What changed in this filing

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Item 1. Business

2025-02-25 compared with 2024-02-28 · 164 added, 164 removed, 116 unchanged (74% of the section changed)

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and, unless otherwise stated, all of its consolidated subsidiaries.

As more fully described below, during 2023, the Company simplified its corporate structure by, among other things, eliminating the umbrella-partnership C corporation structure (“Up-C structure”) that was in place since its initial public offering (“IPO”).

The Company completed its IPO on January 29, 2021, and since then, its Class A common stock trades on the Nasdaq Global Market under the symbol “SHLS.”

Elimination of Up-C Structure and Entity Simplification

In the first quarter of 2023, following a secondary offering of shares of Class A common stock by certain selling shareholders, all the holders of limited liability interests of Shoals Parent LLC (“LLC Interests”), our former operating subsidiary, exchanged all the LLC Interests and corresponding shares of Class B common stock of the Company beneficially owned by them into shares of Class A common stock of the Company.

As a result, upon effectiveness of such exchanges, all of the LLC Interests in Shoals Parent LLC were held by the Company, no other holders owned LLC Interests and no Class B common stock was or is outstanding.

On July 1, 2023, the Company contributed 100% of its LLC Interests to Shoals Intermediate Parent, Inc.

(“Shoals Intermediate Parent”), a wholly-owned subsidiary of the Company.

Following the contribution, Shoals Parent LLC became a disregarded single member limited liability company, eliminating the Company’s Up-C structure.

Following the elimination of the Up-C structure, effective December 31, 2023, the Company consummated an internal reorganization transaction whereby certain of the Company’s wholly-owned subsidiaries merged with and into other subsidiaries.

As part of this reorganization, Shoals Parent LLC merged with and into Shoals Intermediate Parent, with Shoals Intermediate Parent as the surviving corporation.

Shoals is a leading provider of electrical balance of system (“EBOS”) solutions and components for solar, battery storage and electric vehicle (“EV”) charging applications, selling to customers primarily in the United States (“U.S.”) as well as internationally.

Shares of our Class A common stock trade on the Nasdaq Global Market (“Nasdaq”) under the symbol, “SHLS”.

Shoals is a leading provider of electrical balance of system (“EBOS”) solutions and components, including battery energy storage solutions (“BESS”) and Original Equipment Manufacturer (“OEM”) components, for the global energy transition market.

EBOS encompasses all of the components that are necessary to carry the electric current produced by solar panels to an inverter and ultimately to the power grid.

EBOS components are mission-critical products that have a high consequence of failure, including lost revenue, equipment damage, fire damage, and even serious injury or death.

As a result, we generally believe customers prioritize reliability and safety over price when selecting EBOS solutions.

EBOS components that we produce include cable assemblies, inline fuses, combiners, disconnects, recombiners, wireless monitoring systems, junction boxes, transition enclosures, splice boxes and battery energy storage systems (“BESS”) cabinets.

We derive the majority of our revenue from selling “system solutions” which are complete EBOS systems that include several of our components, many of which are customized for the customer’s project.

We refer to complete EBOS solutions that use products manufactured by us, typically in connection with the design and specification of an entire EBOS system, as “system solutions”.

When we sell a system solution, we work with our customers to design, specify and engineer their system solution to provide a complete customized EBOS solution consisting of individualized products that maximizes reliability and energy production while minimizing cost.

We also provide technical support during installation and the transition to operations and maintenance.

We refer to individual, often custom and proprietary, products we sell as “components”.

Given the custom nature of both our system solutions and individual components and the long development cycle for solar energy projects, we typically have 12 months or more of lead time to quote, engineer, produce and ship orders we receive, and we do not stock large amounts of finished goods.

We believe our system solutions are unique in our industry because they integrate design and engineering support, proprietary components and innovative installation methods into a single offering that would otherwise be challenging for a customer to obtain from a single provider or at all.

We sell our solar products principally to engineering, procurement and construction firms (“EPCs”) that build solar energy projects.

However, given the mission critical nature of EBOS, the decision to use our products typically involves input from both the EPC and the owner of the solar energy project.

The custom nature of our system solutions and the long development cycle for solar energy projects typically gives us 12

months or more of lead time to quote, engineer, produce and ship each order we receive, and we do not stock large amounts of finished goods.

Throughout fiscal year 2023, we have maintained focus on our growth strategy and continued strengthening our leadership position in the industry.

We believe that as of December 31, 2023, we have worked with 13 of the top 15 solar EPCs, per Wood Mackenzie data from 2019-2023, and 11 of those EPCs used our combine-as-you-go system on their projects.

We derived approximately 81.5% of our revenue from the sale of system solutions for year ended December 31, 2023.

For the same period, we derived substantially all of our revenue from customers in the U.S.

As of December 31, 2023, we had $631.3 million of backlog and awarded orders.

