Core Insights - Shoals Technologies Group, Inc. has appointed Aaron Zadeh as Country Manager for the Pacific region, focusing on Australia, New Zealand, and the Pacific islands, to enhance its commitment to clean energy solutions in a promising solar market [1][4] - Aaron Zadeh brings over two decades of experience in the solar and energy storage sectors, having held senior roles at leading companies and contributing to significant renewable energy projects globally [2][3] - The appointment is seen as a strategic move to leverage Australia's transformative energy journey and to support the country's renewable energy targets and demand for advanced solar infrastructure [4] Company Overview - Shoals Technologies Group is a leader in electrical balance of systems (EBOS) solutions for the energy transition market, recognized for its innovative technologies that enhance installation efficiency, safety, and system performance [5]

Core Viewpoint - Shoals Technologies Group (SHLS) shows a significant improvement in earnings outlook, making it an attractive investment option as analysts continue to raise their earnings estimates [1][3] Earnings Estimate Revisions - The upward trend in earnings estimate revisions reflects growing analyst optimism regarding the company's earnings prospects, which is expected to positively impact its stock price [2] - For the current quarter, Shoals Technologies is projected to earn $0.12 per share, indicating a year-over-year increase of +50.0%. Over the last 30 days, two estimates have been revised upward, leading to a 13.9% increase in the Zacks Consensus Estimate [6] - For the full year, the expected earnings per share is $0.38, representing a year-over-year change of +8.6%. In the past month, five estimates have been revised upward with no negative revisions, contributing to a positive consensus outlook [7] Zacks Rank and Performance - Shoals Technologies currently holds a Zacks Rank 2 (Buy), indicating strong agreement among analysts in revising earnings estimates upward, which historically correlates with stock performance [8] - Stocks with Zacks Rank 1 (Strong Buy) and 2 (Buy) have shown significant outperformance compared to the S&P 500, suggesting a favorable investment environment for Shoals Technologies [8] Recent Stock Performance - Over the past four weeks, Shoals Technologies shares have increased by 7.1%, indicating investor confidence in the company's earnings growth prospects [9]

Group 1 - Shoals Technologies Group (SHLS) has reached a significant support level and shows potential for investors from a technical perspective [1] - SHLS recently broke through the 50-day moving average, indicating a short-term bullish trend [1] - Over the past four weeks, SHLS has gained 7.1%, and it is currently ranked a Zacks Rank 2 (Buy), suggesting further upward movement [2] Group 2 - The bullish outlook is reinforced by positive earnings estimate revisions, with no estimates decreasing in the past two months and five estimates increasing [3] - The consensus estimate for SHLS has also increased, indicating strong investor interest [3] - Investors are encouraged to monitor SHLS for potential gains in the near future due to its key technical level and favorable earnings revisions [3]

Core Viewpoint - The article emphasizes the importance of value investing and highlights Shoals Technologies Group (SHLS) as a strong value stock based on its favorable valuation metrics and earnings outlook [2][4][7]. Company Summary - Shoals Technologies Group (SHLS) currently holds a Zacks Rank of 2 (Buy) and a Value grade of A, indicating strong potential for value investors [4]. - The stock is trading at a P/E ratio of 10.76, significantly lower than the industry average of 14.45, suggesting it may be undervalued [4]. - SHLS has a PEG ratio of 0.45, which is also lower than the industry average of 0.65, indicating strong earnings growth potential relative to its price [5]. - The P/B ratio for SHLS is 1.33, compared to the industry average of 2.04, further supporting the notion that the stock is undervalued [6]. - Over the past year, SHLS's Forward P/E has fluctuated between 7.04 and 17.31, with a median of 11.36, while its PEG ratio has ranged from 0.29 to 0.72, with a median of 0.47 [4][5]. Industry Summary - The industry average P/E ratio stands at 14.45, while the average PEG ratio is 0.65, indicating that SHLS is positioned favorably within its sector [4][5]. - The average P/B ratio for the industry is 2.04, which highlights SHLS's competitive valuation metrics [6].

