Shoals Technologies Group, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Shoals Technologies Group, Inc. Reports of Independent Registered Public Accounting Firm (Ernst & Young LLP; Nashville, Tennessee; PCAOB ID # 42 ) 45 Report of Independent Registered Public Accounting Firm (BDO USA, P.C.; Austin, Texas, PCAOB ID #243) 49 Consolidated Balance Sheets 50 Consolidated Statements of Operations 51 Consolidated Statements of Changes in Stockholders’ Equity 52 Consolidated Statements of Cash Flows 54 Notes to Consolidated Financial Statements 56 44 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Shoals Technologies Group, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Shoals Technologies Group, Inc. (the “Company”) as of December 31, 2025, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates. 45 Table of Contents Wire Insulation Shrinkback Warranty Description of the Matter The Company’s recorded warranty liability for wire insulation shrinkback was $3.3 million at December 31, 2025. As discussed in Note 8 to the consolidated financial statements, the Company determined that a loss was both probable and reasonably estimable related to a subset of wire harnesses used in its electrical balance of systems (EBOS) solutions that presented unacceptable levels of contraction of wire insulation (“wire insulation shrinkback”). Accordingly, a liability is recorded for the Company’s estimate of probable loss. Auditing the Company’s warranty liability related to wire insulation shrinkback required judgment, as the calculation includes subjective estimates and assumptions in determining the liability. In particular, the estimated costs to remediate is sensitive to the significant assumption of estimated failure rates. How we Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over the wire insulation shrinkback warranty liability process, including management’s review of the estimated failure rates and the completeness and accuracy of the data used to develop the assumption. To test the Company’s determination of the estimated warranty liability related to wire insulation shrinkback, we performed audit procedures that included, among others, assessing the methodologies utilized by management, performing sensitivity analyses on the significant assumption to evaluate the effect of changes to the estimated liability, testing the completeness and accuracy of the underlying data used by the Company in its evaluation, and testing the mathematical accuracy of the calculations. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2025. Nashville, Tennessee February 24, 2026 46 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Shoals Technologies Group, Inc. Opinion on Internal Control Over Financial Reporting We have audited Shoals Technologies Group, Inc.’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Shoals Technologies Group, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2025, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2025, and the related notes and our report dated February 24, 2026 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 47 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Nashville, Tennessee February 24, 2026 48 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Shoals Technologies Group, Inc. Portland, TN Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Shoals Technologies Group, Inc. (the “Company”) as of December 31, 2024, the related consolidated statements of operations, changes in members’/stockholders’ equity(deficit), and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ BDO USA, P.C. We have served as the Company's auditor from 2017 to 2025. Austin, Texas February 25, 2025 49 Table of Contents Shoals Technologies Group, Inc. Consolidated Balance Sheets (in thousands, except shares and par value) December 31, 2025 2024 Assets Current Assets Cash and cash equivalents $ 7,320 $ 23,511 Accounts receivable, net 128,793 78,181 Unbilled receivables 22,133 20,834 Inventory 89,878 55,977 Other current assets 9,762 9,849 Total Current Assets 257,886 188,352 Property, plant and equipment, net 53,302 28,222 Goodwill 69,941 69,941 Other intangible assets, net 33,499 41,083 Deferred tax assets 438,027 454,160 Right-of-use operating lease assets 46,044 1,786 Other assets 5,402 9,536 Total Assets $ 904,101 $ 793,080 Liabilities and Stockholders’ Equity Current Liabilities Accounts payable $ 64,875 $ 20,032 Accrued expenses and other 22,215 12,541 Warranty liability—current portion 3,202 29,602 Deferred revenue 37,031 18,737 Total Current Liabilities 127,323 80,912 Revolving line of credit 136,750 141,750 Right-of-use operating lease liabilities, less current portion 38,661 1,235 Warranty liability, less current portion 403 11,392 Other long-term liabilities 991 991 Total Liabilities 304,128 236,280 Commitments and Contingencies (Note 15) Stockholders’ Equity Preferred stock, $ 0.00001 par value - 5,000,000 shares authorized; none issued and outstanding as of December 31, 2025 and 2024 — — Class A common stock, $ 0.00001 par value - 1,000,000,000 shares authorized; 171,358,711 and 170,670,779 shares issued, 167,450,324 and 166,762,392 outstanding as of December 31, 2025 and 2024, respectively 2 2 Additional paid-in capital 493,090 483,550 Treasury stock, at cost, 3,908,387 shares as of December 31, 2025 and 2024, respectively ( 25,272 ) ( 25,331 ) Retained Earnings 132,153 98,579 Total Stockholders' Equity 599,973 556,800 Total Liabilities and Stockholders’ Equity $ 904,101 $ 793,080 See accompanying notes to consolidated financial statements. 50 Table of Contents Shoals Technologies Group, Inc. Consolidated Statements of Operations (in thousands, except per share amounts) Year Ended December 31, 2025 2024 2023 Revenue $ 475,331 $ 399,208 $ 488,939 Cost of revenue 308,823 257,191 320,635 Gross profit 166,508 142,017 168,304 Operating expenses General and administrative expenses 101,524 82,254 80,719 Depreciation and amortization 8,599 8,591 8,550 Total operating expenses 110,123 90,845 89,269 Income from operations 56,385 51,172 79,035 Interest expense ( 9,994 ) ( 13,827 ) ( 24,100 ) Interest income 305 518 — Gain on sale of assets 1,835 — — Foreign currency (loss) gain, net ( 13 ) — — Income before income taxes 48,518 37,863 54,935 Income tax expense ( 14,944 ) ( 13,736 ) ( 12,274 ) Net income 33,574 24,127 42,661 Less: net income attributable to non-controlling interests — — 2,687 Net income attributable to Shoals Technologies Group, Inc. $ 33,574 $ 24,127 $ 39,974 Earnings per share of Class A common stock: Basic $ 0.20 $ 0.14 $ 0.24 Diluted $ 0.20 $ 0.14 $ 0.24 Weighted average shares of Class A common stock outstanding: Basic 167,257 168,570 164,165 Diluted 168,378 168,725 164,504 See accompanying notes to consolidated financial statements. 51 Table of Contents Shoals Technologies Group, Inc. Consolidated Statements of Changes in Stockholders’ Equity (in thousands, except shares) Class A Common Stock Class B Common Stock Treasury Stock Shares Amount Shares Amount Additional Paid-in Capital Shares Amount Accumulated Earnings Non-Controlling Interests Total Stockholders' Equity Balance at December 31, 2022 137,904,663 $ 1 31,419,913 $ 1 $ 256,894 — $ — $ 34,478 $ 9,615 $ 300,989 Net income — — — — — — — 39,974 2,687 42,661 Equity-based compensation — — — — 20,862 — — — — 20,862 Activity under equity-based compensation plan — — — — ( 4,567 ) — — — 687 ( 3,880 ) Distributions to non-controlling interests — — — — — — — — ( 2,628 ) ( 2,628 ) Vesting of restricted / performance stock units 792,713 — — — — — — — — — Exchange of Class B to Class A common stock 31,419,913 1 ( 31,419,913 ) ( 1 ) 186,745 — — — — 186,745 Reallocation of non-controlling interests — — — — 10,361 — — — ( 10,361 ) — Elimination of the umbrella-partnership C Corporation structure — — — — 247 — — 247 Balance at December 31, 2023 170,117,289 2 — — 470,542 — — 74,452 — 544,996 Net income — — — — — — — 24,127 — 24,127 Equity-based compensation — — — — 14,230 — — — — 14,230 Activity under equity-based compensation plan — — — — ( 1,222 ) — — — — ( 1,222 ) Vesting of restricted / performance stock units 553,490 — — — — — — — — — Repurchase of Class A Common Stock ( 3,908,387 ) — — — — 3,908,387 ( 25,331 ) — — ( 25,331 ) Balance at December 31, 2024 166,762,392 2 — — 483,550 3,908,387 ( 25,331 ) 98,579 — 556,800 52 Table of Contents Shoals Technologies Group, Inc. Consolidated Statements of Changes in Stockholders’ Equity (continued) (in thousands, except shares) Class A Common Stock Class B Common Stock Treasury Stock Shares Amount Shares Amount Additional Paid-in Capital Shares Amount Accumulated Earnings Non-Controlling Interests Total Stockholders' Equity Net income — — — — — — — 33,574 — 33,574 Equity-based compensation — — — — 9,902 — — — — 9,902 Activity under equity-based compensation plan — — — — ( 362 ) — — — — ( 362 ) Vesting of restricted / performance stock units 687,932 — — — — — — — — — Excise taxes on treasury stock transactions — — — — — — 59 — — 59 Balance at December 31, 2025 167,450,324 $ 2 — $ — $ 493,090 3,908,387 $ ( 25,272 ) $ 132,153 $ — $ 599,973 See accompanying notes to consolidated financial statements. 53 Table of Contents Shoals Technologies Group, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2025 2024 2023 Cash Flows from Operating Activities Net income $ 33,574 $ 24,127 $ 42,661 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,817 12,626 10,529 Amortization/write off of deferred financing costs 622 3,093 2,165 Equity-based compensation 9,902 14,230 20,862 Provision for credit losses — — 296 Provision for obsolete or slow-moving inventory 1,206 2,670 5,041 Provision for warranty expense 522 15,203 59,556 Deferred taxes 16,132 14,035 11,334 Other 1,049 — — Changes in assets and liabilities: Accounts receivable ( 50,612 ) 28,937 ( 56,839 ) Unbilled receivables ( 1,299 ) 19,302 ( 23,423 ) Inventory ( 35,107 ) ( 5,843 ) 15,009 Other assets 1,822 ( 9,767 ) 1,355 Accounts payable 43,320 5,636 5,171 Accrued expenses and other 4,790 ( 11,247 ) 4,471 Warranty liability ( 40,965 ) ( 29,123 ) ( 5,202 ) Deferred revenue 18,294 ( 3,491 ) ( 1,031 ) Net Cash Provided by Operating Activities 17,067 80,388 91,955 Cash Flows from Investing Activities Purchases of property, plant and equipment ( 33,043 ) ( 8,393 ) ( 10,578 ) Proceeds from sale of property, plant and equipment 5,088 — — Other — — ( 269 ) Net Cash Used in Investing Activities ( 27,955 ) ( 8,393 ) ( 10,847 ) Cash Flows from Financing Activities Distributions to non-controlling interests — — ( 2,628 ) Employee withholding taxes related to net settled equity awards ( 362 ) ( 1,222 ) ( 3,880 ) Deferred financing costs — ( 2,638 ) — Payments on term loan facility — ( 143,750 ) ( 51,500 ) Proceeds from revolving credit facility 60,000 148,750 45,000 Repayments of revolving credit facility ( 65,000 ) ( 47,000 ) ( 53,000 ) Repurchase of Class A common stock — ( 25,331 ) — Excise taxes on treasury stock transactions 59 — — Deferred offering costs — — ( 1,159 ) Net Cash Used in Financing Activities ( 5,303 ) ( 71,191 ) ( 67,167 ) Net Increase (Decrease) in Cash, Cash Equivalents ( 16,191 ) 804 13,941 Cash, Cash Equivalents—Beginning of Period 23,511 22,707 8,766 Cash, Cash Equivalents—End of Period $ 7,320 $ 23,511 $ 22,707 54 Table of Contents Shoals Technologies Group, Inc. Consolidated Statements of Cash Flows (continued) (in thousands) Year Ended December 31, 2025 2024 2023 Supplemental Cash Flows Information: Cash paid for interest $ 9,110 $ 16,287 $ 23,104 Cash paid for taxes $ ( 183 ) $ 109 $ 1,324 Non-cash investing and financing activities: Purchased equipment not yet paid for $ 1,523 $ — $ — Right of use operating lease assets obtained in exchange for lease obligations $ 46,168 $ — $ — Right of use operating lease liabilities obtained in exchange for lease assets $ 41,336 $ — $ — Recording of deferred tax assets related to exchanges of Class B common stock to Class A common stock $ — $ — $ 187,648 Capital contribution related to tax receivable agreement exchanges of Class B common stock to Class A common stock $ — $ — $ 187,648 See accompanying notes to consolidated financial statements. 