Backlog of $205.8 million represents signed purchase orders or contractual minimum purchase commitments with take-or-pay provisions and awarded orders of $425.5 million are orders we are in the process of documenting a contract but for which a contract has not yet been signed.

As of December 31, 2023, we believe approximately $205.8 million of backlog and $250.0 million of awarded orders have delivery dates in 2024.

The remaining $175.5 million have planned delivery dates beyond 2024.

Additionally, we believe more than 13% of our December 31, 2023 backlog and awarded orders relate to international projects.

As of December 31, 2023, backlog and awarded orders increased by 47% relative to December 31, 2022 and decreased by 0.3% relative to September 30, 2023.

Our Proprietary EBOS System

Historically, most solar energy projects used a wiring architecture known as “homerun”.

Conventional homerun EBOS systems have two distinguishing characteristics:

every string of solar panels in the project is connected to a combiner box with individual positive and negative “wire runs,” and connections between wires are made using a process called “crimping”.

The combiner box functions as a central point to “combine” the individual wire runs into a single feeder cable and contains fuses to protect each circuit.

Making each wire run from the strings to the combiner boxes is a laborious process.

Since EBOS components are mission-critical products that have a high consequence of failure, which may result in lost revenue, equipment damage, fire, and even serious injury or death, we generally believe customers prioritize reliability and safety over price when selecting EBOS solutions.

Traditionally, and for the year ended December 31, 2024, we primarily sold our EBOS solutions and components and OEM components to customers in the United States.

Specifically, we primarily sold to engineering, procurement and construction firms (“EPCs”) for use in large solar projects designed to generate electricity and feed it directly into the electric grid, typically with a generation capacity of 1 megawatt (“MW”) or greater (“utility-scale solar”).

These EPCs work with owners and developers of solar assets to build solar energy projects.

However, given the mission critical nature of EBOS (as further described below), the decision to use our products typically involves input from both the EPC and the owner/developer of the solar energy project.

As further described below, in the third quarter of 2024, we announced our strategic shift to expand our reach and capitalize on international, BESS, data centers, and Commercial, Community, and Industrial (“CC&I”) markets, while also maintaining our focus on domestic utility-scale solar and OEM markets.

This shift is aimed at capitalizing on the growing global demand for renewable energy solutions and diversifying our market presence.

By entering new geographic regions, markets, and applications, we aim to enhance our competitive position and drive long-term growth.

Traditional EBOS Solution

Historically, most solar energy projects used a wiring architecture known as a “homerun.” Conventional homerun EBOS has two distinguishing characteristics:

first, every string of solar panels in the project is connected to a combiner box with individual positive and negative “wire runs,” and second, connections between wires are made using a process called “crimping.” The combiner box functions as a central point to “combine” the individual wire runs into a single feeder cable and contains fuses to protect each circuit.

Making each wire run from the strings to the combiner boxes is a costly and laborious process, requiring expensive copper wire and licensed electricians.

Each wire run must be measured, laid out and fished through conduits that are buried in trenches across the project site.

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The entire installation must be performed by licensed electricians with special training and any mistake in the process can result in a catastrophic system failure.

We invented an alternative to homerun architecture which we refer to as “combine-as-you-go”.

Rather than making individual wire runs from each string to combiner boxes, combine-as-you-go architecture connects multiple strings within each row using specialized wire harnesses with integrated fuses that we refer to as “interconnect harnesses”.

The interconnect harnesses are then connected to a proprietary above ground feeder cable that we refer to as the Big Lead Assembly (“BLA”).

The BLA is our core combine-as-you-go product.

The direct connection between the interconnect harness and the BLA and the integration of fuses into the interconnect harness dramatically reduce the number of wire runs required compared to a conventional homerun system and eliminate the need for combiner boxes.

We believe our combine-as-you-go architecture using interconnect harnesses and BLA has several advantages when compared to conventional homerun EBOS, including:

Weather, moisture, dirt, and human error all contribute to the challenges of completing a high-quality, cleanly-connected system, that is required to remain in service for decades.

Our Proprietary Answers:

The majority of solar energy projects in operation today use conventional homerun architecture.

We design, manufacture and sell system solutions for homerun systems.

We have developed a proprietary EBOS solution for homerun architectures that utilizes our interconnect harness.

Rather than the traditional approach of running a separate wire from each string to a combiner box, our interconnect harness connects multiple strings together at each row using a single wire and simple push connector, rather than a wire crimp.

Combining multiple strings together at each row reduces the number of wire runs that have to be made to combiner boxes, as well as the number of connections that have to be made in each combiner box, which reduces either the total number of combiner boxes or the size of combiner boxes required for the system.

Using push connectors allows a large portion of the EBOS installation to be completed by general laborers, rather than requiring licensed electricians.

Our homerun EBOS system solutions typically include our interconnect harness, combiners and jumpers.

