Q1 2021 Shoals Technologies Group Inc Earnings Call
Good afternoon, and welcome to the Shoals Technologies group first quarter 2021 earnings conference call. Today's call is being recorded and we have allocated one hour for prepared remarks, and Q&A. There is a presentation accompanying the prepared remarks, which can be found on the investor Relations section of the Shoals website.
At this time I would like to turn this conference over to Megan <unk> General Counsel for Shoals technology. Thank you Ma'am you may begin.
Thank you operator, and thank you everyone for joining us today hosting the call with me are Shoals, Chairman Brad for C. E O G C Whitaker CFO stomach garten and S. VP of EV solutions, Jeff Turner.
On this call management 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 press news release regarding first quarter earnings and the comments made during this conference call 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 Dot com, we do not undertake any duty to update any forward looking statements.
Today's presentation also includes references to non-GAAP financial measures you should refer to the information contained in the company's first 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. We are excited to have completed our first quarter as a public company, we continue to execute and deliver on our strategy. We have a great team and an opportunity and not just domestically, but globally as well with that I'll now turn it over to Jason to provide an update on our bid.
Performance and strategy Jason.
Thank you very much Brian and good afternoon, everyone.
We have some important updates to share with you today, so I'll be referring to the slides that were posted to the Investor Relations section of our website earlier this afternoon.
I'll start off with an update on our business and growth strategies.
And then turn it over to Shoals, Chief Financial Officer, Phil Garten, who will provide financial highlights from the first quarter.
And then our SVP of EV solutions, Jeff told <unk> will give an update on our EV business initiatives.
Turning to slide seven of our presentation.
As most of you know 2020 was a record year for Shoals, both in terms of revenues and profits.
That momentum continued into Q1.
We generated more revenue and adjusted EBITDA in the first quarter of 2021 than in any other first quarter in our history.
Our results were driven by continued growth in our system solutions business, which was up 46% versus the first quarter of last year.
That growth was the result of continued strong demand for utility scale solar as well as market share gains.
More and more customers are seeing the value that our combined as you go system provider.
We're converting customers to be L. A in a much shorter period of time than it took us in the past.
To give you some context for how much we've accelerated the customer conversion process.
We have converted four of the top P. P. CS in the U S. BLA when we went public in January.
When he knows first four customers had taken us about three years.
And then just three months since our IPO, we've completed conversion of four additional H B C store system.
Bringing our total to eight.
We see the strong growth we experienced in the first quarter continuing throughout the balance of this year.
As of March 31, 2021, we had backlog and awarded orders of $181 million.
An increase of 42% from the same time last year and greater than our full year 2020 revenues.
We expanded our margins again in the first quarter with gross margin, increasing 635 basis points year over year, and approximately 290 basis points sequentially.
The primary driver of our margin expansion is the continuing shift in mix from components to systems solutions.
There's some solutions carry higher margins than components.
As we transition customers from purchasing components to purchasing system solutions.
Our margins growth.
It's also important to emphasize that the labor savings our customers are achieving using our products can exceed the cost of our products.
When you have a value proposition that's strong it's not hard to maintain prices and earn good margins.
We're seeing tremendous performance from our core combine as you go products.
But we are not standing still.
We're completing field testing of our Avi curve benchmarking and first wire management products with selected customers now and we're on track to generate first revenues from those products in Q4.
We're ahead of schedule on our EV charging products.
And we'll be accelerating the launch of those products from 'twenty to 'twenty two to the fourth quarter of this year.
Now turning to slide eight for the outlook of 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 continued declines in L. C O M Stoller, which makes it more competitive with other sources of generation.
Growing corporate utility commitments to buy more of their energy from renewable resources.
The two year extension of the solar ITC that was passed in December.
As well as the normalization of permitting processes as more states reopen from the pandemic.
The chart on the right of this slot is a reflection of how much things changed in just the past few quarters.
These bars show what IHS estimates were for solar installations in June of last year versus where they were in January of this year.
The total forecast for the U S installations from 2021 to 2020 three has increased by over 30%.
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.
It's also important to highlight that the acceleration in the solar market does more 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 staffing jobs.