55 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements 1 . Organization and Business Shoals Technologies Group, Inc. (the “Company”) was formed as a Delaware corporation on November 4, 2020 for the purpose of facilitating an initial public offering (“IPO”) and other related organizational transactions to carry on the business of Shoals Parent LLC and its subsidiaries (“Shoals Parent LLC”). Shoals Parent LLC was a Delaware limited liability company. The IPO was completed on January 29, 2021. In connection with the IPO, through a series of transactions, the Company became the sole managing member of Shoals Parent LLC and Shoals Parent LLC received shares of Class B common stock of the Company. In March 2023 in connection with the elimination of the Company’s “Up-C” structure as described below, all of the issued and outstanding Company Class B shares were converted to Class A common stock. On July 1, 2023, the Company contributed 100 % of its limited liability interests of Shoals Parent LLC (“LLC Interests”) to its wholly-owned subsidiary Shoals Intermediate Parent, Inc. (“Shoals Intermediate Parent”). Following the contribution, Shoals Parent LLC became a disregarded single member limited liability company, eliminating the umbrella-partnership C corporation structure (“Up-C structure”). Effective July 1, 2023, the Company owned 100 % of Shoals Parent LLC together with its wholly-owned subsidiary, Shoals Intermediate Parent. 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. As of December 31, 2025, Shoals Technologies Group, Inc. owns directly or indirectly five subsidiaries: Shoals Intermediate Parent, Shoals Technologies Group, LLC, Shoals International, LLC, Shoals Energy Spain, S.L., and Shoals Energy Australia Pty Ltd. The Company is headquartered in Portland, Tennessee and is leading design-engineering and manufacturer of advanced electrical infrastructure solutions for mission‑critical applications across solar photovoltaic (PV), battery energy storage solutions (BESS), and data center power systems for the global energy transition market. 2. Summary of Significant Accounting Policies Basis of Accounting and Presentation The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. Non-Controlling Interests The non-controlling interests on the consolidated statements of operations represented a portion of earnings or loss attributable to the economic interests in the Company’s former subsidiary, Shoals Parent LLC, formerly held by direct or indirect holders of LLC Interests and our Class B common stock, including the founder and certain current and former executive officers, employees and their respective permitted 56 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements transferees (the “Continuing Equity Owners”). Activity related to non-controlling interests on the Statements of Changes in Members’ / Stockholders’ Equity represents activity related to the portion of net assets of the Company attributable to the Continuing Equity Owners, based on the portion of the LLC Interests owned by such unit holders. As of March 2023, the Company, along with wholly-owned subsidiary Shoals Intermediate Parent, owned 100 % of Shoals Parent LLC. Effective December 31, 2023, Shoals Parent LLC merged with and into Shoals Intermediate Parent with Shoals Intermediate Parent as the surviving corporation. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. Significant estimates include revenue recognition, allowance for credit losses, useful lives of property, plant and equipment and other intangible assets, impairment of long-lived assets, allowance for obsolete or slow moving inventory, valuation allowance on deferred tax assets, equity-based compensation expense and warranty liability. Cash and Cash Equivalents The Company considers cash and cash equivalents to include cash on hand, cash held in demand deposit accounts, and all highly liquid financial instruments purchased with a maturity of three months or less. Accounts Receivable and Allowance for Credit Losses Accounts receivable is comprised of amounts billed to customers, net of an allowance for credit losses. The allowance for credit losses is estimated by management and is based on historical experience, current conditions and reasonable forecasts. Periodically, management reviews the accounts receivable balances of its customers and adjusts the allowance based on current circumstances and charges off uncollectible receivables when all attempts to collect have failed, although collection efforts may continue. Unbilled Receivables Unbilled receivables arise when the Company recognizes revenue for amounts which cannot yet be billed under terms of the contract with the customer. Inventory Inventories consist of raw materials, work in process, and finished goods. Inventories are stated at the lower of cost or net realizable value. Cost is calculated using the first-in first-out method. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Property, Plant, and Equipment Property, plant, and equipment acquired in acquisitions are recorded at fair value at the date of acquisition; all other property, plant and equipment are recorded at cost, net of accumulated depreciation. Improvements, betterments and replacements which significantly extend the life of an asset are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Repair and maintenance costs are expensed as incurred. A gain or loss on the sale of property, plant and equipment is calculated as the difference between the cost of the asset disposed of, net of accumulated depreciation, and the sales proceeds received. A gain or loss on an asset disposal is recognized in the period that the sale occurs. 57 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements Impairment of Long-Lived Assets When events, circumstances or operating results indicate that the carrying values of long-lived assets might not be recoverable through future operations, the Company prepares projections of the undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the projections indicate that the recorded amounts are not expected to be recoverable, such amounts are reduced to estimated fair value. Fair value is estimated based upon internal evaluation of each asset that includes quantitative analyses of net revenue and cash flows, review of recent sales of similar assets and market responses based upon discussions in connection with offers received from potential buyers. Management determined there was no impairment for the years ended December 31, 2025, 2024 and 2023. Goodwill Goodwill is assessed using either a qualitative assessment or quantitative approach to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount. The qualitative assessment evaluates factors including macroeconomic conditions, industry-specific and company-specific considerations, legal and regulatory environments, and historical performance. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative assessment is performed. Otherwise, no further assessment is required. The quantitative approach compares the estimated fair value of the reporting units to its carrying amount, including goodwill. Impairment is indicated if the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, and an impairment charge is recognized for the differential. The Company completes its annual goodwill impairment test as of October 1 each year. For the years ended December 31, 2025, 2024 and 2023, the Company performed a qualitative assessment of its goodwill and determined no impairment. Since the Company’s formation on May 9, 2017, the Company has not had any goodwill impairment. Amortizable and Other Intangible Assets The Company amortizes identifiable intangible assets consisting of customer relationships, developed technology, trade names, backlog and noncompete agreements because these assets have finite lives. The Company’s intangible assets with finite lives are amortized on a straight‐line basis over the estimated useful lives. The basis of amortization approximates the pattern in which the assets are utilized over their estimated useful lives. The Company reviews for impairment indicators of finite-lived intangibles, as described in the “Impairment of Long-Lived Assets” significant accounting policy. Deferred Offering Costs Deferred offering costs consist primarily of registration fees, filing fees, listing fees, specific legal and accounting costs and transfer agent fees, which are direct and incremental fees related to the IPO and secondary offerings. Deferred Financing Costs Costs incurred to issue debt are capitalized and recorded net of the related debt and amortized using the effective interest method as a component of interest expense over the terms of the related debt agreement. Treasury Stock The Company records treasury stock activities under the cost method whereby the cost of the acquired stock is recorded as treasury stock. The Company’s accounting policy upon the formal retirement of treasury stock is to deduct the par value from common stock and to reflect any excess of cost over par value as a 58 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements reduction to additional paid-in capital (to the extent created by previous issuances of the shares) and then retained earnings. Revenue Recognition The Company recognizes revenue primarily from the sale of EBOS systems and components. The Company determines its revenue recognition through the following steps: (i) identification of the contract or contracts with a customer, (ii) identification of the performance obligations within the contract, (iii) determination of the transaction price, (iv) allocation of the transaction price to the performance obligations within the contract, and (v) recognition of revenue as the performance obligation has been satisfied. The Company’s contracts with customers predominately are accounted for as one performance obligation, as the majority of the obligations under the contracts relate to a single project. For each contract entered into, the Company determines the transaction price based on the consideration expected to be received, net of any variable consideration or options. The transaction price identified is allocated to each distinct performance obligation to deliver a good or service based on the relative standalone selling prices. Management has concluded that the prices negotiated with each individual customer are representative of the standalone selling price of the product. Some of the Company’s sales agreements have rebates and volume-based discounts with tiered pricing which are prospective in nature. We concluded that in these situations, the incentives can represent variable consideration or options, depending upon the specifics of the agreement. In the event the agreement contains an option, the option is considered a material right and, therefore, included in the accounting for the initial arrangement. We estimate the average anticipated discount over the lifetime of the contract, and apply that discount to each contract. On a quarterly basis, we review our estimates and, if needed, updates are made and changes are applied prospectively. The Company primarily recognizes revenue over time as a result of the continuous transfer of control of its product to the customer using the output method based on units manufactured. This continuous transfer of control to the customer is supported by clauses in the contracts that provide rights to payment of the transaction price associated with work performed to date on products that do not have an alternative use to the Company. Management believes that recognizing revenue using the output method based on units manufactured best depicts the extent of transfer of control to the customer. In certain instances the promised goods do have an alternative use. In these instances, revenue is recognized when the customer obtains control of the product. Contracts of this nature typically include customer acceptance clauses, which results in revenue recognition occurring upon customer acceptance. Depending on the size of project, the manufacturing process generally takes from less than one week to four months to complete production. The accounting for each contract involves a judgmental process of estimating total sales, costs, and profit for each performance obligation. Cost of revenue is recognized based on the unit of production. The amount reported as revenue is determined by adding a proportionate amount of the estimated profit to the amount reported as cost of revenue. The Company has elected to adopt certain practical expedients and exemptions as allowed under the new revenue recognition guidance such as (i) recording sales commissions as incurred because the amortization period is less than one year, (ii) excluding any collected sales tax amounts from the calculation of revenue, and (iii) accounting for shipping and handling activities that are incurred after the customer has obtained control of the product as fulfillment costs rather than a separate service provided to the customer for which consideration would need to be allocated (see Shipping and Handling). 