Shoals Technologies Group Inc
NASDAQ:SHLS
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Shoals Technologies Group Inc
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Good afternoon, and welcome to the Shoals Technologies Group Fourth Quarter 2020 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 Ms. 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 today are Shoal's Chairman, Brad Forth; CEO, Jason Whitaker; and CFO, Philip Garton. 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 earnings news release 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.shoals.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 fourth quarter press release for definitional information and reconciliations of historical non-GAAP measures to the comparable financial measures.
With that, let me turn the call over to Brad.
Thank you very much, Mehgan, and good afternoon, everyone. This is our first conference call since completing our initial public offering in January. I would like to start out by thanking our team for their outstanding execution as well as our new shareholders for their tremendous support. The IPO was an important milestone for our company, and we are all excited about the new opportunities that being public creates for us.
2020 was a year of record revenues, margins and profits for Shoals, and I think Jason and his team are just getting started on what they can achieve. I'll now turn it over to Jason to provide an update on our business performance and strategy.
Thanks, Brad. I'm going to focus my remarks today on 4 topics: How we performed against our KPIs in 2020; the outlook for our end markets in 2021; progress we've made on our growth strategy; and actions we've taken to further strengthen the depth, capabilities and commitment of our leadership team. Following that, I'll turn it over to Shoal's Chief Financial Officer, Phil Garton, who will provide financial highlights from the fourth quarter and full year 2020 as well as our 2021 financial outlook.
So starting with our performance against our KPIs. Those of you who met us during our IPO roadshow know we have 2 primary financial objectives: Grow our top line faster than the market; and maintain or expand our adjusted EBITDA margins. We achieved the former by taking share and entering new product categories and the latter by increasing the contribution of higher-margin system solutions to our total revenues. We grew our total revenues in system solution revenues 21% and 57%, respectively, in 2020. Our system solution revenues grew faster than the overall EBOS market as a result of share gains.
In 2020, we believe approximately 50% of the solar energy projects installed in the U.S. use at least 1 Shoal's product, an increase of more than 10 percentage points versus the prior year. In 2020, we generated 66% of our revenues from the sale of system solutions, an increase of approximately 15 percentage points versus the prior year. The increase in the percentage of our revenues from system solutions contributed to an expansion of our adjusted EBITDA margins of more than 900 basis points from 25.5% in 2019 to 34.7% in 2020.
Now turning to the outlook for our end markets. In our core U.S. solar business, we're seeing increasing levels of demand as the build-out of new projects accelerates. The acceleration is being driven by growing corporate and utility commitments to buy more of their energy from renewable resources as well as the normalization of permitting processes as more states reopen from the pandemic. The 2-year extension of the solar ITC in December has also expanded the total number of projects that are viable. Though it may lead to some projects being started later in the year than originally planned as developers have a longer window to commence construction.
To put the market momentum we're seeing in context, our quoting activity in the first 2 months of this year has increased approximately 50% year-over-year. 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 EBOS. 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 our combine-as-you-go system installs much faster than the conventional EBOS 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.
Longer term, we're even more bullish about solar than we were a few months ago. The Department of Energy's estimate for the LCOE of utility-scale solar coming online in 24 months has improved 17% from where it was just a year ago, reflecting solar's continued march down the cost curve. And we've noted it based on declining cost, one of the major solar industry analysts that we follow has increased their forecast for new installations by more than 20% for the next 3 years from what they were forecasting in just June. That's a huge increase in the size of the market and aligns with what we've been seeing in the marketplace and hearing from customers.
And I'll now spend a couple of minutes on our growth strategy and the progress we've made on each element since our IPO. There are 5 elements to our growth strategy: Growing market share by converting more customers to our combine-as-you-go BLA solution; selling more product to our customers by focusing on projects that incorporate energy storage; growing our wallet share with customers by introducing complementary products that address other EBOS categories; expanding internationally; and introducing new products for EV charging infrastructure.
I'm excited to report that we're on or ahead of plan for each of these initiatives. First, our combine-as-you-go system continues to take share from conventional home-run solutions. Late in the fourth quarter, we converted an additional EPC to our system. That EPC has entered into an MSA with us that's already resulted in approximately 320 megawatts of orders for this year. We're targeting converting additional EPCs to our system in 2021 as we work to increase our market share to our 60% target.