The opportunity right now is that big.
Because I'll combine as you go system installs much faster than the conventional ethos and does not require skilled labor.
We can be the difference between our customers being able to take on an incremental job.
Versus letting it go to a competitor because they simply don't have the crews available to do the work.
Turning to slide nine of our presentation.
That growth in the market combined with the share gains we're seeing is reflected in our order book.
Quoting activity has increased 50% from what we were seeing during the same time last year.
And average project sizes have increased 25%.
The latter is very favorable to us because our system solutions or customized to a particular job.
We have certain fixed costs are the same regardless of job sauce.
So as the job size gets bigger we get more leverage on those costs.
More leverage on fixed cost usually translates to higher job margins.
And as I mentioned earlier as of March 31, 2021, our total backlog and awarded orders were $181 million.
Which is greater than our full year revenues last year and.
And represents a 42% increase versus the same period last year.
Turning to page 10 of our presentation.
One of our core growth strategies is to take share with our combined as you go system.
This slide gives you some perspective on how successful we've been in just the past few months converting EP season developers to our system.
When we went public in January there were four major EPC that used our system for most or all of their projects and another 10 that were in transition.
Well, we define customers that's in transition when they place an order that is included in our backlog and awarded orders.
Winning over those first four upc's took about three years.
Contrast that with in the last three months, where we completed conversion of an additional four epc's.
We're getting faster at winning new customers.
More importantly, the amount of time it is taking for sales prospects to place their first order is compressing.
You can see that in the numbers on the page.
Since our IPO in January we identified 21, new prospects.
During the first quarter five of them placed orders.
That means we successfully converted a prospect to an order in less than 90 days.
That is an extraordinarily short period of time for an EPC or developer to move to a new system that has different means and methods.
We think it underscores the tremendous strength and differentiation of our product offering.
Turning to page 11 of our presentation.
I mentioned earlier that we're not stopping with just be alike.
We have additional new products for solar in our pipeline and we're on or ahead of the launch schedule that we set out for those products during our IPO.
The next two products, we'll be introducing our avi curve benchmarking systems and water management solutions.
Avi curb benchmarking systems give owners unparalleled insight into the performance of their projects down to the string level.
And we believe there will be a valuable tool for owners to improve production and lower O&M costs.
Our management solutions are an improvement on conventional wire ties that have a high rate of failure in the field.
This will be a high volume high margin product for us.
Both products are currently being tested with customers and we're on track to generate revenues from both in Q4 of this year.
Now I'll turn it over to Phil to take you through page 12 of our presentation, which has our financial highlights for the first quarter.
Phil.
Thank you Jason.
Revenues in the first quarter increased 12% versus the prior year period to $45 6 million.
Driven by a 46% year over year increase in our system solutions revenues, which was partially offset by a decline in components revenue.
Our first quarter revenues exceeded our plan.
The growth in system solutions revenues reflect strong demand for our combined as you go system.
The decline in components revenue was in line with our plan and reflected a change in the timing of orders from our customers relative to last year and the conversion of certain customers from buyers of components to buyers of system solutions.
Prices across our product lines during the first quarter were comparable to the prior year.
Gross margins in the first quarter increased by 635 basis points versus the prior year period to 41, 2% as a result of a higher portion of revenue coming from combined as you go system solutions.
Purchasing 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 $8 9 million compared to $4 6 million in the prior year period.
This was driven by higher equity based compensation.
Increased payroll expense related to additional head count that we added as part of our planned international growth and new product initiatives.
COVID-19 related costs.
New public company costs, and nonrecurring expenses related to our IPO.
Adjusted EBITDA for the first quarter was $14 1 million up 17% from the $12 1 million in the prior year period.
With adjusted EBITDA margin, increasing more than 120 basis points year over year to 39%.
Adjusted net income was $8 8 million compared to $8 9 million during the same period in the prior year.
This was primarily as a result of higher interest expense as compared with the first quarter of 2020.
Adjusted EBITDA and adjusted net income excludes amortization of intangibles stock.
Stock based compensation.
COVID-19 related expenses and nonrecurring items.
