Q4 2020 Shoals Technologies Group Inc Earnings Call
[music].
Good afternoon, and welcome to the Shoals technologies grip fourth quarter 'twenty 'twenty earnings Conference call. Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A at this time.
I would like to turn the conference over to MS. Megan Pizza General Counsel for Shoals Technologies group. Thank you you may begin.
Thank you operator, and thank you everyone for joining us today hosting the call today are Shoals, chairman Brad for C. E O Jason Whitaker M C O Philip actually on this call management.
We will be making statements based on current expectations and assumptions, which are subject to risks and uncertainties actual results could differ materially from our forward looking statements. If any of our key assumptions are incorrect because of other factors discussed in today's earnings news release and the comments made during this conference call or.
Or in our latest reports and filings with the Securities and Exchange Commission.
Each of which can be found on our website www dot Shoals dotcom we.
We do not undertake any duty to update any forward looking statements.
Today's presentation also includes references to non-GAAP financial measures you.
You should refer to the information contained in the Companys fourth quarter press release for definitional information and reconciliations of historical non-GAAP measures to the comparable financial measures with that let me turn the call over to Brad.
Thank you very much Meghan and good afternoon, everyone. This.
This is our first conference call since completing our initial public offering in January.
I would like to start out by thanking our team for their outstanding execution as well as our new shareholders for their tremendous support.
The IPO was an important milestone for our company and we are all excited about the new opportunities of being public.
Public courage for us.
2020 was a year of record revenues margins and profits for Shoals, and I think Jason and his team are just getting started on what they can achieve.
I'll turn it over to Jason to provide an update on our business performance and strategy.
Thanks, Brad.
I'm going to focus my remarks today on four topics.
How we performed against our Kpis in 2020.
The outlook for our end markets in 2021.
Progress we've made on our growth strategy and actions we've taken to further strengthen the depth.
Capabilities and commitment.
<unk> of our leadership team.
Following that I'll turn it over to Shoals, Chief Financial Officer, Phil Garden, who will provide financial highlights from the fourth quarter and full year 2020, as well as our 2021 financial outlook.
So starting with our performance against our Kpis.
Those of you who met us during our IPO Roadshow, no we have two primary financial objectives.
Grow our top line faster than the market and maintain or expand our adjusted EBITDA margins.
We achieved a former about taking share and entering new product categories.
And the latter by increasing the contribution.
<unk> of higher margin system solutions to our total revenues.
Yeah.
We grew our total revenues and system solution revenues, 21% and 57% respectively in 2020.
Our system solution revenues grew faster than the overall <unk> market as a result of share gains.
In 2020, we believe approximately 50% of the solar energy projects installed in the U S use at least one <unk> product.
An increase of more than 10 percentage points versus the prior year.
In 2020, we generated 66% of our revenues from the sale of system solutions.
An increase of approximately 15 percentage points versus the prior year.
The increase in the percentage of our revenues from system solutions contributed to an expansion of our adjusted EBITDA margins of more than 900 basis points from 25, 5% in 2019 to 34, 7% in 2020.
And now turning to the outlook for our end markets.
In our core U S solar business, we're seeing increasing levels of demand as the build out of new projects accelerates.
The acceleration is being driven by growing corporate and utility commitments to buy more of their energy from renewable resources as well as the.
<unk> position of permitting processes as more states reopen from the pandemic.
The two year extension of the solar ITC in December has also expanded the total number of projects that are viable.
Though it may lead to some projects being started later in the year than originally planned as developers have a longer.
Normal to commence construction.
Yeah.
To put the market momentum were seeing in context, our quoting activity in the first two months of this year has increased approximately 50% year over year.
Yes.
It's also important to highlight that the acceleration in the solar market.
Window or than just increase our addressable market.
It also pushes customers to adopt our solution versus conventional E boss.
The reason for that is as activity levels grow labor rates rise and labor availability falls.
Many of our EPC customers are telling us that they're having difficulty.
It does mean jobs.
The opportunity right now is that big.
Because our combined as you go system install as much faster than the conventional evolves and does not require skilled labor.
We can be the difference between our customers being able to take on an incremental job.