Second, our strategy of concentrating on projects of energy storage is beginning to pay early dividends. Projects with storage spend about 55% more on EBOS than projects with just solar. More and more of our project pipeline includes storage, which we expect to lead to higher Shoals revenues on each project we ship.
Third, our strategy to introduce new products in the EBOS segments where we did not historically plays on track. Last week, we installed preproduction versions of our basic IV curve benchmarking solution across 2 different projects. The customers reported that the installations went flawlessly, and the project owners are already seeing benefits from the granular performance data that the products provide. Next quarter, selected customers will begin installing preproduction versions of our wire management solutions. Those installs will start as soon as our patent dockets issue. We're working on improved versions of our existing products and are currently in the process of following 7 new patent applications, both in the U.S. and internationally.
Fourth, we've continued to make progress on our international expansion strategy. We've recently hired a new VP of EMEA sales to lead our international expansion in that region. And we're already in conversations with 5 potential new European customers.
Fifth, we're focused on developing products for EV charging infrastructure where the same issues of installation inefficiencies and labor availability make building stations more expensive and time consuming than what they need to be. We see shortcomings in the products currently available in the market that create an opportunity for disruption. With Ford, GM and other OEMs recently announcing plans to phase out ICE vehicles, we're moving towards an EV world even faster than what was projected 6 months ago.
Considering that, we've taken steps to accelerate the development of our EV infrastructure business, which we believe could become an entirely new leg to our business. We've recently hired Jeff Tolnar to be our Senior Vice President of EV for Organization. Jeff previously served as the Chief Commercial Officer of Greenlots, a leading provider of turnkey EV charging solutions that was acquired by Shell. We're confident that Jeff and his team will help Shoals disrupt the EV charging space the way we've disrupted solar EBOS. And lastly, I wanted to cover a couple of things we've done since our IPO to further strengthen the depth, capabilities and commitment of our leadership team.
First, we'll be announcing shortly the appointment of 3 new independent directors to our Board, bringing the total to 4 independents. Each of these new independent directors are established business leaders who bring new capabilities to our Board, including international business experience.
Second, we further strengthened our U.S. sales and marketing team by hiring the former Director of Marketing for Canadian Solar and a North American Vice President of Sales, who previously held similar roles for Delta and Huawei. Third, we made all of our employee shareholders in connection with our IPO. We believe that aligning every member of our team with our shareholders is important.
And as you can tell, we've been busy since our IPO. Solar is growing rapidly. Our products are winning in the marketplace, and we're executing well against the growth plans we've laid out in our IPO roadshow. I could not be more optimistic about our potential this year and beyond.
With that, I'll turn it over to Phil for an update on Shoals' financial results and outlook.
Thank you, Jason. I will provide some commentary on our fourth quarter and full year 2020 results, followed by 2021 outlook.
For the fourth quarter, we generated revenues of $38.8 million, which was in line with our expectations. Year-over-year growth was more modest in the fourth quarter due to extended downtime we took in December, while we expanded capacity as well as an extraordinarily strong Q4 2019. We expect quarterly comparisons going forward to be consistent with year-over-year growth implied by our guidance, although we expect more of our growth to come in the second half versus the first half.
Prices across our product lines during the fourth quarter were comparable to the prior year. Gross margins in the fourth quarter increased by more than 530 basis points to 38.3% from the prior year period as a result of a higher proportion of revenue from combine-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 volumes.
Operating expenses were $7.7 million compared to $4.3 million in the prior period. This was driven by higher equity-based compensation, increased payroll expense due to higher head count and nonrecurring expenses related to our IPO. Adjusted EBITDA, which excludes amortization of intangibles, stock-based compensation, COVID-19-related expenses and other nonrecurring items, was $14.1 million, up 32% from $10.7 million in the prior period, with adjusted EBITDA margin increasing approximately 820 basis points year-over-year to 36.4%. Adjusted net income increased 10.6% to $11.1 million compared to $10.1 million during the same period in the prior year.