We have also invented a trunk-bus alternative to traditional homerun architecture which we refer to as “plug-and-play” EBOS.

Rather than making individual wire runs from each string to combiner boxes, plug-and-play architecture connects multiple strings within each row using specialized wire harnesses with integrated fuses that we refer to as “interconnect harnesses.” The copper interconnect harnesses are then connected to a proprietary above ground aluminum feeder cable that we refer to as the Big Lead Assembly (“BLA”), which feed directly into disconnect boxes, which are connected to the inverter.

The BLA is our core plug-and-play product.

The direct connection between the interconnect harness and the BLA and the integration of fuses into the interconnect harness dramatically reduces the number of wire runs required compared to a conventional homerun system and eliminates the need for combiner boxes.

Our patented design includes connection points which incorporate a double molding system, permanently sealing out any moisture or particulates that would otherwise compromise the system.

Additionally, BLA delivers to our customers meaningful cost savings by leveraging aluminum, which is often 80% less expensive than copper.

We believe our plug-and-play EBOS architecture using interconnect harnesses and BLA has several competitive advantages when compared to conventional homerun EBOS, including:

• Installing above ground.

Wiring for conventional homerun systems is typically run through conduits that are buried in trenches.

Trenching is costly and time consuming.

Making repairs to buried wire can also be challenging and expensive, as well as run the risk of unintentionally damaging other buried wire that did not need to be repaired.

Trenching is costly and time consuming, and certain geographies have environmental limits to these types of construction actions.

Making repairs to buried wire can also be

challenging and expensive, as well as run the risk of unintentionally damaging other buried wire that did not need to be repaired.

Our BLA is hung from the mounting system used for the solar panels, enabling above ground installation.

Above ground installation is less costly and far faster than burying

wire in conduits.

Above ground installation is less costly and far faster than burying wire in conduits.

Future maintenance is also significantly easier and less costly because our BLA is easily accessible if repairs are required.

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Conventional homerun systems use crimps and other specialized procedures to connect wires and install combiner boxes that must be performed by licensed electricians.

Because our interconnect harness and BLA use simple push connectors and don’t require combiner boxes, licensed electricians are not needed to install the system.

Because our interconnect harness and BLA use simple push connectors and do not require combiner boxes, licensed electricians (who are often expensive and in short-supply) are not needed to install the system.

• Reducing the number of wire runs .

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• Having greater reliability and lower maintenance costs.

Connection points are often the source of failure in EBOS systems and must be inspected regularly.

Connection points are often the source of failure in EBOS and must be inspected regularly.

A solar energy project that uses our interconnect harness and BLA will have significantly fewer connections and, as a result, fewer failure points to inspect and maintain than the same project would using a conventional homerun system.

We believe fewer potential failure points contributes to higher reliability and lower maintenance costs for solar energy projects that use our combine-as-you-go system when compared to a conventional homerun system.

We believe fewer potential failure points contributes to higher reliability and lower maintenance costs for solar energy projects that use our plug-and-play system when compared to a conventional homerun system.

• Enabling more energy generation.

We believe the design of our interconnect harness and BLA reduces electrical resistance significantly when compared to a conventional homerun system.

Lower resistance reduces energy loss to waste heat dissipation, which we believe results in greater energy generation from solar projects that use our combine-as-you-go system when compared to a conventional homerun system.

Together, we believe these advantages result in lower installation costs and lower material costs for our combine-as-you-go systems when compared to conventional homerun systems.

Lower resistance reduces energy loss to waste heat dissipation, which we believe results in greater energy generation from solar projects that use our plug-and-play system when compared to a conventional homerun system.

Together, we believe these advantages result in lower installation costs, lower material costs, and lower maintenance costs for our plug-and-play systems when compared to conventional homerun systems, as well as potentially lowering impact to the environment due to lower consumption of copper, aluminum and plastics.

Products and Services

System Solutions

We refer to complete EBOS systems that use multiple components produced by us as “system solutions”.

When we sell a system solution, we work with our customers to design, specify and customize their EBOS system to maximize reliability and energy production while minimizing cost.

We also provide technical support during installation and the transition to operations and maintenance.

We design, manufacture and sell system solutions for the two types of wiring architectures used by the U.S.

solar industry:

homerun and combine-as-you-go.

Homerun EBOS:

We have developed a proprietary EBOS solution for homerun architectures that we refer to as an “interconnect harness”.

Combining multiple strings together at each row reduces the number of wire runs that have to be made to combiner boxes as well as the number of connections that have to be made in each combiner box which reduces either the total number of combiner boxes or the size of combiner boxes required for the system.

Using push connectors allows a large portion of the EBOS installation to be completed by general laborers rather than requiring licensed electricians.

Our homerun EBOS system solutions typically include our interconnect harness, combiners and jumpers.