59 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements Shipping and Handling The Company accounts for shipping and handling related to contracts with customers as costs to fulfill its promise to transfer the associated products. Accordingly, payment by the Company’s customers for shipping and handling costs for delivery of the Company’s products are recorded as a component of revenue in the accompanying consolidated statements of operations. Shipping and handling expenses are included as a component of cost of revenue as incurred and totaled $ 5.3 million, $ 4.6 million and $ 5.2 million for the years ended December 31, 2025, 2024 and 2023, respectively. Concentrations The Company has cash deposited at certain financial institutions which, at times, may exceed the limits provided by the Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses on such amount and believes it is not subject to significant credit risk related to cash balances. As of December 31, 2025, $ 6.8 million of the Company’s bank balances were in excess of FDIC insurance limits. The Company had the following revenue concentrations representing approximately 10% or more of revenue for the years ended December 31, 2025, 2024 and 2023 and related accounts receivable concentrations as of December 31, 2025, and 2024: 2025 2024 2023 Revenue % Accounts Receivable % Revenue % Accounts Receivable % Revenue % Customer A 19.1 % 25.2 % 26.4 % 19.0 % 36.3 % Customer B 12.9 % 6.9 % 10.4 % 8.8 % 5.5 % Fair Value Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company follows a fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs may be used to measure fair value, as follows: • Level 1 – Quoted prices in active markets for identical assets or liabilities. • Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 – Unobservable inputs that are supported by little or no market activity that are significant to the fair value of the assets or liabilities. The fair values of the Company’s cash and cash equivalents, accounts receivable, and accounts payable approximate their carrying values due to their short maturities. The carrying value of the Company’s long-term debt approximates fair value and is considered level 2, as it is based on current market rates at which the Company could borrow funds with similar terms. Income Taxes The Company is taxed as a corporation for U.S. federal and state income tax purposes. Prior to July 1, 2023, the Company’s sole material asset was Shoals Parent LLC, which was a limited liability company that was taxed as a partnership for US federal and certain state and local income tax purposes. Shoals Parent 60 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements LLC’s net taxable income and related tax credits, if any, were passed through to its members and included in the member’s tax returns. The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are calculated by applying existing tax laws and the rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the year of the enacted rate change. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that the deferred tax assets will be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. The Company accounts for uncertainty in income taxes using a recognition and measurement threshold for tax positions taken or expected to be taken in a tax return, which are subject to examination by federal and state taxing authorities. The tax benefit from an uncertain tax position is recognized when it is more likely than not that the position will be sustained upon examination by taxing authorities based on the technical merits of the position. The amount of the tax benefit recognized is the largest amount of the benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The effective tax rate and the tax basis of assets and liabilities reflect management’s estimates of the ultimate outcome of various tax uncertainties. The Company recognizes penalties and interest related to uncertain tax positions within the income tax expense financial statement caption in the accompanying consolidated statements of operations. The Company did not have any material interest and penalties during the years ended December 31, 2025, 2024 and 2023. The Company files U.S. federal and certain state income tax returns. The income tax returns of the Company are subject to examination by U.S. federal and state taxing authorities for various time periods, depending on each jurisdictions’ rules, beginning generally after the income tax returns are filed. Product Warranty The Company offers an assurance type warranty for its products against manufacturer defects and does not contain a service element. For these assurance type warranties, a provision for estimated future costs related to warranty expense is recorded when they are probable and reasonably estimable. This provision is based on historical information on the nature, frequency and average cost of claims for each product line. When little or no experience exists for an immature product line, the estimate is based on comparable product lines. Specific liabilities are established once an issue is identified with the amounts for such liabilities based on the estimated cost of correction. These estimates are re-evaluated on an ongoing basis using best-available information and revisions to estimates are made as necessary. As of December 31, 2025 and 2024 our estimated warranty liability was $ 3.6 million and $ 41.0 million, respectively. See further discussion of warranty related matters in Note 8 - Warranty Liability. Equity-Based Compensation The Company recognizes equity-based compensation expense based on the equity award’s grant date fair value. The determination of the fair value of equity awards issued to employees of the Company is based upon the closing market price of the Company’s common stock on the day prior to the grant date. Equity-based compensation expense related to performance stock units is recognized if it is probable that the performance 61 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements condition will be satisfied. The Company accounts for forfeitures as they occur. The grant date fair value of each unit is amortized on a straight-line basis over the requisite service period, including those units with graded vesting. However, the amount of equity-based compensation at any date is at least equal to the portion of the grant date fair value of the award that is vested. Earnings per Share (“EPS”) Basic EPS is computed by dividing net income available to common stockholders by the weighted average shares outstanding during the period. Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue shares, such as unvested restricted stock units, were exercised and converted into shares. Diluted EPS is computed by dividing net income available to common stockholders by the weighted average shares outstanding during the period, increased by the number of additional shares that would have been outstanding if the potential shares had been issued and were dilutive. Segment Reporting ASC 280 (“Segment Reporting”) establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company manages its business on the basis of one operating and reportable segment and derives revenues from selling its product. Foreign Currency Remeasurement The reporting currency of the Company and its subsidiaries is the United States dollar. Remeasurement gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included the consolidated statements of operations. Advertising Expenses Advertising expenses are expensed as incurred. Advertising expenses for the years ended December 31, 2025, 2024 and 2023 were not material to our consolidated financial statements. Research and Development Expenses Research and development expenses are expensed as incurred. Research and development expenses for the years ended December 31, 2025, 2024 and 2023 were not material to our consolidated financial statements. New Accounting Standards Adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-09 for the year ended December 31, 2025, and applied the new disclosure requirements prospectively to the current annual period. Prior period disclosures have not been adjusted to reflect the new disclosure requirements. See Note 16 Income Taxes in the accompanying notes to the consolidated financial statements for further detail. Not Yet Adopted 62 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03. In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the accounting for internal-use software to current development practices, clarifies when to begin capitalizing costs, and enhances disclosure requirements. This update is effective for interim and annual periods beginning after December 15, 2027, with early adoption permitted. ASU 2025-06 is not expected to significantly change our current accounting for internal-use software. In December 2025, the FASB issued ASU 2025-10, Accounting for Government Grants Received by Business Entities, to establish guidance on the recognition, measurement, and presentation of government grants received by business entities. The new guidance leverages the principles in the accounting framework for government assistance in International Accounting Standard 20 "Accounting for Government Grants and Disclosure of Government Assistance". The new guidance is effective for public business entities in annual periods beginning after December 15, 2028, with early adoption permitted. ASU 2025-10 is not expected to significantly change our current accounting for incentives from federal, state, and local governments. Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements. 