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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, 2022 and the applicable year-to-year comparisons to the fiscal year ended December 31, 2021 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, 2022.

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

We are a leading provider of EBOS solutions and components for solar, battery storage and EV charging applications, selling to customers primarily in the United States as well as internationally. EBOS encompasses all of the components that are necessary to carry the electric current produced by solar panels to an inverter and ultimately to the power grid. EBOS components are mission-critical products that have a high consequence of failure, including lost revenue, equipment damage, fire damage, and even serious injury or death. As a result, we generally believe customers prioritize reliability and safety over price when selecting EBOS solutions.

EBOS components that we produce include cable assemblies, inline fuses, combiners, disconnects, recombiners, wireless monitoring systems, junction boxes, transition enclosures, splice boxes and battery energy storage system (“BESS”) cabinets. We derive the majority of our revenue from selling “system solutions” which are complete EBOS systems that include several of our products, many of which are customized for the customer’s project. 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.

We sell our solar products principally to EPCs that build solar energy projects. However, given the mission-critical nature of EBOS, the decision to use our products typically involves input from both the EPC and the owner of the solar energy project. The custom nature of our system solutions and the long development cycle for solar energy projects typically gives us 12 months or more of lead time to quote, engineer, produce and ship each order we receive, and we do not stock large amounts of finished goods.

Throughout fiscal year 2023, we have maintained focus on our growth strategy and continued strengthening our leadership position in the industry. We believe that as of December 31, 2023, we have worked with 13 of the top 15 solar EPCs, per Wood Mackenzie data from 2019-2023, and 11 of those EPCs used our combine-as-you-go system on their projects.

We derived 81.5% of our revenue from the sale of system solutions for the year ended December 31, 2023. For the same period, we derived substantially all of our revenue from customers in the U.S. As of December 31, 2023, we had $631.3 million of backlog and awarded orders. Backlog of $205.8 million represents signed purchase orders or contractual minimum purchase commitments with take-or-pay provisions and awarded orders of $425.5 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, 2023, we believe approximately $205.8 million of backlog and $250.0 million of awarded orders have delivery dates in 2024. The remaining $175.5 million have planned delivery dates beyond 2024. Additionally, we believe more than 13% of our December 31, 2023 backlog and awarded orders relate to international projects. As of December 31, 2023, backlog and awarded orders increased by 47% relative to December 31, 2022 and decreased by 0.3% relative to September 30, 2023.

Elimination of Up-C Structure and Entity Simplification

In 2023, following a secondary offering of shares of Class A common stock by certain selling shareholders, all the holders of LLC Interests exchanged all the LLC Interests and corresponding shares of

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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.

On July 1, 2023, the Company contributed 100% of its LLC Interests to Shoals Intermediate Parent, a wholly-owned subsidiary of the Company. Following the contribution, Shoals Parent LLC became a disregarded single member limited liability company, eliminating the Company’s Up-C structure.

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

During 2023 and 2022, significant levels of inflation resulted in increased energy prices, freight premiums, and other operating costs. These increases are expected to persist into 2024. As a result of inflation, during 2023 and 2022, the Federal Reserve increased interest rates. Such increased interest rates have resulted in higher interest rates associated with our Senior Secured Credit Agreement. The Federal Reserve may continue raising interest rates as long as high inflation persists, and any such additional increases will have a corresponding increase in the interest rates charged under our Senior Secured Credit Agreement. The eventual implications of higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital during our forecasted period.