The majority of solar energy projects in operation today use conventional homerun architecture.

Combine-as-you-go EBOS:

We invented “combine-as-you-go” architecture in 2014 and began offering combine-as-you-go products widely in 2017.

Combine-as-you-go architecture connects all strings in a project to “trunk” wires that feed directly into disconnect boxes, which are connected to the inverter.

With our interconnect harness, BLA combines the functionality of cable assemblies, combiner boxes and fusing all into one product that does not require a licensed electrician to install.

A combine-as-you-go architecture using BLA has significant advantages over traditional homerun architectures, including using less material, requiring fewer man hours to install and having greater reliability and ease of maintenance.

Our combine-as-you-go EBOS system solutions typically include our interconnect harness, BLA and disconnects and, in some projects, transition enclosures and splice boxes.

eMobility solutions:

During 2021, we introduced four new product families for the EV charging market and began taking orders and shipping some component products in 2022.

Order flow and deliveries of our EV system solution continued through 2023 with scaled production underway.

The first offering within the eMobility product family is the power center which combines equipment needed to protect the charging equipment and transform voltage levels from the electric utility to those needed on the respective site.

The power center provides an efficient, cost effective and aesthetically focused option versus traditional methods.

The second offering focuses on quick connect solutions for chargers made by any manufacturer and any power level to connect to the Shoals system.

The quick connect bases dramatically reduce the time required on site for a deployment and reduce the amount of labor required in the field.

The third offering uses our BLA technology in the EV space to connect multiple chargers to a single power center.

This solution eliminates the need for homeruns from each dispenser and is above ground rated which allows wire to be run above ground rather than in underground conduit.

The fourth offering is a raceway system that protects the above ground EV BLAs in walk over and drive over applications.

The raceway system coupled with the EV BLA deploys much more rapidly and cost effectively than traditional methods of deployment.

Solar operations and maintenance (“O&M”) offerings:

During the third quarter of 2023, we introduced our first solar O&M product offering called Snapshot IV.

This solution monitors the specific voltage and current of individual solar panels and compares the results against manufacturer’s claimed/projected performance.

This information will provide O&M teams and owners with a more advanced level of detail than other competing alternatives, with respect to the panel’s performance.

We derived approximately 81.5% of our revenue for the year ended December 31, 2023 from the sale of system solutions.

We design, manufacture and sell a variety of individual EBOS and other components used by the solar, battery storage, or EV charging applications and industries, including:

Enclosures that interconnect wire runs from multiple solar panel strings together so that their current can be fed into a single large cable.

Plug-n-play branch connectors and inline fuses:

Plug-n-play connectors for small commercial and rooftop solar applications in inline fuse, fuse-T, dual inline fuse, T-shaped, X-shaped, Y-shaped and U-shaped configurations.

AC disconnects:

Specialized switches that allow the inverter to be isolated from the grid to enable repairs or in cases of emergency.

Enclosures that interconnect feeders from several combiner boxes into a smaller number of cables that run to the inverter.

Wireless monitoring:

Specialized devices that monitor current, voltage, temperature, tracker rotation and other performance characteristics.

Junction boxes:

Electromechanical interface that provides connection points to collect power from a solar panel.

Wire management:

A system to secure photovoltaic (“PV”) wiring for safety and aesthetic purposes.

EV power cabinets :

enclosures that provide power conversion and protection for EV power systems.

BESS cabinets:

enclosures which contain batteries for utility scale BESS or EV charging sites which require BESS.

We derived approximately 18.5% of our revenue for the year ended December 31, 2023, from the sale of components.

We design, manufacture and sell a variety of products used by the solar and battery storage industries, including:

Solar BLA Solutions :

Wide range of industry-leading plug-and-play cable and cabinet solutions that efficiently harness the power of solar energy.

Homeruns, Interconnection & Extension Solutions :

Patented interconnect system and home run harnesses reduce the specialized labor required in your installation, making the integration of solar panels quicker and more simplistic.

Combiners and Re-Combiners:

Bringing standardization to the next evolution of combiner boxes, optimizing both cost and layout without sacrificing quality or performance.

Load Break Disconnects and Transition Solutions:

Secure, durable and flexible solutions to reduce feeder sizes or disconnect systems for maintenance and shutdowns.

Wireless Performance Monitoring :

Real-time performance monitoring solutions to proactively monitor your solar system performance remotely.

Custom, semi-custom and standardized EBOS solutions for solar + storage and standalone energy storage projects.

Sales and Marketing Strategy

Our sales and marketing strategy is to build product awareness and foster long-term relationships with all key stakeholders that are involved in the lifecycle of a PV, BESS, eMobility, or O&M project.

We educate these stakeholders on the value proposition of our solutions which lower installation costs, provide greater reliability, and lower maintenance costs through a variety of marketing strategies which include direct marketing campaigns, white papers, independent third-party studies, training seminars, and participating in industry conferences and events.