3. Accounts Receivable Accounts receivable, net consists of the following (in thousands): December 31, 2025 2024 Accounts receivable $ 129,289 $ 78,677 Less: allowance for credit losses ( 496 ) ( 496 ) Accounts receivable, net $ 128,793 $ 78,181 4. Inventory Inventory consists of the following (in thousands): December 31, 2025 2024 Raw materials $ 90,694 $ 55,703 Work in process 2,842 2,316 Finished goods 268 2,415 Allowance for obsolete or slow-moving inventory ( 3,926 ) ( 4,457 ) Inventory $ 89,878 $ 55,977 63 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements The following table presents the change in the allowance for obsolete or slow-moving inventory balances (in thousands): December 31, 2025 2024 Allowance balance, beginning of year $ ( 4,457 ) $ ( 6,569 ) Provision ( 1,206 ) ( 2,670 ) Write offs 1,737 4,782 Allowance balance, end of year $ ( 3,926 ) $ ( 4,457 ) 5. Property, Plant and Equipment Property, plant, and equipment, net consists of the following (in thousands): Estimated Useful Lives (Years) December 31, 2025 2024 Land N/A $ 610 $ 840 Building and land improvements 5 - 40 30,228 13,687 Machinery and equipment 3 - 5 23,940 19,958 Furniture and fixtures 3 - 7 3,193 2,705 Vehicles 5 125 125 Construction in Progress 12,694 3,969 70,790 41,284 Less: accumulated depreciation ( 17,488 ) ( 13,062 ) Property, plant and equipment, net $ 53,302 $ 28,222 Depreciation expense for the years ended December 31, 2025, 2024 and 2023 was $ 6.2 million, $ 5.0 million and $ 2.6 million, respectively. During the years ended December 31, 2025, 2024 and 2023, $ 5.2 million, $ 4.0 million and $ 2.0 million, respectively, of depreciation expense was allocated to cost of revenue and $ 1.0 million, $ 1.0 million and $ 0.6 million, respectively, of depreciation expense was allocated to operating expenses. 6. Goodwill and Other Intangible Assets Goodwill As of December 31, 2025 and 2024, goodwill totaled $ 69.9 million. There was no change or adjustments to the carrying amount of goodwill during the years ended December 31, 2025 and 2024. Other Intangible Assets Other intangible assets, net consisted of the following (in thousands): 64 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements Estimated Useful Lives (Years) December 31, 2025 2024 Amortizable: Costs: Customer relationships 13 $ 53,100 $ 53,100 Developed technology 13 34,600 34,600 Trade names 13 11,900 11,900 Total amortizable intangibles 99,600 99,600 Accumulated amortization: Customer relationships 35,223 31,179 Developed technology 22,845 20,183 Trade names 8,033 7,155 Total accumulated amortization 66,101 58,517 Total other intangible assets, net $ 33,499 $ 41,083 Amortization expense related to intangible assets amounted to $ 7.6 million, $ 7.6 million and $ 7.9 million for the years ended December 31, 2025, 2024 and 2023, respectively. Estimated future annual amortization expense for other intangible assets, net are as follows (in thousands): For the Year Ended December 31, Amortization Expense 2026 7,585 2027 7,585 2028 7,585 2029 7,585 2030 3,159 $ 33,499 7. Accrued Expenses and Other Accrued expenses and other consists of the following (in thousands): December 31, 2025 2024 Accrued compensation $ 6,532 $ 5,005 Accrued interest 653 259 Accrued rebates 4,851 3,058 Other accrued expenses 10,179 4,219 Total accrued expenses and other $ 22,215 $ 12,541 8 . Warranty Liability General Warranty 65 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements The Company offers an assurance type warranty for its products against manufacturer defects which does not contain a service element. For these assurance type warranties, a provision for estimated future costs related to warranty expense is recorded when they are probable and reasonably estimable. As of December 31, 2025 and December 31, 2024, our estimated general warranty liability was approximately $ 0.3 million and $ 1.1 million, respectively. The Company recorded total warranty expense related to general warranty matters of $ 0.5 million, $ 1.9 million , and $ 0.4 million for the years ended December 31, 2025, 2024 and 2023, respectively. Wire Insulation Shrinkback Warranty The Company was notified by certain customers that a subset of wire harnesses used in its EBOS solutions has presented unacceptable levels of contraction of wire insulation (“wire insulation shrinkback”). Based upon the Company’s assessment, the Company currently believes the wire insulation shrinkback is related to defective wire manufactured by Prysmian Cables and Systems USA, LLC (“Prysmian”). Based on the Company’s continued analysis of information available as of the date of this Annual Report, the Company determined that a loss was both probable and reasonably estimable. For the year ended December 31, 2023, the Company disclosed an initial range of potential loss from $ 59.7 million to $ 184.9 million. The Company recorded warranty expense for this matter of $ 59.2 million during the year ended December 31, 2023. During the year ended December 31, 2024, the Company determined it was appropriate to adjust the range of estimates previously provided based on additional information obtained. The low-end of the estimated range increased to $ 73.0 million and the high-end decreased to $ 160.0 million. The Company recorded warranty expense of $ 13.3 million during the year ended December 31, 2024. In accordance with ASC 450, Contingencies , the Company believes the potential estimated loss for this matter is $ 73.0 million, which represents the best estimate of the potential loss as of December 31, 2025, of which $ 69.7 million has been incurred to date. As of December 31, 2025, our recorded remaining warranty liability related to this matter was $ 3.3 million. It is reasonably possible that our liability could exceed the amount recorded, including due to additional reports of wire insulation shrinkback at previously affected and reported solar projects or at projects not previously reported or otherwise identified. Any excess amounts remain uncertain. The estimated loss, as revised, continues to be based on several assumptions, including estimated failure rates, future notification of impacted harnesses, the potential magnitude of engineering, procurement and construction firm’s labor cost to identify and perform the repair and replacement of impacted harnesses, materials replacement cost, planned remediation method, and inspection costs. While our wire insulation shrinkback warranty liability represents our best estimate of expected losses, the Company will monitor future activity to best estimate potential losses. The Company has increased, and may further increase, its estimated warranty liability from its current estimate based on available information, including future remediation efforts and the scope of future replacements, if any. Such increase may be material. The Company does not maintain insurance for product warranty issues and has commenced a lawsuit against Prysmian, as discussed in more detail under Wire Insulation Shrinkback Litigation section of Note 15 - Commitments and Contingencies. Because the lawsuit against Prysmian is ongoing, potential recovery from Prysmian is not considered probable as defined in ASC 450, Contingencies, and has not been considered in our estimate of the warranty liability as of December 31, 2025. The Company recorded total warranty expense related to this matter of zero , $ 13.3 million, and $ 59.2 million for the years ended December 31, 2025, 2024 and 2023, respectively. 66 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements Warranty liability, which includes both general warranty and wire insulation shrinkback warranty, consists of the following (in thousands): Year Ended December 31, 2025 2024 2023 Warranty liability, beginning of period $ 40,994 $ 54,914 $ 560 Warranty expense 522 15,203 59,556 Payments ( 40,965 ) ( 29,123 ) ( 5,202 ) Warranty adjustments (1) 3,054 — — Warranty liability, end of period $ 3,605 $ 40,994 $ 54,914 Less: current portion 3,202 29,602 31,099 Warranty liability, net current portion $ 403 $ 11,392 $ 23,815 (1) Warranty adjustments are related to the expected value of scrap recoveries and have been recorded in other assets. 9. Long-Term Debt Long-term debt consists of the following (in thousands): December 31, 2025 2024 Revolving line of credit $ 136,750 $ 141,750 The aggregate amounts of principal maturities on the Company’s long-term debt is as follows (in thousands): For the Year Ended December 31, 2026 $ — 2027 — 2028 — 2029 136,750 Thereafter — $ 136,750 Senior Secured Credit Agreement On November 25, 2020 Shoals Holdings LLC, a former subsidiary of the Company, entered into a senior secured credit agreement (as amended, the “Senior Secured Credit Agreement”), consisting of (i) a $ 350.0 million senior secured six-year term loan facility (the “Term Loan Facility”), (ii) a $ 30.0 million senior secured delayed draw term loan facility, maturing concurrently with the six-year Term Loan Facility (the “Delayed Draw Term Loan Facility”) and (iii) an uncommitted super senior first out revolving credit facility (the “Revolving Credit Facility”). In December 2020, Shoals Holdings LLC entered into two amendments to the Senior Secured Credit Agreement in order to obtain a $ 100.0 million increase to the Revolving Credit Facility and modify the terms of the interest rate and prepayment premium. As part of the first amendment the Company repaid and terminated all outstanding commitments under the Delayed Draw Term Loan Facility. 67 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements On May 2, 2022, Shoals Holdings LLC entered into an amendment to the Senior Secured Credit Agreement in order to increase the amount available for borrowing under the Revolving Credit Facility from $ 100.0 million to $ 150.0 million. The amendment also set forth Secured Overnight Financing Rate (“SOFR”) as the benchmark rate. On December 27, 2023, the Company used proceeds from the Revolving Credit Facility to make a $ 50.0 million voluntary prepayment of outstanding borrowings under the Term Loan Facility. On January 19, 2024, the Company used proceeds from the Revolving Credit Facility to make a $ 100.0 million voluntary prepayment of outstanding borrowings under the Term Loan Facility. On March 19, 2024, the Company entered into an amendment to the Senior Secured Credit Agreement. The amendment, among other things, (i) increased the amount available for borrowing under the Revolving Credit Facility from $ 150.0 million to $ 200.0 million, (ii) reduced the interest rate margin applicable to the Revolving Credit Facility by at least 0.25 %, with additional 0.25 % step-downs if the consolidated first lien secured leverage ratio does not exceed certain thresholds (which step-downs will step back up if such leverage ratio exceeds those thresholds), (iii) reduced the commitment fee applicable to the undrawn amount of the Revolving Credit Facility by at least 0.10 % with additional 0.05 % step-downs if the consolidated first lien secured leverage ratio does not exceed certain thresholds (which step-downs will step back up if such leverage ratio exceeds such thresholds), (iv) lowered the maximum consolidated leverage ratio permitted under the Senior Secured Credit Agreement to (a) 4.25 :1.00 from April 1, 2024 through March 31, 2025 and (b) thereafter, 4.00 :1.00 (with temporary increases to the maximum consolidated first lien secured leverage ratio in the event a material acquisition closes), (v) extended the maturity date applicable to the Revolving Credit Facility to March 19, 2029, the fifth anniversary of the amendment’s effective date, (vi) amended certain covenants under the Senior Secured Credit Agreement in a manner customary for facilities of this type, and (vii) Shoals Technologies Group, Inc. became the sole borrower under the Senior Secured Credit Agreement. On March 19, 2024, the Company made a $ 43.8 million voluntary prepayment of all the outstanding term loans under the Term Loan Facility, thereby terminating all term loan commitments under the Term Loan Facility. Beginning March 19, 2024 and until the delivery of the Company’s compliance certificate for the second quarter of 2024 pursuant to the Senior Secured Credit Agreement, the Revolving Credit Facility bore interest at a rate equal to, at the Company’s election, either adjusted term SOFR or base rate (each, as defined in the Senior Secured Credit Agreement) plus (i) in the case of SOFR rate loans, 2.50 % per annum and (ii) in the case of base rate loans, 1.50 % per annum. Following the delivery of the Company’s compliance certificate for the second quarter of 2024, and as of December 31, 2025, pursuant to our