Shoals Technologies Group, Inc.
For the period ended Sep 30, 2026. Filed Nov 4, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 4, 2026
SHLS$10.08+12.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-04.
0001831651-26-000108
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-04.
0001831651-26-000123
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 118 previous paragraphs and 117 current paragraphs.
71 unchanged; 34 reworded; 11 added; 10 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
Recent Developments
Current report
On November 4, 2026, we entered into the ARRAY Merger Agreement with ARRAY. Upon closing, each share of the Company’s Class A common stock will be exchanged for 1.6931 shares of ARRAY common stock. The closing of the ARRAY Merger is subject to the satisfaction of customary closing conditions, including receipt of required government and regulatory approvals and approval by Shoals shareholders and ARRAY stockholders. If completed, the ARRAY Merger is expected to have a material impact on our business, results of operations and financial condition. The ARRAY Merger Agreement has been approved by each of the Board of Directors of the Company and ARRAY.
Current report
The global trade environment has experienced significant uncertainty and volatility, including changes in tariff rates, product coverage, implementation dates, exemptions and related regulatory guidance. Although certain tariffs previously paid by us have been reimbursed, future changes in trade policy could result in additional tariffs, duties or other costs. The timing, scope and ultimate impact of future trade actions are difficult to predict and may be affected by governmental actions, negotiations with trading partners, judicial proceedings, regulatory developments and changes in applicable laws.
Current report
Tariffs and other trade restrictions may increase the cost of raw materials and components used in our products, including copper, aluminum and other materials, and may also result in higher supplier prices, changes in sourcing arrangements or disruptions to our supply chain. Although we have expanded our domestic capabilities, strengthened supply chain resiliency and increased domestic manufacturing capacity, these measures may not fully mitigate the effects of future changes in trade policy. We may also be unable to pass increased costs on to our customers, or there may be a delay between when such costs are incurred and when they can be recovered, which could adversely affect our gross margins and results of operations. Retaliatory trade measures could also adversely affect exports of our products, customer demand or our competitive position in certain markets.
Current report
We continue to monitor developments in trade policy, tariffs, customs regulations and global supply chain conditions and evaluate procurement, sourcing and inventory strategies intended to mitigate potential adverse effects. However, significant or rapidly implemented changes in trade policy could adversely affect our supply chain, input costs, pricing, cash flows, financial condition and results of operations.
Current report
*Not meaningful as the prior period balance was zero.
Current report
Income tax expense
Current report
Comparison of the Nine Months Ended September 30, 2026 and 2025
Current report
Depreciation and amortization expenses increased by $0.6 million, or 9.5%, for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. This change is attributable to additions of property, plant, and equipment supporting our general and administrative functions.
Current report
Income tax expense
Current report
(d)Represents costs incurred in connection with the ARRAY Merger, primarily consisting of legal, investment banking, accounting, consulting and other professional and advisory fees. We believe these costs are not reflective of our core operations and that excluding them provides a more meaningful view of our ongoing operating performance.
Removed paragraphs (10)
Previous report
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 report
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 report
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 report
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 report
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 report
Income Tax Benefit (expense)
Previous report
Comparison of the Six Months Ended June 30, 2026 and 2025
Previous report
Depreciation and amortization expenses increased by $0.3 million, or 8.0%, for the six months ended June 30, 2026, as compared to the six 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 report
Gain on sale of asset
Previous report
Income tax benefit (expense)
Reworded paragraphs (34)
Previous 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.
Current wording
Traditionally, and for the three and nine months ended September 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 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.
Current wording
We derived 75.2% of our revenue from the sale of system solutions for the nine months ended September 30, 2026. For the same period, we derived substantially all of our revenue from customers in the U.S. As of September 30, 2026, we had $791.7 million of backlog and awarded orders. Backlog of $374.7 million represents signed purchase orders or contractual minimum purchase commitments with take-or-pay provisions and awarded orders of $417.0 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 September 30, 2026, we believe approximately $371.3 million of backlog and $325.3 million of awarded orders have delivery dates in the next twelve months. Additionally, more than 12.9% of our September 30, 2026 backlog and awarded orders related to international projects. As of September 30, 2026, backlog and awarded orders increased by 9.8% relative to the same date last year and decreased by 1.2% relative to June 30, 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, 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.
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 imposition of new or increased tariffs on imported products, including reciprocal tariffs, or retaliatory actions by trading partners could adversely affect our business, financial condition and results of operations.