While we have traditionally focused on the domestic utility-scale solar and OEM markets, in the third quarter of 2024, we announced our strategic shift to expand our reach and capitalize on international, BESS, data centers, and CC&I markets.

On a global scale, there is a growing demand for renewable energy solutions, driven by government incentives, environmental concerns, and the need for sustainable energy sources.

We have introduced a suite of products tailored to international environments and standards, and aim to capitalize on this increasing demand while diversifying our market presence.

Similarly, the CC&I and BESS markets have experienced significant growth as a result of increasing demand for renewable energy solutions and energy storage capabilities according to Wood Mackenzie.

In 2024, we achieved a historic milestone with the highest number of new product releases in our history, paving the way for expansion into new markets, applications, and geographies.

We believe that focusing on CC&I and BESS allows us to leverage our expertise in EBOS solutions to create tailored offerings that enhance the performance and cost-effectiveness of energy storage and CC&I installations.

These shifts are aimed at capitalizing on the growing global demand for renewable energy solutions and diversifying our market presence, which we expect will diversify our revenue streams and reduce reliance on utility-scale solar projects.

By entering new geographic regions and markets, we aim to enhance our competitive position and drive long-term growth.

Our sales and marketing strategy is to build product awareness and foster long-term relationships with key stakeholders that are involved in the lifecycle of a solar or BESS project.

We educate these stakeholders on the value proposition of our solutions which lower installation costs, provide greater reliability, and decrease maintenance costs.

We use a variety of marketing strategies which include direct marketing campaigns, white papers, independent third-party studies, training seminars, and participating in industry conferences and events.

We sell components and system solutions both on a project-to-project basis or through master supply agreements that support a portfolio of projects.

Our sales process is a highly consultative approach that involves working with developers, engineers, EPC’s, subcontractors, and O&M firms.

We work collaboratively to understand the complexities and goals of each project with all stakeholders involved to ensure continuity throughout the decision-making process.

Our sales process is a highly consultative approach that involves working with developers, engineers, EPC’s, subcontractors, and OEM firms.

We work collaboratively with all project stakeholders to understand the complexities and goals of each project to ensure continuity throughout the decision-making process.

This involves us collaborating on site design, product selection, value engineering and optimization.

Our project management team supports the process after a sale is completed by providing the customer submittals for approval, real-time shipping information, and any additional items that may be needed to complete the installation and commissioning.

Our customer care team engages once a site is fully commissioned for any further technical support that may be required for the life of the project.

Our project management team supports the process after a sale is completed by providing the customer submittals for

approval, real-time shipping information, and any additional items that may be needed to complete the installation and commissioning.

Our customer care continues after a project’s completion, with our team providing technical and maintenance support for the life of the project.

We believe that our consultative top-down and bottoms-up approach fosters brand loyalty with all stakeholders and results in retention of our customers.

We have three manufacturing facilities located in Tennessee, one in Alabama, and one in California.

We have national sales leaders in the United States that are supported with engineering staff in Tennessee and California.

From an international standpoint, we have sales personnel located in Spain and Australia.

We have manufacturing facilities located in Tennessee and Alabama.

We have national sales leaders in the United States that are supported by our engineering staff in Tennessee.

Internationally, we have sales personnel located in Spain and Australia.

Our team in Spain services Europe, Latin-America, and Africa regions while our personnel in Australia supports Asia-Pacific.

These sales representatives are supported with our engineering team in the United States to ensure that we are in compliance with local codes and regulations.

These sales representatives are supported by our engineering teams in the United States to ensure that we comply with local codes and regulations.

Our Customers

We sell our products principally to EPCs that build solar energy projects.

The decision to use our products typically involves input from both the EPC and the owner of the solar energy project given the mission critical nature and high consequence of failure of EBOS.

We sell our products principally to EPCs that build solar energy projects on behalf of their customers, the land owners and developers.

The decision to use our products typically involves input from both the EPC and the owner of the solar energy project given the mission critical nature and high cost of failure of EBOS.

EPCs typically construct multiple projects for several different owners.

For the year ended December 31, 2023, our largest customer contributed approximately 36.3% of our total revenue and was the only customer contributing 10% or greater of total revenue.

Our EBOS system solutions and components are highly specialized products that are specific to the solar industry.

The unique expertise required to design EBOS systems and components as well as customers’ reluctance to try unproven products has confined the number of firms that produce such EBOS products to a relatively small number.

Our principal competitors include TerraSmart, LLC (formerly SolarBOS, Inc.), Bentek Corporation, Voltage, LLC and Hikam America, Inc.

For the year ended December 31, 2024, our largest customer contributed approximately 26.4% of our total revenue and was one of two customers contributing 10% or greater of total revenue.