What do you see the adjusted EBITDA and adjusted net income reconciliation tables in the first quarter press release for a bridge to our GAAP results.
Turning to our outlook for 2021.
Based on current market conditions and input from our customers and team we are reaffirming our previous guidance and expect 2021 revenues to be in the range of $230 million to $240 million Rep.
Representing a 34% year over year increase at 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.
As we noted last quarter, we expect year over year revenue growth to increase in subsequent quarters.
At the midpoint of our guidance. We currently anticipate approximately 45% of our full year revenues will fall within the first half and 55% in the second half.
Before I turn it back over to Jason I wanted to make a couple of comments regarding the commodity price increases and supply chain disruptions that several companies in the solar industry and other industries have reported.
We are not seeing those issues in our business.
We only purchase raw materials and components. After we have received a firm order from our customers, which avoids any mismatch between the price we charge our customers and the cost we pay for the inputs to our products.
So far this year all of our major suppliers have continued to meet their delivery commitments and we have not had any difficulty procuring materials for production process.
Jason back to you.
Thanks, Phil I'll now turn it over to Jeff <unk>, our SVP of EV solutions.
Jeff joined Shoals earlier this year.
Previously he was the chief commercial officer for Green launch, where he was responsible for sales relationships with major fleet operators retailers electric utilities and municipalities.
<unk> was sold to shell in 2019.
Jeff has a reputation as an innovator in developing charging solutions and his knowledge and relationships are already helping us to accelerate our EV charging strategy.
With that alternative to Jeff.
Thanks, Jason and good afternoon, everyone.
I'll start out on slide 14 of the presentation and talk about the opportunity that we see for shoals in the EV charging market first EV charging has a lot of similarities to solar the market potential is very large deployments are growing very rapidly and participants need to get more efficient to stay competitive.
Installation is nearly half the cost of deployment for solar project that is about 30%.
And the reason the installation is so costly revolve around a lot of the same issues the need for trenching complex interconnections, homerun cabling and the need for expensive skilled labor.
Together those characteristics make the EV charging market ripe for innovation and the innovation. It needs are in exactly the areas, where shoals has unique expertise and manufacturing capabilities.
Turning to slide 15.
This slide illustrates how most conventional EV charging stations are configured on the left side of the page you have the building blocks of all charging systems Transformers that stepped down to voltage from power lines feed or in distribution panels that distribute power to each dispenser.
And they also function as breakers in the event of a circuit overload.
Each piece of equipment is often source from different vendors and can arrive on site at different times.
Once all the equipment arrives on site it has to be mounted on a concrete pad and manually interconnected.
The process is very time consuming and error prone.
Once all of the equipment is installed on the pad trenches are typically Doug from the pad two each dispenser.
Conduit is laid in the trenches and wireless fish through the conduit to each dispenser individually.
In most cases, there are three to four separate wire runs from each dispenser to the distribution panel the.
The tariff for those runs is the same as it is in solar homeruns.
It's expensive and it's very time consuming not to mention disruption to the customer site and almost all of the work has to be done by licensed electricians.
We intend to change all of that.
Turning to slide 16.
We will be launching four product families that we believe will reduce the installed cost of a charge and deployment by 20% to 30%.
Our first product families of power conversion and protection skids solution Skid solutions at the power entry point will package all of the components needed for an EV charging deployment onto a prefabricated plug and play skid.
Pre assembling the components in our factory will dramatically reduce field installation cost.
Do site disruption increased quality and we'll also give customers the ability to move equipment around their site or to a new site if desired.
Utilization drives the return on investment for charging.
So the ability of our solution to be relocated has a tremendous advantage.
Our second product family is race ways.
Raceway is our above ground cable trays that eliminate or minimize the need for trenching and underground conduit.
Think of them as looking like a speed bump in a parking lot that speed bump will have cables running through it.
Reis ways are used today, but shoals intention is to develop a more aesthetically pleasing and effective solution.
Eliminating trenching and fishing wire through conduit will make instillation much faster cut work dramatically and minimize disruption to the customer site during installation.
Our third product family is our EV BLA.
Our EV BLA takes our solar BLA technology applies at the EV charging to eliminate the multiple home runs from each dispenser to the distribution panel.