Senior Secured Credit Agreement, the Revolving Credit Facility bears interest at a rate equal to, at the Company’s election, either adjusted term SOFR or base rate (each, as defined in the Senior Secured Credit Agreement) plus an applicable interest rate margin, based upon the consolidated first lien secured leverage ratio. The applicable interest rate margin varies from 2.25 % to 3.00 % per annum for term benchmark loans and 1.25 % to 2.00 % per annum for base rate loans. As of December 31, 2025, the interest rate on the Revolving Credit Facility ranged from 6.77 % to 7.03 %, which represented SOFR plus 3.0 %. As of December 31, 2025, there were $ 136.8 million of outstanding borrowings on the Revolving Credit Facility, and the Company had $ 60.5 million of availability under the Revolving Credit Facility. Guarantees and Security The obligations under the Senior Secured Credit Agreement are guaranteed by Shoals Technologies Group, Inc.’s and its wholly owned domestic subsidiaries other than certain immaterial subsidiaries and other 68 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements excluded subsidiaries. The obligations under the Senior Secured Credit Agreement are secured by a first priority security interest in substantially all of Shoals Technologies Group Inc.’s and the guarantors’ existing and future property and assets, including accounts receivable, inventory, equipment, general intangibles, intellectual property, investment property, other personal property, material owned real property, cash and proceeds of the foregoing. Prepayments and Amortization Loans under the Revolving Credit Facility may be voluntarily prepaid, at Shoals Technologies Group Inc.’s option, in whole, or in part, in each case without premium or penalty. There is no scheduled amortization under the Revolving Credit Facility. Restrictive Covenants and Other Matters The Senior Secured Credit Agreement contains affirmative and negative covenants that are customary for financings of this type, including covenants that restrict our incurrence of indebtedness, incurrence of liens, dispositions, investments, acquisitions, restricted payments, and transactions with affiliates. The Senior Secured Credit Agreement also includes customary events of default, including the occurrence of a change of control. As discussed above, the Revolving Credit Facility also includes a consolidated leverage ratio financial covenant that is tested on the last day of each fiscal quarter. As of December 31, 2025, the Company was in compliance with all the required covenants. 10. Earnings per Share ("EPS") Basic EPS of Class A common stock is computed by dividing net income attributable to the Company by the weighted average number of shares of Class A common stock outstanding during the period. Diluted EPS of Class A common stock is computed similarly to basic EPS except the weighted average shares outstanding are increased to include additional shares from the exchange of Class B common stock under the if-converted method and the assumed exercise of any common stock equivalents using the treasury stock method, if dilutive. The Company’s restricted/performance stock units are considered common stock equivalents for this purpose. Basic and diluted EPS of Class A common stock have been computed as follows (in thousands, except per share amounts): 69 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements Year ended December 31, 2025 2024 2023 Numerator: Net income attributable to Shoals Technologies Group, Inc. - basic & diluted $ 33,574 $ 24,127 $ 39,974 Denominator: Weighted average shares of Class A common stock outstanding - basic 167,257 168,570 164,165 Effect of dilutive securities: Restricted / performance stock units 1,121 155 339 Weighted average shares of Class A common stock outstanding - diluted 168,378 168,725 164,504 Earnings per share of Class A common stock - basic $ 0.20 $ 0.14 $ 0.24 Earnings per share of Class A common stock - diluted $ 0.20 $ 0.14 $ 0.24 For the years ended December 31, 2025 and 2024 there were no shares of Class B common stock outstanding as all outstanding shares of Class B common stock (together with the relevant limited liability units) were exchanged for Class A common stock in the first quarter of 2023. 11. Equity-Based Compensation 2021 Long-Term Incentive Plan The Shoals Technologies Group, Inc. 2021 Long-Term Incentive Plan (the “2021 Incentive Plan”) became effective on January 26, 2021. The 2021 Incentive Plan authorized 8,768,124 new shares, subject to adjustment pursuant to the 2021 Incentive Plan. Restricted Stock Units During the years ended December 31, 2025, 2024 and 2023 the Company granted 2,119,962 , 1,559,317 , and 413,873 restricted stock units (“RSUs”), respectively, to certain employees, officers and directors of the Company. The RSUs had grant date fair values ranging from $ 3.26 to $ 10.34 , $ 4.40 to $ 15.39 , and $ 14.45 to $ 28.26 , respectively, during the years ended December 31, 2025, 2024 and 2023. The RSUs generally vest ratably over 3 years, except for director grants which vest over one year , and for retention grants which vest over 2 to 3 years. Activity under the 2021 Incentive Plan for RSUs was as follows: 70 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements Restricted Stock Units Weighted Average Price Outstanding, December 31, 2022 1,736,975 $ 22.34 Granted 413,873 $ 24.78 Vested ( 887,996 ) $ 21.39 Forfeited ( 91,386 ) $ 23.05 Outstanding, December 31, 2023 1,171,466 $ 23.87 Granted 1,559,317 $ 8.91 Vested ( 650,080 ) $ 23.43 Forfeited ( 238,347 ) $ 16.75 Outstanding, December 31, 2024 1,842,356 $ 12.21 Granted 2,119,962 $ 4.33 Vested ( 734,768 ) $ 17.33 Forfeited ( 371,728 ) $ 6.86 Outstanding, December 31, 2025 2,855,822 $ 5.75 Performance Stock Units During the years ended December 31, 2025, 2024 and 2023, the Company granted an aggregate of 941,257 , 324,099 , and 205,585 Performance Stock Units (“PSUs”), respectively, to certain executives. The PSUs granted during 2023 cliff vest after 3 years upon meeting certain revenue and gross profit targets. The PSUs granted during 2024 and 2025 cliff vest after 3 years upon meeting certain revenue and adjusted EPS targets and contain certain modifiers which could increase or decrease the ultimate number of Class A common stock issued to the executives. The PSUs were valued using the market value of the Class A common stock on the grant date ranging from $ 4.59 to $ 5.34 , $ 13.01 to $ 15.39 , and $ 26.55 to $ 28.26 , respectively, during the years ended December 31, 2025, 2024 and 2023. Activity under the 2021 Incentive Plan for PSUs was as follows: Performance Stock Units Weighted Average Price Outstanding, December 31, 2022 256,305 $ 11.89 Granted 205,585 $ 27.75 Vested ( 67,101 ) $ 11.86 Forfeited ( 101,323 ) $ 13.08 Outstanding, December 31, 2023 293,466 $ 22.59 Granted 324,099 $ 15.30 Vested ( 22,790 ) $ 16.04 Forfeited ( 122,109 ) $ 19.26 Outstanding, December 31, 2024 472,666 $ 18.77 Granted 941,257 $ 4.63 Vested ( 37,678 ) $ 14.43 Forfeited ( 54,725 ) $ 9.65 Outstanding, December 31, 2025 1,321,520 $ 9.20 71 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements During the years ended December 31, 2025, 2024 and 2023, the Company recognized $ 9.9 million, $ 14.2 million, and $ 20.9 million, respectively, in equity-based compensation. As of December 31, 2025, the Company had $ 13.9 million of unrecognized compensation costs which is expected to be recognized over a weighted average period of 1.87 years. 12. Stockholders’ Equity Secondary Offerings On March 10, 2023, the selling stockholders, which consisted of certain entities controlled by the Company’s founder, completed a secondary offering consisting of 24,501,650 shares of Class A common stock. Following this transaction, the holders of LLC Interests 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. The Company did not receive any proceeds from the sale of shares of our Class A common stock by the selling stockholders in this offering. As of December 31, 2025 and 2024, there were no shares of Class B common stock nor LLC Interests outstanding, and no shares of Class B common stock are currently issuable. Shoals Parent LLC Ownership Prior to July 1, 2023, the Company owned 100 % of Shoals Parent LLC, was the sole managing member of Shoals Parent LLC and had the sole voting power in, and controlled the management of, Shoals Parent LLC. On July 1, 2023, the Company contributed 100 % of its LLC Interests to Shoals Intermediate Parent. Following the contribution, Shoals Parent LLC became a disregarded single member limited liability company, eliminating the Company’s Up-C structure. Effective December 31, 2023, Shoals Parent LLC merged with and into Shoals Intermediate Parent with Shoals Intermediate Parent as the surviving corporation. Prior to the Company owning 100 % of Shoals Parent LLC, the remaining interest in Shoals Parent LLC was held by the Continuing Equity Owners, who could exchange at each of their respective options, in whole or in part, from time to time, their LLC Interests (along with an equal number of shares of Class B common stock (which shares were then immediately canceled)) for cash or newly issued shares of our Class A common stock. Accordingly, the Company consolidated the financial results of Shoals Parent LLC and reported non-controlling interests in its condensed consolidated financial statements. In accordance with the limited liability company agreement of Shoals Parent LLC, Shoals Parent LLC made cash distributions to its members in an amount sufficient to cover the members’ tax liabilities, if any, with respect to each member’s share of Shoals Parent LLC taxable earnings. The payment of these cash distributions by Shoals Parent LLC to Continuing Equity Owners was recorded as distributions to holders of LLC Interests in the accompanying condensed consolidated statements of stockholders’ equity and condensed consolidated statements of cash flows. Common Stock Economic and Voting Rights Holders of Class A common stock are entitled to one vote per share and, except as otherwise required, vote together as a single class on all matters on which stockholders generally are entitled to vote. Share Repurchase Program and Accelerated Share Repurchase Agreement On June 11, 2024, the Company announced a share repurchase program (the “Repurchase Program”) authorizing the repurchase of up to $ 150.0 million of the Company’s Class A common stock, with an estimated 72 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements completion date of December 31, 2025. Under the Repurchase Program, the Company is authorized to repurchase shares of Class A common stock through open market purchases, privately-negotiated transactions, accelerated share repurchases or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. The Repurchase Program does not obligate the Company to repurchase shares of Class A common stock and the specific timing and amount of repurchases will vary based on available capital resources and other financial and operational performance metrics, market conditions, securities law limitations, and other factors. The shares repurchased pursuant to the Repurchase Program are held as treasury shares of the Company. In connection with the Repurchase Program, on June 11, 2024, the Company entered into an accelerated share repurchase agreement (the “ASR”) with Jefferies LLC to repurchase $ 25.0 million of the Company’s Class A common stock. Under the terms of the ASR, the Company paid $ 25.0 million to Jefferies LLC on June 12, 2024, and received 2,202,643 shares of Class A common stock, representing approximately 60 % of the notional amount of the ASR, based on the closing price of $ 6.81 on June 10, 2024. As of June 12, 2024, the $ 25.0 million payment to Jefferies LLC was recognized as a reduction to stockholders’ equity, consisting of a $ 15.0 million increase in treasury stock, which reflected the value of the initial 2,202,643 shares received upon initial settlement, and a $ 10.0 million decrease in additional paid-in capital, which reflected the value of the shares then held by Jefferies LLC and pending final settlement of the ASR. On August 5, 2024, in final settlement of the ASR, Jefferies LLC delivered an additional 1,705,744 shares of the Company’s Class A common stock to the Company. Final settlement was based on a repurchase price of $ 6.40 per share, which was based on the average of the daily volume weighted average price per share of the Company’s Class A common stock during the term of the ASR, less a discount. Upon final settlement the value of the shares was reclassified from Additional Paid-in Capital to Treasury Stock. The Company did not repurchase any shares of its common stock under the Repurchase Program during the twelve months ended December 31, 2025. 