Shoals Technologies Group, Inc.

Previous wording

Traditionally, and for the three months ended March 31, 2026, we primarily sold our EBOS solutions and OEM components to customers in the United States, while also fulfilling orders for international utility-scale solar projects. Specifically, we primarily sold to engineering, procurement and construction firms (“EPCs”) for use in large solar and BESS projects designed to generate electricity and feed it directly into the electric grid, typically with a generation capacity of 1 megawatt or greater. These EPCs work with owners and developers of solar assets to build energy infrastructure 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 energy infrastructure energy project.

Current wording

Traditionally, and for the three and six months ended June 30, 2026, we primarily sold our EBOS solutions and OEM components to customers in the United States, while also fulfilling orders for international utility-scale solar projects. Specifically, we primarily sold to engineering, procurement and construction firms (“EPCs”) for use in large solar and BESS projects designed to generate electricity and feed it directly into the electric grid, typically with a generation capacity of 1 megawatt or greater. These EPCs work with owners and developers of solar assets to build energy infrastructure 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 energy infrastructure energy project.

Previous wording

We derived 78.8% of our revenue from the sale of system solutions for the three months ended March 31, 2026. For the same period, we derived substantially all of our revenue from customers in the U.S. As of March 31, 2026, we had $758.0 million of backlog and awarded orders. Backlog of $390.3 million represents signed purchase orders or contractual minimum purchase commitments with take-or-pay provisions and awarded orders of $367.7 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, 2026, we believe approximately $375.5 million of backlog and $252.1 million of awarded orders have delivery dates in the next twelve months. Additionally, more than 13.1% of our March 31, 2026 backlog and awarded orders related to international projects. As of March 31, 2026, backlog and awarded orders increased by 17.5% relative to the same date last year and increased by 1.4% relative to December 31, 2025.

Current wording

We derived 74.0% of our revenue from the sale of system solutions for the six months ended June 30, 2026. For the same period, we derived substantially all of our revenue from customers in the U.S. As of June 30, 2026, we had $801.4 million of backlog and awarded orders. Backlog of $425.1 million represents signed purchase orders or contractual minimum purchase commitments with take-or-pay provisions and awarded orders of $376.3 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, 2026, we believe approximately $418.9 million of backlog and $280.7 million of awarded orders have delivery dates in the next twelve months. Additionally, more than 12.7% of our June 30, 2026 backlog and awarded orders related to international projects. As of June 30, 2026, backlog and awarded orders increased by 19.4% relative to the same date last year and increased by 5.7% relative to March 31, 2026.

Previous wording

Our business activities are subject to numerous laws and regulations in the jurisdictions in which we operate. Our exports and imports are subject to complex trade and customs laws, tax requirements, and tariffs established through governmental actions or international agreements. Changes in tax policies or trade regulations, the disallowance of tax deductions on imported merchandise, or the imposition of new tariffs on imported products, including reciprocal tariffs, could have an adverse effect on our business and results of operations.

Current wording

Our business activities are subject to numerous laws and regulations in the jurisdictions in which we operate. Our exports and imports are subject to complex trade and customs laws, tax requirements, and tariffs established through governmental actions, statutory authorities, or international agreements. Changes in tax policies or trade regulations, the disallowance of tax deductions on imported merchandise, the imposition of new or increased tariffs on imported products, including reciprocal tariffs, or retaliatory actions by trading partners could have an adverse effect on our business and results of operations.

Previous wording

In recent years, the U.S. presidential administration (the “Administration”) implemented broad tariff measures affecting a wide range of imports. These actions included a 10% tariff on most imports and various reciprocal tariffs on certain trading partners. Tariff policy remained fluid, with frequent adjustments to tariff percentages and product coverage, as well as ongoing negotiations with global trading partners. These measures contributed to significant volatility and uncertainty in the global trade environment.

Current wording

In recent years, the U.S. presidential administration (the “Administration”) implemented broad tariff measures affecting a wide range of imports. These measures included tariffs imposed under the International Emergency Economic Powers Act (the “IEEPA”), including reciprocal tariffs, and frequent changes in tariff rates, product coverage, implementation dates, exclusions, and related guidance. Tariff policy remained fluid, with frequent adjustments to tariff percentages and product coverage, as well as ongoing negotiations with global trading partners. These measures contributed to significant volatility and uncertainty in the global trade environment and increased costs for many importers.

