Shoals Technologies Group Inc
NASDAQ:SHLS
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Shoals Technologies Group Inc
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Good afternoon, and welcome to Shoals Technologies Group Third Quarter 2022 Earnings Conference Call. Today's call is being recorded, and we have allocated 1 hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Mehgan Peetz, 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 with me are CEO, Jason Whitaker; and CFO, Dominic Bardos. On this call, management will be making projections or other forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. As you listen and consider these comments, you should understand that these statements, including the guidance regarding full year 2022 are not guarantees of performance or results. Actual results could differ materially from our forward-looking statements if any of our assumptions are incorrect or because of other factors.
These factors include, among other things, the risk factors described in our filings with the Securities and Exchange Commission as well as economic and market circumstances, decreased demand for our products, policies and regulatory changes, industry conditions, current macroeconomic events, supply chain disruptions and availability and price of our components and materials. Although we may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and therefore, can be no assurance that the results contemplated in the forward-looking statements will be realized.
We caution that any forward-looking statements included in this discussion is made as of the date of this discussion and 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 third 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 Jason.
Thank you very much, Mehgan, and good afternoon, everyone. I'd like to start off by welcoming Shoal's new CFO, Dominic Bardos, who we're very excited to have on board. Dominic brings over 30 years of global finance and accounting experience across multiple industries, including automotive, retail and industrial services. Prior to joining us, Dominic was the CFO of Holley, a publicly-traded designer, marketer and manufacturer of high-performance products for car and truck enthusiasts. I would also like to thank Kevin Hubbard for the tremendous job he did as our interim CFO and his willingness to stay with us for an extended period, which gave us the time we needed to find the best fit for the CFO position. We are honored to have Kevin's continued support as we transition leadership of our finance team to Dominic.
Now turning to our results for the quarter. I'll start off by providing a snapshot of our Q3 performance, followed by an update on our core product lines and then wrap up with an assessment of current business conditions in the U.S. solar market and how we see them benefiting our business. I'll then turn it over to Dominic, who'll provide an overview of our financial results. Shoals had a phenomenal third quarter, delivering record revenue, gross profit and adjusted EBITDA. Revenue and gross profit grew 52% and 66% year-over-year, respectively.
Gross margin in the quarter was 39.7% compared to 36.4% in the prior year period, driven primarily by a higher proportion of revenue from the company's combine-as-you-go system solutions, which carry higher margins and increased leverage on fixed costs as a result of higher sales volumes. Adjusted EBITDA in the quarter was $26.6 million, increasing both sequentially and year-over-year, even with sustained investment in SG&A to support our growth initiatives.
Demand for our products continues to grow, and we ended the third quarter with record backlog and awarded orders of $471.2 million, an increase of 74% year-over-year and 44% sequentially. System Solutions revenue increased 80%, while components were up slightly relative to last year, consistent with our expectations. The growth in System Solution revenues reflects continued strong demand for our combine-as-you-go system. System Solutions represented 77% of revenue versus 65% in the prior year period.
During the quarter, we converted 4 additional EPCs and developers, bringing the total number of BLA customers to 33 at the end of 3Q. New products also contributed to revenue growth in the quarter with storage, wire management and EV Solutions experiencing particularly strong demand. Earlier this month, we announced that Shoals have been awarded a 1-gigawatt contract to supply BLA and storage solutions on a project that will be one of the largest solar-plus-storage projects in the U.S. when complete. Deliveries for the project are underway and expected to continue throughout 2023.
We continue to ramp production to fulfill customer orders of our new wire management products. Relative to a year ago, the opportunity for wire management has increased more than 5x. We remain on track to complete the certification process for BLA 2.0 and high-capacity plug-and-play harnesses by the end of the year. Initial customer feedback from previewing both products at RE+ was very positive, and we're excited to begin shipments once certification is complete. As we touched on last quarter, we expect these products to further accelerate our growth. As BLA 2.0 will have a higher average selling price per megawatt than our current product and the high-capacity plug-and-play harness will allow us to serve a new and fast-growing application where we do not currently have an offering.
We also continued making progress in our international expansion. Our sales team is having a number of advanced conversations now that our products are fully qualified, and we look forward to providing further updates in 2023. Turning to our EV business. We made significant progress during the quarter, receiving certification to UL standards on our Phase 1 aboveground e-mobility charging solution and completing our first deliveries of our full EV system solutions.