Core Insights - Shoals Technologies Group, Inc. has announced the groundbreaking of the Maryvale Solar and Energy Storage Project, marking a significant milestone in renewable energy infrastructure in Australia [1][4] - The project aims to deliver approximately 243 MW of solar generation capacity and 172 MW of battery storage, contributing to Australia's ambitious target of generating 82% of its electricity from renewable sources by 2030 [2][4] - The collaboration with PCL Construction and Gentari highlights the integration of advanced electrical balance-of-system solutions to enhance the efficiency and reliability of renewable energy delivery [3][4] Company Overview - Shoals Technologies Group is recognized as a leader in electrical balance of systems (EBOS) solutions for the energy transition market, focusing on innovative technologies that improve installation efficiency and system performance [5] - The company has been operational since 1996 and has established itself as a key player in the renewable energy industry [5] Project Details - The Maryvale project is one of Australia's largest DC-coupled solar and battery energy storage systems, designed to enhance grid reliability and enable long-duration clean energy delivery [2][4] - Construction has commenced, with commercial operations expected to begin in early 2027, further supporting Australia's renewable energy targets [4]

Core Insights - Shoals Technologies Group reported Q2 2025 revenue growth of 11.7% to $110.8 million, exceeding the consensus estimate of $104.7 million, with adjusted earnings per share at $0.10, above the expected $0.08 [1][2] - The company upgraded its full-year revenue guidance to $450.0–$470.0 million due to strong demand, despite facing margin pressures and increased legal expenses [1][14] Financial Performance - Revenue for Q2 2025 was $110.8 million, up from $99.2 million in Q2 2024, reflecting an 11.7% year-over-year increase [2] - Adjusted EBITDA decreased to $24.5 million from $27.7 million in the prior year, a decline of 11.6% [2][7] - Gross margin fell to 37.2% from 40.3% year-over-year, a decrease of 3.1 percentage points [2][6] Business Overview - Shoals Technologies Group specializes in designing and manufacturing electrical balance of system (EBOS) solutions for solar and battery energy storage projects, aiming to simplify installation processes [3] - The company is focusing on new product families, including a plug-and-play EBOS platform and battery energy storage solutions, supported by strong R&D efforts [4] Market Trends and Developments - The company reported a record backlog of $671.3 million, up 4.4% year-over-year, indicating strong demand and growth in international markets [5] - International business accounted for over 13.2% of total backlog, highlighting the success of geographic diversification [5] Operational Challenges - Rising legal expenses and warranty remediation have negatively impacted cash flows, with cash flow from operations dropping to $1.7 million in H1 2025 from $50.7 million in the same period last year [8] - Cash reserves decreased significantly from $23.5 million at year-end 2024 to $4.7 million by June 30, 2025 [8] Future Outlook - The company anticipates Q3 2025 revenue between $125.0 million and $135.0 million, with adjusted EBITDA expected in the range of $100.0–$115.0 million for FY2025 [14] - Management expects about 78% of the current backlog to convert to revenue over the next twelve months, indicating improved visibility and reduced project delay risks [15]

Core Insights - Shoals Technologies Group (SHLS) reported quarterly earnings of $0.1 per share, exceeding the Zacks Consensus Estimate of $0.08 per share, with a year-over-year comparison showing no change in earnings [1] - The company achieved revenues of $110.84 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 6.13% and showing an increase from $99.25 million in the same quarter last year [2] - The stock has underperformed the market, losing about 2.7% since the beginning of the year compared to the S&P 500's gain of 7.6% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.12 on revenues of $120.01 million, and for the current fiscal year, it is $0.35 on revenues of $435.84 million [7] - The estimate revisions trend for Shoals Technologies was favorable ahead of the earnings release, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The solar industry, to which Shoals Technologies belongs, is currently ranked in the bottom 39% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Canadian Solar (CSIQ), another company in the same industry, is expected to report quarterly earnings of $1.14 per share, reflecting a significant year-over-year change of +5600%, with revenues anticipated to be $1.92 billion, up 17.3% from the previous year [9][10]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $110.8 million, representing an 11.7% increase year-over-year and a 37.9% sequential increase [6][27] - Adjusted gross profit was $41.2 million, with a gross profit margin of 37.2%, down from 