13. Non-Controlling Interests As of the first quarter of 2023, the Company owned 100 % of Shoals Parent LLC. The following table summarizes the effects of the changes in ownership in Shoals Parent LLC on equity for the year ended December 31, 2023. There was no activity for the years ended December 31, 2025 or 2024. Year ended December 31, 2023 Net income attributable to non-controlling interests $ 2,687 Transfers to non-controlling interests: Increase as a result of activity under equity-based compensation plan 687 Decrease from tax distributions to non-controlling interests ( 2,628 ) Reallocation of non-controlling interests ( 10,361 ) Change from net income attributable to non-controlling interests and transfers to non-controlling interests $ ( 9,615 ) Issuance of Additional LLC Interests 73 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements Under the limited liability company agreement of Shoals Parent LLC (“LLC Agreement”), the Company was required to cause Shoals Parent LLC to issue additional LLC Interests to the Company when the Company issued additional shares of Class A common stock. Other than as it relates to the issuance of Class A common stock in connection with an equity incentive program, the Company contributed to Shoals Parent LLC net proceeds and property, if any, received by the Company with respect to the issuance of such additional shares of Class A common stock. The Company caused Shoals Parent LLC to issue a number of LLC Interests equal to the number of shares of Class A common stock issued such that, at all times, the number of LLC Interests held by the Company was equal to the number of outstanding shares of Class A common stock. During the year ended December 31, 2023, the Company caused Shoals Parent LLC to issue to the Company a total of 601,518 LLC Interests, for the vesting of awards granted under the 2021 Long-Term Incentive Plan. There were no issuance of LLC Interests for the years ended December 31, 2025 and 2024. On July 1, 2023, the Company contributed 100 % of its LLC Interests in Shoals Parent LLC to its wholly-owned subsidiary, Shoals Intermediate Parent. Following the contribution, Shoals Parent LLC became a disregarded single member limited liability company, eliminating the Up-C structure. Effective December 31, 2023, Shoals Parent LLC merged with and into Shoals Intermediate Parent with Shoals Intermediate Parent as the surviving corporation. Distributions for Taxes As a limited liability company (treated as a partnership for income tax purposes), Shoals Parent LLC did not incur significant federal, state or local income taxes, as these taxes were primarily the obligations of its members. As authorized by the LLC Agreement, Shoals Parent LLC was required to distribute cash, to the extent that Shoals Parent LLC had cash available, on a pro rata basis, to its members to the extent necessary to cover the members’ tax liabilities, if any, with respect to each member’s share of Shoals Parent LLC taxable earnings. Shoals Parent LLC made such tax distributions to its members quarterly, based on the single highest marginal tax rate applicable to its members applied to projected year-to-date taxable income. During the year ended December 31, 2023, tax distributions to non-controlling LLC Interests holders were $ 2.6 million. There was no tax distribution activity for the years ended December 31, 2025 and 2024. Other Distributions Pursuant to the LLC Agreement, the Company had the right to determine when distributions would be made to LLC members and the amount of any such distributions. If the Company authorized a distribution, such distribution was made to the members of the LLC (including the Company) pro rata in accordance with the percentages of their respective LLC units. 14. Leases The Company has operating leases for real estate related to manufacturing operations. The following table summarizes the balances as it relates to leases at the end of the period (in thousands): 74 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements December 31, Location on the Consolidated Balance Sheets 2025 2024 Right-of-use asset Right-of-use operating lease assets $ 46,044 $ 1,786 Lease liability, current portion Accrued expenses and other $ 3,217 $ 881 Lease liability, net current portion Right-of-use operating lease liabilities 38,661 1,235 Total lease liability $ 41,878 $ 2,116 The Company entered into a lease agreement for a new manufacturing facility in order to expand the operational footprint of the Portland, Tennessee manufacturing facilities. The accounting commencement date for the lease of this new and expanded facility was September 1, 2025. The Company determines if an arrangement is a lease at its inception. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease ROU assets also include any initial direct costs and prepayments less lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. As the Company’s leases generally do not provide an implicit rate, the Company uses its collateralized incremental borrowing rate based on the information available at the lease commencement date, including lease term, in determining the present value of lease payments. Lease expense for these leases is recognized on a straight-line basis over the lease term. Operating lease arrangements are comprised primarily of real estate and equipment agreements. The Company elected to apply the practical expedient to consider non-lease components as a part of the lease. The Company’s leases contain certain non-lease components for common area maintenance which are variable on a month to month basis and as such recorded as a variable lease expense as incurred. The details of the Company’s operating leases are as follows (in thousands): Year Ended December 31, 2025 2024 2023 Operating lease expense $ 2,884 $ 1,085 $ 1,189 Variable lease expense 233 227 168 Short-term lease expense 111 45 61 Total lease expense $ 3,228 $ 1,357 $ 1,418 The following table presents the maturities of lease liabilities as of December 31, 2025 (in thousands): 75 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements For the Year Ended December 31, Operating Leases 2026 6,070 2027 5,597 2028 5,431 2029 5,596 2030 5,762 Thereafter 30,388 Total lease payments 58,844 Less: Imputed lease interest ( 16,966 ) Total lease liabilities $ 41,878 The Company’s weighted average remaining lease-term and weighted average discount rate are as follows: Year Ended December 31, 2025 2024 Weighted average remaining lease-term 9.58 years 2.33 years Weighted average discount rate 7.1 % 4.5 % Supplemental cash flow and other information related to operating leases are as follows (in thousands): Year Ended December 31, 2025 2024 Operating cash flows from operating leases $ 6,275 $ 1,610 Non-cash investing activities: Right of use operating lease assets obtained in exchange for lease obligations $ 46,168 $ — Right of use operating lease liabilities obtained in exchange for lease assets $ 41,336 $ — 15. Commitments and Contingencies Litigation The Company is from time to time subject to legal proceedings and claims, which arise in the normal course of its business. In the opinion of management and legal counsel, except as disclosed below, the amount of losses or gains that may be sustained, if any, would not have a material effect on the financial position, results of operations or cash flows of the Company. The Company records legal costs associated with loss contingencies, including fees and costs associated with preservation of evidence in connection with the wire insulation shrinkback litigation, as incurred. Intellectual Property Litigation The 2023 IP Litigations. On May 4, 2023, the Company filed a patent infringement complaint with the U.S. International Trade Commission (“ITC”) against Hikam America, Inc., a corporation based in Chula Vista, 76 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements California, and its related foreign entities (together, “Hikam”), and Voltage LLC, a limited liability company based in Chapel Hill, North Carolina, and a related foreign entity (together, “Voltage”). The complaint primarily requests that the ITC (i) investigate unlawful imports of certain photovoltaic connectors and components that the Company alleges infringe on two valid and enforceable patents owned by the Company related to improved connectors for solar panel arrays and (ii) issue a limited exclusion order and a cease and desist order against the Hikam respondents and the Voltage respondents to bar them from importing, marketing, distributing, selling, offering for sale, licensing, advertising, transferring, or otherwise using the infringing photovoltaic connectors and components in and into the United States. Also on May 4, 2023, the Company filed complaints against Hikam in the U.S. District Court for the Southern District of California, and against Voltage in the U.S. District Court for the Middle District of North Carolina on the same subject matter. The District Court actions seek injunctive relief and monetary damages. The District Court actions have been stayed pending the final disposition of the ITC investigation. On August 30, 2024, the Administrative Law Judge issued a Final Initial Determination finding that Voltage violated Section 337 of the Tariff Act of 1930, as amended, by importing infringing LYNX trunk bus products into the United States. However, on January 14, 2025, the ITC reversed the Administrative Law Judge’s Final Initial Determination and issued a Notice of a Commission Final Determination Finding No Violation of Section 337. The Company appealed the ITC’s decision to the Federal Circuit on February 11, 2025. The appeal is pending. On February 11, 2026, the Company and Hikam filed a voluntary, joint-dismissal that will end the legal proceedings as they pertain to Hikam. The Company’s case against Voltage remains stayed pending a ruling in the appeal. The 2025 IP Litigations. On January 9, 2025, the Company filed a patent infringement complaint at the ITC against Voltage. This complaint cites two new patents (the ‘375 and ‘376 Patents) that cover the Company’s BLA solutions. Also on January 9, 2025, the Company filed a complaint against Voltage in the U.S. District Court for the Middle District of North Carolina “(the District Court case”) on the same subject matter. These complaints seek injunctive relief and, in the District Court case, damages for reasonable royalty and lost profits. On February 6, 2026, an Administrative Law Judge at the ITC issued an Initial Determination finding that Voltage’s products infringed on Shoals ‘375 and ‘376 patents. The ITC is expected to issue a Final Determination by June 2026. In the District Court case, a bench trial on certain equitable defenses raised by Voltage is scheduled for February 26-27 of 2026. A jury trial to resolve Shoals’ infringement claims and other remaining matters is scheduled for August 2026. On February 17, 2026, Shoals filed a motion for preliminary