Importantly, margins on these sales are at or above our corporate average as expected. Our EV solutions have now been deployed in more than 15 states in the U.S. Based on customer experience from these deployments, we're now able to validate that our solution offers a 20% to 30% omni cost savings over traditional installation methods. Much like we've done in solar, we can leverage this data to establish the superior value proposition that our products offer and migrate customers from competitors' products to ours.
We believe that the certification to UL standards and growing number of successful deployments of our solutions will result in broader adoption of our technology and create sales opportunities in public projects because our solution simplifies the permitting process for customers. Order growth for our EV solutions continues to exceed our expectations, particularly in the [indiscernible] segments. And looking ahead, UL testing and certification of our drive over Raceway e-mobility charging solution is in progress, and we expect to be completed by year-end.
Now turning to solar market conditions. The 2-year tariff exemption for Chinese panels, the recently passed Inflation Reduction Act and higher energy prices have given our customers and end users the confidence to reinitiate previously delayed projects, make multiyear commitments to invest in solar generation and prioritize product availability and performance over price.
As a result of the improving solar market conditions and our recent performance, we are raising the low end of our 2022 outlook, which Dominic will discuss in further detail. While we're still waiting on further guidance from the treasure on certain aspects of the IRA, the bill provides many demand drivers for Shoals and the industry. First, as we discussed on our last call, we believe the increase and extension of the investment tax credit, coupled with new incentives for storage and EVs will accelerate demand for our products. While we still don't know just how significant the effect on demand will be, initial reaction suggest that the IRA is the most significant piece of legislation for the solar industry to date.
In addition, the prevailing wage provision of the IRA is expected to compound wage pressure in the U.S. market, which further reinforces the value proposition of our combine-as-you-go system. From day 1, we set out to create products that can be installed by anyone as a response to the disproportionately high cost of installing EBOS, which can be equal to or in excess of the cost of the product itself. In environments where labor is more expensive, our solutions are especially attractive as they take less time to install and are installable by general labor. We anticipate the prevailing wage provision will provide a significant tailwind for years to come.
Finally, the significant investments we made this year, including the build-out of our new facility and expansion of engineering, sales and HR head count, we are confident we can meet accelerating demand and continue our strong growth trajectory. I'll now turn it over to Dominic, who'll discuss our third quarter 2022 financial results. Dominic?
Thank you, Jason. I'm very excited to be here today, and I look forward to working with you and the entire team at Shoals during our next chapter of growth. Turning to the financials. For the third quarter, revenue grew 52% versus the prior year period to $90.8 million, driven by higher sales volume as a result of increased demand for solar EBOS generally and specifically our combine-as-you-go system solutions. Our third quarter revenue growth was also aided by the launch of our EV solutions. System Solutions revenue increased 80% year-over-year, and components revenue increased 1% compared to the prior year period. System Solutions represented 77% of revenue versus 65% in the prior year period.
Gross profit increased 66% to $36.0 million compared to $21.8 million in the prior year period. Gross profit as a percentage of revenue grew 330 basis points to 39.7% compared to 36.4% in the prior year period, driven primarily by increased revenue and a higher proportion of revenue from System Solutions.
Third quarter general and administrative expenses were $13.9 million compared to $10.0 million during the same period in the prior year. This change was primarily a result of higher stock-based compensation, planned increased payroll due to higher headcount supporting our growth and product initiatives and public company costs. Adjusted EBITDA increased 57% to $26.6 million compared to $16.9 million for the prior year period. We are beginning to realize leverage on SG&A as planned, and during the quarter, adjusted EBITDA margin expanded more than 100 basis points year-over-year to 29.3%.
As discussed earlier this year, we expected to gain leverage on operating expenses exiting the year, which we've now achieved 1 quarter ahead of schedule. Adjusted net income grew 43% to $16.6 million in the third quarter compared to $11.6 million in the prior year period. As always, we included a reconciliation of non-GAAP measures of adjusted EBITDA and adjusted net income in our press release. Please refer to that for a bridge to our GAAP net income.
