Shoals Technologies Group, Inc.

Previous wording

This MD&A contains the presentation of Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share, which are not presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share are being presented because management believes they provide investors and readers of this Form 10-Q with additional insight into our operational performance relative to earlier periods and relative to our competitors. We do not intend Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share to be substitutes for any GAAP financial information. Readers of this Form 10-Q should use Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share only in conjunction with Gross Profit, and Net Income (Loss), the most closely comparable GAAP financial measures, as applicable. Reconciliations of Adjusted Gross Profit, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share to the respective most closely comparable GAAP measure, as well as a calculation of Adjusted Gross Profit Percentage and Adjusted Diluted Weighted Average Shares Outstanding, are provided below, in “—Non-GAAP Financial Measures.”

Current wording

This MD&A contains the presentation of Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share, which are not presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share are being presented because management believes they provide investors and readers of this Form 10-Q with additional insight into our operational performance relative to earlier periods and relative to our competitors. We do not intend Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share to be substitutes for any GAAP financial information. Readers of this Form 10-Q should use Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share only in conjunction with Gross Profit, and Net Income, the most closely comparable GAAP financial measures, as applicable. Reconciliations of Adjusted Gross Profit, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share to the respective most closely comparable GAAP measure, as well as a calculation of Adjusted Gross Profit Percentage and Adjusted Diluted Weighted Average Shares Outstanding, are provided below, in “—Non-GAAP Financial Measures.”

Previous wording

Traditionally, and for the three months ended March 31, 2025, we primarily sold our EBOS solutions and components and OEM components to customers in the United States. Specifically, we primarily sold to engineering, procurement and construction firms (“EPCs”) for use in large solar projects designed to generate electricity and feed it directly into the electric grid, typically with a generation capacity of 1 megawatt (“MW”) or greater (“utility-scale solar”). These EPCs work with owners and developers of solar assets to build solar energy projects. However, given the mission critical nature of EBOS, the decision to use our products typically involves input from both the EPC and the owner/developer of the solar energy project. We are proud of the breadth of EPCs we have worked with. We believe that as of March 31, 2025, we have worked with 13 of the top 15 U.S. solar EPCs, per Wood Mackenzie data from 2022-2024.

Current wording

Traditionally, and for the three and six months ended June 30, 2025, we primarily sold our EBOS solutions and components and OEM components to customers in the United States. Specifically, we primarily sold to engineering, procurement and construction firms (“EPCs”) for use in large solar projects designed to generate electricity and feed it directly into the electric grid, typically with a generation capacity of 1 megawatt (“MW”) or greater (“utility-scale solar”). These EPCs work with owners and developers of solar assets to build solar energy projects. However, given the mission critical nature of EBOS, the decision to use our products typically involves input from both the EPC and the owner/developer of the solar energy project. We are proud of the breadth of EPCs we have worked with. We believe that as of June 30, 2025, we have worked with 14 of the top 15 U.S. solar EPCs, per Wood Mackenzie data from 2022-2024.

Previous wording

We derived 71.4% of our revenue from the sale of system solutions for the three months ended March 31, 2025. For the same period, we derived substantially all of our revenue from customers in the U.S. As of March 31, 2025, we had $645.1 million of backlog and awarded orders, backlog of $202.2 million represents signed purchase orders or contractual minimum purchase commitments with take-or-pay provisions and awarded orders of $442.9 million are orders we are in the process of documenting a contract for but for which a contract has not yet been signed. As of March 31, 2025, we believe approximately $197.7 million of backlog and $301.7 million of awarded orders have delivery dates in the next twelve months. Additionally, more than 13% of our March 31, 2025 backlog and awarded orders related to international projects. As of March 31, 2025, backlog and awarded orders increased by 5% relative to the same date last year and increased by 2% relative to December 31, 2024.