First is letting it go to a competitor.
Staffing because they simply don't have the crews available to work.
Longer term, we're even more bullish about solar than we were a few months ago.
The department of Energy's estimate for the LCR of utility scale solar coming online in 24 months has improved 17%.
And from where it was just a year ago, reflecting solar has continued march down the cost curve.
And we've noted that based on declining cost one of the major solar industry analysts that we follow has increased their forecast for new installations by more than 20% for the next three years from what they were forecasting and just June.
That's a huge increase in the size of the market and aligns with what we've been seeing in the marketplace and hearing from customers.
And I will now spend a couple of minutes on our growth strategy and the progress we've made on each element since our IPO.
There are five elements to our growth strategy.
Growing market share.
Converting more customers to our combined as you go bill isolation.
Selling more product to our customers by focusing on projects that incorporate energy storage.
Growing our wallet share with customers by introducing complementary products that address other <unk> categories.
Expanding.
Sure.
And introducing new products for EV charging infrastructure.
I am excited to report that we're on or ahead of plan for each of these initiatives.
First our combined as you go system continues to take share from conventional homerun solutions.
Actually in the fourth quarter, we converted an additional APC to our system.
That APC has entered into an MSA with us that has already resulted in approximately 320 megawatts of orders for this year.
We're targeting converting additional apc's to our system in 2021, as we work to increase our market share to our.
Late in 2% target.
Second our strategy of concentrating on projects with energy storage is beginning to pay early dividends.
Project with storage spend about 55% more on Hebe Boston projects with just solar.
More and more of our project pipeline includes storage, which we.
60 to lead to higher Shoals revenues on each project we ship.
Third our.
Our strategy to introduce new products and the <unk> segments, where we did not historically plays on track.
Last week, we installed pre production versions of our basic Avi curve benchmarking solution across two different.
Different projects.
The customers reported that the installations went flawlessly.
And the project owners are already seeing benefits from the granular performance data that the products provide.
Next quarter selected customers will begin installing pre production versions of our wire management solutions.
Suppose installs will start as soon as our patent dockets issue.
So we're working on improved versions of our existing products and are currently in the process of filing seven new patent applications, both in the U S and internationally.
Yes.
Fourth we've continued to make.
Chris on our international expansion strategy.
We've recently hired a new VP of EMEA sales to lead our international expansion in that region.
And we're already in conversations with five potential new European customers.
Fifth.
We're focused on developing products for EV charging infrastructure.
Rick project, where the same issues of installation inefficiencies in labor availability like building stations more expensive and time consuming than what they need to be.
We see shortcomings in the products currently available in the market that create an opportunity for disruption.
With Ford GM and other Oems recently.
Start counting plan to phase out ice vehicles, we're moving towards an EV world, even faster than what was projected six months ago.
Considering that we have taken steps to accelerate the development of our EV infrastructure business, which we believe could become an entirely new leg to our business.
We've recently.
<unk> to be our senior Vice president of easy for our organization.
Jeff previously served as the Chief commercial officer of Green months.
Leading provider of turnkey EV charging solutions that was acquired by shell.
We're confident that Jeff and his team will help shoals disrupt the EV charging space the.
We've disrupted solar evolves.
And lastly, I wanted to cover a couple of things we've done since our IPO to further strengthen the depth capabilities and commitment of our leadership team.
First we will be announcing shortly the appointment of three new independent directors to our board.
<unk> totaled a for independents.
Each of these new independent directors, our established business leaders, who bring new capabilities to our board, including international business experience.
Second we further strengthened our U S sales and marketing team by hiring the former director of marketing.
Radian solar and our North American Vice President of sales, who previously held similar roles for Delta and Huawei.
Third we made all of our employee shareholders in connection with our IPO.
We believe that aligning every member of our team with our shareholders is important.
For Canada, and as you can tell we've been busy since our IPO.
Solar is growing rapidly our products are winning in the marketplace and we're executing well against the growth plans, we laid out in our IPO roadshow.
I could not be more optimistic about our potential this year and beyond.
With that.
Turn it over to Phil for an update on Shoals financial results and outlook.