Our offerings are highly specialized and patented products that are specific to the solar industry.

The unique expertise required to design EBOS, BESS, data centers, and OEM solutions, including system solutions and individual component products, as well as customers’ reluctance to try unproven products, has confined the number of companies that produce such EBOS, BESS and OEM products to a relatively small number.

Our principal competitors include TerraSmart, LLC (formerly SolarBOS, Inc.), Bentek Corporation, Voltage, LLC, Construction Innovation, Premier PV and Hikam America, Inc.

We compete on the basis of product performance and features, installation cost, reliability and duration of product warranty, sales and distribution capabilities, and training and customer support, as well as the ability to provide system solutions rather than individual components.

We believe we are significantly larger as measured by revenue than our next largest competitor.

We have experienced seasonal and quarterly fluctuations in the past as a result of seasonal fluctuations in our customers’ business.

Our end users’ ability to install solar energy systems is affected by weather, as for example during the winter months in the northeastern U.S.

Our end users’ ability to install solar energy systems is affected by weather, as installation and construction projects slow during the colder winter months in the U.S.

Such installation delays can impact the timing of orders for our products.

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Our process uses specialized manufacturing equipment that we have developed and involves joining wire together using resistance welds and then sealing the joint with two separate layers of insulating material, which we refer to as “undermold/overmold”.

Resistance welding produces significantly stronger bonds than competing techniques used by our competitors.

Specifying complementary materials for the undermold and overmold significantly reduces the risk of moisture infiltrating the connection and enables us to provide superior ultraviolet (“UV”) protection, strain relief, impact resistance, and thermal stability over a wide range of environmental conditions.

Together, we believe these techniques substantially reduce the risk that our cable develops a fault over its lifetime.

While highly specialized and flexible, our manufacturing equipment is not costly, and we believe we do not require significant capital expenditures to maintain or increase our manufacturing capacity.

Our principal manufacturing facilities are located in Tennessee, Alabama, and California.

Our Alabama facility is ISO 9001:2015 certified.

We believe resistance welding produces significantly stronger bonds than competing techniques used by our competitors.

Specifying complementary materials for the undermold and overmold significantly reduces the risk of moisture infiltrating the connection

and enables us to provide superior ultraviolet (“UV”) protection, strain relief, impact resistance, and thermal stability over a wide range of environmental conditions.

Together, we believe these techniques have shown to substantially reduce the risk that our cable develops a fault over its lifetime.

Our principal manufacturing facilities are located in Tennessee and Alabama.

Our Alabama facility is Internation Organization for Standardization (“ISO”) 9001:2015 certified.

In 2024, we announced our intention to invest substantial capital over the next five years to expand and consolidate our existing Tennessee-based manufacturing and distribution operations to a new, larger facility in Portland, Tennessee.

As part of the expansion, we are in the process of relocating our Tennessee-based manufacturing operations to a single, larger facility.

Research and Development

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We believe that we have developed and commercialized most of the new EBOS products and installation methods adopted by the U.S.

solar industry over the past five years, including plug-n-play wiring, interconnect harnesses and combine-as-you-go architecture for solar energy projects.

solar industry over the past five years, including plug-and-play wiring and architecture, and interconnect harnesses for solar energy projects.

Our development strategy is to identify features that bring value to our customers and differentiate us from our competitors.

We measure the effectiveness of our R&D using a number of metrics, beginning with a market requirements definition, which includes a program budget, financial payback, resource requirements, and time required to launch the new product, system, or service into the market.

We employ a stringent

engineering phase gate review process that ensures all R&D programs are meeting their stated objectives from inception to deployment.

We employ a stringent engineering review process that ensures all R&D programs are meeting their stated objectives from inception to deployment.

We have a strong R&D team with significant experience in solar energy as well as expertise in electrical engineering, systems/control engineering and power electronics.

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patents, 32 issued non-U.S.

patents, 33 patent application pending for examination in the U.S.

and 154 domain name registrations.

patents, and 58 global patent applications pending examination.

Many of our patents relate to more efficient electrical wiring and power transmission from solar panels to power inverters at solar installations.

issued patents are scheduled to expire between 2031 and 2037.

As of December 31, 2023, our issued U.S.

patents had an average remaining life of approximately 11.0 years.

The term of individual patents extend for varying periods of time, depending upon the date of filing of the patent application, the date of patent issuance, and the legal term of patents in the countries in which they are obtained.

Generally, patents issued for applications filed in the U.S.

are effective for 20 years from the earliest effective filing date of a non-provisional patent application.

Our current U.S.

issued patents are scheduled to expire from 2031 to 2043.

The majority of our issued U.S.

patents are not set to expire until 2035 or later.

When patents expire, we lose the protection and competitive advantages they provided, which could negatively impact our operating results;

however, we continue to pursue further intellectual property protection through U.S.

and foreign patent applications, non-disclosure agreements, and under trade secret laws.