Current wording

We derived 74.2% of our revenue from the sale of system solutions for the six months ended June 30, 2025. For the same period, we derived substantially all of our revenue from customers in the U.S. As of June 30, 2025, we had $671.3 million of backlog and awarded orders, backlog of $260.9 million represents signed purchase orders or contractual minimum purchase commitments with take-or-pay provisions and awarded orders of $410.4 million are orders we are in the process of documenting a contract for but for which a contract has not yet been signed. As of June 30, 2025, we believe approximately $247.1 million of backlog and $293.2 million of awarded orders have delivery dates in the next twelve months. Additionally, more than 13.3% of our June 30, 2025 backlog and awarded orders related to international projects. As of June 30, 2025, backlog and awarded orders increased by 4.4% relative to the same date last year and increased by 4.1% relative to March 31, 2025.

Previous wording

On March 4, 2025, the current Presidential Administration (the “Administration”) imposed a 25% tariff on all goods imported from Canada and Mexico, with specific exemptions for certain products such as Canadian oil, natural gas, uranium, and other energy sources, which are subject to a lower 10% tariff. On April 2, 2025, the Administration imposed significant tariffs, including a 10% tariff on most imports from other trading partners, as well as additional reciprocal tariffs on specific countries. On April 9, 2025, the Administration imposed a 145% tariff on Chinese imports, effective immediately. Also on April 9, 2025, the Administration implemented a

Current wording

Beginning in March 2025, the current Presidential Administration (the “Administration”) imposed broad actions related to tariffs with global trading partners. On April 2, 2025, the Administration imposed significant tariffs, including a 10% tariff on most imports from other trading partners, as well as additional reciprocal tariffs on specific countries. On April 9, 2025, the Administration implemented a 90-day pause on tariffs for most countries, with an ability to negotiate trade deals with the United States. On July 31, 2025, the Administration announced modifications to reciprocal tariff rates, with rates on most goods in excess of 10% with specific exceptions. These rates will take effect on August 7, 2025. Negotiations with trading partners are ongoing by the Administration and future changes in tariff policies are possible. The imposition of tariffs have led to retaliatory tariffs and tariff countermeasures, and the Administration and U.S. trading partners have threatened further restrictions on trade.

Previous wording

90-day pause on tariffs for all other trading partners, including Canada and Mexico, and capped the reciprocal tariffs at 10% for countries that did not retaliate against the United States. Future changes in tariff policies are possible. As a result, the global trade environment has experienced extreme uncertainty and volatility, and is rapidly evolving. In recent years, we have expanded our domestic capabilities, supply chain resiliency, and manufacturing capacity, which helps offset some of the volatility we face due to trade policies and regulations.

Current wording

As a result, the global trade environment has experienced extreme uncertainty and volatility, and is rapidly evolving. In recent years, we have expanded our domestic capabilities, supply chain resiliency, and manufacturing capacity, which helps offset some of the volatility we face due to trade policies and regulations.

Previous wording

The 2022 Inflation Reduction Act (“IRA”) in the U.S. made significant changes to the U.S. tax code to incentivize the development and use of solar-generated electricity to meet the country’s growing demand for power. The IRA offered tax incentives to companies who provide goods connected to the development and use of solar energy. The IRA allowed U.S. taxpayers making capital investments in solar projects to claim certain Investment Tax Credits (“TC”) for the installation of these solar projects. The IRA also generally allowed U.S. taxpayers to elect to receive a production tax credit (“PTC”) in lieu of the TC for qualified solar facilities if the construction began before January 1, 2025, among other requirements. While the IRA increased incentives for solar energy, some of those incentives have already begun to decrease and phase out. Additionally, given the change in U.S. presidential administrations, the future of the IRA and any federal solar incentives remains uncertain. If the IRA is repealed or significantly altered, it could have several adverse effects on our business. The removal of the incentives that drive demand for solar energy production could reduce the financial attractiveness of solar projects, leading to decreased demand for our products. Additionally, the uncertainty surrounding the future of these incentives could cause delays in project financing and execution, further impacting our sales volume and growth rate.