In 2022 and to a lesser extent during 2023, as a consequence of macroeconomic events, our ability to obtain raw materials required to manufacture our components and system solutions from domestic and international suppliers, as well as our ability to secure inbound logistics to and from our facilities, were impacted, with additional delays linked to international border crossings and the associated approvals and documentation. The Company does not directly source a significant amount of raw materials from Europe. However, the Russia-Ukraine war has reduced the availability of certain materials that can be sourced in Europe and, as a result, increased global logistics costs for the procurement of some inputs and materials used in our products. We expect these trends to persist into 2024. In addition, changes over the last few years in the international relations and tariff regimes between the U.S. and China in response to various political issues and heightened uncertainty regarding China-Taiwan relations could significantly adversely impact the availability of parts and components to us, and, correspondingly, our ability to produce our components at targeted levels, although we did not experience such negative effects during 2023. We are continuously monitoring the condition of our supply chain and evaluating our procurement strategy to reduce any negative impact on our business, financial condition, and results of operations.

In response to supply chain constraints, in 2022 we increased certain raw materials inventory, partly to limit the potential impact of supply chain issues of raw materials in the near term. During 2023, we continued to monitor and reduce our inventory levels.

In 2023, the domestic utility scale solar market experienced slowing growth as a result of the costs of project financing, lingering uncertainty about the application of the Inflation Reduction Act of 2022 to solar projects, supply chain constraints and interconnection complications. We expect these trends to persist in 2024. However, even though we expect our growth rate to decline from the very high levels of the last few years, we believe that our domestic utility scale business will continue growing at an attractive rate.

As of December 31, 2023, other than increased interest expense, we did not experience material adverse effects on our financial results from the events and trends discussed above.

Recent Developments

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On February 21, 2024, we announced our intention to expand and consolidate our existing manufacturing and distribution operations into a new, more than 600,000 square foot facility in Portland, Tennessee over the next five years. On February 7, 2024, we entered into a lease agreement for the new facility.

Separately, in February 2024, we announced the closing of our Poway, California facility as a result of a strategic assessment aimed at enhancing overall production and performance and at allowing for greater efficiency throughout our operations. The closure is expected to be completed in May 2024.

Key Components of Our Results of Operations

The following discussion describes certain line items in our consolidated statements of operations.

Revenue

We generate revenue from the sale of EBOS systems and components for homerun and combine-as-you-go architectures, battery storage, EV charging infrastructure, and O&M offerings. Our customers include EPCs, utilities, solar developers, independent power producers, solar module manufacturers and charge point operators. We derive the majority of our revenue from selling solar system solutions. When we sell a solar system solution, we enter into a contract with our customers covering the price, specifications, delivery dates and warranty for the products being purchased, among other things. Our contractual delivery period for solar system solutions can vary from one to three months whereas manufacturing typically requires a shorter time frame. Contracts for solar system solutions can range in value from several hundred thousand to several million dollars.

Our revenue is affected by changes in the price, volume and mix of solar 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 solar system solutions and components, changes in product mix between homerun and combine-as-you-go EBOS, geographic mix of our customers, strength of competitors’ product offerings, and availability of government incentives to the end-users of our products.

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

Cost of Revenue and Gross Profit

Cost of revenue consists primarily of system solutions and components costs, including purchased raw materials, as well as costs related to 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.

Operating Expenses

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

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and include salaries, equity-based compensation, benefits, payroll taxes and commissions. The number of full-time employees in our general and administrative departments increased from 115 to 149 from December 31, 2022 to December 31, 2023, 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.

General and Administrative Expenses

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

Depreciation

Depreciation in our operating expenses consists of costs associated with property, plant and equipment (“PP&E”) not used in manufacturing our products. We expect that as we increase both our revenue and the number of our general and administrative personnel, we will invest in additional PP&E to support our growth resulting in additional depreciation expense.

Amortization

Amortization of intangibles consists of amortization of customer relationships, developed technology, trade names, backlog and noncompete agreements over their expected period of use.

Non-operating Expenses

Interest Expense

Interest expense consists of interest and other charges paid in connection with our Senior Secured Credit Agreement.

Payable Pursuant to the Tax Receivable Agreement Adjustment

Tax Receivable Agreement (“TRA”) adjustment consists of changes to our tax rate since the initial recording of the liability related to the TRA.