40.3% in the prior year [28] - Adjusted EBITDA was $24.5 million, or 22.1% of revenue, compared to $27.7 million and 27.9% in the prior year [11][31] - Net income increased to $13.9 million from $11.8 million in the prior year, aided by a $3.1 million gain on the sale of a facility [30] Business Line Data and Key Metrics Changes - Strong bookings of approximately $137.1 million led to a record backlog of $671.3 million, with a book-to-bill ratio of 1.2 [6][36] - The Community Commercial and Industrial (CC and I) segment is expected to generate over $10 million in revenue this year, with June being the highest month of bookings since tracking began [20] - The OEM business is tracking ahead of expectations, driven by strong demand from a single customer [21] Market Data and Key Metrics Changes - The U.S. utility-scale solar market saw a 20% increase in construction year-over-year in the first half of 2025 [16] - The demand for data centers and AI applications is driving significant growth, with data center power demand expected to double by 2030 [24][18] Company Strategy and Development Direction - The company is focused on expanding its product offerings and enhancing operational efficiencies through automation and lean manufacturing principles [10][15] - Strategic growth initiatives include international markets, CC and I, OEM, and Battery Energy Storage Solutions (BESS) [19][22] - The company aims to leverage its domestic manufacturing advantage to capture market share and address labor cost challenges [15][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand environment despite regulatory uncertainties, noting that customers are pushing projects forward [7][12] - The company anticipates a strong second half of 2025, with revenue guidance for Q3 in the range of $125 million to $135 million, representing 28% year-over-year growth at the midpoint [36][37] - Management highlighted the importance of maintaining strong relationships with EPCs and developers to navigate the evolving market landscape [11][14] Other Important Information - The company is nearing completion of remediation work related to defective wire, with positive feedback from customers [11] - Legal expenses remain elevated due to ongoing litigation, impacting operating profit margins [30][63] - The company has a high-quality balance sheet, ending the quarter with cash and equivalents of $4.7 million and net debt of $127.1 million [34] Q&A Session Summary Question: What are you seeing in terms of order activity and willingness to move forward? - Management noted strong market demand and project calendars are loaded, with construction up 20% [44][45] Question: Can you provide more color on 2026 expectations? - Management refrained from providing guidance for 2026 but emphasized strong backlog and awarded orders [53] Question: What are the main drivers behind the revenue guidance update? - The increase is attributed to strong execution and winning new customers, with a diverse customer mix [58][59] Question: How sticky are the newer relationships expected to be? - Management aims to convert new customers to higher-margin products over time, focusing on value and quality [90] Question: Can you provide more color on the international markets' revenue contribution? - Revenue contribution from international markets has been minimal in 2025, but growth is expected to accelerate in 2026 [99]

Q2 EARNINGS REPORT August 2025 © 2025 Shoals Technologies Group Disclaimer Forward-Looking Statements This presentation contains forward-looking statements that are based on our management's beliefs and assumptions and on information currently available to our management. Forward-looking statements include information concerning our possible or assumed future results of operations; expectations regarding the utility-scale solar market; project delays; regulatory environment; the effects of strategic pricing ...

[Forward-Looking Statements](index=5&type=section&id=FORWARD-LOOKING%20STATEMENTS) [Overview of Forward-Looking Statements](index=5&type=section&id=Overview%20of%20Forward-Looking%20Statements) The report's forward-looking statements are based on management's current beliefs and are subject to risks - Forward-looking statements cover future results, market expectations, business strategies, and potential risks[8](index=8&type=chunk) - Such statements involve known and unknown risks that may cause actual results to differ materially from expectations[9](index=9&type=chunk) - Readers should not place undue reliance on these statements, which reflect management's beliefs as of the report date[9](index=9&type=chunk) [Key Risk Factors](index=5&type=section&id=Key%20Risk%20Factors) Key risks include solar demand, warranty estimates, supply chain disruptions, and macroeconomic conditions - Diminished demand for solar energy projects could materially adversely impact growth and financial results[11](index=11&type=chunk) - Failure to accurately estimate losses from the wire insulation shrinkback matter could materially impact