manufacturers credits. We’d love to.

I’d love for eBOS to get credit for that and get some dollars, but we don’t currently get that today. So if they do phase those things out aggressively, that’s okay for us. We are still going to continue to produce eBOS. Now the timing, if folks are allowed to safe harbor and start projects earlier, like I say, there might be some challenges if it’s not permitted yet and you really don’t have that in place. But other than that we just have to wait and see over the next few weeks how everything plays out.

Mark Strauss, Analyst: Got it. Okay. One of the other kind of new things with the House and the Senate bills has been the FIOC provision. So this is the foreign entity of concern. Can you talk about that?

Is that a headwind for Shoals? Is it a potential tailwind when you look at your supply chain versus your competitors?

Dominic Bartos, CFO, Shoals: Yeah, generally speaking, it’s probably favorable for Shoals in that if there are some Chinese competitors or competitors from those countries that might face some limitations about the ability to be involved in solar projects, I think any time you can focus on domestic content, and if that can be a showpiece, if that’s what the administration is after, then that should benefit Shoals. Shoals, we produce all of our eBOS solutions in The United States, just north of Nashville, Tennessee, and we’re a domestic manufacturer. Now from our supply chain standpoint, not everything can be sourced in The United States. If panels have a certain proprietary connector, they have to be procured from that vendor. They may be overseas.

There are certain photovoltaic components that are not just available for manufacturers in The US, certain fuse types and things like that. But all that is changing. So if domestic content becomes more and more of a priority, then that will be able to take precedence here in The United States as well. So we’re excited to be a US based manufacturer. We think that if the foreign entities of concern, if there are limitations placed on it, generally speaking that will help us.

It might cause some disruptions in the industry as folks are trying to work on their own supply chains. But we are well positioned for that. Okay.

Mark Strauss, Analyst: Can we talk about competition? So other E BOSS technology providers kind of status quo licensed electrician approach. Can you just kind of just for the general audience kind of talk about the pros and cons of Shoals versus other solutions? We get the question of IPC a lot lately. I know that Scholes has put out some white papers on this.

Can you just kind of give us a brief overview?

Dominic Bartos, CFO, Shoals: Yeah, sure. So Scholes is predominantly based on the electrical balance of systems, is moving those electrons between the panels to the inverter. It’s all direct current on a solar field. And we manufacture those solutions on a custom basis. We design them and we work with the EPCs to maximize the efficiency of the field layout and we build everything to spec.

And it’s done in a factory. So we have quality control standards. We are able to test the joints for voltage leakage and all those sorts of things. And we ship this final solutions with plug and play sort of abilities. They’re connectorized, you can just simply connect them in the field with minimal licensed and skilled electricians.

Some of the competition that you mentioned, for example, insulation piercing connectors, it’s IPCs that we call them, those have to be done in the field. IPCs are fundamentally clamshell sorts of devices that have to be ratcheted down on these large trunk feeder cables. But you can’t test it in the field and they have the propensity to have a breakdown sooner than our solutions. So we have seen some developers say we don’t want IPCs on our fields. Simple, full stop.

They wanted a manufactured solution which we engineered to last a lifetime of the panels. And so from a competition standpoint, IPCs are there. You may have seen BenTech is a company that sells IPCs and NextTracker is interested in exploring that. They purchased BenTech. But Bentech has been around.

They sell combiner boxes and components and then some IPCs. But they don’t do the manufactured full solutions like we do. So the competitive environment hasn’t changed all that much. I think the FIOC language would certainly support us if we have a Chinese competitor that we’re working against right now that is manufacturing. But that’s another story altogether.

Mark Strauss, Analyst: Okay. Is there a way to quantify that when you go to your customers that says, okay, well this is our failure rate. This is what we’ve seen with IPCs historically, right? So that you might be I’m just being hypothetical here. Like if an IPC is undercutting you up front by 5%, 10%, 15%, is there a way to kind of show the lifetime value, the lifetime savings of your solution?