Gain on Termination of Tax Receivable Agreement

Gain on termination of TRA is related to the early termination and settlement of the TRA, as discussed in Note 18 - Payable Pursuant to the Tax Receivable Agreement of the consolidated financial statements. The TRA was terminated in December 2022.

Income Tax Expense

Shoals Technologies Group, Inc. is subject to U.S. federal and state income tax in multiple jurisdictions. Prior to the July 1, 2023 contribution described in Note 17 - Income Taxes, Shoals Parent LLC was a pass-through entity for federal income tax purposes but incurred income tax in certain state jurisdictions. On July 1, 2023, the Company contributed 100% of its LLC Interests in Shoals Parent LLC to its wholly-owned subsidiary, Shoals Intermediate Parent, and following the contribution, Shoals Parent LLC became a disregarded single member limited liability company, eliminating the Up-C structure.

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Results of Operations

Set forth below is a comparison of the results of operations and changes in financial condition for the years ended December 31, 2023 and 2022.

The following table summarizes our results of operations (dollars in thousands):

Operating expenses

Comparison of the years ended December 31, 2023 and 2022

Revenue

Revenue increased by $162.0 million, or 50%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022, driven by higher sales volumes as a result of increased demand for solar EBOS generally and our combine-as-you-go system solutions specifically. Our total number of customers, along with the number of combine-as-you-go system solutions projects, increased during the year ended December 31, 2023 as compared to the year ended December 31, 2022. We believe expanding customer recognition of the benefits of our combine-as-you-go system solutions resulted in increased demand for our products.

Cost of Revenue and Gross Profit

Cost of revenue increased by $125.0 million, or 64%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022, driven by $61.7 million of wire insulation shrinkback expense recorded during the year ended December 31, 2023. The remaining increase is driven by the increase in revenue. Gross profit as a percentage of revenue was 34.4% and 40.2%, respectively, during the years ended December 31, 2023 and 2022. The decrease in gross profit as a percentage of revenue was driven by the increase in wire insulation shrinkback expense and was offset by a higher portion of overall revenue coming from our combine-as-you-go system solutions, which carry higher margins than our other products, slightly lower raw materials input costs, increased leverage on fixed costs, and efficiencies gained in operations.

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Operating Expenses

General and Administrative

General and administrative expenses increased $24.8 million, or 44%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase in general and administrative expenses was the result of an increase in wages, benefits and related taxes of $9.9 million due to increased employee headcount to support our growth, as well as an increase in equity-based compensation of $4.1 million related to termination of our former CEO for disability and an increase in employee headcount, and an increase in professional fees of $7.3 million, related to a $3.3 million increase in legal fees incurred in connection with the ongoing patent infringement litigation, a $1.3 million increase in legal fees related to wire insulation shrinkback litigation, and $2.7 million of other miscellaneous professional services.

Depreciation and Amortization

Depreciation and amortization expense decreased by $0.5 million, or 6%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022, due to definite lived intangible assets that became fully amortized during 2022 and 2023.

Interest Expense

Interest expense, net increased by $5.6 million or 30%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022, due to increased borrowing rates. During 2022 and 2023, the Federal Reserve increased interest rates resulting in higher interest rates associated with our Senior Secured Credit Agreement. The increase in interest expense was offset by a decrease in the weighted average outstanding balance of the Revolving Credit Facility and Term Loan Facility during the year ended December 31, 2023 compared to the year ended December 31, 2022.

Payable Pursuant to the Tax Receivable Agreement Adjustment

Payable pursuant to the TRA adjustment decreased $6.7 million or 100% for the year ended December 31, 2023 as compared to the year ended December 31, 2022, due to termination and settlement of the TRA on December 6, 2022.

Gain on Termination of Tax Receivable Agreement

Gain on termination of TRA for the year ended December 31, 2022 totaled $110.9 million, which is equal to the difference between the carrying value of the payable pursuant to the TRA recorded as of the date of amendment to the TRA, which permitted its termination, net of related fees. There was no gain on termination of TRA for the year ended December 31, 2023.