Now turning to our full year results. Revenues for the year ended December 31, 2020, grew 21.5% to $175.5 million compared to $144.5 million in the prior year. This was driven by significantly higher sales volumes as a result of increased demand for solar EBOS generally and our combine-as-you-go product specifically. We derived 66% of our revenues in 2020 from sales of system solutions, which was an increase of approximately 15 percentage points versus 2019.
Gross profit increased 50.5% to $66.5 million compared to $44.2 million in the prior year. This was driven by higher volume and efficiency gains. Gross margin expanded by approximately 700 basis points to 37.9% in 2020 compared to 30.6% in the prior year period. Higher gross margin was a result of having more revenues to absorb fixed costs as well as increased sales of system solutions for combine-as-you-go EBOS, which carry higher margins than our other products.
Operating expenses were $29.3 million compared to $17.3 million in the prior year. This was primarily as a result of higher noncash, equity-based compensation related to our Class C units issued, an increase in head count and professional fees related to our IPO.
Adjusted EBITDA grew 65.6% to $60.9 million compared to $36.8 million in the prior year. Adjusted net income increased 66.4% to $56.3 million compared to $33.9 million in the prior year. Adjusted EBITDA and adjusted net income exclude the amortization of intangibles, stock-based compensation, COVID-19-related expenses and nonrecurring items. Please see the adjusted EBITDA and adjusted net income tables in our fourth quarter press release.
Turning to our outlook for 2021. Our backlog as of December 31, 2020, was $157 million, representing an increase of 46% year-over-year. We have also seen our backlog continue to grow during the first quarter as a result of robust order activity. Based upon what we are seeing in the market and feedback from our customers, we currently expect 2021 revenues to be in the range of $230 million to $240 million, representing a 34% year-over-year increase based on the midpoint of the range. We expect adjusted EBITDA to be in the range of $75 million to $80 million and adjusted net income to be in the range of $47 million to $51 million.
Now I will turn it back over to Jason for closing remarks.
Thanks, Phil. I'd like to wrap up with 5 simple reasons why we're excited about Shoals for 2021 and beyond. Number one, growth in our core U.S. solar market is accelerating. Number two, we have the category-killing product for solar EBOS, and we're taking share. Number three, we continue to migrate customers from components to system solutions, which allows us to earn higher margins. Number four, we're on our way to tapping the international market opportunity, which could ultimately be as large as our core U.S. market. And number five, we see an opportunity to bring innovation to the EV charging, which could create an entirely new leg for our business.
Thank you for your time today. Now we'll open up the line for questions.
[Operator Instructions]
Our first question comes from the line of Brian Lee with Goldman Sachs.
Congrats on the first quarter here out as a public company. Good job. Maybe just first question, Jason, and Phil, the backlog is up 46% as of the end of 2020 so you got a lot of momentum heading into the new year. The revenue guidance, I know you're saying it's based on what you're hearing from the customers and the visibility you have, but it's up 30%, 35% year-on-year. So can you give a little bit of context? I mean the backlog, as I recall, is a 12-month number. So is the revenue outlook just a little bit conservative relative to the backlog growth? Or is the backlog just kind of a lot of first half visibility and so you don't want to stretch into kind of the back half and what kind of business trends you might see there? And then I have a follow-up.
Perfect. This is Jason. Good talking to you, again, and thank you very much. I guess, first of all, we take meeting the commitments we make to our shareholders very serious. And for that reason, we're very confident in the guidance we provided today. But keep in mind, to the extent that we do see our performance meaningfully exceeding our guidance, we would definitely update you in subsequent quarters coming down the pike.
All right. Fair enough. But just to maybe provide a little bit of context, the backlog is a 12-month number. And would you say there's any kind of notable timing cadences to first half, second half embedded in that backlog?
So the backlog is -- a large portion of the backlog is a 12-month number. I mean, as we've talked about before, we do see even further visibility past that, but a significant portion of that backlog is in the first 12 months, with a large portion of that actually rolling into Q3 and Q4 as we see it today.