The BLA, we will have the same plug and play features and benefits as our solar BLA.
Our fourth product family is our quad charger skid, our quad Charger is a prefabricated skid with for dispensers that is designed to sit at the intersection of four parking spots.
Quad charger minimize this placement and cabling costs, because each skids supports for vehicles.
We think this will be an ideal product for fleets.
Importantly, each of our product families can be used individually or in concert with one another we will encourage customers to purchase a complete system, which will be a value multiplier well.
Well, we designed each product to stand on its own if customers want to purchase only certain components.
Turning to slide 17.
We see an opportunity to disrupt the market and we are moving fast.
Phase one products skid solutions and the Quad Charger are already in development and we expect to have our first units deployed with customers in Q4.
Our phase two products Raceway and EV BLA are being developed now and we expect to have our first units deployed with customers in the first quarter of next year.
We currently expect full commercial launch of all products will occur in the second quarter of 2022.
Turning to slide 18.
We're targeting two types of customers to our EV charging products E. P. CS that build stations and charge point operators, we already had preliminary discard recessions with several epc's theyre very excited about our product. It helps it some of them are already shoals solar customers and that they have seen Howard tech.
Knowledge, it can impact our cost and efficiency.
Our value proposition for the E. P. CS that use our <unk> solutions will be first to make them more cost competitive and second to allow them to take on more jobs with the same number of staff because of less time on site for each job.
We're targeting charge plant operators, because they are the ultimate beneficiary of lower installation costs and because they typically specify which vendors equipment. They will allow <unk> to use for their stations.
Our goal is to demonstrate the benefits of our system to charge point operators and to have them specifier solutions when they solicit bids from <unk> to build stations importantly.
Importantly, we don't have to spend a lot of money to penetrate this market.
We think we can cover both groups with a relatively small investment in sales and market development resources.
Today, the industry is fairly concentrated and you can get to roughly 80% of the addressable market that you are only about a dozen companies turning to slide 19.
I'd like to close by talking about the large potential that we see for our EV business.
Between 2021, and 2025, Bloomberg estimates that there will be more than 250000, new public and commercial charging points installed in the U S.
Also important to note is that estimate was prepared before the biding administration announced its plan $174 billion investment in electric vehicles and charging infrastructure.
We currently believe the addressable spend across our product families is approximately $5000 per charge point deployed.
Keep in mind that number will be lower on smaller level, two chargers and significantly higher on D C and high power Chargers.
What that translates to is cumulative revenue potential of about $1 $3 billion over the next four years in the U S alone.
Our goal is to maximize share and grow revenue per charge point.
While maintaining gross margins consistent with our solid business, even if you assume relatively small share for shoals, you get to some pretty meaningful revenue numbers and we don't intend to be a small player.
Now I'll turn it back over to Jason.
I think you can see from Jeff slides that we're very active and fully committed to building out our EV business.
We see an opportunity to bring real innovation to that market and build an entirely new leg for our company.
I couldnt be more pleased with our team's execution, thus far and we are just getting started.
We look forward to reporting on our progress in the coming quarters.
With that I'd like to ask the operator to open 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. He confirmation tone will indicate your line is in the question queue. You May press star two to remove your question from the queue for participants using speaker equipment. It may be necessary for you to pick up.
Your handset before pressing the star keys, one moment, while we poll for questions.
My first question comes from the line of Brian Lee with Goldman Sachs. You May proceed with your question.
Hey, guys. Good afternoon, thanks for taking the questions.
First on the gross margin of 41% plus that's pretty impressive it seems like you're running pretty ahead of plan. A is there any reason margins don't stay at these levels or grind, even higher moving through the year because it sounds like you know you mentioned supply chain is not an issue for you.
And if that's the case does that make some of your profit targets for 2021, a bit on the conservative side or how should we just be thinking about that given how well you're doing on gross margins already and then I had a follow up.
Hello, Brian This is phillippe.
I do think our gross margins will be consistent through the year and do have upside. The big driver here is mix. We are combined as you go system solutions do have excellent margins because they provide excellent value and we continue to see the market.