Yeah.
Thank you, Jason I will provide some commentary on our fourth quarter and full year 2020 results followed by our 2021 outlook for.
For the fourth quarter, we generated revenues of $38 8 million.
Which was in line with our expectations.
Year over year growth was more modest in the fourth quarter due to extended downtime. We took in December while we expanded capacity as well as an extraordinarily strong Q4 2019.
We expect quarterly comparisons going forward to be consistent with year over year growth.
<unk> guidance.
Though we expect more of our growth to come in the second half versus the first half.
Prices across our product lines during the fourth quarter were comparable to the prior year.
Gross margins in the fourth quarter increased by more than 530 basis points to 38, 3%.
Employees from the prior year period as a result of a higher proportion of revenue from combined as you go system solutions.
Are you seeing efficiencies from increased volumes.
Improved material planning, which reduced logistics costs enhancements to product design that lowered manufacturing costs and other manufacturing efficiencies.
Resulting from higher production volume.
Operating expenses were $7 7 million compared to $4 3 million in the prior period.
This was driven by higher equity based compensation increased payroll expense due to higher head count and nonrecurring expenses related to our IPO.
<unk> adjusted EBITDA, which excludes the amortization of intangibles stock based compensation COVID-19 related expenses and other nonrecurring items was $14 1 million up 32% from $10 7 million in the prior period with adjusted EBITDA margin increasing approximately.
820 basis points year over year to 36, 4%.
Adjusted net income increased 10, 6% to $11 $1 million compared to $10 1 million during the same period in the prior year.
Now turning to our full year results.
<unk> revenues for the year ended December 31, 2020 grew 21, 5% to $175 5 million.
Compared to a $144 5 million in the prior year.
This was driven by significantly higher sales volumes as a result of increased demand for solar <unk> generally.
Red line as you go product specifically.
We derived 66% of our revenues in 2020 from sales and system solutions, which was an increase of approximately 15 percentage points versus 2019.
Gross profit increased 55% to $66 five.
And.
Compared to $44 2 million in the prior year.
This was driven by higher volume and efficiency gains.
Gross margin expanded by approximately 700 basis points to 37, 9% in 2020 compared to 36% in the prior year period.
Higher gross.
<unk> was a result of having more revenues to absorb fixed costs as well as increased sales of system solutions for combined as you go he boss, which carry higher margins than our other products.
Operating expenses were $29 3 million compared to $17 3 million in the prior year.
This was.
Smart merrily as a result of higher noncash equity based compensation related to our class B units issued.
An increase in head count and professional fees related to our IPO.
Adjusted EBITDA grew 65, 6% to $60 9 million compared to $36.
Pardon me in the prior year.
Adjusted net income increased 66, 4% to $56 3 million compared to $33 9 million in the prior year.
Adjusted EBITDA and adjusted net income exclude the amortization of intangibles stock based compensation Covid.
Agent gain related expenses and nonrecurring items.
Please see the adjusted EBITDA and adjusted net income tables in our fourth quarter press release.
Turning to our outlook for 2021, our backlog as of December 31, 2020 was $157 million representing <unk>.
An increase of 46% year over year.
We have also seen our backlog continued to grow during the first quarter as a result of robust order activity.
Based upon what we're seeing in the market and feedback from our customers. We currently expect 2021 revenues to be in the range of 230 to 240 million.
Representing a 34% year over year increase based on the midpoint of the range. We expect adjusted EBITDA to be in the range of $75 million to $80 million and adjusted net income to be in the range of $47 million to $51 million.
Now I will turn it back over to Jason for closing remarks.
Thanks, Phil.
I'd like to wrap up with five simple reasons, while we're excited about shoals for 2021 and beyond.
Number one.
Growth in our core U S solar market is accelerating.
Number two we have the category, killing product for solar evolves and where Te.
Sure.
Number three we continue to migrate customers from components to systems solutions, which allows us to earn higher margins.
Number four we're on our way to tapping the international market opportunity, which could ultimately be as large as our core U S market.
And number five we see an opportunity to bring innovation to the EV charging which could create an entirely new leg for our business.