Previous wording
Inflationary pressures persisted through 2025 and into 2026, driven in part by tariff‑related cost increases that elevated prices for imported and domestic goods. Forecasts indicate that while inflation is expected to gradually ease, it remains above the desired targets, with ongoing price pressures anticipated into 2026. Interest rates, though off their historic highs, remain elevated relative to long‑term averages, and forecasters expect only modest declines in 2026. Higher borrowing costs, coupled with uncertainty created by shifting tariff regimes and evolving monetary policy, may continue to affect capital markets and increase our cost of financing.
Current wording
Inflationary pressures persisted into 2026, driven in part by tariff-related cost increases that elevated prices for imported and domestic goods. Forecasts indicate that while inflation is expected to gradually ease, it remains above desired targets, with ongoing price pressures anticipated through 2026. Interest rates, though off their historic highs, remain elevated relative to long-term averages, and uncertainty remains regarding the future path of monetary policy, including the potential for interest rates to remain elevated or increase further if inflationary pressures persist. Higher borrowing costs, coupled with uncertainty created by shifting tariff regimes and evolving monetary policy, may continue to affect capital markets and increase our cost of financing.
Previous wording
Our revenue is affected by changes in the price, volume and mix of system solutions and components purchased by our customers. The price and volume of our system solutions and components is driven by the demand for our energy infrastructure system solutions and components, volume based discounts and rebate incentives, changes in product mix, geographic mix of our customers, strength of competitors’ product offerings, and availability of government incentives to the end-users of our products.
Current wording
Our revenue is affected by changes in the price, volume and mix of system solutions and components purchased by our customers. The price and volume of our system solutions and components are driven by the demand for our energy infrastructure system solutions and components, volume based discounts and rebate incentives, changes in product mix, geographic mix of our customers, strength of competitors’ product offerings, and availability of government incentives to the end-users of our products.
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 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.
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 186 to 211 from September 30, 2025 to September 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 targeted geographic markets and could 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 serving the U.S., Asia-Pacific, Europe, Latin America, and Africa geographies. 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
Amortization of intangibles consists of amortization of customer relationships, developed technology, trade names, backlog and noncompete agreements over their expected period of use.
Current wording
Amortization of intangibles consists of amortization of customer relationships, developed technology, and trade names over their expected period of use.
Previous wording
Gain on sale of asset represents consideration received in excess of the net book value of assets sold.
Current wording
Gain (loss) on sale of asset represents consideration received in excess of the net book value of assets sold.
Previous wording
Foreign currency gains and losses arise from the remeasurement of transactions in a currency other than the function currency of the Company based on exchange rate fluctuations.
Current wording
Foreign currency gains and losses arise from the remeasurement of transactions in a currency other than the functional currency of the Company based on exchange rate fluctuations.
Previous 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.
Current wording
Revenue increased by $59.5 million, or 43.8%, for the three months ended September 30, 2026 as compared to the three months ended September 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
Cost of revenue increased by $44.2 million, or 63.5%, for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, driven by the increase in revenue. Gross profit as a percentage of revenue was 30.3% during the three months ended June 30, 2026, and 37.2% during the three months ended June 30, 2025. Gross profit as a percentage of revenue declined year over year primarily due to operational inefficiencies associated with the ramp-up and transition into the new manufacturing facility and product mix within the quarter, along with costs incurred to address product quality matters, including rework and corrective actions, as well as material-related inefficiencies and incremental lease accounting amortization.
Current wording
Cost of revenue increased by $47.4 million, or 55.4%, for the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, driven by the increase in revenue. Gross profit as a percentage of revenue was 31.9% during the three months ended September 30, 2026, and 37.0% during the three months ended September 30, 2025. Gross profit as a percentage of revenue declined period over period primarily due to operational inefficiencies associated with the ramp-up and transition into the new manufacturing facility and product mix within the period, along with costs incurred to address product quality matters, including rework and corrective actions, as well as incremental lease accounting amortization.
Previous wording
General and administrative expenses increased $5.4 million, or 23.4%, for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. The increase in general and administrative expenses was the result of a $4.4 million increase in 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 $1.6 million, or 5.4%, for the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. The increase in general and administrative expenses was the result of a $5.4 million increase in cash and share-based incentive compensation expense due to improved financial performance in comparison to the prior year and increased headcount, which was offset by $4.1 million in decreased spending related to legal matters in the current quarter in comparison to the prior year quarter.
Previous 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.
Current wording
Depreciation and amortization expenses increased by $0.2 million, or 12.5%, for the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. This change is attributable to additions of property, plant, and equipment supporting our general and administrative functions.