Moving to our balance sheet, having dug into the numbers, we have opportunities to optimize working capital, particularly inventory and accounts receivable in the coming quarters. As of September 30, 2022, backlog and awarded orders were $471.2 million, representing a new record for the company and an increase of 74% and 44% versus the same time last year and June 30, 2022, respectively. The growth in backlog and awarded orders reflects continued robust customer demand for Shoals products. Turning to our full year outlook. Based on current market conditions and input from our customers and team, we are raising the low end of our previous outlook. We now expect 2022 revenue to be in the range of $310 million to $325 million, up 45% to 52% year-over-year. On the back of our strong third quarter results and expectation of continued leverage on operating expenses, we now expect adjusted EBITDA to be in the range of $80 million to $86 million and adjusted net income to be in the range of $48 million to $53 million. As we move forward, we generally expect adjusted EBITDA margin will increase on a year-over-year basis, though the increase will not be linear due to the timing of spend and the potential for mix to shift from quarter to quarter. Now back to Jason for closing remarks.
Thanks, Dominic. I'd like to close by thanking all of our customers for their commitment to Shoals, our employees for their contributions to our company's success, and our shareholders for their continued support. 2022 is shaping up to be a huge year for Shoals despite the headwinds we confronted during the first half of the year. With strong demand for solar and EV, successful new product and sales initiatives and the tremendous strength of our core BLA product, I'm incredibly optimistic about what we can achieve in the coming quarters. And with that, thank you, everyone. I appreciate your time today, and we'll now open the line for questions.
[Operator Instructions]. The first question comes from Mark Strouse of JPMorgan.
Yes. Congrats on the strong backlog. I wanted to start with that, if I could. Are you seeing any change in your order activity as far as kind of the time line of deliveries? If we kind of look back over the last UL since you've been public and kind of the ratio of what your backlog implies for the next 12 months or so. Is there any reason to believe that, that general ratio should maintain going forward or are you seeing that elongation of any of your order activity?
Yes. Mark, Jason here. Good to speak with you again. I appreciate the compliments. Definitely the team effort here. Yes, as we've talked about in the past, our backlog and award orders generally represents that I would say time period over the next 9 to 12 months. I mean, obviously, there's kind of like a bell curve, right? You're going to have some spillover from time to time. But generally speaking, still in that same 9- to 12-month period.
Okay. Good to hear. And then just a follow-up. I understand the gross margins can fluctuate quite a bit with mix. But just any commentary, Dominic, you can provide on SG&A going forward, just some of the investments that you've made year-to-date and kind of leverage going forward?
Sure. Thanks, Mark. Yes. From a margin standpoint, one of the things that we've looked at is some of the growth that we've had from positions, the investments that we've made in incremental positions in some of the public company expenses, including our readiness to -- for our Sarbanes-Oxley controls this year. So from that standpoint, we did get some good leverage in Q3 from higher sales volume and the guidance range that we've projected out there does anticipate fewer production days in Q4. So the margins will fluctuate. But as we've guided to previously, that 38% to 40% gross margin is a great target for us to have there. And then we should see, as we mentioned in the prepared remarks, some continued expansion in EBITDA margin over time.
The next question comes from Philip Shen of ROTH Capital Partners.
Congrats on a strong quarter. I wanted to check in with the strength in Q3 and 4 and to see how much of that volume may have come from projects that you're serving that don't have modules, but that do have tracker and you were able to install the EBOS on despite the lack of modules?
Yes. Good to talk to you again, Phil. I think it's kind of a 2-part question. I'll kind of take the Q3, Q4 first. First of all, as we talked about during our Q2 call, our expectation was that Q4 would be slightly stronger than Q3, but it turned out Q3 was exceptionally strong, as we just talked about.
One thing I do want to talk about from a Q4 perspective because I think it's very important, when you look at the midpoint of guidance that we have for the year, costs were nearly 80% year-over-year revenue growth. So we still have a very strong Q4 itself. And as Dominic also mentioned, as we move throughout Q4 because of the holiday season, there are definitely fewer working days as we go through the quarter and end of the year. But specifically, regarding the projects from a panel perspective, there are projects that we will be serving. I don't know that there are projects that we're currently serving, but I know there's projects that we will be serving or close to it, that are going to be moving forward based upon UFLPA or just based on panel availability in general, Phil. There's not that many out there that I can think of, but there are quite a few in the ones that I know that do have panels that are affected are moving forward. I guess you could say as plan with construction based upon any potential panel delays.