Previous wording

On February 20, 2026, the U.S. Supreme Court invalidated the Administration’s tariff measures, ruling that the International Emergency Economic Powers Act did not authorize their imposition. While the ruling halted those specific tariff programs, the longer‑term implications for U.S. trade policy remain uncertain. Future regulatory or legislative actions resulting from the ruling could impact our operations, supply chain, and cash flow.

Current wording

On February 20, 2026, the U.S. Supreme Court (the “Supreme Court”) invalidated the Administration’s tariff measures, ruling that the IEEPA did not authorize their imposition. Following the ruling, the Administration terminated the IEEPA tariffs, and U.S. Customs and Border Protection (“CBP”) ceased applying and collecting those duties for goods entered or withdrawn for consumption on or after February 24, 2026. While the ruling halted IEEPA-based tariffs, the longer‑term implications for U.S. trade policy remain uncertain as the Administration promptly announced a temporary, across the board tariff under Section 122 of the Trade Act of 1974, initiated additional investigations, and has now proposed new tariffs on more than 60 countries, which are expected to take effect around the time the Section 122 tariffs expire. The Supreme Court ruling did not address issues relating to refund eligibility, timing, or procedures. Future judicial, regulatory or legislative actions related to the Supreme Court ruling could impact our operations, supply chain, and cash flow.

Previous wording

On March 4, 2026, the Court of International Trade issued an order requiring Customs and Border Protection (“CBP”) to process certain tariff‑refund claims in accordance with the Supreme Court’s ruling.

Current wording

On March 4, 2026, the Court of International Trade issued an order requiring CBP to process certain tariff‑refund claims in accordance with the Supreme Court’s ruling. CBP has been developing and implementing a phased refund process through its system, but litigation, appeals, and administrative implementation remain ongoing.

Previous wording

Tariff actions have negatively affected our gross margins due to both direct tariff payments and higher supplier prices reflecting secondary tariff costs. Although we have expanded our domestic capabilities, strengthened supply chain resiliency, and increased domestic manufacturing capacity, these measures may not fully offset the impact of future trade policy changes. Any significant new tariffs, retaliatory actions by trading partners, or rapid shifts in trade regulations could increase raw material costs—including steel, copper, and aluminum—and may limit our ability to source key materials efficiently. Additionally, retaliatory tariffs could affect exports of our manufactured products and potentially lead customers to seek alternative suppliers.

Current wording

Tariff actions have negatively affected our gross margins due to both direct tariff payments and higher supplier prices reflecting secondary tariff costs. Although we have expanded our domestic capabilities, strengthened supply chain resiliency, and increased domestic manufacturing capacity, these measures may not fully offset the impact of the heightened tariff environment in which we are currently operating or future trade policy changes. Any significant new tariffs, retaliatory actions by trading partners, or rapid shifts in trade regulations could increase raw material costs—including steel, copper, aluminum, and other components used in our products—and may limit our ability to source key materials efficiently. Additionally, retaliatory tariffs could affect exports of our manufactured products and potentially lead customers to seek alternative suppliers.

Previous wording

We continue to monitor supply chain conditions and evaluate procurement strategies to reduce potential adverse effects on our business, financial condition, and results of operations. We also continue to optimize inventory levels in preparation for future production demands.

Current wording

We continue to monitor trade policy developments, litigation and administrative processes relating to tariffs, CBP guidance, and supply chain conditions and evaluate procurement strategies to reduce potential adverse effects on our business, financial condition, and results of operations. We also continue to optimize inventory levels in preparation for future production demands and potential changes in supplier lead times, pricing and availability.

Previous wording

Federal, state, local, and foreign governmental bodies offer incentives to owners, end users, distributors, and manufacturers of solar energy systems to promote the development of solar electricity. The range and duration of these incentives vary widely by geographic market.

Current wording

Federal, state, local, and foreign governmental bodies offer incentives to owners, end users, distributors, and manufacturers of solar energy systems to promote the development of solar electricity. The range, eligibility requirements, availability, and duration of these incentives vary widely by geographic market and are subject to change.