Previous 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.
Current wording
Interest expense increased by $1.1 million, or 37.5%, for the three months ended September 30, 2026, as compared to the three months ended September 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 September 30, 2026 compared to the three months ended September 30, 2025.
Previous 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.
Current wording
Litigation settlement expense, net of recoveries increased by $1.0 million for the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. This is due to the accrual for the settlement amount, net of insurance recoveries related to the Company’s Derivative litigation. See Note 13 - Commitments and Contingencies, in our condensed consolidated financial statements included in this Form 10-Q for more information.
Previous 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.
Current wording
Income tax expense totaled $6.2 million for the three months ended September 30, 2026, as compared to income tax expense of $4.0 million for the three months ended September 30, 2025. Our effective income tax rate for the three months ended September 30, 2026 and 2025 was 25.8% and 25.1%, respectively. The change in our effective income tax rate was primarily attributable to nondeductible compensation under Section 162(m) during the three months ended September 30, 2026.
Previous wording
Revenue increased by $112.7 million, or 59.0%, for the six months ended June 30, 2026 as compared to the six 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.
Current wording
Revenue increased by $172.2 million, or 52.7%, for the nine months ended September 30, 2026 as compared to the nine months ended September 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
Cost of revenue increased by $91.5 million, or 75.1%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, driven by the increase in revenue. Gross profit as a percentage of revenue was 29.8% during the six months ended June 30, 2026, and 36.3% during the six months ended June 30, 2025. Gross profit as a percentage of revenue declined period over period primarily due to operational inefficiencies associated with the ramp-up and transition into the new manufacturing facility and product mix within the period, along with costs incurred to address product quality matters, including rework and corrective actions, as well as material-related inefficiencies and incremental lease accounting amortization.
Current wording
Cost of revenue increased by $138.9 million, or 67.0%, for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, driven by the increase in revenue. Gross profit as a percentage of revenue was 30.6% during the nine months ended September 30, 2026, and 36.6% during the nine months ended September 30, 2025. Gross profit as a percentage of revenue declined period over period primarily due to operational inefficiencies associated with the ramp-up and transition into the new manufacturing facility and product mix within the period, along with costs incurred to address product quality matters, including rework and corrective actions, as well as incremental lease accounting amortization.
Previous 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.
Current wording
General and administrative expenses increased $16.3 million, or 22.0%, for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. The increase in general and administrative expenses was the result of $11.4 million in increased payroll, cash and incentive based share expense due to increased headcount in comparison to the prior year, $3.3 million in increased costs related to administration, and a $1.5 million increase in legal expenses for ongoing matters related to wire insulation shrinkback, intellectual property, and shareholder litigation matters.
Previous wording
Interest expense, increased by $1.7 million, or 37.1%, for the six months ended June 30, 2026, as compared to the six 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 six months ended June 30, 2026 compared to the six months ended June 30, 2025.
Current wording
Interest expense increased by $2.8 million, or (37.3)%, for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. This increase was due to an increase in the total weighted average outstanding balance of the Revolving Credit Facility during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025.
Previous wording
Income tax expense totaled $3.3 million for the six months ended June 30, 2026, as compared to income tax expense of $5.4 million for the six months ended June 30, 2025. Our effective income tax rate for the six months ended June 30, 2026 and 2025 was 21.6% and 28.5%, respectively. The change in our effective income tax rate was due to changes in various discrete items, particularly RSU and PSU shortfalls and windfalls during the six months ended June 30, 2026.
Current wording
Income tax expense totaled $9.5 million for the nine months ended September 30, 2026, as compared to income tax expense of $9.4 million for the nine months ended September 30, 2025. Our effective income tax rate for the nine months ended September 30, 2026 and 2025 was 24.2% and 27.0%, respectively. The decrease in the effective tax rate for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, was primarily due to stock compensation tax windfalls and the reversal of a related Section 162(m) deferred tax asset valuation allowance.
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 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.
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, (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, (xi) litigation settlement expense, net of insurance recoveries, and (xii) transaction, integration, and restructuring costs. 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, (viii) litigation settlement expenses, net of insurance recoveries, and (ix) transaction, integration, and restructuring costs, 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
(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.
Current wording
(a)For the three and nine months ended September 30, 2026, represents $0.7 million and $7.3 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 nine months ended September 30, 2025, represents $6.8 million and $11.9 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 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.