Thank you for your time today.
Now, we'll open up the line for questions.
At this time, we'll be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
<unk> been using speaker equipment and may be necessary for you to pick up your handset before pressing the star keys.
Please limit yourself to one question and one follow up one moment, while we poll for questions.
Our first question comes from the line of Brian Lee with Goldman Sachs. You May proceed with your question.
Hey, guys. Thanks for taking my questions Congrats.
Congrats on the first quarter here out publicly.
Public company good job.
Maybe just first question, Jason and Phil.
The backlog is up 46% as of the end of 2020, so you've got a lot of momentum heading into the new year.
The revenue guidance I know, you're saying, it's based on what Youre hearing from the customers and the visibility you have but it's up.
30, 35% year on year. So can you give a little bit of context, I mean, the backlog as I recall is a 12 month number. So is the revenue outlook just a little bit.
Conservative relative to the backlog growth there is a backlog just kind of a lot of first half visibility and so you don't want to stretch into kind of the back half.
What kind of business trends you might see there and then I have a follow up.
Perfect Hey, Brian This is Jason good good talking to you again and thank you very much.
I guess first of all we take meeting the commitments, we make to our shareholders very serious and for that reason, we're very confident in the guidance we provided today.
But.
But you know keep in mind to the extent that we do see our performance meaningfully exceeding our guidance, we would definitely update you in subsequent quarters coming down the pipe.
Alright fair enough, but just just to maybe provide a little bit of context. The backlog is at 12 months number and would you say, there's a you know anytime.
Any kind of.
Notable.
Timing cadence is to first half second half embedded in that backlog.
So the backlog as you know a large portion of the backlog is there is a 12 month number I mean as we've talked about.
Before we do see even further visibility past that but.
Significant portion of that backlog is in the first part.
12 months.
With a large portion of that actually rolling into Q3 and Q4.
As we see it today.
Okay. Great. That's helpful. And then just my follow up is on some of the commentary around that.
<unk> and conversion so it sounds like you've already.
Done a conversion here early on in the new year and you've got several more on the way can you provide a bit of context as to.
Are these all kind of larger top 10, Pcs I know you had several of them at the time of IPO, but are.
Are these the rest of the top 10 you hadn't.
Yet converted and is there sort of a target for then becoming kind of 50% you'd be coming 50% of their book This year, and then moving higher or kind of what's the cadence for penetrating some of the new accounts as you do convert them over thanks guys.
No perfect. Thanks, Brian Good question so.
Isn't that the EPC that we mentioned in our prepared remarks that is definitely a top player in the market.
And from a timing standpoint, it really it really difficult to say I can tell you that.
I'm very proud of.
Sales team is operated.
And what they've been able to accomplish from that perspective.
During this time period in which we start working with those you can see.
That conversion cycle may vary somewhat down the path we are going after.
Several more property UPC there in the market to be able to get us to our.
Golden.
Okay. Thanks, a lot guys.
Thank you very.
Yes.
Our next question comes from the line of.
Shar <unk> with Guggenheim Partners you May proceed with your question.
Hey, guys How's it going and its actually Coty Clark on for Shar. Thanks for taking my questions.
So first can you provide any updated color on the progress.
Granted feel a 2.0 are you still on track to complete product engineering, but <unk>. This year end and then when should we expect more detail on the product and its implications on your growth trajectory is it kind of after that product engineering phase or is that or are the validation and certification.
Yes.
Oh, Hey, Cody this is Jacob Jason speaking so.
As we've talked about in the past I'll just.
Ill cover a few of those topics, we can't go into a lot of detail about the only to point out.
Because we haven't completed that full patent cycle.
But again, how would think about the product is.
But it offers an additional level of savings from an installation cost perspective base.
Based upon our labor savings it barrage above and beyond what the current BLA bring to the market today.
And when we look at the 2.0, it does that by essentially incorporating other component that we don't care.
Currently provide or participate in today.
And when you look at really where we are.
Hard to say, where we are on track with that product as well just like we are with all of our other products that we've mentioned about bringing to market.
But just to reiterate what that is we will be going through and doing a.
A commercial launch early.