Great. And then a follow-up here on the backlog question, and awarded orders as well. It looks like when you parse out the difference, most of the increase in that category in the backlog and awarded orders came from awarded orders as opposed to backlog. I think backlog increased from $195 million to $199 million and awarded orders went to $272 million from $133 million. So just wanted to confirm do you expect those awarded orders to be delivered in the next 9 to 12 months. I think I heard you say that.
And then also in your Q, it looks like you have a $200 million worth of contracts that have take-or-pay provisions. And so I wanted to see if you could talk through, and you mentioned just now, Jason, kind of a distribution of contracting type. But going forward, would you expect to have more longer-term contracts with the same customer, similar to maybe a first solar or something like that ahead?
So quite a bit there, Phil. Maybe I'll try to knock off a few of those. One of the things that I can say is, during RE+, we definitely saw a pretty big change in sentiment regarding customers wanting to have more long-term conversations. Obviously, it takes a while to have those conversations to get things complete. But just wanted to make sure that customers have the ability to access our capacity was one of the key topics that we had. So who knows where that goes, but definitely great conversations that span out of RE+ directly along those lines for what does that opportunity look like further out?
Yes, specifically on backlog and awarded orders, kind of referring back in Q2, everyone recall is one of the things that we said was we really didn't have a lot of coverage or a lot of spillover left in the quarter based upon the extension or -- I'm sorry, the moratorium on the 2-year panel tariffs. So when you look at where we are from Q2, Q3, obviously, you're having the full quarter with that in play, obviously, having some strong support from IRA perspective definitely allowed us to realize very strong growth in backlog and awarded orders. But I think over time, Phil, this may not always be the case. But if you go back and you look, specifically, you'll find that you'll get a pretty decent jump in awarded orders and then obviously, the backlog start eating away at that, and then you'll get a big jump again. So definitely very excited about where we are and very excited for what the future holds.
[Operator Instructions]. The next question comes from Maheep Mandloi of Credit Suisse.
Could you talk about the EV charging business? How much of the revenues in the quarter or the year coming from that business? And how should we think about its contribution to the backlog and awarded orders here?
Yeah, Maheep, Jason here. So at the moment, we're not providing breakout of e-mobility or new products storage or international. But from an e-mobility perspective, obviously, very excited about what we've been able to accomplish, launching that product out. What I can tell you is, it is contributing to our backlog and awarded orders and expect that will continue to be the case over time. Feedback from customers has been nothing short of amazing and very excited that we've been able to accomplish not only a successful launch, but launch over 15 different states with validating that value proposition that we're able to bring with that 20% to 30% savings on installation time and cost while also maintaining our average corporate margin profile. So very, very, very exciting jobs from that perspective and only see that continue to grow.
Got it. And then maybe just like one housekeepings. I think one of the slides where you talk about the product road map which show why harness product probably has been pushed out by a quarter. Just wanted to check what's driving that? And does that impact any product revenues for '22 or '23 for you guys?
Yes. When you look at the backlog and awarded orders that we have, I mean, a large portion of that is going to be based upon current products that we have released out. So when we talk about our wire management product and our BLA 2.0, we're still tracking out to have certification complete on both of those particular products, which will allow us to finish up that commercialization phase. So we've already previewed those at RE+. And they do -- those 2 products do work very well together, and they're also very complementary. So looking forward to finalizing the certification process on both sides of those particular products and the opportunity we have in front of us as we move into 2023 with those.
And just a clarification, is that certification for U.S. or Europe? That's all from my end.
Good question, Maheep. So right out of the gate, we're looking at our high-impacting product and our BLA 2.0. So the initial certification that we're going after is going to be UL certification, which is for North America. And then based upon that, we will branch out accordingly, much like we've done with all of our other product lines. So we'll definitely keep you informed as we progress throughout that time line.
The next question comes from Brian Lee of Goldman Sachs.
Sorry if I missed this one, but I think you were talking about how 3Q ended up being stronger than expected and hence, why there's a little bit of a sequential downtick into 4Q when we back out the new revised guidance for the year. I thought it was a little noticeable that the EBITDA margin seems to be declining quite significantly from the EBITDA margin you just posted in 3Q. It seems like much more so than the EPS and revenue declines that are inferred here. So can you kind of talk about whether that's mix? Whether there's some incremental costs like what's happening with the EBITDA line that it's such a more pronounced quarter-on-quarter downtick versus the other metrics you're guiding to here?