Okay. Great. That's helpful. And then just my follow-up is on some of the commentary around the EPCs and conversion. So it sounds like you've already done a conversion here early on in the new year, and you've got several more on the way. Can you provide a bit of context as to -- are these all kind of larger top 10 EPCs? I know you had several of them at the time of IPO. But are these -- the rest of the top 10 you hadn't yet converted? And is there sort of a target for them becoming kind of 50%, you becoming 50% of their book this year and then moving higher? Or kind of what's the cadence for penetrating some of the new accounts as you do convert them over?
No, perfect. Thanks, Brian. Good question. So the EPC that we mentioned in our prepared remarks, that is definitely a top player in the market. And from a timing standpoint, it's really difficult to say. I can tell you that I'm very proud of how the sales teams has operated and what they've been able to accomplish from that perspective. But just considering that the time period in which we start working with those EPCs, that conversion cycle may vary coming down the pike. So we are going after several more top EPCs that are in the market to be able to get us to our big goal that we're going.
Our next question comes from the line of Shar Pourreza with Guggenheim Partners.
It's actually Kody Clark on for Shar. So first, can you provide any updated color on the progress with BLA 2.0? Are you still on track to complete product engineering by 2Q this year? And then when should we expect more detail on the product and its implications on your growth trajectory? Is it kind of after that product engineering phase? Or is that after the validation and certification phase?
Kody, this is Jason speaking. So as we've talked about in the past, I'll just cover a few of those topics. We can't go into a lot of detail about BLA 2.0 because we haven't completed a full patent cycle. But again, how I would think about the product is, is that it offers an additional level of savings from an installation cost perspective, based upon the labor savings that it provides above and beyond what the current BLA brings to the market today.
And when we look at the BLA 2.0, it does that by essentially incorporating other components that we don't currently provide or participate in today. And when you look at really where we are, I'm excited to say we're on track with that product as well, just like we are with all of our other products that we've mentioned about bringing to market. But just to reiterate what that is, we will be going through and doing a commercial launch early next year and expect to be generating revenue towards the latter half of 2022. And then once we complete the patent docket for that particular product itself and we go through our, what I would call preproduction process with our customer base, that's when we will open up that particular technology for further information.
Got it. Okay. That's helpful. And then second, just on the rip-and-replace opportunity. You mentioned previously that you're starting to see some RFPs for these type of projects. Wondering if that's picked up at all in the past few months? And is there any data points that you can kind of point to that would help us bring this opportunity in 2021 and beyond?
So the short answer is we have seen an increase in rip-and-replace opportunities. That since the last -- I guess since the last time we spoke, we've actually quoted quite a few projects, to be honest. But when you look at guidance, forward-looking guidance, it's very difficult to be able to predict exactly what that is because it depends upon what the failure mode is. If it's a -- if it's something that's impeding performance and it's not a safety issue, it's really based upon the frequency in which that particular client wants to go through and replace that product, they may just replace that as it fails. But if it's a significant safety issue, then they're pretty much obligated to go through and replace that product with something that works. So it's very difficult to be able to provide forward guidance from a rip-and-replace perspective.
Awesome. Congrats on the execution.
Absolutely. Thanks, Kody.
Our next question comes from the line of Michael Weinstein with Crédit Suisse.
On international shipping delays we're seeing in some of the ports, I'm just wondering if -- is that impacting you at all? And I know a lot of your parts are made domestically, but is it impacting perhaps -- maybe your overseas expansion in any way?
Yes. So that's a good question, Michael. So yes, we are seeing much like I would assume everybody else is. We are seeing shipping delays. But one of the things that you'll find is we're very conservative, both on inbound and outbound. Not very much of our product is inbound, but specifically outbound. So we try to make sure that we don't miss any particular customer delays. And for that reason, we've been very successful in executing against the commitments that we made to our customers. And as a result, have not had any shortcomings from a delivery perspective right now.
Great. And also, the -- are you seeing any impact at all from higher commodity costs, copper, aluminum and the like?
Yes. Hey, Phil?
