Shoals Technologies Group (SHLS -13.20%), a leading provider of electrical balance of system (EBOS) solutions for solar and energy storage projects, posted its second quarter 2025 results on August 5, 2025. The standout news: Revenue (GAAP) grew 11.7%, reaching $110.8 million—well ahead of the $104.7 million consensus estimate. Adjusted earnings per share landed at $0.10, topping the expected $0.08. However, gross margin (GAAP) fell to 37.2%, a decline from the prior year. Management described the quarter as one of strong demand and record backlog, though pressure on margins and increased legal expenses tempered profitability. The company upgraded full-year revenue guidance to $450.0–$470.0 million in light of solid demand, after factoring in higher-than-expected costs.
| Metric | Q2 2025 | Q2 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| Adjusted Diluted EPS (Non-GAAP) | $0.10 | $0.08 | $0.10 | 0.0% |
| EPS | $0.08 | $0.08 | $0.07 | 14.3% |
| Revenue | $110.8 million | $104.7 million | $99.2 million | 11.7% |
| Adjusted EBITDA | $24.5 million | $27.7 million | (11.6%) | |
| Gross Margin | 37.2% | 40.3% | (3.1 pp) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Company Overview and Business Drivers
Shoals Technologies Group designs and manufactures EBOS solutions for solar and battery energy storage projects. EBOS refers to all the components and systems—like wiring assemblies and combiners—that connect the physical parts of a solar or storage installation, excluding the solar panels and batteries themselves. Its products are designed to make installation faster, cheaper, and safer for builders, targeting both utility-scale and expanding commercial and industrial projects.
Recently, the company has focused on rolling out new proprietary product families such as its plug-and-play EBOS platform and battery energy storage solutions, along with original equipment manufacturer (OEM) components. Shoals is leveraging strong R&D and a growing patent portfolio to maintain a technological edge. Market expansion—both geographically and into areas like data centers and energy storage—has become central. Success relies on continued innovation, diversification, and close relationships with major engineering and construction clients.
Quarterly Developments and Performance Drivers
The period featured robust revenue growth and a record backlog of $671.3 million in awarded projects and orders, up 4.4% year-over-year and a 4.1% sequential increase in backlog and awarded orders. Management described strong demand and noted growth in international backlog as new orders picked up. International business composed more than 13.2% of total backlog and awarded orders as of June 30, 2025—highlighting early gains from Shoals' geographic diversification push. In tandem, backlogs in data centers and the battery energy storage (BESS) segment grew as Shoals won projects with a "hyperscaler" cloud client and secured new community, commercial, and industrial (CC&I) customers.
The revenue figure (GAAP) beat analyst estimates by $6.1 million. However, the company’s gross margin (GAAP) fell to 37.2% from 40.3% the prior year. Pricing adjustments, growing volume discounts, and a heavier mix of newer customers and international projects played key roles, as Shoals took on costlier projects to build relationships and enter new markets. Management signaled that mid-to-high-30% gross margins would remain the norm for the remainder of 2025 as the company continues aggressive market and customer outreach.
Profitability headwinds were also visible in adjusted EBITDA, which dropped to $24.5 million compared to $27.7 million in the prior-year period. The company attributed this to both greater operating expenses and margin pressure. With nearly $3.0 million of that driven by legal spending tied to issues such as wire insulation shrinkback litigation and intellectual property disputes. A one-time $3.1 million asset sale also inflated net income, but adjusted net income edged down versus last year.
Significantly, rising legal expenses and warranty remediation have started impacting cash flows. Cash flow from operations (GAAP) was $1.7 million for the first half of 2025, a steep drop from $50.7 million in the comparable period last year. Cash reserves (GAAP) fell from $23.5 million at year-end 2024 to $4.7 million as of June 30, 2025, while accounts receivable and inventory both increased. Warranty liabilities tied to wire insulation issues fell from $29.6 million as of December 31, 2024 to $15.1 million as of June 30, 2025, but legal costs will remain elevated as related litigation is expected to extend into 2026. Despite these pressures, Shoals did not announce any share repurchases during the quarter.
Product Family and Market Trends
Shoals’ core product categories include its proprietary EBOS platform—modular electrical components designed to simplify solar project wiring—as well as BESS offerings for storing renewable energy, and OEM components integrated into others' equipment. Shoals’ new product launches produced tangible results: more than 15% of its backlog included at least one product not on offer a year ago, boosting wins in both core and new markets like data centers and CC&I. Management also called out multiple strategic partnership wins in battery energy storage, particularly through direct sales to large data center clients and OEM partners supplying packaged storage solutions.
Shoals' plug-and-play EBOS architecture continues to act as a differentiator, enabling easier project builds—especially in international regions that require less skilled labor. Against a backdrop of increasing tariffs and U.S. domestic content requirements, the company’s domestic manufacturing base was highlighted as an edge. While precise revenue by segment is not disclosed, management emphasized that new markets for energy storage and CC&I are providing early momentum. However, entry into international and CC&I markets has involved aggressive pricing and new customer incentives that are weighing on margins. The pipeline for new projects, especially those funded by export agencies or requiring domestic U.S. content, offers future opportunities but may carry lower initial margins.
The company worked to address its historical exposure to major customer concentration, with two additional customers now making up at least 10% of business each, according to recent filings. While this signals some progress in diversification, Shoals remains at risk if a large customer reduces or ends business, or if policy shifts slow solar installations. Regulatory and government incentives remain a foundational driver, but changes connected to U.S. policy, such as the Inflation Reduction Act’s future, could impact demand and project scheduling. For now, management reports continued strong commitment from its core engineering, procurement, and construction (EPC) client base despite headline regulatory volatility.
No material one-time product write-downs occurred in the period, and capital spending continued for the company’s large, consolidated manufacturing facility in Tennessee—a move intended to drive future leverage and efficiency gains. Looking forward, management cites greater quoting activity and order wins in CC&I, OEM, and BESS as contributing to an improving mix.
Outlook and Guidance
Shoals raised its full-year 2025 revenue outlook to $450.0–$470.0 million, up from $410.0–$450.0 million previously (GAAP designation not specified). Revenue for Q3 2025 is now anticipated between $125.0 million and $135.0 million. Adjusted EBITDA is expected in the $100.0–$115.0 million range for FY2025. However, management reduced its projection for cash flow from operations to $15.0–$25.0 million for full year 2025, down from earlier targets due to increased operating expenses and the ongoing impact of legal and warranty costs. Capital expenditures are now forecast at $30.0–$40.0 million for the full year, reflecting planned investment in new production capacity and automation.
Management expects about 78% of its current backlog and awarded orders to convert to revenue over the next twelve months, as of March 31, 2025, with improved visibility and a reduced risk of project delays in 2025 compared to 2024. Still, questions remain about the sustainability of margin recovery, the time frame for resolving ongoing litigation, and persistent risks related to customer concentration and macro policy changes. With ample demand and strong backlog, the central focus for investors in the coming quarters will be on further improvement in margin trends, cash flow generation, and real progress on legal and warranty issues.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