Transitioning to those and that's where the sales growth is going to happen this year.
As far as our conservative nature for the year.
I think we're being prudent as we look at our forecast for the year and guidance and I'll turn it over to Jason in case, he has any more comments on that.
No I think that's good they'll go ahead Brian.
Alright, Yeah second question that is helpful.
I wanted to ask around the E V, which is great.
Great disclosure here nice to see you guys accelerating that and breaking it out a bit.
I don't I don't want to put you on the spot, but the IPO I think you talked about a 30 million dollar annual opportunity for Shoals and EV charging.
I take the new 5000 dollar per charging point.
And assume the 25% market share like you said at the IPO that seems like it's an $80 million annual opportunity just assuming a linear average so.
First is that right and then second what's driving that much bigger potential here versus the prior view thanks guys.
Good question, Brian Good to talk to you again, so first of all I'd like to start off there's a lot of tailwind as we well know, particularly behind EV, especially when you look at the bite and infrastructure plan.
And when we first.
Initiated our plan from an EBIT perspective, we really focused on one of the products and as you can see here.
We're updating to show what our full product launch looks like as of right now into two different phases.
So based upon that we have extended further into the opportunity within the <unk> space and again, referring back to exactly what Jeff covered.
You know what I can say at this point as you know the opportunity ahead is about $1 3 billion and when you look at that.
Even though there's opportunity from 2021 through 2025, and I think the most exciting thing about that is as we believe that that's a very conservative estimate and it definitely does not include the latest announcements from the bottom administration plan.
But at this particular point, Brian I can't go into any specific details other than we see significant upside to what we've already talked about.
And definitely look forward to providing more clear direction on that in quarters to come.
Alright, Thanks, guys I'll pass it on appreciate it.
Thanks again, Brian.
Our next question comes from the line of sharp for Russo with Guggenheim. You May proceed with your question.
Hey, guys good evening.
Hey, How's it going.
So just a couple of quick questions here first the BLA conversion data. That's on slide 10 is super helpful, but sort of with the highlighted 21 incremental prospects in steel launch, especially with the 16 that have yet to place orders can you maybe frame the size of these opt.
<unk> as we think about your backlog and then the potential timing of these opportunities we sort of think about revenue recognition clearly.
Your conversions have been very strong and it's been happening at a much faster pace, but how do we sort of frame. This.
Yes, that's a good question Shar. So first of all when you look at you know Bill I, specifically as a percentage of revenue and growth going forward.
At this point in time I can't go into any particular further detail as to exactly what that looks like but I think the key takeaway here is.
When you look at what we've been able to accomplish in such a short window right.
Especially we spent a lot of time in previous conversations talking about conversion time.
A few of the things you feel the takeaway here is the fact that we've doubled the number of EP season developers that are converted but I think the most exciting thing is when you go out and you look at the prospects that we've identified and we've been working on is that conversion from those 21 prospect.
We're 16 still reminding that prospect category.
Five almost immediately moved up and transition.
So we're very excited about that and as Phil also mentioned.
We see a significant amount of the growth going forward from a revenue perspective. This particular year coming based upon the transition of our combined as you go or bill like product.
Got it and then and then I know the sales team.
Seen an increase in quoting on sort of that repair and replace opportunities that remain kind of fully incremental to your forecasting in that $500 million annual target that you set by 'twenty three during deal launch any sort of status there as we think about the about these incremental revenue recognition.
So at this point.
We're not including that in our guidance or our forecast our guidance going forward sure.
From a rip and replace perspective I can tell you that the conversations are not going away and if anything they're being further increased.
But at this point in time again, we've not included that in our guidance because it's really hard to predict.
Exactly when that opportunity may fall into our lap and based upon that we've excluded that for potential upside as that transpires.
Got it and then lastly for me is I know you guys are the this slide 11 on sort of the new product introductions and the timing is is super helpful and you've talked about in the past about sort of thinking about the wallet share through these kind of complementary products.
You know sort of increasing rate and when you think about your boss being about 555 cents or 50 megawatt project you already do two cents of it where are you sort of as far as hitting your target for that incremental one and a half.