Sure, Brian. It's Dominic here. First of all, we're absolutely very pleased with the 3Q performance and some of that revenue pull forward did help us from a leverage perspective in the quarter, aiding the margins. A couple of things. Yes, we do expect with less revenue in Q4 to lose a little bit of that leverage. And then we also have modeled in some of the public company expenses and some of the incremental expenses such as myself and other staff positions that we have coming online to be increased in Q4 as well. And so we're very pleased with the margins where we are. We do think that it's very important to recognize that it is a slightly lower revenue period for us. We do lose some leverage back off that. And as we've guided to earlier in the year, we do expect some SG&A expenses and investments to continue to grow quarter-over-quarter sequentially.
Okay. That's helpful. And then just going back to Phil's question about the mix of backlog and awarded orders. I mean the overall performance there was quite impressive. So kudos to you guys. But could you remind us, Jason, as to kind of what takes an awarded order into official backlog status? And then whether or not you mentioned during the prepared remarks, you're seeing a lot of customer demand for like multiyear investments and what have you. Are you seeing sales cycles or delivery cycles sort of elongate to any degree? Just trying to understand whether some of this is forward booking out-year opportunities, which I know there's a lot of happening in the utility scale environment when you look at some of your peers, particularly in the panel space that are booking multiyears in advance?
Yes. Great question, Brian. So a couple of things. It's nothing like what you would expect and what you're seeing on the panel side of things. Right now, when we look at backlog and awarded orders, it still represents a roughly 9 to 12 month period. What I was talking about earlier as far as conversations at RE+, I think there's probably an opportunity where that may start to elongate out based on initial conversations that we're having with customers that are out there that really want to understand what we're capable of performing for them not only in 2023, but even beyond.
But again, that's not something that we're really talking about today. There are conversations that are happening. And if something like that were to transpire, we'll definitely update you accordingly. And to go back and answer the original question, I believe it was what does it take for an opportunity to move into awarded orders and then ultimately flip over into backlog. So once you look at an opportunity that goes into backlog itself is when we have that PO itself with all Ts & Cs, fully completed, everything agreed to, and we are executing on that product.
So when you look at awarded orders, that's a point at which we've been award that particular product. There's multiple stages, right? If we have an MSA in place, we may be looking at specific site nomenclature. We may be going through Ts & Cs with new customers. But really just buttoning up and going through those last-minute details on that particular project that allow us to execute that and turn that directly into backlog to sales front.
The next question comes from Colin Rusch of Oppenheimer.
Can you talk a little bit about the content of the bookings from a perspective of international bookings as well as EV projects?
Yes, Colin, great speaking with you again. Looking at the backlog on awarded orders, what I can say is that a meaningful portion of that is coming through with our full system cells, specifically BLA itself. But as far as the definitive breakdown, we're not breaking that down yet, whether you look at international side of things or whether you look at e-mobility.
Okay. And then the second one is really just around the urgency of shortage related to electricians out in the field. Are you seeing that get more intense at this point for your customers? And how is that impacting the sales cycle for you guys?
Yes. I mean it's hard to say exactly how that contributes. But as we've talked about a lot in the past, and from day 1, what we've done is we've set out the [indiscernible], our products and system solutions that can be installed by anyone. And that really is a direct response to the disproportionately high cost of EBOS because some of the EBOS -- the cost of installing EBOS components can be at or even greater than the cost of product itself. So obviously, when you're looking at the prevailing wage provision, that's an inflationary condition and that just further reinforces our value proposition of our combine-as-you-go with BLA product.
So when you have environments like this where labor is more expensive, our solutions will generally be more attractive. So pretty excited about that. What I can say is that even customers that have utilized BLA understand that value, I've reached back out to really dive in and that much more detail to make sure that they're really capturing everything they can. So it's definitely contributing to that, but exactly how much that is, it's hard to say, Colin.
The next question comes from Kashy Harrison of Piper Sandler.
So my first question is on BLA 2.0. I was just wondering, do you think there's upside for projects that have already been signed and awarded? In other words, do you think that some of your customers that have already said, "Hey, we're going to give you this business today for BLA 1.0 may come around and say, actually, we want to upgrade to BLA 2.0", and then we could see that backlog and awarded a move up faster entering 2023?