Current wording

The 2022 Inflation Reduction Act (“IRA”) in the U.S. made significant changes to the U.S. tax code to incentivize the development and use of solar-generated electricity to meet the country’s growing demand for power. The IRA offered tax incentives to companies who provide goods connected to the development and use of solar energy. The IRA allowed U.S. taxpayers making capital investments in solar projects to claim certain Investment Tax Credits (“TC”) for the installation of these solar projects. The IRA also generally allowed U.S. taxpayers to elect to receive a production tax credit (“PTC”) in lieu of the TC for qualified solar facilities if the construction began before January 1, 2025, among other requirements.

Previous wording

Beginning in late 2023 and continuing in 2024, the domestic utility scale solar market experienced project delays that pushed and delayed projects beyond 2024. While there are inherent delays and pushouts with solar and construction projects in normal operating environments, the pushouts and delays experienced in late 2023 and into 2024 were significantly greater than we have historically experienced, and they impacted our results during 2024, lowering demand and sales volume. These trends were the result of several factors, including: permitting issues; supply chain disruptions; labor availability; project financing; anti-dumping and countervailing duties; interconnection complications; and uncertainty regarding changes in the U.S. trade environment. While we are currently experiencing a more normalized business environment, we expect these challenges to persist to a lesser degree in the near term. We continue to expect a modest amount of project delays when compared to historical levels. As a result, we believe the industry is poised for growth across both our core and new markets, driven by the continued and increasing need for energy around the world.

Current wording

The domestic utility scale solar market has experienced volatility that has had an impact on our business. Industry trends are impacted by a variety of factors, including: permitting issues; supply chain disruptions; labor availability; project financing; anti-dumping and countervailing duties; interconnection complications; and uncertainty regarding changes in public policy and the U.S. trade environment. Amidst the volatility, the U.S. solar industry has shown demonstrated levels of growth in 2025, with recorded expansion in new solar module manufacturing capacity according to the Solar Energy Industries Association. As a result, we believe the industry is poised for continued growth across both our core and new markets, driven by the continued and increasing need for energy around the world.

Previous wording

Global inflationary pressures persisted during the first quarter of 2025 and are expected to persist to a lesser extent during the remainder of 2025; however, the impact of inflation remains uncertain for the rest of 2025. Interest rates have remained generally higher when compared to historical rates, causing the interest rates associated with our Senior Secured Credit Agreement to be generally higher; however, interest rates did decline from their historically high levels during the course of 2024. Should interest rates rise, when combined with the implications of higher government deficits and debt, tighter monetary policy, political instability, and volatility and uncertainty in global trade, the Company’s costs for accessing capital are uncertain and may rise during our forecasted period.

Current wording

Global inflationary pressures persisted during the first two quarters of 2025 and are expected to persist to a lesser extent during the remainder of 2025; however, the impact of inflation remains uncertain for the rest of 2025. Interest rates have remained generally higher when compared to historical rates, causing the interest rates associated with our Senior Secured Credit Agreement to be generally higher; however, interest rates did decline from their historically high levels during the course of 2024. Should interest rates rise, when combined with the implications of higher government deficits and debt, tighter monetary policy, political instability, and volatility and uncertainty in global trade, the Company’s costs for accessing capital are uncertain and may rise during our forecasted period.

Previous wording

Our ability to obtain the raw materials required to manufacture our components and system solutions from domestic and international suppliers, as well as our ability to secure inbound logistics to and from our facilities, remained challenging during the first quarter of 2025, complicated by volatility in government policies and regulation concerning trade and ongoing political conflict. While the Company does not directly source a significant amount of raw materials from Europe, the Russia-Ukraine war has reduced the availability of certain materials that can be sourced in Europe and, as a result, increased global logistics costs for the procurement of some inputs and materials used in our products. We expect these trends to persist as challenges and conflicts remain in 2025.

Current wording

Our ability to obtain the raw materials required to manufacture our components and system solutions from domestic and international suppliers, as well as our ability to secure inbound logistics to and from our facilities, remained challenging during the first half of 2025, complicated by volatility in government policies and regulation concerning trade and ongoing political conflict. While the Company does not directly source a significant amount of raw materials from Europe, the Russia-Ukraine war has reduced the availability of certain materials that can be sourced in Europe and, as a result, increased global logistics costs for the procurement of some inputs and materials used in our products. We expect these trends to persist as challenges and conflicts remain in 2025.