Is that year and expect to be generating revenue towards the latter half of 2022.
And then once we complete the patent docket.
For that particular product itself and we go through our what I would call pre production.
Process with our customer base, that's when we will.
Early next open up that particular technology for further information.
Got it Okay. That's helpful. And then second just on the Rip and replace opportunity you know you've mentioned previously that youre starting to see some rfps for these type of projects wondering if that's picked up at all in the past few months and is there any data.
Other points that you can kind of point to that would help us frame this opportunity in 2021 and beyond.
So the short answer is.
We have seen an increase in and rip and replace opportunities.
Since the last I guess since the last.
Time, we spoke we've actually quoted quite a few projects to be honest.
But when you look at guidance forward looking guidance, it's very difficult to to.
Be able to predict exactly what that is because it depends upon what the failure mode is if it's a good.
It's something that's impeding performance and it's not a safety issue, it's really based upon.
The frequency in which that particular client wants to go through and replace that product they might just replace it as it fills.
But if it's a if it's a significant safety issue then they're pretty much obligated to go through and and replace that product with something that works. So it's very difficult.
To be able to provide forward guidance from a rip and replace perspective.
Awesome. Thanks, so much and congrats on the execution.
Absolutely. Thanks Scotty.
Our next question comes from the line of Michael Weinstein with Credit Suisse. You May proceed with your question.
Hi, guys. Thanks for thanks for the question, Hey, I'm on an international shipping delays that we're seeing.
<unk> for the ports. So I'm just wondering if is.
Is that impacting you at all and I know in a lot of your parts or are made domestically, but is it impacting perhaps maybe your overseas expansion in any way.
Yeah.
Yeah. So that's a good question Michael.
Yeah, we are seeing much like <unk>.
Would assume everybody else's.
We are seeing shipping delays.
But one of the things that you'll find is we're very conservative.
Both on inbound and outbound not.
Not very much of our product is inbound, but specifically outbound so we try to make sure that.
You know, we don't Miss any particular customer delays.
For that reason, we've been very successful in executing against the commitments that we made to our customers and as a result of not had any shortcomings from a delivery perspective right now.
Great and.
Also the are you seeing any impact at all from higher commodity costs.
Copper aluminum and and the like.
Yeah, Hey, Phil Yeah.
Sure.
Yeah, I got that one.
Right.
Rice's of copper and aluminum wire have increased but they are not impacting our margins.
As you know the reason is that our wire suppliers commit to a price in the week.
Costs within our system and that our customer only has seven days to accept that.
And that's when they can issue a P O if they wait more than the seven days, we will refresh the quote.
That'll be reflected in the new price on there. They are quoted so we pass through all commodity.
We close on to our customers and they.
They understand it and we understand it so it works quite well.
Got it and you're still a relatively small part of the overall cost of of construction. So it's not Oh, yes, you don't see it impacting our sales really that much probably right.
No it hasn't moved.
Risks are yet on the demand for the product to the overall product.
In terms of Oh go ahead go ahead.
Jason just one other thing I mean, when you look at the increase right.
You're asking about in terms of sales I mean, you know we're seeing an increase you know all of our competition has seen an increase as well so but.
Yeah, we've not seen any.
Do you have any decrease in sales because of the good questions.
Got you.
What about the revenue mix in 2021 versus U S versus international stores EV charging a congratulations to Jeff on heading the new EV infrastructure business and also just in terms of E V. Yeah since since.
Any.
So you last spoke about it I mean are you seeing any more total addressable market, there or any more opportunities beyond that I think it was like a $30 million opportunity that you've previously talked about there.
So as far as.
Ford guidance, breaking it down between the different opportunities in the different segments, that's something that.
Since youre doing.
As of right now, but yes, we're very excited about EV.
I'm very excited about bringing Jeff online and.
There's there's a lot of things that we see you know we talked about in the past you know the EV market is much like what the the solar market was to US you know.
We're not many many many years ago, and we see a lot of opportunities for optimization.
Just based upon products that don't really exist out there in the market today. So we're very excited about that but we're still tracking towards the commitments that we made in the public market.