Yes, sure. Yes, I got that one. Prices of copper and aluminum wire have increased, but they are not impacting our margins. As you know, the reason is that our wire suppliers commit to a price that we quote in a system and that our customer only has 7 days to accept that quote. And that's when they can issue a PO. If they wait more than the 7 days, we will refresh the quote, and that will be reflected in the new price on their -- that they're quoted. So we pass through all commodity risks onto our customers. And they understand it, and we understand it. So it works quite well.
Got it. You're still a relatively small part of the overall cost of construction, so it's not...
Oh, yes.
And you don't see it impacting your sales really that much probably, right?
No. It hasn't moved the needle yet on the demand for the product, for the overall product.
Just in terms of -- go ahead...
This is Jason. Just one other thing. I mean when you look at the increase, right, that's -- you're asking about in terms of sales. I mean we're seeing an increase, all of our competition are seeing an increase as well. So but yes, we've not seen any decrease in sales because of it. Good question.
Got you. What about the revenue mix in 2021 versus U.S., versus international, storage, EV charging? Congratulations to Jeff on heading the new EV Infrastructure business. And also, just in terms of EV, yes. Since you last spoke about it, I mean, are you seeing any more total addressable market there? Any more opportunities beyond that, I think, the $30 million opportunity that you previously talked about there?
So as far as forward guidance, breaking it down between the different opportunities, the different segments, that's something that we're not doing as of right now. But yes, we're very excited about EV. Very excited about bringing Jeff online, and there's a lot of things that we see. We've talked about in the past. The EV market is much like what the solar market was to us many, many, many years ago. We see a lot of opportunities for optimization just based upon products that don't really exist out there in the market today. So we're very excited about that, but we're still tracking towards the commitment that we made to the public market.
[Operator Instructions] Our next question comes from the line of Paul Coster with JPMorgan.
And welcome to the public markets. So just focusing on the international growth and the EV growth opportunities for a moment. Can you talk a little bit about your go-to-market strategies for both and how they're evolving? It sounded like in the international zone, you're hiring a marketing professional. Previously, I thought you'd be following your customers into those markets. So perhaps you can elaborate on that. And Jason, it did sound like you're incrementally constructive about EV charging, and you must have some visibility into how you're going to get to market with it because it's a much more fragmented end market, right?
Yes, Paul. Jason here. So looking at the international market, we have -- the hiring that we have made there is we've hired our VP of EMEA. So boots on the ground, local representation. We're very excited about that hire. And when you look at the strategy in general, we're really -- as we've talked about in the past, is taking a two-pronged approach that we found to be very successful in North America by working with not only the local EPCs, but also the owners and the developers to make sure that they really understand that value proposition and push that product through into the EPCs that they work with. So again, very similar approach to what we've done, very successfully in North America. And as I mentioned, we're already working with several new clients internationally. And working on the projects that they have in their pipeline so that we can start converting them over to the Shoals' product suite.
And to your second part of the question, Paul, and let me know if I missed something else. When you look at EV, as we talked about in the past, the products that we're going after are predominantly on the EBOS side that allow you to go through and optimize the EBOS portion of that EV market. And ironically, because of that, several of the customers that we already serve and serve well in the space, specifically renewables, already play in that market. So we're going to take a very similar approach in EV by going after the larger installers. And again, we're looking at fleet-level applications. So we're not really targeting what would be quantified as like a residential sale, which is very fragmented, as you mentioned, Paul.
Okay. Got it. All right. One last question. You said that the quoting activity was up, I think, 50% year-on-year or something of that note. So what is quoting activity? Perhaps you can just sort of define it for us there.
So that...
Is it the dollar value or the number of calls, for instance?
Yes. So yes, that's actually a great question, Paul. That particular metric, I believe, was the quoting activity itself, as quantified by the number of quotes that go out from the sales team. But how I would think of that is, when you look at the market that we're in, a lot of the projects that are going out are very, very large projects. So a significant increase in what we've seen year-over-year. I'm very excited about the opportunity ahead.
[Operator Instructions] Our next question comes from the line of Stephen Byrd with Morgan Stanley.
Congrats on a good start to being a public company.
Thank you very much, Steve.
I wanted to just explore the EV business a little bit more. It sounds like you're very optimistic there. Is this something where we could see some relatively important announcements sometime this year? Do you think it's sort of more likely to just see incremental activity without any sort of major sort of milestone agreements? Or is it more likely to be, I guess, a -- chunky to use a non-scientific term, but just sort of how should we kind of think about the evolution of that opportunity in 2021?