Previous wording

Our revenue growth is dependent on continued growth in the number of solar energy projects constructed each year and our ability to increase our share of demand in the geographies where we currently compete and plan to compete in the future, as well as our ability to continue to develop and commercialize new and innovative products that address the changing technology and performance requirements of our customers.

Current wording

Our revenue growth depends on continued growth in the number of solar energy projects constructed each year and our ability to increase our share of demand in the geographies where we currently compete and plan to compete in the future, as well as our ability to continue to develop and commercialize new and innovative products that address the changing technology and performance requirements of our customers.

Previous wording

Operating expenses consist of general and administrative expenses as well as depreciation and amortization expense. Personnel-related costs are the most significant component of our operating expenses and include salaries, equity-based compensation, benefits, payroll taxes and commissions. The number of full-time employees in our general and administrative departments increased from 159 to 171 from March 31, 2024 to March 31, 2025, and we expect to hire new employees in the future to support our future growth. The timing of these additional hires could materially affect our operating expenses in any particular period, both in absolute dollars and as a percentage of revenue.

Current wording

Operating expenses consist of general and administrative expenses as well as depreciation and amortization expense. Personnel-related costs are the most significant component of our operating expenses and include salaries, equity-based compensation, benefits, payroll taxes and commissions. The number of our full-time employees increased from 155 to 177 from June 30, 2024 to June 30, 2025, and we expect to hire new employees in the future to support our growth. The timing of these additional hires could materially affect our operating expenses in any particular period, both in absolute dollars and as a percentage of revenue.

Previous wording

General and administrative expenses consist primarily of salaries, equity-based compensation expense, employee benefits and payroll taxes related to our executives, and our sales, finance, human resources, information technology, engineering and legal organizations, travel expenses, facilities costs, marketing expenses, insurance, bad debt expense and fees for professional services. Professional services consist of audit, tax, accounting, legal, internal controls, information technology, investor relations and other costs. We expect to increase our sales and marketing personnel as we expand into new geographic markets. Substantially all of our sales are currently in the U.S. We currently have a sales presence in the U.S., Asia-Pacific, Europe, Latin America, and Africa. We intend to grow our sales presence and marketing efforts in current geographic markets and expand to additional countries in the future.

Current wording

General and administrative expenses consist primarily of salaries, equity-based compensation expense, employee benefits and payroll taxes; our sales, finance, human resources, information technology, engineering and legal organizations; travel expenses; facilities costs; marketing expenses; insurance; bad debt expense; and, fees for professional services. Professional services consist of audit, tax, accounting, legal, internal controls, information technology, investor relations and other costs. We expect to increase our sales and marketing personnel as we expand into new geographic markets. Substantially all of our sales are currently in the U.S. We currently have a sales presence in the U.S., Asia-Pacific, Europe, Latin America, and Africa. We intend to grow our sales presence and marketing efforts in current geographic markets and expand to additional countries in the future.

Previous wording

Cost of revenue decreased by $2.1 million, or 3.9%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, driven by the decrease in revenue. Gross profit as a percentage of revenue was 35.0% during the three months ended March 31, 2025, and 40.2% during the three months ended March 31, 2024. The decrease in gross profit as a percentage of revenue was driven by strategic pricing actions, volume discounts, customer and product mix, and reduced fixed cost absorption due to lower revenues.

Current wording

Cost of revenue increased by $10.4 million, or 17.5%, for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, driven by the increase in revenue. Gross profit as a percentage of revenue was 37.2% during the three months ended June 30, 2025, and 40.3% during the three months ended June 30, 2024. The decrease in gross profit as a percentage of revenue was driven by strategic pricing actions, volume discounts, and customer and product mix.