As a reminder, please limit yourself to one question and one follow up our next question comes from the line of Paul Coster with J P. Morgan you May proceed with your question.
Yeah. Thanks for taking my question and welcome to the public markets.
So just focusing on the international growth and the growth opportunities.
Just for a moment can you talk a little bit about your go to market strategies for both somehow the revolving it sounded like them international so new hiring of marketing.
Uh huh.
Professional.
Previously I thought you'd be following your customers since those markets, perhaps you can elaborate on that.
It did sound like you're incrementally a constructive about you'd be charging them and you must have some visibility into how are you going to get to market with it because it's much more fragmented end market right.
Yeah, Hey, Paul Jason here so.
Looking at the international.
And took it.
We have the higher that we have made there.
<unk> is a we've hired our VP of EMEA, so boots on the ground local representation, we're very excited about that hire.
And when you look at the strategy in general.
Really you know as we've talked about in the past as you know.
Taking.
So mark two prong approach that we've found to be very successful in North America about working with not only the locally P. CS but also the <unk>.
Owners and developers to make sure that they really understand that value proposition and and and push that product through and to the APC.
They work with so again very similar approach to what we've done very successfully in North America.
And as I mentioned, we're already working with several new clients internationally and working on the projects that they have in their pipeline. So that we can start.
Converting them over to the shelves product suite.
And your second part of the question, Paul and let me know if I missed something else. When you look at when you look at E D.
As we've talked about you know in the past.
Products that were going after.
Predominantly on the <unk> side that allow you to go through and optimize the <unk> portion of that E D.
P C and ironically because of that several of the customers that we already serve and serve well you know in this space specifically.
Specifically renewables are already playing in that market. So we're going to take a very similar approach in E.
By going after the.
Mark larger installers and again, we're looking at.
Fleet level applications. So we're not really targeting what would be quantified it as like a residential sale, which is very fragmented as you mentioned Paul.
Okay got it Okay. One last question you said that the quoting activity was up 50% year.
So what is quoting activity.
Perhaps you can just sort of define it for us.
So that is it just all the value or the number of koos <unk>.
So that's actually a great question, Paul that particular metric I believe was the quoting activity itself.
In Europe.
<unk> quantified the number of quotes that go out from the sales team.
But how I would think of that is.
When you look at the market that we're in.
A lot of the projects that are going out are very very large projects. So a significant increase in what.
Selling year over year, and very excited about the opportunity ahead.
Okay. Thanks.
Thanks, Paul.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
While we poll for questions.
Your next question comes from the line of Stephen Byrd with Morgan Stanley You May proceed with your question.
Hey, good afternoon, congrats on a good start to being a public company.
Thank you Brett to your point.
I wanted to just explore the the EV business, a little bit more it sounds like you're very optimistic.
We've seen is this something where we could see some relatively important announcements sometime this year or do you think it sort of more like if you just see incremental activity without any sort of major sort of milestone agreements.
Agreements or is it more likely to be I guess chunky to use a non scientific term but.
Just sort of how should we kind of think about the evolution of that opportunity in 2021.
Yeah.
So what I would what I would think of E Bay and in terms of 2021 is really we're building out what I would call of an EV infrastructure business unit.
And we're doing that again.
Based upon the the rapid acceleration that we see in the EV market. So we're going to be going through validating some of the product that we've already identified and then further finalizing our product road map so that.
We can rollout a very successful product based upon feedback.
Back from the customers that we already know that participate in that market.
And.
As that particular.
Product opportunity begins to flourish.
We will communicate about more of our plans in the upcoming quarters.
Understood. So it does sound like maybe one of the more notable things will just be sort.
Sort of major.
Product announcements that you think sort of address a critical need there right that could be.
Some of the more noteworthy things we see.
Yeah. That's that's what that that's something that you could definitely consider going forward will be just a general products that we're bringing out announcements and exactly what they.
Yes, okay.
Okay, Great and then just one other on geographic.
Geographic growth with a number of questions on that already but given.
Given the nature of your higher I thought I'd just check in since the time of your IPO in terms of areas of.
Geographic areas that look most promising to you it sounds like you know your Europe.