So what I would -- how I would think of EV in terms of 2021 is really, we're building out what I would call an easy infrastructure business unit. And we're doing that again, based upon the rapid acceleration that we see in the EV market. So we're going to be going through validating some of the products that we've already identified and then further finalizing our product road map so that we can roll out a very successful product based upon feedback from the customers that we already know that participate in that market. And as that particular product opportunity begins to flourish, we'll definitely communicate about more of our plans in the upcoming quarters.
Understood. So it does sound like maybe one of the more notable things would just be sort of major product announcements that you think sort of address a critical need there, right? That could be some of the more noteworthy things we see.
Yes. That's what -- that's something that you could definitely consider going forward would be just general products that we're bringing out, announcements and exactly what they do, yes.
Okay. Great. And then just one other on geographic growth, a number of questions on that already. But given the nature of your hire, I thought I'd just check in since the time of your IPO in terms of areas of -- the geographic areas that look most promising to you? It sounds like Europe continues to be a key area. Are there any other geographies sort of noteworthy that we should be thinking about?
So we're -- obviously, you're spot on with Europe in that general region. That was one of the reasons why we went after bringing on our first Canada in that area, but also LatAm. We're still seeing a lot of opportunity in Australia. So really, without going into a lot of detail, a lot of the opportunities that we originally laid out, we are seeing still exist today. But I definitely would say that Europe is a very strong area as we speak right now.
Our next question comes from the line of Philip Shen with ROTH Capital Partners.
First one has to do with revenue mix as we get through the quarters. I think Phil, you talked about more revenues in the back half versus the first half. Can you talk about or quantify in any way what that might mean? And if there's any way you can even provide a quarterly sense, that would be very helpful.
Okay. Philip, this is Philip. We don't give those forecast by quarter. But as I mentioned, there is a significant step up, even though we see a very strong first half, which, as I mentioned, strong growth year-over-year as we've seen the last several quarters, last couple of years that historic growth. We're going to see that in the -- we see that in the first part of the year, but then a major step-up in the second half, a lot of projects are coming online.
Okay. So would a 70-30, maybe 70 -- maybe 65-35 split work between back half and first half?
Jason, do you want to comment?
I'm not sure exactly how much I can say, honestly, sorry, in our first half. But it will definitely be weighted towards the second half.
Okay. Great. And then maybe talk through the margin cadence by quarter as well, if possible. Do we see improvement as we go through the year? Is it flattish and steady at this high 30s level percentage?
Well, the EBITDA margins, there's a variety of margins. But if you look at adjusted EBITDA margins, we will see it lower in the first part of the year and actually lower for the year than it was prior year. And if you remember, as we talked about it during the IPO, it's primarily driven by investment in our SG&A, which is driven by two: The public company costs; as well as, of course, equity-based compensation and those type of things, and we're investing in all of those growth initiatives. So there'll be a step function in 2021 in SG&A, which is what we're looking at, and we've talked about before. But then the margins, the gross margins on our top line, we'll see -- we're projecting to continue to improve as we go through the year.
Okay. So we got roughly -- high 30 -- 38.3% in Q4. And should we see that steady in Q1 and Q2? And then maybe a slight tick up in Q3 and Q4?
I would -- I don't want to go into details, but there will be an impact of SG&A as we go into this year that it will take a step down, or we're projecting that.
You're talking about gross margins? Sorry, Phil.
Gross margins, I'm sorry. Gross margins, we see to continue to do very well and improve as we see that market shift to higher-margin products to our system solutions.
Okay. One last one, if I may, around capacity. From your prospectus, you guys talked about being at 1.8x or having 1.8x capacity of your trailing 12-month revenues as of the end of Q3, which were about $175 million. So if you just simply apply that 1.8x, it suggests that you could be at $315 million in terms of a run rate of revenue versus your 2021 guidance of $235 million. Can you just talk about what -- what would it take to get to that higher level of revenue? What's limiting you now? And what might open that up?