The term of individual patents in our portfolio vary, depending on, for example, the date of filing or date of patent issuance and the legal term of the patents in the jurisdictions in which they are obtained.

Utility patents issued from U.S.

patent applications are generally granted for a term of 20 years from the earliest effective filing date of a non-provisional patent application to which the application claims priority.

In certain instances, this term may be adjusted to account for United States Patent and Trademark Office delay.

The duration of patents outside of the U.S.

varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing date.

However, the actual protection afforded by a patent varies on a country-to-country basis and depends upon many factors, including the type of patent, the scope of its coverage, the availability of legal remedies in a particular country, and the validity and enforceability of the patent.

We rely on trade secret protection and confidentiality agreements to safeguard our interests with respect to proprietary know-how that is not patentable and processes for which patents are difficult to enforce.

We believe that many elements of our manufacturing processes involve proprietary know-how, technology or data that are not covered by patents or patent applications, including technical processes, test equipment designs, algorithms and procedures.

varies in accordance with provisions of applicable local law, but typically

is also 20 years from the earliest effective filing date.

The actual protection afforded by a patent varies on a country-to-country basis and depends upon many factors, including the type of patent, the scope of its coverage, the availability of legal remedies in a particular country, and the validity and enforceability of the patent.

We also rely on trade secrets and seek to protect and maintain the confidentiality of proprietary know-how to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.

These aspects of our business include proprietary know-how, technology or data that are not covered by patents or patent applications, including technical processes, test equipment designs, algorithms and procedures.

Our policy is to require research and development employees to enter into confidentiality and proprietary information agreements with us to address intellectual property protection issues and to assign to us all of the inventions, designs and technologies they develop during the course of employment with us.

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We also require our customers and business partners to enter into confidentiality agreements before we disclose any sensitive aspects of our technology or business plans.

Government Regulation

Environmental Laws and Regulations

We are subject to a variety of environmental, health and safety, and pollution-control laws and regulations in the jurisdictions in which we operate.

We do not believe the costs of compliance with these laws and regulations will be material to the business or our operations.

We may use, handle, generate, store, discharge and dispose of hazardous substances, chemicals and wastes at some of our facilities in connection with our product development, testing and manufacturing activities.

Any failure by us to control the use of, to remediate the presence of or to restrict adequately the discharge of such substances, chemicals or wastes could subject us to potentially significant liabilities, clean-up costs, monetary damages and fines or suspensions in our business operations.

Government Incentives

Federal, state, local and foreign government bodies provide incentives to owners, end users, distributors and manufacturers of solar energy systems to promote solar electricity.

These incentives take the form of rebates, tax credits and other financial incentives such as system performance payments, payments for renewable energy credits associated with renewable energy generation, and either an exclusion of solar energy systems from property tax assessments or a reduction in the property tax rate.

The range and duration of these incentives varies widely by geographic market.

The 2022 Inflation Reduction Act (“IRA”) in the U.S.

made significant changes to the tax credit regime that applies to solar facilities.

The IRA allowed U.S.

taxpayers making capital investments in solar projects to claim certain Investment Tax Credits (“TC”) for the installation of these solar projects.

The IRA also generally allowed U.S.

taxpayers to elect to receive a production tax credit (“PTC”) in lieu of the TC for qualified solar facilities if the construction began before January 1, 2025, among other requirements.

In the case of projects placed in service after 2024, each of the TC and PTC will be replaced by similar “technology neutral” tax credit incentives that mimic the TC and PTC but also require that projects satisfy a “zero greenhouse gas emissions” standard (which solar does) in order to qualify for the credits.

This new credit regime will continue to apply to projects that began construction prior to the end of 2033 (and possibly later), at which point the credits will

become subject to a phase-out schedule.

While the IRA increased incentives for solar energy, some of those incentives have already begun to decrease.

Additionally, given the change in U.S.

presidential administrations, the future of the IRA and any federal solar incentives remains uncertain;

however, direct changes to the IRA would require new legislation.

Trade Regulation and Import Tariffs

Our business activities are subject to numerous laws and regulations in the jurisdictions in which we operate.

Particularly, our exports and imports are subject to complex trade and customs laws, tax requirements and tariffs set by governments through mutual agreements or unilateral actions.

Changes in tax policies or trade regulations, the disallowance of tax deductions on imported merchandise, or the imposition of new tariffs on imported products, could have an adverse effect on our business and results of operations.

Our Human Capital

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Diversity and Inclusion

We are steadfast in our commitment to diversity, equity and inclusion, recognizing its pivotal role in driving positive outcomes for our business and enables us to better meet the needs of our customers.

We believe that diversity is the range of our human differences, including but not limited to race, ethnicity, gender, gender identity, sexual orientation, age, economic status, physical and mental ability, religious or ethical values system, national origin, and political beliefs.

