Shoals (SHLS) Q3 2026 Earnings Call Transcript

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DATE

Nov. 4, 2026

CALL PARTICIPANTS

• Vice President of Finance and Investor Relations – Matt Tractenberg
• Chairman of the Board – Brad Forth
• Chief Executive Officer – Brandon Moss
• Chief Executive Officer of ARRAY Technologies – Kevin Hostetler
• Chief Financial Officer – Dominic Bardos
• Chief Financial Officer of ARRAY Technologies – Keith Jennings

TAKEAWAYS

• Merger Exchange Ratio — 1.6931 shares of Array Technologies common stock for each share of Shoals Technologies Group, Inc. owned, structuring the transaction as an all-stock merger.
• Combined Ownership — 65% for Shoals shareholders and 35% for Array shareholders upon completion of the transaction.
• Projected 2027 Revenue — $2.2 billion to $2.4 billion, representing the preliminary estimated outlook for the combined entity.
• Projected 2027 Adjusted EBITDA — $410 million to $480 million, which includes anticipated synergies from the merger.
• Annual Synergy Target — $100 million in incremental EBITDA expected by the third year, with $35 million in run-rate synergies targeted for the first year.
• Preferred Stock Redemption — $161.3 million to be redeemed within 90 days of closing at $0.93 on the dollar, reducing future distributions by over $60 million through 2031.
• Secondary Preferred Redemption — $156.3 million to be redeemed over three years at $0.96 on the dollar, contributing to a total preferred stock reduction of over 60%.
• Shoals Q3 Revenue — $195.3 million, a 43.8% increase driven by high demand and productivity improvements at the new manufacturing facility.
• Shoals Q3 Adjusted EBITDA — $39.8 million, representing 20.4% of revenue compared to $32.2 million in the prior-year period.
• Combined Backlog — $3.4 billion as of Sept. 30, 2026, including awarded orders across both organizations.
• Pro Forma Leverage — 2.6 times net debt to Adjusted EBITDA on a 2026 basis, with a projected decline to less than two times by 2027.
• Operational Cost Savings — $20 million annually from the elimination of duplicate public company costs and corporate overhead consolidation.
• Tax Assets — $1.6 billion of tax amortization and $237 million of net operating losses (NOLs) that the combined company expects will reduce future cash tax obligations.
• Shoals Q3 Gross Margin — 31.9%, a decrease from 37.0% last year due to operational inefficiencies during the new facility ramp-up and product quality rework.
• Array Q3 Revenue — $330 million, including the first month of contribution from the acquisition of Affordable Wire Management (AWM).
• Array Order Book — $2.6 billion, representing a 42% increase driven by strong domestic tracker execution.
• Shoals FY 2026 Revenue Guidance — $665 million to $685 million, reflecting a raised and narrowed outlook for the full year.
• Shoals Q4 2026 Outlook — $165 million to $185 million in revenue with Adjusted EBITDA between $36 million and $40 million.
• Shoals Q3 New Orders — $186 million, marking the third-highest bookings period in the company’s history.
• Capital Expenditure Guidance — $20 million to $30 million for the full year 2026, focused on finishing facility transitions and operational scaling.
• Tracker Market Opportunity — 2 percentage points of U.S. market share gain, which management estimated would translate to nearly $20 million of incremental EBITDA.

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RISKS

• Management reported that Shoals gross profit percentage was negatively impacted by “operational inefficiencies associated with the ramp-up and transition into the new manufacturing facility and product mix within the quarter, along with costs incurred to address product quality matters, including rework and corrective actions.”
• Kevin Hostetler noted that Array Adjusted gross margin of 22.8% included “a 330 basis point charge for a long-dated 45X rebate reserve with a certain supplier.”
• Management indicated that the merger is subject to regulatory approvals and a majority vote from both companies’ shareholders, with a target closing in the first quarter of 2027.

SUMMARY

Shoals Technologies Group, Inc. (SHLS +10.27%) announced a definitive merger agreement with Array Technologies to create a combined energy infrastructure platform specializing in electrical and structural balance of system solutions. Management reported that the all-stock transaction will result in Shoals shareholders owning 65% of the new entity, which is expected to operate under a new name and ticker symbol. The strategic rationale focuses on a significant cross-selling opportunity, as only 20% of projects currently utilize products from both companies. The combined company expects to leverage Shoals’ customer engagement and Array’s international footprint to drive growth in the utility-scale solar market, while also targeting expansion into battery energy storage and data center power infrastructure. Financial priorities include achieving $100 million in annual synergies by the third year and significantly reducing outstanding preferred stock to improve free cash flow.

• Management identified an 80% non-overlap in existing project volumes between the two companies, representing a cross-selling opportunity estimated at $2.5 billion in incremental sales.
• CEO Moss indicated that the company will continue to advance AirLink and PowerHub products to target the data center and battery storage markets.
• The merger structure was chosen to preserve Array’s existing debt financing, avoiding the need for refinancing and keeping interest costs lower.
• Management noted that the combined company will have access to an estimated U.S. profit pool of approximately $1.8 billion annually across its integrated product stack.
• CEO Moss stated, “The immediate value is coordination and simplicity, but the bigger opportunity is to design products that work together from the beginning.”
• The company plans to use Array’s established international sales infrastructure to accelerate the entry of Shoals products into global markets where it currently lacks a major presence.

INDUSTRY GLOSSARY

• EBOS (Electrical Balance of System): All components of a solar power system other than the panels themselves, including wiring, combiners, and fuses.
• SBOS (Structural Balance of System): The mechanical and structural components of a solar installation, such as trackers and foundations.
• BLA (Big Lead Assembly): A Shoals-branded plug-and-play wiring solution designed to replace traditional solar combiners and reduce field labor.
• 45X: A reference to Section 45X of the Internal Revenue Code, which provides production tax credits for domestic manufacturing of clean energy components.
• NOL (Net Operating Loss): A tax credit created when a company’s allowable tax deductions exceed its taxable income, used to offset future tax payments.
• EPC (Engineering, Procurement, and Construction): Fir

  Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.