Dominic Bartos, CFO, Shoals: That’s what we’re trying to do because everything is dollars and cents in this business as you would expect. You should expect that from Ma’am, the CFO. Yeah, dollars and cents drive this business. And if something is going to break down sooner in the field, it’s an interesting dynamic in the solar industry because the fields may be built by developers. Our customers of record are actually the engineering procurement and construction firms, not the original developer.

And they only have to warranty a site for a couple of years to the developer. Developers will sell these sites. So we’re working with developers to help educate them about the lifetime benefits of the Shoal solution versus an insulation piercing connector. But once again, we have to test in laboratories. We’re mimicking heat and wave cycles of thermal expansion, contraction of charge and that the only time in the field will really show this happening because insulation piercing connectors have to be installed in all kinds of weather conditions.

They can have dust, they can have grass, they can have rain and moisture. And all of those things are detrimental to the life of those products. So we simulate some of that in our own testing and we’ll continue to prove that out and work with our developers and prove out the business case for our solution.

Mark Strauss, Analyst: Got it. Okay. So you have some very big deals. So you have the 10 gig MSA with Blattner, which I think is coming to the end of its completion, but kind of a new 12 gigawatt deal with them for the next couple of years. You’ve got a 12 gig deal with UGT for international projects.

Can you just kind of talk about that trend? Should we expect more MSA type deals, maybe not that magnitude, but similar kind of structure, multiyear, multi gigawatt agreements? And why? I mean why do you think the market might be transitioning towards that?

Dominic Bartos, CFO, Shoals: Sure. So yes, you’re exactly right. Blattner just signed us up again for another 12 gigs just last year. And so we’re starting to work on that development now. It goes through 2027 through the middle of twenty twenty seven.

The MOU and the deal with UGT in Sun Africa, their subsidiary, is really exciting because that allows us to export from The United States. Many of those projects for them are actually funded by Western banks like the Export Import Bank, and they require domestic content. So for us, it looks very much like our domestic work and that’s a great way to be pulled around the globe. We love master supply agreements for two fundamental reasons. From our perspective, it really helps us predict have better predictability about projects that we’re going to win, the timing.

It allows us to look at how we look at our own supply chain and we can secure deals and get better deals on quantities of cabling and connectors and various things that we need, gives us some predictability about where labor is going to be deployed. It gives us confidence to invest in our facilities and growth. As you know, we’ve invested in a new facility. We continue to invest in a new facility right there in Tennessee. And we’re going to consolidate operations and it’s going to give us an even greater capacity.

So we love to have the MSAs. Now from a customer perspective, it’s a great deal too because they don’t have to worry about sourcing this every single time. They know they have the quality products from Shoals. They know they can count on that and they can worry about the other aspects of their deals. So we will expect to sign up additional EPCs with MSAs.

I’d actually love to sign up some developers with MSAs that say, hey, Shoals Technologies Group products will be specked into the projects and will be handed off to the EPCs. We’re not quite there to announce those yet, but we’re working all angles there.

Mark Strauss, Analyst: Is that something new targeting developers instead of EPCs? You’ve been trying that for a while.

Dominic Bartos, CFO, Shoals: We’ve actually started going a little bit deeper into the developer ranks because we have seen that some of the EPCs reasons for not selecting Shoals, we believe are shortsighted. And so the long term benefits of our products, if it does carry a small cost premium to them on the front end, they need to understand the benefits and sometimes EPCs are only worried about it for two years and they just want to keep a low cost on the front end. So we have expanded our involvement with developers directly. We’ve gone deeper and that’s an area that we’re very excited to see some very good response to the Shoals products.

Mark Strauss, Analyst: Okay. So going back to international, so you mentioned the UGT partnership and kind of being pulled into some of these markets. Is there also a push? Are there certain markets that you are targeting? Or is it really just kind of are your US customers pulling you into certain international businesses?

Dominic Bartos, CFO, Shoals: Yeah. Have a targeted approach as well, boots on the ground. We have a sales representation in Spain that handles our European side and also in the Central American countries and Latin American countries where we won some projects such as Chile. We love Australia. Australia just had a very favorable election result.