Our goal is to cultivate a workplace where everyone feels welcomed, valued, treated equitably and respected.

We continue to increase our outreach, recruitment, hiring, and retention of diverse groups at all levels of our workforce, including leadership roles.

We also focus on listening, learning, and responding to our employees’ concerns to help ensure that we can provide a diverse, equitable, and inclusive workplace today and into the future.

As of December 31, 2023, our full-time employee population, which was composed of 1,248 individuals, had the following diversity metrics:

• 62% of our full-time employee population self-identified as ethnically diverse;

• 45% of our full-time employee population self-identified as female;

• Women made up 36% of our manager population, which consisted of 55 individuals with management responsibility.

As of December 31, 2023, of the 10 members of our executive management team, which includes the Chief Executive Officer and direct reports, Chief Revenue Officer, Chief Product Officer, and Senior VP of Business Development, two self-identify as ethnically diverse and one as female.

As of December 31, 2023, of the eight members of our board of directors, one self-identifies as ethnically diverse and two as female.

We remain committed to the long-term strategic benefits of diversity and inclusion initiatives, recognizing their pivotal role in driving positive outcomes for our business, enabling us to better meet the needs of our customers, and creating long-term value for our stockholders.

Our goal is to cultivate a workplace where everyone feels welcomed, valued, treated fairly and respected.

Our commitment to diversity does not and has never included quotas or systematic preferences, nor does it mean compromising merit.

We will continue our outreach, recruitment, hiring, and retention of diverse groups at all levels of our workforce, including leadership roles.

We believe that these efforts enhance our capacity to attract and retain employees who will help our business innovate and succeed.

We also focus on listening, learning, and

responding to our employees’ concerns to help ensure that we can provide a diverse, equitable, and inclusive workplace today and into the future.

Employee Training and Development

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Compensation and Benefits

We strive to provide a comprehensive suite of rewards and benefits.

We provide a comprehensive suite of rewards and benefits.

Our benefits program is designed to provide coverage for our employees’ overall health and wellbeing.

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Our occupational health and safety program is designed to drive a proactive safety culture beginning with our management setting the tone for our safety culture and ensuring that everyone feels a sense of ownership for each other’s safety and well-being.

We strive to have an interdependent safety culture where all employees feel responsible for each other’s safety.

This begins with our leadership setting the tone through effective communication of shared ownership, proactive approach to accident prevention and instilling a continuous improvement philosophy.

The key to preventing injuries begins with establishing the risk profile in our facilities through effective risk assessment and incident reporting and analysis processes.

This process enables the organization to implement proactive safety measures, including ergonomic improvements, behavioral and unsafe condition audits, near miss reporting and assessments, as leading indicators towards our journey to zero accidents.

This process enables the organization to implement proactive safety measures, including ergonomic improvements, behavioral and unsafe condition audits, and near miss reporting and assessments, as leading indicators towards our journey to zero accidents.

Elimination of Up-C Structure and Entity Simplification

In the first quarter of 2023, we simplified our corporate structure by, among other things, eliminating the umbrella-partnership C corporation structure (“Up-C structure”) that was in place since its January 29, 2021 initial public offering (“IPO”).

Following a secondary offering of shares of Class A common stock by certain selling stockholders in March 2023, all the holders of limited liability interests of Shoals Parent LLC (“LLC Interests”), our former operating subsidiary, exchanged all the LLC Interests and corresponding shares of Class B common stock of the Company beneficially owned by them into shares of Class A common stock of the Company.

Following the elimination of the Up-C structure, the Company consummated an internal reorganization transaction, effective December 31, 2023, whereby certain of the Company’s wholly-owned subsidiaries merged with and into other subsidiaries.

As part of this reorganization, Shoals Parent LLC merged with and into Shoals Intermediate Parent, with Shoals Intermediate Parent as the surviving corporation.

Available Information

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Forward-looking statements include information concerning our possible or assumed future results of operations;

business strategies;

expectations regarding the utility-scale solar market;

project delays;

regulatory environment;

the effects of competitive dynamics, volume discounts and customer mix in our key markets;

pipeline and orders;

business strategies, plans and expectations;

sales and marketing goals;

technology developments;

financing and investment plans;

warranty, litigation and liability accruals and estimates of loss or gains;

warranty and liability accruals and estimates of loss or gains;

estimates of potential loss related to the wire insulation shrinkback matter (as defined below);

litigation strategy and expected benefits or results from the current intellectual property and wire insulation shrinkback litigation;

competitive position;

industry and regulatory environment;

potential growth opportunities, including international growth, production and capacity at our plants;

and the effects of competition.

potential growth opportunities, including opportunities associated with our entry into new markets;

production and capacity at our plants;

and potential repurchases under the Company’s Repurchase Program (as defined below).

Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business