profit margins[11](index=11&type=chunk) - Supply chain disruptions due to raw material flow interruptions or trade policy changes could adversely affect revenue[11](index=11&type=chunk) - Defects or performance problems in products can lead to equipment failure, reputational damage, and decreased revenue[12](index=12&type=chunk) - Macroeconomic conditions and intense market competition pose risks to business and financial results[12](index=12&type=chunk) - Ongoing patent infringement complaints and wire insulation shrinkback litigation present significant legal uncertainties[12](index=12&type=chunk) [PART I — FINANCIAL INFORMATION](index=8&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=8&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and accompanying notes [Condensed Consolidated Balance Sheets (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) Condensed Consolidated Balance Sheets | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $794,964 | $793,080 | | Total Current Assets | $190,073 | $188,352 | | Cash and cash equivalents | $4,686 | $23,511 | | Accounts receivable, net | $103,432 | $78,181 | | Inventory, net | $56,899 | $55,977 | | Total Liabilities | $219,557 | $236,280 | | Total Current Liabilities | $81,346 | $80,912 | | Warranty liability—current portion | $15,102 | $29,602 | | Total Stockholders' Equity | $575,407 | $556,800 | - Total assets increased slightly to **$795.0 million**, while **cash and cash equivalents significantly decreased** from $23.5 million to $4.7 million[15](index=15&type=chunk) - Total liabilities decreased to **$219.6 million**, primarily due to a **reduction in the current portion of warranty liability** from $29.6 million to $15.1 million[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) Condensed Consolidated Statements of Operations | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $110,841 | $99,249 | $191,202 | $190,056 | | Gross profit | $41,202 | $39,997 | $69,342 | $76,457 | | Income from operations | $15,998 | $18,581 | $20,310 | $30,165 | | Net income | $13,855 | $11,802 | $13,573 | $16,576 | | Basic EPS | $0.08 | $0.07 | $0.08 | $0.10 | | Diluted EPS | $0.08 | $0.07 | $0.08 | $0.10 | - Quarterly revenue **increased by 11.7% YoY** to $110.8 million, while six-month revenue saw a modest **0.6% increase**[16](index=16&type=chunk) - Quarterly net income **grew 17.4% YoY** to $13.9 million, but six-month net income **decreased by 18.1% YoY** to $13.6 million[16](index=16&type=chunk) - Gross profit percentage **decreased to 37.2% for the quarter** and **36.3% for the six months** due to strategic pricing and product mix changes[157](index=157&type=chunk)[164](index=164&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Unaudited)) Condensed Consolidated Statements of Changes in Stockholders' Equity | Metric (in thousands, except shares) | Balance at Dec 31, 2024 | Balance at Jun 30, 2025 | | :--- | :--- | :--- | | Class A Common Stock Shares | 166,762,392 | 167,353,860 | | Class A Common Stock Amount | $2 | $2 | | Additional Paid-in Capital | $483,550 | $488,525 | | Treasury Stock Shares | 3,908,387 | 3,908,387 | | Treasury Stock Amount | $(25,331) | $(25,272) | | Retained Earnings | $98,579 | $112,152 | | Total Stockholders' Equity | $556,800 | $575,407 | - Total stockholders' equity **increased to $575.4 million**, driven by net income and equity-based compensation[18](index=18&type=chunk) - The company **did not repurchase any shares** of its common stock during the six months ended June 30, 2025[18](index=18&type=chunk)[83](index=83&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Condensed Consolidated Statements of Cash Flows | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $1,737 | $50,701 | | Net Cash Used in Investing Activities | $(10,342) | $(4,485) | | Net Cash Used in Financing Activities | $(10,220) | $(65,734) | | Net Decrease in Cash and Cash Equivalents | $(18,825) | $(19,518) | | Cash and Cash Equivalents—End of Period | $4,686 | $3,189 | - Net cash from operating activities **significantly decreased to $1.7 million** from $50.7 million, primarily due to changes in working capital[21](index=21&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) - Net cash used in investing activities **increased to $10.3 million**, driven by higher purchases of property, plant, and equipment[21](index=21&type=chunk)[187](index=187&type=chunk) - Net cash used in financing activities **decreased to $10.2 million** due to lower debt payments and reduced share repurchases[21](index=21&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) [Note 1. Organization and Business](index=14&type=section&id=Note%201.