The Labour Party did very well. They are very interested in renewable energy. They’re very interested in battery energy storage solutions. And so we’re very excited about Australia. They have lots of land, very rectilinear.

Our products work really well on large plots like that. We also announced that we have a memorandum of understanding in The Kingdom Of Saudi Arabia. They want to put a lot of solar there. So we have some targeted places that we want to do some things like that. We definitely have a sales effort working on that.

But we enjoy being pulled around the globe to places we normally wouldn’t go with UGT. So it’s great. Okay.

Mark Strauss, Analyst: Can we go to the warranty issue? Can you just kind of talk about any updates there as far as potential timing, charges, resolution?

Dominic Bartos, CFO, Shoals: Yes. So the warranty solution that we’re working through right now is progressing as we’ve discussed on previous timelines. The two elements of it are the remediation work that we’re doing for customers that were impacted by the defective wire and that is moving as scheduled. I think there was some severe rain and flooding events this spring that delayed a couple of them being done, but we’re largely on track to complete that this year. And we have, from a legal standpoint, we’re in the fact discovery phases of that litigation with Prismean.

We expect depositions and the fact discovery to be completed here in the next few months before we can really sit down and have some meaningful discussions. I’d love to be able to work that out with Prismean, just have them resolve the issues and move on. They’re a large and well respected cable company. They just had a bad series of products for us for a while.

Mark Strauss, Analyst: Okay. So in the spirit of saying the word data center and seeing your stock trade up, can you talk about data centers? I mean, so you mentioned at the outset that let me be serious with my question here, sorry. You mentioned at the outset that demand is very strong. I mean to the extent that you have visibility, right, into who the actual off taker is, I mean is there a way to see, okay, this is this part of our pipeline is kind of normal replacement of natural gas, whatever.

This part of our pipeline has really come on because of kind of the data center angle. And you kind of talk about what you guys think is the potential magnitude of that opportunity. Yes.

Dominic Bartos, CFO, Shoals: So we don’t directly have that visibility. We do rely on some professionals and consulting groups in the space to look at that. And I think I can’t recall the exact percentage that was estimated of the demand of the energy that went on the grid last year, how much was due to data centers and artificial intelligence driving that demand. We don’t expect that to wane at all in the coming years. We expect the prognosticators that have called for energy demand growth in The United States and globally to continue largely driven by data centers.

So on our core base of products, it’s a fantastic place to be. We need energy in the near term and everything else that’s been talked about as potential solutions has multiple years of development lead times and cycles. Solar has a pipeline in place that can continue. So with regards to the actual data center products, we think it’d be a great way. We have some lower cost and more efficient ways to move electrons using aluminum with our BLA system as an example.

We could modify that to work with data centers to be the power distributor instead of large expensive and rigid copper bus bars. But it takes someone to change. You have to work with engineers of record. So that’s further out for us as a product offering. But in the meantime, we’re thrilled to see that the data center providers, those that are building these out are going to work with renewable energy sources as well to get their energy needs met.

Mark Strauss, Analyst: Any questions? Okay. Can you talk about gross margins going forward? So kind of obviously, you’ve got different products, you’ve got systems and you’ve got components that can influence kind of your gross margin on a quarterly basis. But can you talk about competition?

Can you talk about maybe like the drag from the new facility that you’re building that’s not fully operational yet? Kind of how to think about near term margins, where they go and kind of your targets over time?

Dominic Bartos, CFO, Shoals: Yes. So we’ve talked about this year in the near term being in the mid-30s to high-30s as a percentage for gross margin. And that’s a very important metric for us and we are committed to driving that, we put dollars in the bank. And by that I’m looking for operating profits and cash flows. So for example, there’s a way that we’ve actually looked at our BLA product And folks have said, well, we would like you to run this longer and kind of replace this feeder cable that we’re buying from someone else.

Can you guys run a long tail BLA? It’s fundamentally a BLA but just much longer. Instead of 150 feet for one BLA, it might be 600, 700 feet. Well, that’s a new area for us. It’s not really adding value to that last 500 feet of cable.