injunction seeking additional, immediate relief to prevent the alleged infringing activities from continuing while the case is pending. Voltage’s response to this motion is due March 10, 2026. The Company is vigorously pursuing these 2023 IP Litigations and the 2025 IP Litigations. However, at this stage, the Company is unable to predict the outcome or impact on its business and financial results. The Company is accounting for these matters as a gain contingency, and will record any such gain in future periods if and when the contingency is resolved, in accordance with ASC 450, Contingencies. Wire Insulation Shrinkback Litigation On October 31, 2023, the Company filed a complaint against Prysmian in the U.S. District Court for the Middle District of Tennessee, Nashville Division. The Company filed an amended complaint on December 4, 2024. The amended complaint alleges that the Company suffered damages caused by defective wire Prysmian 77 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements sold to the Company from approximately 2019 through approximately 2022. The amended complaint alleges that the wire at issue in the litigation has presented unacceptable levels of wire insulation shrinkback. The amended complaint includes, among other causes of action, product liability, breach of contract, breach of warranty, indemnity, and negligence claims. Mediation in this case is ongoing. The Company seeks compensatory and punitive damages, recovery of all costs and expenses incurred by the Company in connection with the identification, repair and replacement of the Prysmian wire alleged to be defective, and other legal and equitable relief. The Company is vigorously pursuing its amended complaint, and as the Company continues to assess this matter, it may, from time to time, amend, update or supplement the amended complaint to, among other things, increase the damages sought for various purposes, including in accordance with increases to the Company’s estimated warranty liability and related expenses related to this matter. At this stage, the Company is unable to predict the outcome of this litigation or the impact on its business and financial results. The Company is accounting for this matter as a gain contingency, and will record any such gain in future periods if and when the contingency is resolved, in accordance with ASC 450, Contingencies. Securities Litigation On March 21, 2024, a purported stockholder filed a putative securities class action against the Company and certain of its current and former executive officers in the United States District Court for the Middle District of Tennessee, Nashville Division, captioned Westchester Putnam Counties Heavy & Highway Laborers Local 60 Benefits Fund v. Shoals Technologies Group, Inc., et al. The complaint alleges violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, based on allegedly false and misleading statements and omissions relating to the wire insulation shrinkback matter. The complaint seeks unspecified monetary damages, recovery of fees and costs, and other relief that the court may find appropriate. On May 8, 2024 and May 15, 2024, respectively, similar class action complaints were filed in the same court against the Company and certain current and former officers, but these complaints also named as defendants the Company’s Board of Directors, and the selling stockholders and underwriters of the Company’s secondary public offering. While the allegations are largely similar to the first complaint, these new complaints also alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933. These cases were captioned Oklahoma Police Pension and Retirement System v. Shoals Technologies Group, Inc. and Kissimmee Utility Authority Employees Retirement Plan v. Shoals Technologies Group, Inc. On May 24, 2024, all of these cases were consolidated into one action captioned In re Shoals Technologies Group, Inc. Securities Litigation. Plaintiff Erste Asset Management GmbH has been appointed Lead Plaintiff. On December 9, 2024, Lead Plaintiff and plaintiff Kissimmee Utility Authority Employees’ Retirement Plan filed a consolidated complaint, and on February 4, 2025, Plaintiffs filed an amended complaint. The Company filed a motion to dismiss the amended complaint on February 18, 2025. Plaintiffs filed an opposition to the motion to dismiss on April 21, 2025. On September 30, the court issued its ruling on the motion to dismiss, granting it in part and denying it in part. On January 21, 2025, Plaintiffs filed a motion for class certification, appointment of class representatives, and approval of class counsel. Defendants’ opposition to Plaintiffs’ motion is due April 6, 2026. Plaintiffs’ reply brief in support of their motion is due May 21, 2026. In December 2025 and January 2026, the Company and the Plaintiffs engaged in court-ordered mediation. This case is ongoing. Although the Company intends to continue to vigorously defend against these claims, there is no guarantee that the Company will prevail. Accordingly, the Company is unable to determine the ultimate outcome of this consolidated lawsuit or determine the amount or range of potential losses associated with the consolidated lawsuit. 78 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements Derivative Litigation On May 16, 2024, a derivative stockholder action was filed against certain current and former officers and directors of the Company in the United States District Court for the Middle District of Tennessee, Nashville Division, captioned Corwin v. Forth, et al . The complaint asserts claims for breach of fiduciary duty relating to the wire insulation shrinkback matter. The complaint seeks unspecified monetary damages, restitution, the adoption of certain governance reforms, recovery of fees and costs, and other relief that the court may find appropriate. The Company is named as a nominal defendant only. On July 24, 2024, another derivative stockholder action was filed against certain current and former officers and directors of the Company in the same court, captioned Ouellet v. Whitaker et al . The complaint asserts, among others, claims for breach of fiduciary duty, gross mismanagement, abuse of control, waste of corporate assets, unjust enrichment, and violations of Section 14(a) of the Exchange Act, and insider trading, all of which relate to the wire insulation shrinkback matter. The complaint seeks unspecified monetary damages, restitution, the adoption of certain governance reforms, recovery of fees and costs, and other relief that the court may find appropriate. The Company is named as a nominal defendant only. On August 21, 2024, these derivative stockholder actions were consolidated into a single action captioned In re Shoals Technologies Group, Inc. Derivative Litigation (the “Tennessee Derivative Action”). On March 26, 2025, another derivative stockholder action was filed against certain current and former officers and directors of the Company in the same court as the consolidated action, captioned Norman v. Whitaker, et al. The complaint asserts, among others, claims for violations of Sections 14(a) and 20(a) of the Exchange Act, breach of fiduciary duty, insider trading, and unjust enrichment, all of which relate to the wire insulation shrinkback matter. The complaint seeks unspecified monetary damages, restitution, the adoption of certain governance reforms, recovery of fees and costs, and other relief that the court may find appropriate. The Company is named as a nominal defendant only. On April 11, 2025, the Norman action was consolidated with the Tennessee Derivative Action. On January 19, 2026, the parties in the Tennessee Derivative Action filed a stipulation to stay the Tennessee Derivative Action until 60 days following the conclusion of the January 2026 mediation in the Securities Litigation. On December 2, 2025, another derivative stockholder action was filed against certain current and former officers and directors of the Company in the Delaware Court of Chancery, captioned Gipsman v. Whitaker, et al. (the “Delaware Derivative Action”). The Delaware Derivative Action asserts claims for breach of fiduciary duty, insider trading, unjust enrichment, and corporate waste, all of which relate to the wire insulation shrinkback matter. The complaint seeks unspecified monetary damages, restitution, the adoption of certain governance reforms, recovery of fees and costs, and other relief that the court may find appropriate. The Company is named as a nominal defendant only. Although the Company intends to continue to vigorously defend against these claims, there is no guarantee that the Company will prevail. Accordingly, the Company is unable to determine the ultimate outcome of the derivative litigation or determine the amount or range of potential losses associated with the lawsuit. Surety Bonds The Company provides surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee the Company’s performance in accordance with contractual or legal obligations. As of December 31, 2025, the maximum potential payment obligation with regard to surety bonds was $ 40.3 million. Employee Benefit Plan 79 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements The Company has a 401(k) retirement plan for substantially all of its employees based on certain eligibility requirements. Effective January 1, 2021 the Company began making matching contributions to the plan and may also provide discretionary contributions to the plan at the discretion of management. No such discretionary contributions have been made since inception of the plan. For the years ended December 31, 2025, 2024 and 2023, the Company made matching contributions totaling $ 1.4 million, $ 0.7 million and $ 0.5 million, respectively. 16. Income Taxes The components of income before income taxes are as follows (in thousands): Year Ended December 31, 2025 2024 2023 Domestic $ 48,518 $ 37,863 $ 54,935 Foreign — — — Income before income taxes $ 48,518 $ 37,863 $ 54,935 The components of income tax expense are as follows (in thousands): Year Ended December 31, 2025 2024 2023 Current income taxes: Federal $ — $ 11 $ — State ( 1,188 ) ( 310 ) 915 Foreign — — — Total current income taxes ( 1,188 ) ( 299 ) 915 Deferred income taxes: Federal 13,338 10,890 10,146 State 2,794 3,145 1,188 Foreign — — — Total deferred income taxes 16,132 14,035 11,334 Other tax expense — — 25 Income tax expense $ 14,944 $ 13,736 $ 12,274 A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the prospective adoption of ASU 2023-09 is as follows: 80 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements Year Ended December 31, 2025 U.S. Federal Statutory Tax Rate $ 10,189 21.0 % State and Local Income Taxes, Net of Federal Income Tax Effect (a) 1,855 3.8 % Changes in Valuation Allowances ( 48 ) ( 0.1 ) % Nontaxable or Nondeductible Items Equity Compensation 2,051 4.2 % Other 529 1.1 % Other Adjustments 368 0.8 % Effective Tax Rate $ 14,944 30.8 % (a) The state taxes in Texas made up the majority (greater than 50 percent) of the tax effect in this category. A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes prior to the adoption of ASU 2023-09 is as follows: Year Ended December 31, 2024 2023 U.S. federal income taxes at statutory rate $ 7,951 $ 11,537 State and local income tax, net of federal benefit 787 1,811 Permanent tax adjustments 146 101 Equity-based compensation 1,764 447 Non-deductible officers' compensation 343 968 Non-controlling interests — ( 564 ) Termination of Up-C structure — ( 2,347 ) Change in valuation allowance 2,112 988 Other 633 ( 667 ) Income tax expense $ 13,736 $ 12,274 81 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements The components of the deferred tax assets and liabilities are as follows (in thousands): Year Ended December 31, 2025 2024 Deferred tax assets: Inventory, net 1,157 1,203 Property, plant & equipment, net 170 728 Goodwill (1) 385,586 419,088 