Previous wording

The 2022 Inflation Reduction Act (“IRA”) introduced significant long‑term tax incentives to promote solar energy deployment in the United States. Under the IRA, taxpayers investing in solar projects may qualify for Investment Tax Credits (“ITC”) or elect to claim Production Tax Credits (“PTC”) for eligible facilities.

Current wording

The 2022 Inflation Reduction Act (the “IRA”) introduced significant long‑term tax incentives to promote solar energy deployment in the United States. Under the IRA, taxpayers investing in eligible solar projects may qualify for Investment Tax Credits (“ITC”) or elect to claim Production Tax Credits (“PTC”) for eligible facilities.

Previous wording

In 2025, H.R. 1, the One Big Beautiful Bill Act, modified several energy‑related tax provisions of the IRA. These changes include an accelerated phaseout or termination of the ITC and PTC for solar projects placed in service after 2027, as well as restrictions related to “foreign entities of concern,” which render certain projects owned or controlled by prohibited foreign entities ineligible for specific tax credits.

Current wording

In 2025, H.R. 1, the One Big Beautiful Bill Act, modified several energy‑related tax provisions of the IRA. These changes include an accelerated phaseout or termination of the ITC and PTC for solar projects placed in service after 2027, as well as restrictions related to “foreign entities of concern,” which render certain projects owned or controlled by prohibited foreign entities ineligible for specific tax credits. The Department of the Treasury (the “Treasury”) and the Internal Revenue Service (the “IRS”) have issued guidance regarding certain prohibited foreign entity and material assistance requirements, and further guidance or rulemaking may affect how these restrictions are interpreted and applied.

Previous wording

The domestic utility‑scale solar market has previously experienced volatility driven by a combination of permitting delays, supply‑chain constraints, labor shortages, project‑financing challenges, interconnection bottlenecks, and uncertainty stemming from federal trade and tax policy changes. We believe long‑term demand fundamentals remain strong; however, new circumstances may emerge and could affect future project timing, pricing dynamics, and customer mix. We continue to monitor market conditions and manage these uncertainties through proactive commercial strategies, inventory planning, and close engagement with customers and suppliers.

Current wording

The domestic utility‑scale solar market has previously experienced volatility driven by a combination of permitting delays, supply‑chain constraints, labor shortages, project‑financing challenges, interconnection bottlenecks, and uncertainty stemming from federal trade and tax policy changes. We believe long‑term demand fundamentals remain strong; however, new circumstances may emerge and could affect future project timing, pricing dynamics, and customer mix. These circumstances include changes in federal or state energy policy, delays in Treasury or IRS guidance, interpretations of tax credit eligibility requirements, lengthy lead times for electrical equipment, and uncertainty regarding the ability of developers to meet deadlines. We continue to monitor market conditions and manage these uncertainties through proactive commercial strategies, inventory planning, and close engagement with customers and suppliers.

Previous wording

The market for critical power infrastructure is expanding as electricity demand increases and energy systems grow more complex; however, this growth is accompanied by uncertainty arising from shifting policy frameworks, technological change, and varying levels of industry participation. These conditions may result in inconsistent coordination across stakeholders, policy fragmentation, and differing degrees of market readiness, each of which could influence project execution, capital allocation, and technology deployment. We will continue to assess how volatility in the industries in which we operate may affect our operations, capital expenditures, and cash flows.

Current wording

The market for critical power infrastructure is expanding as electricity demand increases and energy systems grow more complex, including as a result of data center expansion, artificial intelligence growth, electrification, grid modernization, and renewable energy deployment. However, this growth is accompanied by uncertainty arising from shifting policy frameworks, technological change, and varying levels of industry participation. These conditions may result in inconsistent coordination across stakeholders, policy fragmentation, and differing degrees of market readiness, each of which could influence project execution, capital allocation, and technology deployment. We will continue to assess how volatility in the industries in which we operate may affect our operations, capital expenditures, and cash flows.