Previous wording

General and administrative expenses decreased $1.1 million, or 4.7%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The decrease in general and administrative expenses was the result of a $3.3 million decrease in general legal expenses for intellectual property and shareholder litigation matters, offset by a $1.7 million increase in legal expenses related to wire insulation shrinkback litigation.

Current wording

General and administrative expenses increased $3.8 million, or 20.0%, for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. The increase in general and administrative expenses was the result of a $3.0 million increase in general legal expenses for wire insulation shrinkback, intellectual property, and shareholder litigation matters.

Previous wording

Depreciation and amortization expenses increased by less than $0.1 million, or 1.5%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The increase was due to acquisitions of property, plant, and equipment in between the periods of comparison.

Current wording

Depreciation and amortization expenses decreased by less than $0.1 million, or 2.6%, for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. Levels of intangible assets and property, plant, and equipment associated with operating expenses remained consistent period over period.

Previous wording

Income tax expense totaled $2.3 million for the three months ended March 31, 2025, as compared to income tax expense of $2.4 million for the three months ended March 31, 2024. Our effective income tax rate for the three months ended March 31, 2025 and 2024 was 114.0% and 33.9%, respectively. The change in our effective income tax rate was due to various discrete items, particularly RSU and PSU shortfalls, during the three months ended March 31, 2025.

Current wording

Income tax expense totaled $3.1 million for the three months ended June 30, 2025, as compared to income tax expense of $3.7 million for the three months ended June 30, 2024. Our effective income tax rate for the three months ended June 30, 2025 and 2024 was 18.4% and 23.9%, respectively. The change in our effective income tax rate was due to various discrete items, particularly RSU and PSU shortfalls and a state tax refund, during the three months ended June 30, 2025.

Previous wording

Interest expense, decreased by $2.1 million, or 46.0%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. This decrease was due to a decrease in the total weighted average outstanding balance of the Term Loan Facility and Revolving Credit Facility during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, as well as a decrease in borrowing rates applicable to the Senior Secured Credit Agreement and decreases in the federal funds effective rate as compared to the prior period.

Current wording

Interest expense, decreased by $3.1 million, or 39.9%, for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. This decrease was due to a decrease in the total weighted average outstanding balance of the Term Loan Facility and Revolving Credit Facility during the six months ended June 30, 2025 compared to the six months ended June 30, 2024, as well as a decrease in borrowing rates applicable to the Senior Secured Credit Agreement and decreases in the federal funds effective rate as compared to the prior period.

Previous wording

We define Adjusted Gross Profit as gross profit plus wire insulation shrinkback expenses. We define Adjusted Gross Profit Percentage as Adjusted Gross Profit divided by revenue. We define Adjusted EBITDA as net income (loss) plus/(minus) (i) interest expense, (ii) interest income, (iii) income tax expense, (iv) depreciation expense, (v) amortization of intangibles, (vi) equity-based compensation, (vii) wire insulation shrinkback expenses, and (viii) wire insulation shrinkback litigation expenses. We define Adjusted Net Income as net income (loss) plus (i) amortization of intangibles, (ii) amortization / write-off of deferred financing costs,

Current wording

We define Adjusted Gross Profit as gross profit plus wire insulation shrinkback expenses. We define Adjusted Gross Profit Percentage as Adjusted Gross Profit divided by revenue. We define Adjusted EBITDA as net income plus/(minus) (i) interest expense, (ii) interest income, (iii) income tax expense, (iv) depreciation expense, (v) amortization of intangibles, (vi) equity-based compensation, (vii) gain on sale of asset (viii) wire insulation shrinkback expenses, and (ix) wire insulation shrinkback litigation expenses. We define Adjusted Net Income as net income plus (i) amortization of intangibles, (ii) amortization / write-off of deferred financing costs, (iii) equity-based compensation, (iv) gain on sale of asset (v) wire insulation shrinkback expenses, and (vi) wire insulation shrinkback litigation expenses, all net of applicable income taxes. We define Adjusted Diluted EPS as Adjusted Net Income divided by the diluted weighted average shares of Class A common stock outstanding for the applicable period.