Income Tax Expense

Income tax expense was $12.3 million for the year ended December 31, 2023 as compared to income tax expense of $9.0 million for the year ended December 31, 2022. Our effective income tax rate for the year ended December 31, 2023 and 2022 was 22.3% and 5.9%, respectively. The increase in the effective income tax rate was due to a reduction in permanent differences as a result of net income attributable to non-controlling interests, as well as the gain on termination of TRA recorded during 2022, and an increase in the valuation allowance during 2023 compared to a decrease in the valuation allowance during 2022. These increases were offset by a decrease related to the elimination of the Up-C structure on July 1, 2023, as discussed in more detail in 17 - Income Taxes.

Non-GAAP Financial Measures

Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share (“EPS”)

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We define Adjusted Gross Profit as gross profit plus wire insulation shrinkback expenses. We define Adjusted Gross Profit Percentage as Adjusted Gross Profit divided by revenue. We define Adjusted EBITDA as net income plus (i) interest expense, net, (ii) income tax expense, (iii) depreciation expense, (iv) amortization of intangibles, (v) payable pursuant to the TRA adjustment, (vi) gain on termination of TRA, (vii) loss on debt repayment, (viii) equity-based compensation, (ix) acquisition-related expenses, (x) COVID-19 expenses, (xi) non-recurring and other expenses, (xii), wire insulation shrinkback expenses, and (xiii) wire insulation shrinkback litigation expenses. We define Adjusted Net Income as net income attributable to Shoals Technologies Group, Inc. plus (i) net income impact from assumed exchange of Class B common stock to Class A common stock as of the beginning of the earliest period presented, (ii) adjustment to the provision for income tax, (iii) amortization of intangibles, (iv) amortization of deferred financing costs, (v) payable pursuant to the TRA adjustment, (vi) gain on termination of TRA, (vii) loss on debt repayment, (viii) equity-based compensation, (ix) acquisition-related expenses, (x) COVID-19 expenses, (xi) non-recurring and other expenses, (xii) wire insulation shrinkback expenses, and (xiii) wire insulation shrinkback litigation expenses, all net of applicable income taxes. We define Adjusted Diluted EPS as Adjusted Net Income divided by the diluted weighted average shares of Class A common stock outstanding for the applicable period, which assumes the exchange of all outstanding Class B common stock for Class A common stock as of the beginning of the earliest period presented.

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

Among other limitations, Adjusted Gross Profit, Adjusted Gross Profit Percentage, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and may be calculated by other companies in our industry differently than we do or not at all, which may limit their usefulness as comparative measures.

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

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Reconciliation of Gross Profit to Adjusted Gross Profit and Adjusted Gross Profit Percentage (in thousands):

Year Ended December 31,

Wire insulation shrinkback expenses (a) $ 61,705 $ — $ —

Adjusted gross profit percentage 47.0% 40.2% 38.8%

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

Year Ended December 31,

Payable pursuant to the TRA adjustment (b) — 6,675 1,663

Gain on termination of TRA — (110,883) —

Loss on debt repayment — — 15,990

Acquisition-related expenses — 42 2,349

COVID-19 expenses (c) — — 339

Non-recurring and other expenses (d) — — 2,598

Wire insulation shrinkback expenses (a) 61,705 — —

Wire insulation shrinkback litigation expenses (e) 1,260 — —

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Reconciliation of Net Income Attributable to Shoals Technologies Group, Inc. to Adjusted Net Income (in thousands):

Year Ended December 31,

Adjustment to the provision for income tax (g) (653) (3,726) (456)