%20Organization%20and%20Business) - Shoals Technologies Group, Inc. is a leading provider of electrical balance of systems (EBOS) solutions for the global energy transition market[25](index=25&type=chunk) - The company is headquartered in Portland, Tennessee, with five direct or indirect subsidiaries as of June 30, 2025[24](index=24&type=chunk)[26](index=26&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=14&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) - The financial statements are prepared in accordance with U.S. GAAP, consolidating all subsidiaries[27](index=27&type=chunk)[28](index=28&type=chunk) - Management makes significant estimates for revenue recognition, credit losses, warranty liability, and other key areas[32](index=32&type=chunk) Customer Concentration | Customer | 2025 Revenue % | 2025 Accounts Receivable % | 2024 Revenue % | 2024 Accounts Receivable % | | :--- | :--- | :--- | :--- | :--- | | Customer A | 17.5 % | 22.6 % | 35.2 % | 19.0 % | | Customer B | 14.5 % | 6.1 % | 8.1 % | 8.8 % | - **Customer A's revenue concentration decreased significantly** from 35.2% in 2024 to 17.5% in 2025 for the six-month period[33](index=33&type=chunk) - The company is evaluating the impact of new FASB ASUs related to income tax and expense disaggregation disclosures[35](index=35&type=chunk)[38](index=38&type=chunk) [Note 3. Accounts Receivable](index=16&type=section&id=Note%203.%20Accounts%20Receivable) Accounts Receivable | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accounts receivable | $103,928 | $78,677 | | Less: allowance for credit losses | $(496) | $(496) | | Accounts receivable, net | $103,432 | $78,181 | - Net accounts receivable **increased by 32.3%** to $103.4 million at June 30, 2025[40](index=40&type=chunk) [Note 4. Inventory](index=16&type=section&id=Note%204.%20Inventory) Inventory | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Raw materials | $58,876 | $55,703 | | Work in process | $1,949 | $2,316 | | Finished goods | $353 | $2,415 | | Allowance for obsolete or slow-moving inventory | $(4,279) | $(4,457) | | Inventory, net | $56,899 | $55,977 | - Net inventory **increased slightly by 1.6%** to $56.9 million, primarily due to an increase in raw materials[41](index=41&type=chunk) [Note 5. Property, Plant and Equipment](index=17&type=section&id=Note%205.%20Property,%20Plant%20and%20Equipment) Property, Plant and Equipment | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Construction in progress | $20,156 | $3,968 | | Total PP&E | $56,961 | $41,284 | | Less: accumulated depreciation | $(14,983) | $(13,062) | | Property, plant and equipment, net | $41,978 | $28,222 | - Net property, plant, and equipment **increased significantly by 48.8%** to $42.0 million, driven by a substantial increase in construction in progress[43](index=43&type=chunk) - Depreciation expense for the six months was **$2.8 million**, up from $2.4 million in 2024[43](index=43&type=chunk)[44](index=44&type=chunk) [Note 6. Goodwill and Other Intangible Assets](index=17&type=section&id=Note%206.%20Goodwill%20and%20Other%20Intangible%20Assets) - Goodwill remained unchanged at **$69.9 million** as of June 30, 2025[45](index=45&type=chunk) Other Intangible Assets | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total amortizable intangibles | $102,200 | $102,200 | | Total accumulated amortization | $64,909 | $61,117 | | Total other intangible assets, net | $37,291 | $41,083 | - Net other intangible assets **decreased by 9.2%** to $37.3 million due to ongoing amortization[47](index=47&type=chunk) - Amortization expense for intangible assets was **$3.8 million** for the six months ended June 30, 2025, consistent with the prior year[47](index=47&type=chunk) [Note 7. Accrued Expenses and Other](index=18&type=section&id=Note%207.%20Accrued%20Expenses%20and%20Other) Accrued Expenses and Other | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued compensation | $4,626 | $5,005 | | Accrued interest | $344 | $259 | | Accrued rebates | $3,618 | $3,058 | | Accrued professional fees | $6,079 | $1,448 | | Other accrued expenses | $2,261 | $2,771 | | Total accrued expenses and other | $16,928 | $12,541 | - Total accrued expenses **increased by 35.0%** to $16.9 million, primarily due to a significant increase in accrued professional fees[48](index=48&type=chunk) [Note 8. Warranty Liability](index=18&type=section&id=Note%208.%20Warranty%20Liability) - The estimated general warranty liability decreased from $1.1 million to **$0.6 million** at June 30, 2025[49](index=49&type=chunk) - The wire insulation shrinkback warranty liability remained at an estimated low-end loss of **$73.0 million**, with a remaining liability of **$19.2 million**[52](index=52&type=chunk) - **No warranty expense** related to wire insulation shrinkback was recorded in the first six months of 2025 or 2024[54](index=54&type=chunk) Warranty Liability Activity | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Warranty liability, beginning of period | $31,413 | $51,799 | $40,994 | $54,914 | | Warranty expense | $0 | $829 | $256 | $1,394 | | Payments | $(11,626) | $(5,298) | $(21,463) | $(8,978) | | Warranty liability, end of period | $19,787 | $47,330 | $19,787 | $47,330 | [Note 9. Long-Term Debt](index=20&type=section&id=Note%209.