Previous wording

Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS are intended as supplemental measures of performance that are neither required by, nor presented in accordance with, GAAP. We present Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS because we believe they assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS: (i) as factors in evaluating management’s performance when determining incentive compensation, as applicable; (ii) to evaluate the effectiveness of our business strategies; and (iii) because our credit agreement uses measures similar to Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS to measure our compliance with certain covenants.

Current wording

Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS are intended as supplemental measures of performance that are neither required by, nor presented in accordance with, GAAP. We present Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS because we believe they assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted Gross

Previous wording

Because of these limitations, Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. You should review the reconciliation of gross profit to Adjusted Gross Profit and Adjusted Gross Profit Percentage, net income (loss) to Adjusted EBITDA, and net income (loss) to Adjusted Net Income and Adjusted Diluted EPS below and not rely on any single financial measure to evaluate our business.

Current wording

Because of these limitations, Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. You should review the reconciliation of gross profit to Adjusted Gross Profit and Adjusted Gross Profit Percentage, net income Adjusted EBITDA, and net income to Adjusted Net Income and Adjusted Diluted EPS below and not rely on any single financial measure to evaluate our business.

Previous wording

Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands):

Current wording

Reconciliation of Net Income to Adjusted EBITDA (in thousands):

Previous wording

Reconciliation of Net Income (Loss) to Adjusted Net Income (in thousands):

Current wording

Reconciliation of Net Income to Adjusted Net Income (in thousands):

Previous wording

(a)For the three months ended March 31, 2025 and 2024, there were no expenses related to warranty for wire insulation shrinkback relating to the identification, repair and replacement of a subset of wire harnesses presenting unacceptable levels of wire insulation shrinkback. We consider expenses incurred in connection with the identification, repair and replacement of the impacted wire harnesses distinct from normal, ongoing service identification, repair and replacement expenses that would be reflected under ongoing warranty expenses within the operation of our business, which we do not exclude from our non-GAAP measures. In the future, we also intend to exclude from our non-GAAP measures the benefit of liability releases, if any. We believe excluding expenses from these discrete liability events provides investors with a better view of the operating performance of our business and allows for comparability through periods. See Note 8 - Warranty Liability, in our condensed consolidated financial statements included in this Form 10-Q for more information.

Current wording

(a)For the three and six months ended June 30, 2025, represents no wire insulation shrinkback warranty expenses related to the identification, repair and replacement of a subset of wire harnesses presenting unacceptable levels of wire insulation shrinkback, nor any inventory write-downs of wire in connection with wire insulation shrinkback. For the three and six months ended June 30, 2024 represents $0.5 million of inventory write-downs of wire in connection with the identification, repair and replacement of a subset of wire harnesses presenting unacceptable levels of wire insulation shrinkback. We consider expenses incurred in connection with the identification, repair and replacement of the impacted wire harnesses distinct from normal, ongoing service identification, repair and replacement expenses that would be reflected under ongoing warranty expenses within the operation of our business, which we do not exclude from our non-GAAP measures. In the future, we also intend to exclude from our non-GAAP measures the benefit of liability releases, if any. We believe excluding expenses from these discrete liability events provides investors with a better view of the operating performance of our business and allows for comparability through periods. See Note 8 - Warranty Liability, in our condensed consolidated financial statements included in this Form 10-Q for more information.

Previous wording

(b)For the three months ended March 31, 2025 and 2024, represents $2.5 million and $0.8 million, respectively, of expenses incurred in connection with the lawsuit initiated by the Company against the supplier of the defective wire. We consider this litigation distinct from ordinary course legal matters given the expected magnitude of the expenses, the nature of the allegations in the Company’s complaint, the amount of damages sought, and the impact of the matter underlying the litigation on the Company’s financial results. In the future, we also intend to exclude from our non-GAAP measures the benefit of recovery, if any. We believe excluding expenses from these discrete litigation events provides investors with a better view of the operating performance of our business and allows for comparability through periods. See Note 13 - Commitments and Contingencies, in our condensed consolidated financial statements included in this Form 10-Q for more information.

