Welcome, everybody. This is our 10th annual Energy Conference. Thank you very much for joining. My name is Mark Strauss. I cover clean energy here in the U.S. This next session is with Shoals. This is an overweight-rated stock for us. We've got Dominic Bardos, CFO. Dominic, thank you for joining. Thanks so much, Mark. Appreciate you having us. We'll try and keep this open. If anybody has any questions, feel free to raise your hand. I think we've got mics running around. I could be wrong on that. Yeah. Okay. Thank you. With that, let's just get stuck in. Dom, can we talk about just kind of start with it's been a very active—it's an understatement—an active last few months or so in the space. Can we—I want to come back to talking about tariffs and the IRA rabbit holes, wherever we're going with that. Can you just kind of talk about demand and bookings, kind of activity, pipeline activity that you're seeing since your last update on the 1Q call? Sure. As we said on the last call, demand in the near term has remained very strong. Projects are moving forward. You have a lot of our EPC customers have very full slates. As you know, but maybe perhaps some of the listeners may not, the lead times, the length of time for solar projects is relatively lengthy. A lot of these projects have taken flight and are well underway. They have been permitted. They know their interconnection dates. Demand has remained very strong. Okay. All right. Can you talk about the pain points in development today for your customers? You mentioned the EPC customers and their full slates. I mean, it's been a pretty volatile last couple of years with interconnections, with supply chain, with policy uncertainty, financing. Kind of where do we stand with some of that? Can you talk about your expectations anyway of when these headwinds might potentially go away? Yeah. So let's set aside the regulatory environment for a minute because that's huge right now. That's created a lot of turmoil. We'll talk about that, I'm sure, here in a minute. Some of the other things are very consistent. Right now in the solar industry, it's similar constraints that have been there, but the industry has learned to deal with them. Things like labor availability for both skilled and unskilled labor in often remote locations. The supply chain elements of large switchgear and transformer equipment and those sorts of things is still lengthy lead times on getting those things fulfilled. The industry has learned how to work those into timelines. Permitting and interconnection still remain challenges. Like anything, we talked about--I was just joking outside about getting permitting for nuclear. I imagine that's going to be a little bit harder than getting solar permitted. Those are the kinds of things that are still abounding in the industry. Recently, the, I would say, unpredictability of administrative change, either with tariffs or the regulatory policy, has introduced a new slate of issues. I'm sure we'll talk about some of that. Okay. Yeah. Let's pivot to that. I mean, we've got the House bill that's been approved. We've seen the Senate Finance Committee, whenever that was, a week ago now. Who knows? This could be, we could find out something today. Yeah. Again, kind of going down the different rabbit holes here. I mean, kind of comparing and contrasting the House bill versus the Senate bill, can you just kind of talk about what you see as kind of demand trends, I guess, near term? I mean, if you've got to begin construction in 60 days or begin by year-end 2027 to get a partial credit, I mean, just kind of how do you think the shape of everything looks here? I think you've caveated this well. It is very premature, and everything is still in flight. Clearly, we were pleased to see some of the changes that the Senate commissions would like to put into it, which is extending and perhaps easing some of the reductions that you would see for tax credits in the IRA, the investment tax credits. It is still early for that. I think folks are still trying to figure that out. The administration has targeted the 4th of July. We'll see how that does if that comes through. Fundamentally, with regards to the industry, it appears that the availability of investment tax credits will be phased out. I think that's a given at this point. We have to see the timing of that. Whether or not construction on these projects can be accelerated is a difficult question. Simply because if you know you have a lead time, you're not permitted yet. If you have interconnection that could be years away, it's hard to pull things forward just to safe harbor. The definitions of what means you're started, have you started investment, have you purchased panels, those are the sorts of things that will flesh out with guidance here coming up in the next few weeks. We'll have a much better understanding of that. Fundamentally, folks are just going to have to deal with an inflationary cost of new solar. If tax credits go away, then things will just become more expensive. There will be some offtake agreements, some power purchase agreements that will have to be renegotiated or perhaps negotiated with a different starting point. None of that fundamentally changes demand. We still need energy. We still need electrons on the grid. If solar in the near term, I would say the next few years, is still the fastest way to get things on the grid, I do not think the changes are going to be that devastating for the industry. I think the good news, I think, for Shoals is it is very much the same business for us right now. There was nothing in these things that really directly impact us. We do not participate in the 45X manufacturers' credits. We would love to. I would love for EBOS to get credit for that and get some dollars. We do not currently get that today. If they do phase those things out aggressively, that is okay for us. We are still going to continue to produce EBOS. Now, the timing, if folks are allowed to safe harbor and start projects earlier, like I say, there might be some challenges if it's not permitted yet and you really don't have that in place. Other than that, we just have to wait and see over the next few weeks how everything plays out. Got it. Okay. One of the other kind of new things with the House and the Senate bills has been the FEOC provision. So this