Kashy, maybe thinking about it a little bit different way. I don't think that we have any customers out there that are holding off on orders, waiting for BLA 2.0. But if things -- if history repeats itself, when you look at the different generations of BLA we have because as we talked about in the past, our current generation BLA is not the original BLA that we brought to market. So what I can tell you in the past is customers have proceeded forward with the most optimum solution commercially available at that point in time. And then whenever anything became more viable, they would take a look at that and find out is this really worth them making that change. And in cases in the past, there were many cases in the past where customers were like, yes, we can definitely do this if it doesn't impact the material side of things. So there's definitely opportunity for that. How that looks is really hard to say. But like I said, I could foresee that happening on some projects if history repeats itself.
That's helpful. And then maybe just as my follow-up, I think it was this quarter last year where you indicated that the policy uncertainty was resulting in a significant amount of project redesign. I'm just curious, based on what you're seeing right now during -- as of this call, how is the magnitude of redesigns compared to last year? Is it about the same? Has it accelerated? Has it decelerated?
As far as the number of project redesigns, I feel confident saying it's definitely decelerated. And I think there are several reasons for that, just to clarify what I mean there. For a lot of different projects, we still may carry multiple different designs. And that's something that what you found before what happened very early on in the project. And then as that project progresses, that would read down into very finite selections. So those selections are not happening nearest quick, but being carried much further to the design cycle, which I think allows customers more versatility without going through what I would call AKA redesign, fire drill redesign.
So I think it's really being smarter about where we've come from, but definitely the number of redesigns have decreased from a year ago to date.
The next question comes from Joseph Osha of Guggenheim Partners.
Just returning to this issue of backlog. Again, I heard you say 9 to 12 months. I'm wondering, do you get the center, can you tell yet whether projects are being maybe pulled into 2023? Or is most of this big increase in backlog, just people pulling the trigger on projects that had already been planned, but they weren't sure if they could get panels for?
Yes. Joe, it's hard to say what all the different levers are that are being pulled up. I think obviously, there are a couple of different things that I've talked about earlier. You have the 2-year moratorium, obviously, IRA, which has brought a lot more certainty to the industry itself. I don't know that I can say that there have been projects that have been pulled in from '24 to '23. But what I can say in general is that customers are trying to get projects back on track and completed as quick as they possibly can. So I would necessarily break that on any particular time, just a general conversation is let's get these near-term projects completed and let's try to see if there were any projects that were derailed at some point in the past, how we can get them back on track.
Yes, that makes sense. And then just a more general question. Are you prepared to talk about from a capacity standpoint, how much you could theoretically dip on a run rate basis now and looking into next year?
Yes, we're not -- we've not released anything out specifically on the capacity side of things, Joe. But how we operate, we utilize very similar information as far as backlog and awarded orders. Then obviously, you couple that with the pipeline that feeds into that right your funnel as well as some industry benchmarks. And we try to mention that we understand exactly what our customers are asking of us. And we do our best to stay ahead of things from a capacity perspective. What I can tell you is I feel very comfortable right now from a capacity standpoint. And if something were to change, and customers sort of reach out, we would have a swing in the industry and actually increase the management further, then we would pivot accordingly, right, to be able to support our customers.
But amongst many other things, making sure that you're dependable is extremely, extremely important to Shoals, and we want to make sure that we are a very strong partner to our customers.
The next question comes from Martin Malloy of Johnson Rice.
I want to ask you about Slide 27 and the new product introductions, the BLA 2.0, the high-capacity products, can you maybe remind us of what the impact is on the addressable -- on your addressable market relative to your existing addressable market with these new product introductions?
Yes. So overall, not specifically to BLA 2.0. Our goal over time is for us to get to roughly $0.03 to $0.035 per watt, right? So right now, on average, you look at kind of where we were, we benchmarked that, that was coming off about $0.02 per watt. So add another $0.01 to $0.015 of additional opportunities through new products. BLA 2.0 is definitely one of those contributors as well as the high-capacity harness itself. And there's even many more outside of the 4 that we've mentioned on that page, AC products and the like, some of which we'll talk about in 2023 as we roll forward.
But when I look at BLA 2.0 and I look at the high-capacity harness, what I would say is out of the 4 that are on that page, those bottom 2 do carry a more meaningful position towards -- going towards that additional $0.01 $0.015. So we've not released out any exact specifics as to what BLA 2.0 carries or high-capacity harness.
Thank you. This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.