Current wording

(b)For the three and six months ended June 30, 2025, represents $2.5 million and $5.1 million, respectively, of expenses incurred in connection with the lawsuit initiated by the Company against the supplier of the defective wire. For the three and six months ended June 30, 2024, represents $1.3 million and $2.2 million of expenses incurred in connection with the lawsuit initiated by the Company against the supplier of the defective wire. We consider this litigation distinct from ordinary course legal matters given the expected magnitude of the expenses, the nature of the allegations in the Company’s complaint, the amount of damages sought, and the impact of the matter underlying the litigation on the Company’s financial results. In the future, we also intend to exclude from our non-GAAP measures the benefit of recovery, if any. We believe excluding expenses from these discrete litigation events provides investors with a better view of the operating performance of our business and allows for comparability through periods. See Note 13 - Commitments and Contingencies, in our condensed consolidated financial statements included in this Form 10-Q for more information.

Previous wording

Reconciliation of Diluted Weighted Average Shares Outstanding to Adjusted Diluted Weighted Average Shares Outstanding (in thousands, except per share amounts):

Current wording

Calculation of Adjusted Diluted Earnings per Share (in thousands, except per share amounts):

Previous wording

We generated cash from operating activities of $15.6 million during the three months ended March 31, 2025, as compared to cash provided by operating activities of $12.9 million during the three months ended March 31, 2024. As of March 31, 2025, our cash and cash equivalents were $35.6 million, an increase from $23.5 million as of December 31, 2024. As of March 31, 2025 we had outstanding borrowings of $141.8 million, consistent with outstanding borrowings of $141.8 million as of December 31, 2024. As of March 31, 2025, we also had $58.2 million available for additional borrowings under our $200.0 million Revolving Credit Facility.

Current wording

We generated cash from operating activities of $1.7 million during the six months ended June 30, 2025, as compared to cash provided by operating activities of $50.7 million during the six months ended June 30, 2024. As of June 30, 2025, our cash and cash equivalents were $4.7 million, a decrease from $23.5 million as of December 31, 2024. As of June 30, 2025 we had outstanding borrowings of $131.8 million, a $10.0 million decrease from outstanding borrowings of $141.8 million as of December 31, 2024. As of June 30, 2025, we also had $68.2 million available for additional borrowings under our $200.0 million Revolving Credit Facility.

Previous wording

The Company did not repurchase any shares of its common stock under the Repurchase Program during the three months ended March 31, 2025. As of March 31, 2025, the Company was authorized to repurchase up to $125 million of the Company's common stock under the Repurchase Program.

Current wording

The Company did not repurchase any shares of its common stock under the Repurchase Program during the six months ended June 30, 2025. As of June 30, 2025, the Company was authorized to repurchase up to $125 million of the Company’s common stock under the Repurchase Program.

Previous wording

During the three months ended March 31, 2025, we also used approximately $9.5 million of cash to pay for expenses related to the identification, repair and replacement of the wire harnesses impacted in connection with the wire insulation shrinkback matter. We expect to continue spending significant amounts of cash in connection thereof. For more information, see Note 8 - Warranty Liability in our condensed consolidated financial statements.

Current wording

During the six months ended June 30, 2025, we also used approximately $20.7 million of cash to pay for expenses related to the identification, repair and replacement of the wire harnesses impacted in connection with the wire insulation shrinkback matter. We expect to continue spending significant amounts of cash in connection thereof. For more information, see Note 8 - Warranty Liability in our condensed consolidated financial statements.

Previous wording

For the three months ended March 31, 2025, cash provided by operating activities was $15.6 million, primarily due to operating results that included $(0.3) million of net loss, which included $8.9 million of non-cash expense, along with cash inflows in accounts receivable and unbilled receivables of $20.9 million and accounts payable and accrued expenses of $6.3 million. These cash inflows were offset by cash outflows of $9.8 million related to the warranty liability as well as an increase in inventory of $5.4 million, an increase in other assets of $1.5 million, and a decrease of $3.5 million in deferred revenue.