Previous wording

Sourcing raw materials and securing inbound logistics continues to present challenges, reflecting persistent global supply chain disruptions, trade‑policy volatility, and geopolitical conflict. Tariff‑driven increases in import prices have raised costs across multiple inputs, contributing to higher procurement and logistics costs. Ongoing geopolitical instability, including the conflict in the Middle East involving Iran, Israel, and the United States, may disrupt the availability of certain materials and contribute to increased global freight and input costs. We expect these sourcing and logistics pressures to persist through 2026 as trade uncertainty and geopolitical tensions remain unresolved.

Current wording

Sourcing raw materials and securing inbound logistics continues to present challenges, reflecting persistent global supply chain disruptions, trade‑policy volatility, and geopolitical conflict. Tariff‑driven increases in import prices and secondary supplier cost increases have raised costs across multiple inputs, contributing to higher procurement and logistics costs. Ongoing geopolitical instability, including the conflict in the Middle East involving Iran, Israel, and the United States, may disrupt the availability of certain materials, contribute to increased global freight and input costs, and further complicate procurement planning. We expect these sourcing and logistics pressures to persist through 2026 as trade uncertainty and geopolitical tensions remain unresolved.

Previous wording

Cost of revenue consists primarily of system solutions and components costs, including purchased raw materials, as well as costs related to importing and tariffs, shipping, customer support, product warranty, personnel and depreciation of manufacturing and testing equipment. Personnel costs in cost of revenue include both direct labor costs as well as costs attributable to any individuals whose activities relate to the transformation of raw materials or component parts into finished goods or the transportation of materials to the customer. Our product costs are affected by the underlying cost of raw materials, including copper and aluminum; component costs, including fuses, resin, enclosures, and cable; technological innovation; economies of scale resulting in lower component costs; and improvements in production processes and automation. We do not currently hedge against changes in the price of raw materials. Some of these costs, primarily indirect personnel and depreciation of manufacturing and testing equipment, are not directly affected by sales volume. Gross profit may vary from year to year and is primarily affected by our sales volume, product prices, product costs, product mix, customer mix, geographical mix, shipping method and warranty expense.

Current wording

Cost of revenue consists primarily of system solutions and components costs, including purchased raw materials, as well as costs related to importing and tariffs, shipping, customer support, product warranty and rework, personnel and depreciation of manufacturing and testing equipment. Personnel costs in cost of revenue include both direct labor costs as well as costs attributable to any individuals whose activities relate to the transformation of raw materials or component parts into finished goods or the transportation of materials to the customer. Our product costs are affected by the underlying cost of raw materials, including copper and aluminum; component costs, including fuses, resin, enclosures, and cable; technological innovation; economies of scale resulting in lower component costs; and improvements in production processes and automation. We do not currently hedge against changes in the price of raw materials. Some of these costs, primarily indirect personnel and depreciation of manufacturing and testing equipment, are not directly affected by sales volume. Gross profit may vary from year to year and is primarily affected by our sales volume, product prices, product costs, product mix, customer mix, geographical mix, shipping method and warranty expense.

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 our full-time employees increased from 171 to 199 from March 31, 2025 to March 31, 2026, 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.

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 177 to 210 from June 30, 2025 to June 30, 2026, 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 legal and professional fees, 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 legal and professional fees, 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 targeted geographic markets and could expand to additional countries in the future.

Previous wording

Revenue increased by $60.2 million, or 74.9%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, driven by strong underlying demand of products, the impact of market share capture initiatives, and an increase in volume of projects in the current year.

Current wording

Revenue increased by $52.5 million, or 47.4%, for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, driven by strong underlying demand of products, the impact of market share capture initiatives, and an increase in volume of projects in the current year.

Previous wording

Depreciation and amortization expenses increased by $0.1 million, or 6.7%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. Levels of intangible assets and property, plant, and equipment associated with operating expenses remained consistent period over period.

Current wording

Depreciation and amortization expenses increased by $0.2 million, or 9.3%, for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. Intangible assets and property, plant, and equipment remained stable period over period, with only a modest increase driven by routine capital investments.