%20Long-Term%20Debt) Long-Term Debt | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Revolving Credit Facility | $131,750 | $141,750 | | Long-term debt, net of current portion | $131,750 | $141,750 | - Outstanding borrowings under the Revolving Credit Facility **decreased by $10.0 million** to $131.8 million[57](index=57&type=chunk) - As of June 30, 2025, the interest rate on the facility ranged from **7.11% to 7.17%**, with **$68.2 million of availability**[64](index=64&type=chunk) - The company was in **compliance with all required debt covenants** as of June 30, 2025[66](index=66&type=chunk) [Note 10. Earnings per Share ("EPS")](index=21&type=section&id=Note%2010.%20Earnings%20per%20Share%20(%22EPS%22)) Earnings per Share | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income - basic and diluted | $13,855 | $11,802 | $13,573 | $16,576 | | Weighted average shares outstanding - basic | 167,286 | 169,991 | 167,124 | 170,136 | | Weighted average shares outstanding - diluted | 167,562 | 170,100 | 167,238 | 170,252 | | Basic EPS | $0.08 | $0.07 | $0.08 | $0.10 | | Diluted EPS | $0.08 | $0.07 | $0.08 | $0.10 | - Basic and diluted EPS for Class A common stock were **$0.08** for the three and six months ended June 30, 2025[70](index=70&type=chunk) [Note 11. Equity-Based Compensation](index=22&type=section&id=Note%2011.%20Equity-Based%20Compensation) - The company granted **2.0 million Restricted Stock Units (RSUs)** during the six months ended June 30, 2025[72](index=72&type=chunk) - **0.9 million Performance Stock Units (PSUs)** were granted, cliff vesting after 3 years upon meeting performance targets[73](index=73&type=chunk)[75](index=75&type=chunk) Equity-Based Compensation Expense | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Equity-based compensation expense | $2,594 | $4,087 | $5,255 | $9,110 | - Unrecognized compensation costs totaled **$19.8 million** as of June 30, 2025, to be recognized over a weighted average period of 2.2 years[75](index=75&type=chunk) [Note 12. Stockholders' Equity](index=23&type=section&id=Note%2012.%20Stockholders'%20Equity) - Holders of Class A common stock are entitled to one vote per share; **no Class B common stock was outstanding**[76](index=76&type=chunk) - A **$150.0 million share repurchase program** was announced on June 11, 2024[77](index=77&type=chunk) - **No shares were repurchased** under the program during the six months ended June 30, 2025, leaving **$125.0 million authorized**[83](index=83&type=chunk) [Note 13. Commitments and Contingencies](index=25&type=section&id=Note%2013.%20Commitments%20and%20Contingencies) - The company is pursuing **two intellectual property litigations** against Hikam and Voltage for patent infringement[85](index=85&type=chunk)[86](index=86&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) - The ITC reversed a finding of violation against Voltage, which the company has appealed[85](index=85&type=chunk) - A lawsuit was filed against Prysmian for damages caused by **defective wire insulation shrinkback**[90](index=90&type=chunk) - Multiple **securities class action and derivative lawsuits** have been filed against the company related to the wire insulation matter[91](index=91&type=chunk)[92](index=92&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) - The maximum potential payment obligation for surety bonds was **$5.8 million** as of June 30, 2025[99](index=99&type=chunk) [Note 14. Income Taxes](index=29&type=section&id=Note%2014.%20Income%20Taxes) Effective Tax Rate | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Effective tax rate for continuing operations | 28.5% | 27.1% | - The effective tax rate **increased from 27.1% to 28.5%** in H1 2025, primarily due to discrete items for equity awards and a state tax refund adjustment[102](index=102&type=chunk) [Note 15. Revenue Recognition](index=29&type=section&id=Note%2015.%20Revenue%20Recognition) Revenue by Product Type | Product Type (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | System solutions | $84,412 | $79,292 | $141,806 | $144,350 | | Components | $26,429 | $19,957 | $49,396 | $45,706 | | Total revenue | $110,841 | $99,249 | $191,202 | $190,056 | - System solutions accounted for **74.2% of total revenue** for the six months ended June 30, 2025[124](index=124&type=chunk) Contract Balances | Contract Balance (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Billed accounts receivable | $94,979 | $70,882 | | Retainage | $8,453 | $7,299 | | Contract assets | $1,591 | $4,251 | | Unbilled receivables | $9,861 | $20,834 | | Deferred revenue | $20,075 | $18,737 | | Accrued rebates | $3,618 | $3,058 | - **Unbilled receivables decreased significantly** from $20.8 million to $9.9 million, while billed accounts receivable increased[107](index=107&type=chunk) [Note 16. Segment Reporting](index=30&type=section&id=Note%2016.