So as we're thinking about the wallet share gains from where you are today and incorporating slide 11.
Where are you as far as hitting that three now sent golf from a market share perspective wallet share.
Yeah, No you know how would think about that when you look at the products specifically on slide 11 first of all I mean, that's that's not all the products that we have currently in development, but just a few that we highlighted and when you look at those and you take those into full consideration those cover.
A large majority of that conversion with more specifically the high capacity plug and play harness and the BLA 2.0.
Having a higher weighted effect to that transition.
Okay got it I guess I'm kind of curious is where are you as far as the wallet share gains versus where you are today from a different from an <unk> perspective.
Yeah.
So wallet share as it correlates to the new product introductions are I want to make sure I understand youre quite right right.
Alright versus the five five cents total E boss wallet share that's out there.
Yeah, sorry, so when you look at the new products. We're just touch based on you know from wire management Avi curve.
High capacity or BLA. So those are products that we're introducing into the market based upon the timeline that we've depicted on slide 11.
And that timeline would correlate with a significant portion of that conversion of that additional wallet share as we roll these products out.
Okay perfect. That's what I was trying to get at thank you. So much I appreciate it.
Yeah.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question comes from the line of Colin Rusch with Oppenheimer. You May proceed with your question.
Thanks, So much guys can you talk a little bit about the pipeline bookings and growth of the business in Europe I know, it's kind of early days, but want to get a sense of how much progress you're making at this point.
Yeah, Hey, Collyn, Jason here, good to talk to you again.
We've talked about before.
We have our VP of EMEA in place.
And he's absolutely hitting the ground running I'm very excited about what he's been able to pull together over there are the number of customers that we've already reached out to and communicated with and even the fact that our product offering has been very well received in those conversations.
The best thing to really correlate back to is the.
Chart. It really shows where we are in our BLA conversion and more specifically when you look at the.
The prospects that we have and the customers that are in transition some of the customers that are in transition resided in the international market and more specifically because of the customers.
That are in the prospects are in the international market as well. So that's how it kind of think about that again very excited about what we've been able to accomplish but at this point I can't provide any further details as far as the exact specifics on international.
Awesome, that's actually Super helpful.
Then as you look at the domestic customers in the sell through you know we're hearing you know various commentary around you know Brooklyn projects or delays in construction schedules can you just give us a sense of how close you are tracking that with your customers and any shifts in some of the delivery time frames that you had expected and how that works just and given that you've locked in pricing on both commodities.
And in the final product early in the process.
Yeah, No. That's a good question so as of August 1st of all you know we're in constant communication.
You know with our customers.
And whether they be direct or indirect being an EPC or direct developer or indirect and as of right. Now I mean, we're not seeing any significant change in the timing of projects the reality.
He is as we all know projects do move from time to time.
But we're seeing nothing that would that.
That would force us to change our current outlook.
Alright, thanks, so much guys.
Our next question comes from the line of Philip Shen with Roth Capital Partners. You May proceed with your question.
Philip You May proceed with your question.
Are you on mute.
Okay. Our next question comes from the line of Michael Weinstein with Credit Suisse. You May proceed with your question.
Hi, guys. Thanks for the question.
Hum.
With six new international prospects out there I'm wondering if you're planning to expand at all on manufacturing international markets as well.
Is that it.
Anything you can say on that on.
Along those lines.
Yeah, Hey, Michael Jason here, good to talk to you again.
So when you look at the growth that we have right now.
Based upon our initial target markets that we've identified.
We're going to serve those you know those markets out of our current North American facilities, and how I would really think about that going forward is when we look at our next phase of growth internationally.
One of the areas that might force us to look into expanding our manufacturing footprint internationally.
Would be an area that would allow us to access certain markets that would require a local content.
Got you.
And along the same lines any strategic partnership plans or M&A type discussions you can talk about I mean, you never really had much competition out there I was just wondering if there's any.
Anybody out there worth worth taking a look at it in terms of strategic partnerships or acquisitions.
No I think Michael Theres really nothing to discuss at this time.
We're always looking for potential M&A.
Especially if it would accelerate our growth plans, but nothing to talk about it as of now.
