Shoals Technologies Group, Inc. (SHLS)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our consolidated financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the year ended December 31, 2025 (“2025 Form 10-K”) and this Quarterly Report on Form 10-Q (“Form 10-Q”). In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under the sections of our 2025 Form 10-K and this Form 10-Q captioned “Forward-Looking Statements” and “Risk Factors”.

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.”

Overview

Shoals Technologies Group is a leading design-engineering company and manufacturer of advanced electrical infrastructure solutions for mission‑critical applications across solar photovoltaic (PV), battery energy storage solutions (BESS), and data center power systems. Our solutions also support original equipment manufacturers (“OEMs”). EBOS encompasses all of the components that are necessary to carry the electric current produced by solar panels or stored by a BESS solution to an inverter and ultimately to the power grid. Since electrical infrastructure is the backbone of a solar or BESS project, our products play a mission-critical role in the quality, safety, reliability, and efficiency of energy projects, which the industry prioritizes over price when selecting EBOS solutions.

We design, manufacture and sell a variety of products used by the solar and battery storage industries, including Solar BLA Solutions; Homeruns, Interconnection and Extension Solutions; Combiners and Re-Combiners; Load Break Disconnects and Transition Solutions; Wireless Performance Monitoring; and BESS. We refer to complete EBOS solutions that use products manufactured by us, typically in connection with the design and specification of an entire EBOS system, as “system solutions”. When we sell a system solution, we work with our customers to design, specify and engineer their system solution to provide a complete customized EBOS solution consisting of individualized products that maximizes reliability and energy production while minimizing cost. We also provide technical support during installation and the transition to operations and maintenance. We refer to individual, often custom and proprietary, products we sell as “components”. We believe our system solutions are unique in our industry because they integrate design and

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engineering support, proprietary components and innovative installation methods into a single offering that would otherwise be challenging for a customer to obtain from a single provider or at all.

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.

We have a focus in two end-markets: (1) clean, grid connected energy and (2) data center and mission-critical electrical infrastructure. This market diversification seeks to capitalize on the growing global demand for energy and the need to accelerate electrification.

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.

Trends and Uncertainties

Trade Regulation and Import Tariffs

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.

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.

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

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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.

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.

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.

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.

Energy‑Related Incentives

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.

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.

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 t

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our consolidated financial statements and the related notes and other financial information included in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. For this purpose, any statements contained in this Form 10-K that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under the sections of this Form 10-K captioned “Forward-Looking Statements” and “Risk Factors”. Management’s discussion and analysis relating to the fiscal year ended December 31, 2024 and the applicable year-to-year comparisons to the fiscal year ended December 31, 2023 are not included in this Annual Report on Form 10-K but can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

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-K 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,

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Adjusted Net Income, and Adjusted Diluted Earnings per Share to be substitutes for any GAAP financial information. Readers of this Form 10-K 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, Net Income, and Net Income Attributable to Shoals Technologies Group, Inc., 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.”

Overview

Shoals Technologies Group is a leading design-engineering and manufacturer of advanced electrical infrastructure solutions for mission‑critical applications across solar photovoltaic (PV), battery energy storage solutions (BESS), and data center power systems. Our solutions also support original equipment manufacturers (“OEMs”). EBOS encompasses all of the components that are necessary to carry the electric current produced by solar panels or stored by a BESS solution to an inverter and ultimately to the power grid. Since electrical infrastructure is the backbone of a solar or BESS project, our products play a mission-critical role in the quality, safety, reliability, and efficiency of energy projects, which the industry prioritizes over price when selecting EBOS solutions.

We design, manufacture and sell a variety of products used by the solar and battery storage industries, including Solar BLA Solutions; Homeruns, Interconnection and Extension Solutions; Combiners and Re-Combiners; Load Break Disconnects and Transition Solutions; Wireless Performance Monitoring; and BESS. We refer to complete EBOS solutions that use products manufactured by us, typically in connection with the design and specification of an entire EBOS system, as “system solutions”. When we sell a system solution, we work with our customers to design, specify and engineer their system solution to provide a complete customized EBOS solution consisting of individualized products that maximizes reliability and energy production while minimizing cost. We also provide technical support during installation and the transition to operations and maintenance. We refer to individual, often custom and proprietary, products we sell as “components”. We believe our system solutions are unique in our industry because they integrate design and engineering support, proprietary components and innovative installation methods into a single offering that would otherwise be challenging for a customer to obtain from a single provider or at all.