Previous wording

Interest expense, increased by $0.5 million, or 20.2%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. This increase was due to an increase in the total weighted average outstanding balance of the Revolving Credit Facility during the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Current wording

Interest expense, increased by $1.2 million, or 55.4%, for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. This increase was due to an increase in the total weighted average outstanding balance of the Revolving Credit Facility during the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

Previous wording

Income tax benefit totaled $0.1 million for the three months ended March 31, 2026, as compared to income tax expense of $2.3 million for the three months ended March 31, 2025. Our effective income tax rate for the three months ended March 31, 2026 and 2025 was 23.1% and 114.0%, respectively. The change in our effective income tax rate was due to changes in various discrete items, particularly RSU and PSU shortfalls during the three months ended March 31, 2026.

Current wording

Income tax expense totaled $3.4 million for the three months ended June 30, 2026, as compared to income tax expense of $3.1 million for the three months ended June 30, 2025. Our effective income tax rate for the three months ended June 30, 2026 and 2025 was 21.7% and 18.4%, respectively. The change in our effective income tax rate was due to changes in various discrete items, particularly RSU and PSU windfalls during the three months ended June 30, 2026.

Previous wording

General and administrative expenses increased $9.3 million, or 43.0%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase in general and administrative expenses was the result of a $6.2 million increase in legal expenses for ongoing matters related to wire insulation shrinkback, intellectual property, and shareholder litigation matters along with $1.6 million in increased cash and share-based incentive compensation expense due to increased headcount in comparison to the prior year period.

Current wording

General and administrative expenses increased $14.7 million, or 32.9%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. The increase in general and administrative expenses was the result of $6.0 million in increased payroll, cash and incentive based share expense due to increased headcount in comparison to the prior year, a $5.5 million increase in legal expenses for ongoing matters related to wire insulation shrinkback, intellectual property, and shareholder litigation matters, and $1.9 million in increased costs related to technology and administration.

Previous wording

Litigation settlement expense, net of recoveries increased by $5.3 million for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. This is due to the accrual for the expected settlement amount, net of insurance recoveries related to the Company’s Securities litigation. See Note 13 - Commitments and Contingencies, in our condensed consolidated financial statements included in this Form 10-Q for more information.

Current wording

Litigation settlement expense, net of recoveries increased by $5.3 million for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. This is due to the accrual for the expected settlement amount, net of insurance recoveries related to the Company’s Securities litigation. See Note 13 - Commitments and Contingencies, in our condensed consolidated financial statements included in this Form 10-Q for more information.

Previous wording

We define Adjusted Gross Profit as gross profit plus plant optimization expenses. We define Adjusted Gross Profit Percentage as Adjusted Gross Profit divided by revenue. We define Adjusted EBITDA as net loss plus/(minus) (i) interest expense, (ii) interest income, (iii) income tax expense/(benefit), (iv) depreciation expense, (v) amortization of intangibles, (vi) equity-based compensation, (vii) gain (loss) on sale of asset (viii) wire insulation shrinkback litigation expenses, (ix) plant optimization expenses, (x) shareholder litigation expenses, and (xi) litigation settlement expense, net of insurance recoveries. 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 (loss) on sale of asset (v) wire insulation shrinkback litigation expenses, (vi) plant optimization expenses, (vii) shareholder litigation expenses, and (viii) litigation settlement expenses, net of insurance recoveries, 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.

Current wording

We define Adjusted Gross Profit as gross profit plus plant optimization 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/(benefit), (iv) depreciation expense, (v) amortization of intangibles, (vi) equity-based compensation, (vii) gain (loss) on sale of asset (viii) wire insulation shrinkback litigation expenses, (ix) plant optimization expenses, (x) shareholder litigation expenses, and (xi) litigation settlement expense, net of insurance recoveries. 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 (loss) on sale of asset (v) wire insulation shrinkback litigation expenses, (vi) plant optimization expenses, (vii) shareholder litigation expenses, and (viii) litigation settlement expenses, net of insurance recoveries, 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

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.

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 to 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

(a)For the three months ended March 31, 2026 and 2025, represents $3.7 million and $2.5 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

(a)For the three and six months ended June 30, 2026, represents $2.9 million and $6.6 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, 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. 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

(b)For the three months ended March 31, 2026 and 2025, represents $0.6 million and zero of expenses incurred in connection with actions taken to consolidate our operations into a newly constructed facility, including items such as professional fees, relocation, facility set-up and other costs. We believe excluding expenses from these events provides investors with a better view of the operating performance of our business and allows for comparability through periods.