Current wording
(b)For the three and nine months ended September 30, 2026, represents $0.1 million and $1.2 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, which relates to costs classified within cost of revenue based on their nature and function. For the three and nine months ended September 30, 2025, represents $0.7 million of expenses incurred in connection with actions taken to consolidate our operations into a newly constructed facility, which primarily consisted of costs classified within general and administrative expenses based on their nature and function. 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 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.
Current wording
(c)For the three and nine months ended September 30, 2026, represents $0.1 million and $2.3 million, respectively, of expenses incurred in connection with the Company’s defense of certain derivative and class action litigation and for the three and nine months ended September 30, 2026, represents $1.0 million and $6.3 million, respectively, in settlement expenses associated with this litigation. For the three and nine months ended September 30, 2025, represents $0.3 million and $1.2 million, respectively, 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
(d)Shoals Technologies Group, Inc. is subject to U.S. Federal income taxes, in addition to state and local taxes. Represents the estimated tax impact of all Adjusted Net Income add-backs, excluding those which represent permanent differences between book versus tax. The adjustment to the provision for income tax reflects the effective tax rates below.
Current wording
(e)Shoals Technologies Group, Inc. is subject to U.S. Federal income taxes, in addition to state and local taxes. Represents the estimated tax impact of all Adjusted Net Income add-backs, excluding those which represent permanent differences between book versus tax. The adjustment to the provision for income tax reflects the effective tax rates below.
Previous 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.
Current wording
Cash used in operating activities was $5.8 million during the nine months ended September 30, 2026, as compared to cash provided by operating activities of $21.2 million during the nine months ended September 30, 2025. As of September 30, 2026, our cash and cash equivalents were $7.7 million, an increase from $7.3 million as of December 31, 2025. As of September 30, 2026 we had outstanding borrowings of $163.8 million, a $27.0 million increase from outstanding borrowings of $136.8 million as of December 31, 2025. As of September 30, 2026, we also had $84.8 million available for additional borrowings under our $250.0 million Revolving Credit Facility.
Previous 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.
Current wording
For the nine months ended September 30, 2026, cash used in operating activities was $5.8 million, due to operating results that included $29.7 million of net income, which included $53.1 million of non-cash expense, along with cash inflows in deferred revenue of $19.2 million, accrued expenses and other of $17.5 million, and litigation receivable and settlement liabilities of $5.5 million. These inflows were offset by outflows in inventory of $61.5 million, accounts receivable and unbilled receivables of $21.5 million, warranty of $6.9 million, and other assets of $3.4 million.
Previous 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.
Current wording
For the nine months ended September 30, 2025, cash provided by operating activities was $21.2 million, primarily due to operating results that included $25.5 million of net income, which included $26.9 million of non-cash expense, along with cash inflows in unbilled receivables of $13.1 million, accounts payable of $12.6 million, accrued expenses of $11.7 million, deferred revenue of $7.4 million, and other assets of $2.5 million. These cash inflows were offset by cash outflows of $39.3 million related to accounts receivable, $33.7 million of warranty liability, and $5.5 million in inventory.
Previous 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.
Current wording
For the nine months ended September 30, 2026, net cash used investing activities was $17.5 million, which was attributable to purchases of property and equipment.
Previous 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.
Current wording
For the nine months ended September 30, 2025, net cash used investing activities was $20.8 million, which was attributable to the purchase of $25.9 million in property and equipment, offset by the proceeds from the sale of property and equipment of $5.1 million.
Previous 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.
Current wording
For the nine months ended September 30, 2026, net cash provided by financing activities was $23.6 million, due to $60.0 million in borrowings on the Revolving Credit Facility offset by $33.0 million in repayments and $3.4 million in taxes paid related to net share settled equity awards.
Previous 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.
Current wording
For the nine months ended September 30, 2025, net cash used in financing activities was $15.3 million, due to $65.0 million in payments on the Revolving Credit Facility, offset by $50.0 million in borrowings, and $0.3 million in taxes paid related to net share settled equity awards.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Litigation settlement expense, net of recoveries increased by $6.3 million for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. This is due to the accrual for the settlement amount, net of insurance recoveries related to the Company’s Securities and Derivative litigations. See Note 13 - Commitments and Contingencies, in our condensed consolidated financial statements included in this Form 10-Q for more information.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Litigation settlement expense, net of recoveries
Previous report — wording carried elsewhere
Litigation settlement expense, net of recoveries
Previous report — wording carried elsewhere
Gain on sale of asset decreased $3.1 million from the previous period due to the prior year sale of owned land and building assets to consolidate operations into new facilities.