Traditionally, and for the year ended December 31, 2025, 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 (as further described below), the decision to use our products typically involves input from both the EPC and the owner/developer of the energy infrastructure energy project.

We have a focus in two end-markets: (1) clean, grid connected energy and (2) data center + mission-critical electrical infrastructure. This market diversification seeks to capitalize on the growing global demand for energy and the need to accelerate electrification.

We derived 78.7% of our revenue from the sale of system solutions for the year ended December 31, 2025. As of December 31, 2025, we had $747.6 million of backlog and awarded orders. Backlog of $326.2 million represents signed purchase orders or contractual minimum purchase commitments with take-or-pay provisions and awarded orders of $421.4 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 December 31, 2025, we believe approximately $326.2 million of backlog and $277.3 million of awarded orders have delivery dates in 2026. The remaining $144.1 million have planned delivery dates beyond 2026. Additionally, we believe more than 12% of

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our December 31, 2025 backlog and awarded orders relate to international projects. As of December 31, 2025, backlog and awarded orders increased by 17.8% relative to December 31, 2024 and increased by 3.7% relative to September 30, 2025.

Elimination of Up-C Structure and Entity Simplification

In the first quarter of 2023, we simplified our corporate structure by, among other things, eliminating the umbrella-partnership C corporation structure (“Up-C structure”) that was in place since its January 29, 2021 initial public offering (“IPO”). Following a secondary offering of shares of Class A common stock by certain selling stockholders in March 2023, all the holders of limited liability interests of Shoals Parent LLC (“LLC Interests”), our former operating subsidiary, exchanged all the LLC Interests and corresponding shares of Class B common stock of the Company beneficially owned by them into shares of Class A common stock of the Company. As a result, upon effectiveness of such exchanges, all of the LLC Interests in Shoals Parent LLC were held by the Company, no other holders owned LLC Interests and no Class B common stock was or is outstanding.

Following the elimination of the Up-C structure, effective December 31, 2023, the Company consummated an internal reorganization transaction whereby certain of the Company’s wholly-owned subsidiaries merged with and into other subsidiaries. As part of this reorganization, Shoals Parent LLC merged with and into Shoals Intermediate Parent, with Shoals Intermediate Parent as the surviving corporation.

Trends and Uncertainties

Trade Regulation and Import Tariffs

Our business activities are subject to numerous laws and regulations in the jurisdictions in which we operate. Particularly, our exports and imports are subject to complex trade and customs laws, tax requirements and tariffs set by governments through mutual agreements or unilateral actions. 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.

Beginning in March 2025, the current U.S. presidential administration (the “Administration”) unveiled broad actions related to tariffs with global trading partners. Subsequently, the Administration has imposed a series of significant tariffs, including a 10% tariff on most imports from other trading partners, as well as additional reciprocal tariffs on specific countries. Administration activity related to changes in tariff percentages and qualifying products, including active negotiations with trading partners and internal trade policy development, is ongoing. Future changes in tariff policy, scope, or duration remain highly uncertain and may occur with little advance notice. The Administration’s imposition of tariffs has led to retaliatory tariffs and tariff countermeasures, and the Administration and U.S. trading partners have threatened further restrictions on trade.

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. However, these actions may not fully mitigate the effects of current or future tariff policies.

In 2025, the impacts of tariffs have caused a deterioration on our gross margins through our direct payment of tariffs and secondary tariff costs passed to us rising prices from suppliers. The future implementation, scope, and modification of tariffs is still uncertain. Any significant new tariffs or the threat thereof, which may last for an indefinite period of time, may make it more difficult for us to source raw materials

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and could result in increased prices for certain of our raw materials including steel, copper and aluminum. Retaliatory tariffs imposed by trading partners could impact the export of our manufactured projects and cause our customers to seek alternatives. The implementation of these proposed tariffs, any future increases in existing tariff rates, additional tariffs on other goods, or further retaliatory actions from other governments, or the threat thereof, may result in higher costs for us, and there can be no assurance we will be able to pass on any of the increases in raw material costs directly resulting from the tariffs to our customers. Such actions may also result in more difficulty or the inability to obtain needed materials.

On February 20, 2026, the U.S. Supreme Court invalidated the Administration's tariff measures after concluding that the International Emergency Economic Powers Act did not authorize their imposition. It is uncertain how future repercussions of the ruling and

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