Current wording

(b)For the three and six months ended June 30, 2026, represents $0.5 million and $1.1 million of expenses incurred in connection with actions taken to consolidate our operations into a newly constructed facility, including items such as professional fees, relocation, facility set-up and other costs. We believe excluding expenses from these events provides investors with a better view of the operating performance of our business and allows for comparability through periods.

Previous wording

(c)For the three months ended March 31, 2026, represents $1.6 million of expenses incurred in connection with the Company’s defense of certain derivative and class action litigation and $5.3 million in settlement expenses associated with this litigation. For the three months ended March 31, 2025, represents $0.7 million of expenses incurred in connection with the Company’s defense of certain derivative and class action litigation. We consider expenses incurred in connection with these legal matters distinct from normal matters and expenses within the operation of our business.

Current wording

(c)For the three and six months ended June 30, 2026, represents $0.5 million and $2.1 million of expenses incurred in connection with the Company’s defense of certain derivative and class action litigation and for the three months and six months ended June 30, 2026, represents zero and $5.3 million, respectively, in settlement expenses associated with this litigation. For the three and six months ended June 30, 2025, represents $0.2 million and $0.9 million of expenses incurred in connection with the Company’s defense of certain derivative and class action litigation. We consider expenses incurred in connection with these legal matters distinct from normal matters and expenses within the operation of our business.

Previous wording

Cash used in operating activities was $41.4 million during the three months ended March 31, 2026, as compared to cash provided by operating activities of $15.6 million during the three months ended March 31, 2025. As of March 31, 2026, our cash and cash equivalents were $1.9 million, a decrease from $7.3 million as of December 31, 2025. As of March 31, 2026 we had outstanding borrowings of $181.8 million, a $45.0 million increase from outstanding borrowings of $136.8 million as of December 31, 2025. As of March 31, 2026, we also had $15.4 million available for additional borrowings under our $200.0 million Revolving Credit Facility.

Current wording

Cash used in operating activities was $34.6 million during the six months ended June 30, 2026, as compared to cash provided by operating activities of $1.7 million during the six months ended June 30, 2025. As of June 30, 2026, our cash and cash equivalents were $15.7 million, an increase from $7.3 million as of December 31, 2025. As of June 30, 2026 we had outstanding borrowings of $196.8 million, a $60.0 million increase from outstanding borrowings of $136.8 million as of December 31, 2025. As of June 30, 2026, we also had $51.4 million available for additional borrowings under our $250.0 million Revolving Credit Facility.

Previous wording

For the three months ended March 31, 2026, cash used in operating activities was $41.4 million, due to operating results that included $0.3 million of net loss, which included $10.3 million of non-cash expense, along with cash inflows in unbilled receivables of $7.0 million, accounts payable of $15.2 million, and accrued expenses of $2.5 million. These cash inflows were offset by cash outflows of $69.6 million in inventory, $6.7 million in deferred revenue, $2.5 million of warranty liability, and $2.2 million in other assets.

Current wording

For the six months ended June 30, 2026, cash used in operating activities was $34.6 million, due to operating results that included $11.8 million of net income, which included $30.2 million of non-cash expense, along with cash inflows in deferred revenue of $18.2 million, accrued expenses and other of $10.0 million, and litigation receivable and settlement liabilities of $4.3 million. These inflows were offset by outflows in inventory of $97.1 million, accounts receivable and unbilled receivables of $6.4 million, warranty of $4.1 million, and other assets of $2.4 million.

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, 2026, net cash used investing activities was $7.6 million, which was attributable to purchases of property and equipment.

Current wording

For the six months ended June 30, 2026, net cash used investing activities was $14.7 million, which was attributable to purchases of property and equipment.

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 purchases 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, 2026, net cash used in financing activities was $43.7 million, due to $45.0 million in borrowings on the Revolving Credit Facility, and $1.3 million in taxes paid related to net share settled equity awards.

Current wording

For the six months ended June 30, 2026, net cash provided by financing activities was $57.7 million, due to $60.0 million in borrowings on the Revolving Credit Facility, and $2.3 million in taxes paid related to net share settled equity awards.

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.