Accrued expenses and other 943 793 Warranty liability 128 9,573 Net operating loss 55,562 27,269 Equity-based compensation 1,434 2,559 163(j) business interest expense 2,648 3,039 Other 11,229 2,510 Total deferred tax assets 458,857 466,762 Less valuation allowance ( 3,043 ) ( 3,100 ) Total deferred tax assets, net 455,814 463,662 Deferred tax liabilities: Other intangible assets, net ( 7,078 ) ( 8,872 ) Other ( 10,709 ) ( 630 ) Total deferred tax liabilities ( 17,787 ) ( 9,502 ) Net deferred tax asset $ 438,027 $ 454,160 (1) Goodwill represents the excess of tax-deductible goodwill over book goodwill of $ 1,658 million as of December 31, 2025, and $ 1,795 million as of December 31, 2024, which is mainly related to the step-up in tax basis resulting from exchanges of LLC Interests for shares of Class A common stock. During the year ended December 31, 2023, the Company acquired the remaining non-controlling interest in Shoals Parent LLC and contributed 100 % of its interest to its wholly-owned subsidiary Shoals Intermediate Parent, thereby eliminating the Company’s Up-C structure. As a result of the contribution, Shoals Parent LLC ceased to be treated as a partnership for U.S. federal income tax purposes and became a single-member disregarded entity. Accordingly, the Company converted its outside basis differences in its investment in Shoals Parent LLC and remeasured its deferred taxes using the inside basis differences of Shoals Parent LLC’s assets and liabilities. The conversion from outside to inside basis differences resulted in a net deferred tax benefit of approximately $ 5.1 million, which has been recorded in the accompanying consolidated statement of operations for the year ended December 31, 2023. As of December 31, 2025, the Company has $ 235.9 million and $ 121.7 million federal and state net operating loss carryforwards, respectively. If not utilized, $ 235.9 million of the federal net operating loss can be carried forward indefinitely. If not utilized, $ 27.0 million of the state net operating loss can be carried forward indefinitely and $ 94.7 million will expire between 2033-2045. In the prior year, the Company recorded a valuation allowance related to its state net operating loss carryforwards and goodwill amortization in the amount of $ 2.1 million, as it is more likely than not these deferred tax assets would not be realized. As of December 31, 2025, the Company’s assessment of the valuation allowance resulted in an insignificant adjustment in the current year. The valuation allowance mainly derives from states with shortened net operating loss carryforward periods. Additionally, since goodwill amortization is the primary contributor to the net operating losses, it must be considered in the analysis, as the net operating loss carryforwards will expire before the benefit of the goodwill amortization is fully realized in 82 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements certain states. As of December 31, 2023, the Company determined that a valuation allowance related to land and other non-amortizable intangibles in the amount of $ 1.0 million was required, as it is more likely than not these deferred tax assets would not be realized. As of December 31, 2025, an insignificant amount of the valuation allowance was released due to the disposal of land. The federal and state valuation allowance is $ 0.9 million and $ 2.1 million, respectively, for a total valuation allowance of $ 3.0 million as of December 31, 2025. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. OBBBA includes significant changes to U.S. federal income tax law, including modifications to the 2017 Tax Cuts and Jobs Act and 2022 Inflation Reduction Act provisions. The law made changes to certain business deductions and credits, and new limitations and incentives affecting capital investment and clean energy. As of December 31, 2025, OBBBA had minimal impact on the Company’s tax position. Given the complexities, including recently issued guidance from the Internal Revenue Service and regulations from the U.S. Treasury Department, we will continue to monitor these developments and evaluate the potential future impact to our results of operations. As of December 31, 2025 and 2024, the Company has recorded $ 0.7 million and $ 1.0 million, respectively, of gross unrecognized tax benefits inclusive of interest and penalties, all of which, if recognized, would favorably impact the effective tax rate. We do not expect a significant change in our uncertain tax benefits in the next twelve months. The Company recognizes penalties and interest related to uncertain tax positions within the provision (benefit) for income taxes line in the accompanying consolidated statements of operations. We are generally subject to tax examinations by U.S. federal and state tax authorities for years beginning after 2021 and 2020, respectively. The table below provides the updated requirements of ASU 2023-09 for cash paid for income taxes, net of refunds. Year Ended December 31, 2025 Cash paid for income taxes, net of refunds U.S. Federal $ — U.S. State and Local Minnesota ( 10 ) Tennessee ( 173 ) Other — Foreign — Total cash paid during the period for income taxes $ ( 183 ) 17. Revenue Recognition Disaggregation of revenue Based on Topic 606 provisions, the Company disaggregates its revenue from contracts with customers based on product type. Revenue by product type is disaggregated between system solutions and components. System solutions are contracts under which the Company provides multiple products typically in connection 83 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements with the design and specification of an entire EBOS system. Components represents sales of individual components. The following table presents the Company’s revenue disaggregated by product type (in thousands): Year Ended December 31, 2025 2024 2023 System solutions $ 374,189 $ 306,145 $ 398,384 Components 101,142 93,063 90,555 Total revenue $ 475,331 $ 399,208 $ 488,939 Contract Balances The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables, retainage, and deferred revenue on the consolidated balance sheets, recorded on a contract-by-contract basis at the end of each reporting period. The Company’s contract balances consist of the following (in thousands): December 31, Location on the Consolidated Balance Sheets 2025 2024 Billed accounts receivable Accounts receivable, net $ 119,521 $ 70,882 Retainage Accounts receivable, net $ 9,272 $ 7,299 Contract assets Other assets $ — $ 4,251 Contract liabilities Accrued expenses and other $ 1,811 $ — Unbilled receivables Unbilled receivables $ 22,133 $ 20,834 Deferred revenue Deferred revenue $ 37,031 $ 18,737 Accrued rebates Accrued expenses and other $ 4,851 $ 3,058 The majority of the Company’s contract amounts are billed as work progresses in accordance with agreed-upon contractual terms, which generally coincide with the shipment of one or more phases of the project. Billing sometimes occurs subsequent to revenue recognition, resulting in unbilled receivables. The changes in unbilled receivables relate to fluctuations in the timing of billings for the Company’s revenue recognized over-time. Certain contracts contain retainage provisions. Retainage represents a contract asset for the portion of the contract price earned by the Company for work performed but held for payment by the customer as a form of security until the Company obtains specified milestones. The Company typically bills retainage amounts as work is performed. Retainage provisions are not considered a significant financing component because they are intended to protect the customer in the event that some or all of the obligations under the contract are not completed. The changes in retainage relate to fluctuations in the timing of retainage billings and achievement of specified milestones. For certain contracts, we provide customers with incentives upon entering into multi-year agreements or volume specific commitments. Any up-front incentives to customers that are not made in exchange for distinct goods and services are capitalized as a contract asset within other assets, which are subsequently recognized as a reduction to revenue over the term of the customer arrangements. 84 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements The Company also receives deferred revenue in the form of customer deposits. The customer deposits are short term as the related performance obligations are typically fulfilled within 12 months. The changes in deferred revenue relate to fluctuations in the timing of customer deposits and completion of performance obligations. During the year ended December 31, 2025, $ 13.5 million, or 72 % of deferred revenue recorded as of December 31, 2024, was recognized in revenue. During the year ended December 31, 2024, $ 20.6 million, or 93 % of deferred revenue recorded as of December 31, 2023, was recognized in revenue. Accrued rebates are recorded based on sales volumes from agreed upon rebate terms. Rebates are typically paid within three to four months . 18. Segment Reporting The Company is organized and operates as one operating and reportable segment, which carries out business activities related to the design, development, manufacture and marketing of products and services for EBOS solutions and components. The Company’s chief operating decision maker (“CODM”), the Chief Executive Officer, reviews operating results including discrete financial information and profitability metrics at a consolidated entity level for purposes of making resource allocation decisions and for evaluating financial performance. This structure is reflected in our organizational and reporting model. The accounting policies of the consolidated segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance of the Company and decides how to allocate resources based on income from operations and net income that is also reported on the consolidated income statement. The CODM is involved in determining and reviewing projected net income and income from operations as part of the annual operating plan process. Throughout the year, the CODM considers forecast to actual results and variances on a monthly and quarterly basis to allocate resources for the Company. The following table presents selected financial information with respect to the Company’s single operating segment for the years ended December 31, 2025, 2024 and 2023: Year Ended December 31, 2025 2024 2023 Revenue $ 475,331 $ 399,208 $ 488,939 Cost of revenue 308,823 257,191 320,635 Gross profit 166,508 142,017 168,304 Operating expenses General and administrative 101,524 82,254 80,719 Depreciation and amortization 8,599 8,591 8,550 Total operating expenses 110,123 90,845 89,269 Income from operations 56,385 51,172 79,035 Non-operating income/(expense) (1) ( 7,867 ) ( 13,309 ) ( 24,100 ) Income tax expense ( 14,944 ) ( 13,736 ) ( 12,274 ) Net income $ 33,574 $ 24,127 $ 42,661 (1) Consists of non-operating expenses included on the consolidated income statements which includes interest expense, interest income, gains and losses on the disposal of assets, and foreign currency gains and losses. All of the Company's long-lived tangible assets, as well as the Company's operating lease right-of-use assets recognized on the Consolidated Balance Sheets were located within the United States. 85 Table of Contents Shoals Technologies Group, Inc. Notes to Consolidated Financial Statements 19. Subsequent Events On February 20, 2026, the U.S. Supreme Court invalidated the current U.S. presidential administration's tariff measures after concluding that the International Emergency Economic Powers Act did not authorize their imposition. It is uncertain how future repercussions of the ruling and other changes in trade policy would impact our operations, supply chain, and cash flow. 86 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.