is the foreign entity of concern. Can you talk about that? Is that a headwind for Shoals? Is it a potential tailwind when you look at your supply chain versus your competitors? Yeah. Generally speaking, it's probably favorable for Shoals in that if there are some Chinese competitors or competitors from those countries that might face some limitations about the ability to be involved in solar projects. I think anytime you can focus on domestic content, and if that can be a showpiece, if that's what the administration is after, then that should benefit Shoals. Shoals, we produce all of our EBOS solutions in the United States, just north of Nashville, Tennessee. We're a domestic manufacturer. Now, from our supply chain standpoint, not everything can be sourced in the United States. If panels have a certain proprietary connector, they have to be procured from that vendor. They may be overseas. There are certain photovoltaic components that are not just available for manufacturers in the U.S., certain fuse types and things like that. All that is changing. If domestic content becomes more and more of a priority, then that will be able to take precedence here in the United States as well. We are excited to be a U.S.-based manufacturer. We think that if the foreign entities of concern, if there are limitations placed on it, generally speaking, that will help us. It might cause some disruptions in the industry as folks are trying to work on their own supply chains. We are well positioned for that. Okay. Can we talk about competition? Other EBOS technology providers, kind of status quo licensed electrician approach, can you just kind of, just for the general audience, kind of talk about the pros and cons of Shoals versus other solutions? We get the question of IPC a lot lately. I know that Shoals has put out some white papers on this. Can you just kind of give us a brief overview? Yeah, sure. Shoals is predominantly based on the electrical balance of systems, which is moving those electrons between the panels to the inverter. It's all direct current on a solar field. We manufacture those solutions on a custom basis. We design them, and we work with the EPCs to maximize the efficiency of the field layout. We build everything to spec. It's done in a factory. We have quality control standards. We are able to test joints for voltage leakage and all those sorts of things. We ship the final solutions with plug-and-play sort of abilities. They're connectorized, and you can just simply connect them in the field with minimal licensed and skilled electricians. Some of the competition that you mentioned, for example, insulation piercing connectors, it's IPCs that we call them. Those have to be done in the field. IPCs are fundamentally clamshell sorts of devices that have to be ratcheted down on these large trunk feeder cables. You can't test it in the field. They have the propensity to have a breakdown sooner than our solutions. We have seen some developers say, "We don't want IPCs on our fields." Simple, full stop. They wanted a manufactured solution, which we engineered to last a lifetime of the panels. From a competition standpoint, IPCs are there. You may have seen Bentek is a company that sells IPCs. Nextracker is interested in exploring that. They purchased Bentek. Bentek has been around. They sell combiner boxes and components and some IPCs. They don't do the manufactured full solutions like we do. The competitive environment hasn't changed all that much. I think the FEOC language would certainly support us if we have a Chinese competitor that we're working against right now that is manufacturing. That is another story altogether. Okay. Is there a way to quantify that when you go to your customers that says, "Okay, well, this is our failure rate. This is what we've seen with IPCs historically," right? So that you might be—I'm just being hypothetical here. If an IPC is undercutting you upfront by 5%, 10%, 15%, is there a way to kind of show the lifetime value, the lifetime savings of your solution? That's what we're trying to do because everything's dollars and cents in this business, as you would expect. You should expect that from me, I'm the CFO. Yeah, dollars and cents drive this business. If something is going to break down sooner in the field, it's an interesting dynamic in the solar industry because the fields may be built by developers. Our customers of record are actually the engineering, procurement, and construction firms, not the original developer. They only have to warranty a site for a couple of years to the developer. Developers will sell these sites. We're working with developers to help educate them about the lifetime benefits of the Shoals solution versus an insulation piercing connector. Once again, we have to test in laboratories. We're mimicking heat and wave cycles of thermal expansion, contraction of charge. The only time in the field will really show this happening because insulation piercing connectors have to be installed in all kinds of weather conditions. They can have dust. They can have grass. They can have rain and moisture. All of those things are detrimental to the life of those products. We simulate some of that in our own testing. We will continue to prove that out and work with our developers and prove out the business case for our solution. Got it. Okay. So you have some very big deals. You have the 10 gig MSA with Blattner, which I think is coming to the end of its completion, but kind of a new 12 gigawatt deal with them for the next couple of years. You have a 12 gig deal with UGT for international projects. Can you just kind of talk about that trend? Should we expect more MSA-type deals, maybe not that magnitude, but similar kind of structure, multi-year, multi-gigawatt agreements? And why? I mean, why do you think the market might be transitioning towards that? Sure. So yeah, you're exactly right. Blattner just signed us up again for another 12 gigs just last year. We're starting to work on that development now. It goes through 2027, through the middle of 2027. The MOU and the deal with UGT in Southern Africa, their subsidiary, is really exciting because that allows us to export from the United States. Many of those projects for them are actually funded by Western banks like the Export-Import Bank. They require domestic content. For