%20Segment%20Reporting) - The company operates as a **single operating and reportable segment** focusing on EBOS solutions and components[112](index=112&type=chunk) - The Chief Operating Decision Maker (CODM) reviews consolidated financial information for resource allocation[113](index=113&type=chunk)[115](index=115&type=chunk) - All long-lived tangible assets are located within the United States[116](index=116&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial results, key operational trends, liquidity, and critical accounting policies [Overview](index=32&type=section&id=Overview) - Shoals is a leading provider of EBOS solutions and components for the global energy transition market[119](index=119&type=chunk) - The company's system solutions are primarily sold to EPCs for utility-scale solar projects in the U.S[120](index=120&type=chunk)[122](index=122&type=chunk) - A strategic expansion into international, BESS, data center, and CC&I markets was announced in Q3 2024[123](index=123&type=chunk) Backlog and Awarded Orders | Metric | June 30, 2025 | | :--- | :--- | | Backlog and awarded orders | $671.3 million | | Backlog | $260.9 million | | Awarded orders | $410.4 million | | Estimated delivery in next 12 months (backlog) | $247.1 million | | Estimated delivery in next 12 months (awarded orders) | $293.2 million | | International projects (backlog and awarded orders) | >13.3% | | YoY increase in backlog and awarded orders | 4.4% | | QoQ increase in backlog and awarded orders | 4.1% | [Trends and Uncertainties](index=33&type=section&id=Trends%20and%20Uncertainties) - The global trade environment is uncertain due to tariffs and trade restrictions, which could increase raw material costs[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[129](index=129&type=chunk) - The 2022 Inflation Reduction Act (IRA) incentivized solar development, but recent legislation modifies these provisions, potentially reducing future demand[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - The U.S. solar market faces volatility but is poised for continued growth due to new manufacturing capacity[136](index=136&type=chunk) - Global inflationary pressures, higher interest rates, and supply chain challenges are expected to persist[138](index=138&type=chunk)[139](index=139&type=chunk) [Key Components of Our Results of Operations](index=35&type=section&id=Key%20Components%20of%20Our%20Results%20of%20Operations) - Revenue is generated from EBOS solutions and components and is influenced by price, volume, and product mix[141](index=141&type=chunk)[143](index=143&type=chunk) - Cost of revenue includes raw materials, shipping, warranty, and personnel, affecting gross profit[145](index=145&type=chunk) - Operating expenses consist of general and administrative costs, with personnel being the most significant component[146](index=146&type=chunk)[147](index=147&type=chunk) - Non-operating expenses include interest expense, interest income, gain on asset sale, and income tax expense[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) Three Months Ended June 30 | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $110,841 | $99,249 | $11,592 | 11.7 % | | Cost of revenue | $69,639 | $59,252 | $10,387 | 17.5 % | | Gross profit | $41,202 | $39,997 | $1,205 | 3.0 % | | General and administrative expenses | $23,064 | $19,218 | $3,846 | 20.0 % | | Income from operations | $15,998 | $18,581 | $(2,583) | (13.9)% | | Net income | $13,855 | $11,802 | $2,053 | 17.4 % | - For the three months ended June 30, 2025, **revenue increased by 11.7%**, but **gross profit percentage decreased to 37.2%**[156](index=156&type=chunk)[157](index=157&type=chunk) - General and administrative expenses **increased by 20.0%** for the three months, primarily due to a **$3.0 million rise in legal expenses**[158](index=158&type=chunk) Six Months Ended June 30 | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $191,202 | $190,056 | $1,146 | 0.6 % | | Cost of revenue | $121,860 | $113,599 | $8,261 | 7.3 % | | Gross profit | $69,342 | $76,457 | $(7,115) | (9.3)% | | General and administrative expenses | $44,757 | $41,990 | $2,767 | 6.6 % | | Income from operations | $20,310 | $30,165 | $(9,855) | (32.7)% | | Net income | $13,573 | $16,576 | $(3,003) | (18.1)% | - For the six months ended June 30, 2025, **revenue increased by 0.6%**, but **gross profit decreased by 9.3%**[163](index=163&type=chunk)[164](index=164&type=chunk) - General and administrative expenses **rose by 6.6%** for the six months, driven by a **$2.1 million increase in legal expenses**[165](index=165&type=chunk) - Interest expense **decreased by 39.9%** for the six months due to lower outstanding debt balances[167](index=167&type=chunk) - A **$3.1 million gain on asset sale** was recognized due to the consolidation of operations[161](index=161&type=chunk)[168](index=168&type=chunk) [Non-GAAP Financial Measures](index=42&type=section&id=Non-GAAP%20Financial%20Measures) - The company presents supplemental non-GAAP measures to provide additional insight into operational performance[170](index=170&type=chunk)[171](index=171&type=chunk) - These measures exclude items like wire insulation shrinkback and litigation expenses to offer a clearer view of core business performance[170](index=170&type=chunk)[176](index=176&type=chunk) Non-GAAP Reconciliation | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Adjusted Gross