So, Phil, that's a good question, and pleasure speaking with you again. So yes, you are correct. As far as the capacity we have, and again, as we've talked about in the past, we try to be very aggressive when it comes to having capacity available. It's not uncommon for some of that customized manufacturing equipment that we design and build ourselves for it to be built a year plus in advance. As a matter of fact, we're installing a significant amount of equipment that I highly doubt will be touched this particular calendar year.
So that's one of the things that we always try to stay ahead of to make sure that we have that capacity available for opportunities when they come back to you that you can actually capitalize on. So very important to our growth down the road.
And when you look at the last half of your question, Phil, taking a -- and maybe -- I may have misunderstood this, but essentially taking a spike up to 350 (sic) [ $315 million ] or the like, really, we want to make sure that even though we do have a lot of opportunities ahead and some very exciting growth, we also want to do that very conservatively and make sure that we can meet all the demands of our customers because you can have the best product out there in the world and if you can't meet the demands that your customers need, then you're not going to be successful. So it's really a combination of the 2, Phil.
Congrats as well on a successful IPO.
Absolutely. Thank you very much, Phil.
Our next question comes from the line of Colin Rusch with Oppenheimer.
Can you give us a sense of how much of the revenue growth from 2020 to 2021 is being driven by higher commodity prices?
We actually don't have anything built in our model for growth about higher commodity prices because we do pass those on. So we have put nothing in our model of tweaking that up for commodity prices.
Okay. That's super helpful. And then can you speak to any acceleration in close rates or the trend lines in terms of how much of the business you're quoting, you're actually ultimately winning over the last couple of quarters?
Yes. That's one of the things that we're not prepared to talk about today. But again, what I can say is that the quotes that are going out and the phenomenal job that our sales organization is doing, is nothing short of amazing. So very excited about the rate of closure on those projects.
Our next question comes from the line of Ben Kallo with Baird.
So 2 questions. So all the solar calls we've been listening to are talking about accelerating growth. And so just like maybe you all's perspective on that. And then two, I grew up in Knoxville kind of close to you guys. And there's a political sense about like solar panels, wind turbines being not good in some areas. And I just want to hear you all's perspective on how you guys deal with the political part of all this?
Yes, Ben, this is Jason here. So I'll take the first part of the question and maybe turn the second question over to Brad if he wants to comment or I can proceed with it as well. But when you look at the first question, from a growth perspective, we are seeing a lot of opportunity ahead. When you -- as we talked about before and mentioned in the prepared remarks, a 50% increase in our quote profile from the sales organization is a very significant increase. So we're seeing a lot of opportunities. When you look at some of those projects, we feel like some of those -- some of that quoting is coming in maybe from projects that otherwise may not have been able to be constructed until the ITC took place. But yes, we're definitely seeing a lot of opportunities in growth, projects that are coming online quicker or projects that we hadn't heard of as well as opportunities carrying out towards the latter year and on in the 2022 or 2023.
It's Brad speaking, and I'm happy to speak a little bit to the political question. Look, I think you go back a decade or so ago, and solar was not competitive with alternative sources of generation, absent subsidies. So political constituencies that are opposed to sort of meddling in free markets and that sort of thing, obviously, weren't too happy about that. But that was then. This is now. Solar is full stop cost -- of levelized cost of energy of any form of production. I think the technology, at this point, speaks for itself. And I do think that political opposition wanes and is waning over time as a result of that. And it is a very robust, reliable technology. It doesn't have many new problems when you build it the way that many other technologies have. It actually performed well in the ERCOT region, by the way, during the big problems that occurred there. I think it was a 1 source of generation that exceeded expectations, unlike both gas and wind. So we feel we're really on the right side of the equation here. And hopefully, any resistance, over time, evaporates just because of the economic merits that solar provides.
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 Whitaker, CEO, for closing remarks.
So thank you, everyone, for joining us today. I'd like to close by reiterating how proud I am of our team and the excitement that I have for our future. I'd also like to thank our shareholders for their tremendous support, and we look forward to future discussions updating you on our progress. Thank you very much.
Thank you for joining us today. This concludes today's conference. You may disconnect your lines at this time.