us, it looks very much like our domestic work. That's a great way to be pulled around the globe. We love master supply agreements for two fundamental reasons. From our perspective, it really helps us predict, have better predictability about projects that we're going to win, the timing. It allows us to look at how we look at our own supply chain. We can secure deals and get better deals on quantities of cabling and connectors and various things that we need. It gives us some predictability about where labor is going to be deployed. It gives us confidence to invest in our facilities and growth. As you know, we've invested in a new facility. We continue to invest in a new facility right there in Tennessee. We are going to consolidate operations. It is going to give us even greater capacity. We love to have the MSAs. Now, from a customer perspective, it is a great deal too because they do not have to worry about sourcing this every single time. They know they have the quality products from Shoals. They know they can count on that. They can worry about the other aspects of their deals. We will expect to sign up additional EPCs with MSAs. I'd actually love to sign up some developers with MSAs that say, "Hey, Shoals Technologies Group products will be specced into the projects. It'll be handed off to the EPCs." We're not quite there to announce those yet. We're working all angles there. Is that something new, targeting developers instead of the EPCs? You've been trying that for a while. We've actually started going a little bit deeper into the developer ranks because we have seen that some of the EPCs' reasons for not selecting Shoals, we believe, are short-sighted. The long-term benefits of our products, if it does carry a small cost premium to them on the front end, they need to understand the benefits. Sometimes EPCs are only worried about it for two years. They just want to keep a low cost on the front end. We have expanded our involvement with developers directly. We've gone deeper. That is an area that we're very excited to see some very good response to the Shoals products. Okay. Going back to international, you mentioned the UGT partnership and kind of being pulled into some of these markets. Is there also a push? Are there certain markets that you are targeting? Or is it really just kind of your U.S. customers pulling you into certain international businesses? Yeah. We have a targeted approach as well, boots on the ground. We have a sales representation in Spain that handles our European side and also in the Central American countries and Latin American countries where we won some projects, such as Chile. We love Australia. Australia just had a very favorable election result. The Labor Party did very well. They are very interested in renewable energy. They're very interested in battery energy storage solutions. We are very excited about Australia. They have lots of land, very rectilinear. Our products work really well on large plots like that. We also announced that we have a memorandum of understanding in the Kingdom of Saudi Arabia. They want to put a lot of solar there. We have some targeted places that we want to do some things like that. We definitely have a sales effort working on that. We enjoy being pulled around the globe to places we normally wouldn't go with UGT. So it's great. Okay. Can we go to the warranty issue? Can you just kind of talk about any updates there as far as potential timing, charges, resolution? Yeah. So the warranty solution that we're working through right now is progressing as we've discussed on previous timelines. The two elements of it are the remediation work that we're doing for customers that were impacted by the defective wire. And that is moving as scheduled. I think there was some severe rain and flooding events this spring that delayed a couple of them being done. We are largely on track to complete that this year. From a legal standpoint, we're in the fact discovery phases of that litigation with Prysmian. We expect depositions and the fact discovery to be completed here in the next few months before we can really sit down and have some meaningful discussions. I'd love to be able to work that out with Prysmian, just have them resolve the issues and move on. They're a large and well-respected cable company. They just had a bad series of products for us for a while. Okay. In the spirit of saying the word data center and seeing your stock trade up, can you talk about data centers? Well. I mean, you mentioned at the outset that demand is very strong. I mean, to the extent that you have visibility, right, into who the actual off-taker is, I mean, is there a way to see, "Okay, this part of our pipeline is kind of normal replacement of natural gas, whatever. This part of our pipeline has really come on because of kind of the data center angle"? Can you kind of talk about what you guys think is the potential magnitude of that opportunity? Yeah. So we do not directly have that visibility. We do rely on some professionals and consulting groups in the space to look at that. I think I cannot recall the exact percentage that was estimated of the demand of the energy that went on the grid last year, how much was due to data centers and artificial intelligence driving that demand. We do not expect that to wane at all in the coming years. We expect the prognosticators that have called for energy demand growth in the United States and globally to continue, largely driven by data centers. On our core base of products, it is a fantastic place to be. We need energy in the near term. Everything else that has been talked about as potential solutions has multiple years of development lead times and cycles. Solar has a pipeline in place that can continue. With regards to the actual data center products, we think it'd be a great way. We have some lower cost and more efficient ways to move electrons using aluminum with our BLA system as an example. We could modify that to work with data centers to be the power distributor instead of large, expensive, and rigid copper busbars. It takes someone to change. You have to work with engineers of record. That is further out for us as a product offering. In the meantime, we're thrilled to see that the data center providers, those that are building these out, are going to work with renewable