Profit | $41,202 | $40,463 | $69,342 | $76,923 | | Adjusted Gross Profit Percentage | 37.2 % | 40.8 % | 36.3 % | 40.5 % | | Adjusted EBITDA | $24,472 | $27,685 | $37,261 | $48,143 | | Adjusted Net Income | $16,938 | $17,808 | $22,137 | $30,445 | | Adjusted Diluted EPS | $0.10 | $0.10 | $0.13 | $0.18 | - **Adjusted EBITDA decreased by 22.6%** for the six months ended June 30, 2025, compared to the prior year[175](index=175&type=chunk) - **Adjusted Diluted EPS decreased from $0.18 to $0.13** for the six months ended June 30, 2025, compared to the prior year[177](index=177&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) - Operations are financed primarily through operating cash flows and borrowings, with resources deemed sufficient[178](index=178&type=chunk) - Cash and cash equivalents **decreased from $23.5 million to $4.7 million** at June 30, 2025[179](index=179&type=chunk) - Net cash provided by operating activities was **$1.7 million**, a significant decrease from $50.7 million in the prior year[179](index=179&type=chunk)[185](index=185&type=chunk) - Net cash used in investing activities was **$10.3 million**, primarily for property and equipment purchases[187](index=187&type=chunk) - Net cash used in financing activities was **$10.2 million**, reflecting payments on the Revolving Credit Facility[188](index=188&type=chunk) - Approximately **$20.7 million of cash was used for wire insulation shrinkback remediation** during the six months[183](index=183&type=chunk) [Critical Accounting Policies and Accounting Estimates](index=47&type=section&id=Critical%20Accounting%20Policies%20and%20Accounting%20Estimates) - The company performs an annual goodwill impairment assessment in Q4 or more frequently if indicators exist[195](index=195&type=chunk) - Fair value determinations for goodwill require significant judgment and are sensitive to changes in assumptions[196](index=196&type=chunk) - Despite a decline in market capitalization, management does not believe the reporting unit's fair value is below its carrying value[197](index=197&type=chunk)[198](index=198&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk exposure are reported for the period - **No material changes** in market risk exposure occurred during the six months ended June 30, 2025[199](index=199&type=chunk) - For a detailed analysis of market risk, refer to the 2024 Form 10-K[199](index=199&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirms the effectiveness of disclosure controls and procedures as of the reporting date - Disclosure controls and procedures were evaluated and concluded to be **effective at the reasonable assurance level** as of June 30, 2025[201](index=201&type=chunk) - **No changes to internal control over financial reporting** occurred during the quarter that materially affected controls[202](index=202&type=chunk) [PART II – OTHER INFORMATION](index=48&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings detailed in the financial statement notes - The company is involved in various litigation types, including intellectual property, contract, and warranty claims[204](index=204&type=chunk) - Except as detailed in Note 13, no current claims are believed to have a material adverse effect on the business[204](index=204&type=chunk) - The results of litigation are uncertain and may involve significant costs and diversion of management resources[204](index=204&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) Readers are directed to the 2024 Form 10-K for a comprehensive discussion of risk factors - Readers should refer to the risk factors in the 2024 Form 10-K for material factors affecting the business[205](index=205&type=chunk) - The disclosed risk factors may not cover every risk, and additional unknown risks could adversely affect the company[205](index=205&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds occurred during the period[206](index=206&type=chunk) [Item 3. Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities are reported for the period - Not applicable; no defaults upon senior securities[207](index=207&type=chunk) [Item 4. Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company's operations - Not applicable; no mine safety disclosures[208](index=208&type=chunk) [Item 5. Other Information](index=49&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the period - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the six months ended June 30, 2025[209](index=209&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL documents - Exhibits include organizational documents, an Offer Letter, CEO and CFO certifications, and various Inline XBRL documents[211](index=211&type=chunk)[214](index=214&type=chunk) [SIGNATURES](index=51&type=section&id=SIGNATURES) [Report Signatures](index=51&type=section&id=Report%20Signatures) The report is certified by the Chief Executive Officer and Chief Financial Officer - The report was signed on August 5, 2025, by the Chief Executive Officer and Chief Financial Officer[216](index=216&type=chunk)[218](index=218&type=chunk)