Continues to be a key area are there any other geographies sort of noteworthy that we should be thinking about.
So you know we're you know obviously you're spot on with Europe, you know in that General region. You know that was one of the reasons why we went after bringing on.
Our first candidate in that area.
But also Latam.
We're still seeing a lot of opportunity in Australia, so really without going into a lot of detail.
A lot of the opportunities that we originally laid out we are seeing still exist today, but I definitely would say that Europe is a very strong area as we speak right now.
Perfect.
Perfect. Thank you very much.
Our next question comes from the line of Philip Shen with Roth Capital Partners. You May proceed with your question.
Hey, guys. Thanks for taking my questions first one has to do with revenue mix.
As we get through.
The quarter.
<unk>.
Phil you talked about more revenues in the back half.
Versus the first half can you talk about or quantifying any way what that might mean and if there's any way you could even provide a quarterly sense.
That'd be very helpful. Thanks.
Okay. So this is phillippe.
We we don't give those forecast by quarter, but as I mentioned there is a.
A significant step up even though we see a very strong first half.
With as I mentioned are.
Strong growth year over year as we've seen the last several quarters.
Last couple of years that historic growth, we're going to see that and we see that in the first part of the year, but then a major step up in the second half a lot of projects are coming online.
Okay. So would 70 30, maybe something.
Maybe 65 35 split work hub between.
Catherine first half.
Hi.
Yeah.
Jason do you want to comment I'm not sure exactly how much I can say honestly sorry isn't in our first.
Coal, but there will definitely be weighted towards the second half.
Okay, Great and then maybe.
Talk through the margin cadence by quarter as well if possible.
We see improvement as we go through the year or does it flattish.
Steady at this high thirties level a percentage.
Well the EBITDA margins.
There's a variety of margins, but if you.
You look at adjusted EBITDA margins.
We will see it lower in the first part of the year.
And actually lower for the year than it was prior year and if you remember as.
As we talked about during the IPO, it's primarily driven by investment in our SG&A.
Which is driven by two the the.
Public company costs.
As well as far as the equity based compensation and those type of things and we're investing in all of those growth initiatives. So there'll be a step function in 2021 in SG&A.
Which is what we're looking at and we've talked about before but then the margins the gross margin.
Margins on our top line, we will see we're projecting to continue to improve as we go through the year.
Okay. So.
We got remember roughly high 30, low 38, 3% in Q4.
Shall we see that study in Q1, and two and then maybe.
A slight tick up in Q3 and four.
I would.
Don't go into details, but there they will be an impact of SG&A as we go into this year.
That it will take a step down we are projecting that.
We're talking about gross margin sorry, Phil.
Gross.
Margins I'm sorry.
Margins, we see to continue to do very well and improve as we see that market shifts to higher margin products to our system solutions.
Okay. One last one if I may I'm around capacity from your perspective, you guys talked about being at one eight times.
<unk> we're.
We're having 1.8 times capacity of your trailing 12 months.
Revenues.
As of the end of Q3, which were about $175 million.
So if you just simply apply that one point in time. It suggests that you could be at 315 million in terms of a run rate of revenue.
Versus your 'twenty.
Q1 guide of $235 million can you just talk about what's what would it take to <unk>.
Get to that higher level of revenue, what's limiting you know and and what might open that up thanks.
Right.
So Phil that's a good question.
'twenty 'twenty, you're speaking with you again.
So yes, you are correct you know as far as the capacity that we have and again as we've talked about in the past.
We try to be very aggressive when it comes to having capacity available Oh, it's not uncommon for some of that customized manufacturing equipment.
That we we design and build ourselves.
For it to be built you know a year plus in advance a matter of fact.
We're installing.
Significant amount of equipment that are highly doubt will be touched this particular calendar year.
So that's one of the things that we always try to stay ahead of you know to make sure that we have that capacity.
Equipment available.
You know for opportunities when they come out to you that you can actually capitalize on so a very important to our growth down the road and when you look at the.
The last half of your question Phil.
You know taking a maybe I may have misunderstood this but essentially taking.
I see a spike up.