energy sources as well to get their energy needs met. Yeah. Any questions? Okay. Can you talk about gross margins going forward? So kind of obviously, you've got different products. You've got systems. And you've got components that can influence kind of your gross margin on a quarterly basis. But can you talk about competition? Can you talk about maybe the drag from the new facility that you're building that's not fully operational yet? Kind of how to think about near-term margins, where they go, and kind of your targets over time. Yeah. So we've talked about this year in the near term being in the mid-30s to high 30s as a percentage for gross margin. While that's a very important metric for us, and we are committed to driving that, we put dollars in the bank. By that, I'm looking for operating profits and cash flows. For example, there's a way that we've actually looked at our BLA product. Folks have said, "Well, we would like you to run this longer and kind of replace this feeder cable that we're buying from someone else. Can you guys run a long-tail BLA?" It's fundamentally a BLA, but just much longer. Instead of 150 feet for one BLA, it might be 600 feet, 700 feet. That's a new area for us. It's not really adding value to that last 500 feet of cable. We can sell it, perhaps at a lower margin. Why not? It's putting dollars in the bank. It helps us leverage. We're very focused on maintaining a very aggressive hold on our SG&A expenses. We'd like to see some of our legal expenses go down and be able to invest in some other areas of the business. Other than that, we want to put operating profit and cash flows in the bank. We do have a target of getting back over 40% long-term. We still have very attractive margins. Some of the things that we talked about, our battery energy storage product solutions, are very attractive and accretive to us on the margin basis. We want to grow that, clearly. Our export business is very comparable to what we achieve domestically. We want to keep doing that. As we looked at our CC&I, or the Community Commercial Industrial space, it's accretive margins to what we've been achieving. They are very small parts of the business today. It is going to take some time to ramp those. As those ramp, that will help support where we've made deals for huge volume agreements in our core business. We believe in the near term, I would say it's mid-30s to upper 30s. We will just go from there. Got it. Okay. On that point, so I focus mostly on utility-scale solar so far in this conversation. But can you talk about CCI? Can you talk about storage, EV charging? I mean, some of the other adjacent markets that you've been looking at, how to think about that kind of over the near and medium term when that really starts to scale, you think? Yeah. So we're booking revenue right now and have this year, excuse me, for CC&I and for BESS. We've had some international wins that we're working on. CC&I is interesting in that there's a nice play that we get because they're accustomed to having to cobble things together on their own. We have a solution that is plug and play. We can help them out. The CC&I space is really learning our product set. We're very excited about that. Excuse me. With our BESS products, we have some really exciting deals because a lot of solar projects are interested in battery energy storage. Australia is also another market very interested in it because they've inverted their curves. They actually have a demand curve for utility from their grid that goes down in the peak days because everyone's got solar. They need to be able to store it for the shoulders. In the battery energy storage space, we have some very standard products, the combiners and recombiners, that we can sell to EPCs. We're working with OEMs on actually skidded solutions, which are standalone to help drive all the electronics necessary for these storage solutions. As more and more projects keep BESS attached to their projects, I think it's upwards of 50% now of all the pipeline projects that you see, like in Wood Mackenzie, those projects all have half of them have battery energy storage plans as well. We're very excited to be in that space. That's another very good market for us. We'll continue to work on our OEM business. We'll have junction boxes. First Solar has been a fantastic customer for years. We've been able to grow with them. We think there's opportunities for other types of panels in that space as well. Like I said, I'm interested in putting dollars and cash flow in the bank. I don't necessarily need it to be the highest margin products all the time. I just want to keep growing. Yeah. Okay. Last chance. Any questions, anybody? Okay. Dom, last question for me. Can you just kind of talk about, I mean, so you just said you're focused on cash in the bank, cash flow. Can you talk about capital allocation, how we should think about potential M&A, buybacks, anything else? Sure. Yeah, actually my first priority is always grow the business. We are making the investments necessary to grow the business organically. Secondarily, we are looking at inorganic acquisition opportunities all the time. When our stock was as depressed as it has been, it was difficult to look at leverage and say, is this an accretive acquisition or not? We do not want to be stupid about capital. I am very disciplined about this. I am going to make sure that we have the return for the shareholders. We are not going to acquire something just for the sake of making an acquisition. That said, there are multiple small companies that can either augment our product offering here domestically or could help us internationally with the footprint. We are always looking for what we could do inorganically. Finally, I would say some of the financial things about, okay, share repurchases. We did that last year. We have an authorization remaining for the balance of this year. My cash consumption right now has been predominantly built out our new facility and handle the warranty remediation things. That will turn right around here in relatively short order. We will have an opportunity to evaluate that. Like I said, my first priority is grow the business. Got it. Okay. With that, we can wrap. Dominic, thank you. Thanks so much, Mark. Really appreciate your time. Thanks for having us. Appreciate it. Thank you.