And it's Brad I wanted to just a little more color on the lack of need here and the now for international factories. That's also a function of the fact that our products pack out so well that we can ship them anywhere in the world for half a percent of revenue or less so absent a local content.
Carmen switch Jason alluded to that's not otherwise been economic necessity like it is for many other things.
And inflated a freight environment that's.
Also proven to be just very helpful. Even domestically.
So you guys haven't or you're not anticipating any problems with shipping containers or or lack of I guess.
And of a squeeze on shipping.
Shipping services that are available out there right now.
Yes, we're impacted by that at this point you know unlike many many other industries. So it's so we're in a nice place.
We vertically integrated by the way on our manufacturing and that is because the product packs out so well, we can get it where it needs to be.
Readily.
Gotcha.
Okay. Thank you.
Yes.
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 questions. It sounds like you're doing a great job of managing the supply chain.
You are minimizing the the margin risk associated was quoting when commodity prices erosion, but the I guess, what Christian as you know some of these deliveries are few states some way out and between now and then.
<unk> experienced some disruption failure to deliver by your suppliers.
Do you have future sites at risk here, if the supply situation does deteriorate further.
Hello, Hey, Paul This is Jacob.
Yeah, Hey, Paul It's always you know all of them.
Good talking to you again I'll take the initial part of that and infill if theres anything you want to add feel free to jump in.
So when you look at that.
The supply I think it's important to note that.
From an inbound perspective, a large portion of our input our raw materials in the light.
Really reside out of North America.
When you look at at delays there.
You could have a couple of day delay, but the reality is that's not going to harm.
Our operations and really because of that.
No we've not seen any impacts that.
That would actually strain our manufacturing environment, nor have we seen any any debt resulted in delays that go out to our customers and there are several other reasons for that abl's multiple vendors that we can pull from.
But very very happy you know operationally speaking for how well the teams performed until you can you can add anything if you'd like.
Sure.
All the other item when you you talked about commodity prices and you get something that's out there nine months or something with some of the projects are because as you know in our process, we have great visibility whats coming up we locked in that price even if it's out there several months with both with the supplier that matches exactly what that.
The purchase order ties to because we have these projects down by week as we look out so even though it may be a ways out and you do see the commodity increasing commodity volatility.
We were we've stepped back from that yeah, we've locked that in with the supplier and it works very well for all parties.
Got it okay, and just something maybe it's a misunderstanding on my part, but we obviously like everyone's seen a lot of.
Solar plus storage projects all of a sudden there's some very very large.
To what extent is the product.
I've been to cool.
For that.
Okay.
So application, but your large scale customer sites.
Yeah, Hey, Paul.
Okay.
Sorry, yes, so Paul how to think about that again, just from a very high level and I'm, obviously simplifying this but.
From a very high level.
Both systems require E box.
When you look at things your panels are configured in a series and parallel configurations of harvest the energy and the batteries are really in that same configuration to store the energy.
So there's there's a lot of wiring this involved in that.
Theres also.
Circuit protection devices.
We're involved in that so there's a lot of similarity there are a few differences when you look at the.
The inrush current or the incidental energy that you actually have because it is a energy storage or it is like battery device.
But outside of that there's a lot of similarities and overlap between the two.
Mhm.
Okay, I know you're already seeing revenues associated with storage or is it still I mean, we've got is beginning to kind of slip into revenues in the second half very modest.
Yeah no.
As you well mentioned, Paul you know I'll I'll confirm I mean, we're excited about the growing number of solar projects that were seeing in our pipeline that have storage attached.
And you know really it's unfolding the way that we really thought and the way that you know a lot of the a lot of the <unk>.
A lot of the analysts and stuff, we're providing feedback so when you look at the projects that we have we currently do have projects in our pipeline and based upon those projects and their timing associated we expect to convert those into our backlog and awarded orders towards the latter part of the year.
Okay got you. Thanks, so much.
Thanks, Paul.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question comes from the line of Philip Shen with Roth Capital Partners. You May proceed with your question.
Hey, guys. Thanks for having me jump back on I'm, sorry for the trouble earlier.