So we can sell it perhaps at a lower margin, but why not? It’s putting dollars in the bank. It helps us leverage. So we’re very focused on maintaining a very aggressive hold on our SG and A expenses. We would like to see some of our legal expenses go down and be able to invest in some other areas of the business.

But other than that, we want to put operating profit and cash flows in the bank. So we do have a target of getting back over 40% long term. We still have very attractive margins. Some of the things that we talked about, our battery energy storage product solutions are very attractive and accretive to us on a margin basis. We want to grow that clearly.

Our export business is very comparable to what we achieve domestically. We want to keep doing that. As we looked at our CC and I or the community commercial industrial space, it’s accretive margins to what we’ve been achieving. But they’re very small parts of the business today. So it’s going take some time to ramp those.

And as those ramp, that will help support where we’ve made deals for huge volume agreements in our core business. So we believe in the near term I would say it’s mid-30s to upper 30s and then we’ll just go from there.

Mark Strauss, Analyst: Got it. Okay. On that point, so I focus mostly on utility scale solar so far in this conversation. But can you talk about CCI? Can you talk about storage, EV charging?

I mean some of the other adjacent markets that you’ve been looking at, how to think about that kind of over the near and medium term when that really starts to scale

Dominic Bartos, CFO, Shoals: Yeah. So we’re booking revenue right now and have this year, excuse me, for CC and I and for BESS. We’ve had some international wins that we’re working on. So CC and I is interesting in that there’s nice play that we get because they’re accustomed to having to cobble things together on their own. And we have a solution that is plug and play and we can help them out.

So the CC and I space is really learning our product set and we’re very excited about that. And with our best products, we have some really exciting deals because a lot of solar projects are interested in battery energy storage. Australia is also another market very interested in because they’ve inverted their curves. They actually have a demand curve for utility from their grid that goes down in the peak days because everyone’s got So they need to be able to store it for the shoulders. Well, in the battery energy storage space, we have some very standard products, the combiners and recombiners that we can sell to EPCs.

We’re working with OEMs on actually skidded solutions, which are standalone to help drive all the electronics necessary for these storage solutions. And so as more and more projects keep BEST attached to their projects, I think it’s upwards of 50% now of all the pipeline projects that you see like in Wood Mackenzie or with the those projects all have half of them have battery energy storage plans as well. So we’re very excited to be in that space. That’s another very good market for us. And then we’ll continue to work on our OEM business of junction boxes.

First Solar has been a fantastic customer for years. We’ve been able to grow with them. And we think there’s opportunities for other types of panels in that space as well. So like I said, I’m interested in putting dollars and cash flow in the bank. I don’t necessarily need it to be the highest margin products all the time.

I just want to keep growing. Yes. Okay.

Mark Strauss, Analyst: Last chance. Any questions, anybody? Okay. Dom, last question for me. Can you just kind of talk about I mean, so you just said you’re focused on cash in the bank, cash flow.

Can you talk about capital allocation? How we should think about potential M and A, buybacks, anything else?

Dominic Bartos, CFO, Shoals: Sure. So yes, we’ve actually my first priority is always grow the business. So we’re making the investments necessary to grow the business organically. And secondarily, we are looking at inorganic acquisition opportunities all the time. When our stock was as depressed as it has been, it was difficult to use, you know, look at leverage and say, is this an accretive acquisition or not?

We don’t want to be stupid about capital. I am very disciplined about this. I’m going make sure that we have the return for the shareholders. We’re not going to acquire something just for the sake of making an acquisition. That said, there are multiple small companies that can either augment our product offering here domestically or could help us internationally with the footprint.

So we are always looking for what we could do inorganically. And then finally I would say some of the financial things about okay share repurchases. We did that last year. We have an authorization remaining for the balance of this year. My cash consumption right now has been predominantly build out our new facility and handle the warranty remediation things.

But that will turn right around here in relatively short order and so then we’ll have an opportunity to evaluate that. But like I said, my first priority is grow the business.

Mark Strauss, Analyst: Got it. Okay. With that, we can wrap. Dominic, thank

Dominic Bartos, CFO, Shoals: Thanks so much, Mark. Really appreciate your time and thanks for having us. Thank you.

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