$3 50, or or the like really we want to make sure that you know even though we do have a lot of opportunities ahead in some very exciting growth.
We also want to do that very conservative conservatively and make sure.
That we can meet all the demands of our customers because you can have the best.
<unk> out there in the world.
And if you can't meet the demands of your customers need then you're not going to be successful. So it's really a combination of the two Phil.
Thanks, Jason appreciate all the answers to my detailed questions and congrats as well on a successful IPO.
Absolutely. Thank you very much bill.
Our next question comes from the line of Colin Rusch with Oppenheimer. You May proceed with your question.
Thanks, So much guys can you give us a sense of how much of the revenue growth from 2020 to 2021, its being driven by higher commodity prices.
First product, we actually don't have anything built in our model for for growth about higher commodity prices, because we do pass those on.
So we have we have put nothing in our model.
Of tweaking that up for commodity prices.
Okay. That's super helpful. And then can you speak.
Me too.
The acceleration in close rates or the the trend lines in terms of.
How much of the business, you're quoting you actually ultimately winning over the last couple of quarters.
Yeah. That's that's one of the things that we're not prepared to talk about today, but again, what I can say.
Does that.
The quotes that are going out there and the phenomenal job that our sales organization is doing is nothing short of amazing. So very excited about the about the rate of closure on those projects.
Okay. Thanks, a lot guys.
Yes.
Our next question comes from the line.
Then Palo with Baird you May proceed with your question.
Hey al.
Thanks.
For the question. So two questions. So all of the solar calls, we've been listening to or talking about accelerating growth.
So.
Maybe your perspective on that and then two I grew up in the hospital.
Close to you guys.
There's a there's a.
Political sense a belt.
Like solar panels wind turbines being being not good.
Good in some areas.
Yeah I just wanted to hear your perspective on how you.
You guys deal with the political part of all of those things.
Yeah.
Yeah, Hey, Ben this is Jason here, So I'll take the first part of the question and maybe turn the second question over to Brad if he wants to comment.
Or I can proceed with it as well, but you know when you look at the first question you know from a growth perspective.
We are seeing a lot of opportunity ahead of you know when you know as we've talked about before and mentioned in our prepared remarks.
50% increase in and our quote.
<unk> profile from the sales organization.
Is a very significant increase.
So we're seeing a lot of opportunities when you look at some of those projects.
You know we feel like some of those some of that coding it's coming in at maybe from projects that otherwise.
<unk> may not have been able to be constructed.
Until you know the ITC.
Took place but.
But yeah, we're definitely seeing a lot of a lot of opportunities in growth projects that are coming online quicker.
Quicker or projects that we hadn't heard of as well as you know opportunities carrying out towards the latter year.
In 2020.
Turning to 2023.
Yeah.
Okay.
It was granted.
Uh huh.
I'm happy to speak a little bit to the political question.
I think you'd go back a decade, or so ago and solar was not competitive with alternative sources of generation option subsidies.
Our political constituencies that are opposed to sort of meddling in free markets and that sort of thing obviously weren't too happy about that but that was then this is now a solar is full stop.
Cost of level liberalized cost of energy of any form of production I think that the technology.
At this point speaks for itself and I do think that political opposition wanes and as waning over time as a result of that and it is a very robust reliable technology. It doesn't have NIMBY problems. When you build it the way that many other technologies.
We have it actually performed well in the ERCOT region by the way during the big problems that occurred there I think it was the one source of generation exceeded expectation. So unlike unlike both gas and wind. So we feel we're really on the on the right side of the equation.
Quays in here and hopefully any resistance overtime evaporates, just because of the economic merits that solar provides.
Thank you.
You're welcome.
Ladies and gentlemen, we have reached the end of today's question and answer session.
I would like to turn this call back over to Mr. Joseph Medical CEO for closing remarks.
Okay.
So thank you everyone for joining us today and I'd like to close by reiterating how proud I am of our team and the excitement that I have our future I'd also like to thank our shareholders for their tremendous.
Support and we look forward to future discussions updating you on our progress. Thank you very much.
Thank you for joining US today. This concludes today's conference you may disconnect your lines at this time.
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