Current wording

For the six months ended June 30, 2025, cash provided by operating activities was $1.7 million, primarily due to operating results that included $13.6 million of net income, which included $16.5 million of non-cash expense, along with cash inflows in unbilled receivables of $11.0 million, accounts payable of $6.1 million, and accrued expenses of $3.9 million. These cash inflows were offset by cash outflows of $25.3 million related to accounts receivable, $21.5 million of warranty liability, and $2.4 million and $1.5 million in other assets, and inventory, respectively.

Previous wording

For the three months ended March 31, 2024, cash provided by operating activities was $12.9 million, primarily due to operating results that included $4.8 million of net income, which included $13.7 million of non-cash expense, along with a decrease in accounts receivable and unbilled receivables of $20.4 million. These cash inflows were offset by a decrease of $12.1 million in accounts payable and accrued expenses, an increase of $6.8 million in inventory, cash outflows of $3.7 million related to the warranty liability, and a decrease of $0.4 million in deferred revenue.

Current wording

For the six months ended June 30, 2024, cash provided by operating activities was $50.7 million, primarily due to operating results that included $16.6 million of net income, which included $26.5 million of non-cash expense, along with a decrease in accounts receivable and unbilled receivables of $38.0 million. These cash inflows were offset by a decrease of $11.9 million in accounts payable and accrued expenses driven by payment of 2023 bonuses during March 2024 and a reduction in accrued interest, cash outflows of $9.0 million related to the warranty liability, an increase of $7.7 million in inventory, and a decrease of $1.0 million in deferred revenue.

Previous wording

For the three months ended March 31, 2024, net cash used in investing activities was $2.5 million, all of which was attributable to the purchase of property and equipment.

Current wording

For the six months ended June 30, 2025, net cash used investing activities was $10.3 million, which was attributable to the purchase of $15.4 million in property and equipment, offset by the proceeds from the sale of property and equipment of $5.1 million.

Previous wording

For the three months ended March 31, 2025, net cash used in investing activities was $3.2 million, which was attributable to the purchase of property and equipment.

Current wording

For the six months ended June 30, 2024, net cash used in investing activities was $4.5 million, which was primarily attributable to the purchase of property and equipment.

Previous wording

For the three months ended March 31, 2025, net cash used in financing activities was $0.3 million, due to $20.0 million in payments on the Revolving Credit Facility, offset by $20.0 million in borrowings, and $0.3 million in taxes related to net share settled equity awards.

Current wording

For the six months ended June 30, 2025, net cash used in financing activities was $10.2 million, due to $40.0 million in payments on the Revolving Credit Facility, offset by $30.0 million in borrowings, and $0.3 million in taxes paid related to net share settled equity awards.

Previous wording

For the three months ended March 31, 2024, net cash used in financing activities was $17.8 million, primarily due to $143.8 million in voluntary prepayments on, and the payoff of, the Term Loan Facility, $2.0 million of deferred financing costs paid in connection with the amendment of the Senior Secured Credit Facility on March 19, 2024, and $0.8 million in taxes related to net share settled equity awards. These cash outflows were offset by $128.8 million in net borrowings on the Revolving Credit Facility.

Current wording

For the six months ended June 30, 2024, net cash used in financing activities was $65.7 million, primarily due to $143.8 million in principal payments on the Term Loan Facility, $25.2 million paid to repurchase the Company’s Class A common stock under the ASR, $2.6 million of deferred financing costs paid in connection with the amendment to the Senior Secured Credit Agreement, and $0.9 million in taxes related to net share settled equity awards. These cash outflows are offset by $106.8 million in net proceeds on the Revolving Credit Facility.

Previous wording

Although our market capitalization further declined in the first quarter of 2025, we do not believe that it is more likely than not that the fair value of our single reporting unit is less than the carrying value.

Current wording

Although our market capitalization declined in the first quarter of 2025, we do not believe that it is more likely than not that the fair value of our single reporting unit is less than the carrying value. Throughout the second quarter of 2025, our stock price and market capitalization remained at levels that support this conclusion.