As it relates to E V can you talk through how many target companies you're active with today similar to that slide 10, you know the.
Kind of the bottom two buckets there.
Opportunities you know who you are active with them then.
Who you're prospecting.
You talked about how the.
Customer base is highly concentrated but how many are you actually actively involved with now in and when do you think we could see some announcements with some easy customers. Thanks.
Hey, Bill Jason here, I'll start that and Jeff if there's anything you want to add feel free to join in so when you look at the approach that we're taking.
Jeff highlighted in the presentation.
Similar to what we did in renewables. So you know first and foremost you know we work with the EPC is very intimately.
So that they understand the product solution that we're bringing to market and we understand their need to make sure that it addresses their needs.
And as that really as we start to capitalize on those relationships again, just like we've seen in the accelerated conversion on our full system combined as you go and BLA in solar.
We start working with us.
Jeff referred to as the charge point operators.
Which is very similar to like the developers and the owners and solar to make sure that they understand that full value proposition. So the phase that we're in now is working directly with those EPC.
Make sure that.
The product that we're bringing to market they completely understand what that is and we're well aligned on that launch, but as far as the specifics or concerns Phil I can't go into you know.
Any specific details as to exactly who we're talking to but what I what I am very excited about is the the multitude or the the number of EPC that we have spoken with have been very excited about the product offerings that we're bringing to market.
So just one quick point to add and we also have been working with Cps. So it's about <unk> <unk> and <unk> and they are both very excited about what we're doing.
Okay. Thank you both of them that are.
And you know what when I am thinking about the U S utility.
Utility scale market, you know a lot of our recent conversations with E. P. CS and developers as you know just how tight things are and you know with module pricing and.
In the spot market, increasing from you know call. It a high 20 cents per watt to 30.
35, 38 cents per watt you know.
And then it seems like all the P. CS are booked out and there's just tightness everywhere through the chain was wondering how much of your backlog might be at risk as a result of our projects that might be getting pushed out.
Jason I think you may have addressed part of this earlier, but wanted to kind of ask that question, more specifically and and and put a finer point on it. Thanks.
Yeah, No issue Phil So when you look as I mentioned earlier, we do work very closely.
With our customers.
And those include both EPC and developers.
And.
There are some shifting of projects, but nothing that you know.
Based upon where projects currently set right now nothing that's meaningful enough.
That would cause us to change our outlook and what we plan on performing to for 2021.
Okay, Great really appreciate the color and I'll pass it on thanks Cheers.
Thanks Bill.
Our next question comes from the line of Jeff Osborne with Cowen You May proceed with your question.
Yeah. Good evening, just a couple of questions on my end I was wondering I know you're limited in what you can say and as it relates to combine as you go or BLA as a percentage of revenue Jason.
Jason but I was wondering if you can give us a sense of context for the backlog is there a meaningful shift of the backlog to combine as you go relative to the percentage of revenue.
Yeah. That's you know at this point, Jeff that something that you know that I can't really touch base on definitively, but again I think the exciting part about that is I mean, that's really one of our main growth initiatives.
To capture share and more specifically do that with our combined as you go product and we're seeing a lot of growth in that particular area.
But as of right now I can't I can't really touch based on that but I do look forward to going over that level of detail with you.
When we go through when we announce our fourth quarter, our fourth quarter earnings.
Got it and then I don't think you touched on but it's on the chart, but B L. A 2.0 I imagine you'll introduce that at S. P. O just based on the timing.
Can you give us a sense of where you are in the development of that and then what the commercialization processes for that.
Yeah. So bill at 2.0, we're definitely on track for that if not slightly ahead of schedule and going through the product engineering portion of that which transitions into our validation and certification.
And depending upon exactly where that product is we may or may not launch that at Spi and may be you know one of the preceding shows following that.
But very excited about how the team is performing on that product and absolutely look forward to bringing it to market.
Great. Thank you that's all I had.
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. Jason Let it go for closing remarks.
Yeah. Thank you everyone for joining us today I would like to close by thanking all of our team members for their contributions to our success.
Our shareholders for their support and our customers for their commitments and we look forward to future discussions and updating you on our progress with quarters to come. 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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