Payable pursuant to the TRA adjustment (b) — 6,675 1,663

Gain on termination of TRA — (110,883) —

Loss on debt repayment — — 15,990

Acquisition-related expenses — 42 2,349

COVID-19 expenses (c) — — 339

Non-recurring and other expenses (d) — — 2,598

Wire insulation shrinkback expenses (a) 61,705 — —

Wire insulation shrinkback litigation expenses (e) 1,260 — —

(a) For the year ended December 31, 2023 represents, (i) $59.1 million wire insulation shrinkback warranty expenses related to the identification, repair and replacement of a subset of wire harnesses presenting unacceptable levels of wire insulation shrinkback, and (ii) $2.6 million of inventory write-downs of the defective red wire. We consider expenses incurred in connection with the identification, repair and replacement of the impacted wire harnesses as well as the write-down of related inventory distinct from normal, ongoing service identification, repair and replacement expenses that would be reflected under ongoing warranty expenses within the operation of our business and normal write-downs of inventory, which we do not exclude from our non-GAAP measures. In the future, we also intend to exclude from our non-GAAP measures the benefit of liability releases, if any. We believe excluding expenses from these discrete liability events provides investors with a better view of the operating performance of our business and allows for comparability through periods. See Note 9 - Warranty Liability, in our consolidated financial statements included in this Annual Report on Form 10-K for more information.

(b) Represents an adjustment to eliminate the adjustment of the payable pursuant to the TRA.

(c) Represents costs incurred as a direct impact from the COVID-19 pandemic, disinfecting and reconfiguration of facilities, medical professionals to conduct daily screenings of employees and direct legal costs associated with the pandemic.

(d) Represents certain costs associated with non-recurring professional services, our prior private equity owners’ expenses and other costs.

(e) For the year ended December 31, 2023 represents $1.3 million of expenses incurred in connection with the lawsuit initiated by the Company against the supplier of the defective red 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

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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 16 - Commitments and Contingencies, in our consolidated financial statements included in this Annual Report on Form 10-K for more information.

(f) Reflects net income to Class A common stock from assumed exchange of corresponding shares of our Class B common stock held by our founder and management.

(g) Shoals Technologies Group, Inc. is subject to U.S. Federal income taxes, in addition to state and local taxes. The adjustment to the provision for income tax reflects the effective tax rates below, assuming Shoals Technologies Group, Inc. owned 100% of the units in Shoals Parent LLC prior to March 10, 2023.

Year Ended December 31,

Statutory U.S. Federal income tax rate 21.0 % 21.0 % 21.0 %

Permanent adjustments 1.9 % 0.2 % 1.2 %

State and local taxes (net of federal benefit) 3.3 % 3.0 % 6.4 %

Effective income tax rate for Adjusted Net Income 26.2 % 24.2 % 28.6 %

(h) Represents the estimated tax impact of all Adjusted Net Income add-backs, excluding those which represent permanent differences between book versus tax.

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

Year Ended December 31,

Liquidity and Capital Resources

We finance our operations primarily with operating cash flows and current and long-term borrowings. Our ability to generate positive cash flow from operations is dependent on the strength of our gross profits as well as our ability to quickly turn our working capital. Based on our past performance and current expectations, we believe that operating cash flows and availability under our Revolving Credit Facility will be sufficient to meet our near and long-term future cash needs.

We generated cash from operating activities of $92.0 million during the year ended December 31, 2023, as compared to cash provided by (used in) operating activities of $39.5 million and $(4.1) million, respectively, during the years ended December 31, 2022 and 2021. As of December 31, 2023, our cash and cash

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equivalents were $22.7 million, an increase from $8.8 million as of December 31, 2022. As of December 31, 2023 we had outstanding borrowings of $183.8 million, a decrease from $243.3 million as of December 31, 2022. As of December 31, 2023 we also had $109.7 million available for additional borrowings under our $150.0 million Revolving Credit Facility.

On December 27, 2023 and January 19, 2024 we used proceeds from the Revolving Credit Facility and cash on hand to make $50.0 million and $100.0 million, respectively, voluntary prepayments of outstanding borrowings under the Term Loan Facility. Following the January prepayment, we had outstanding borrowings of $168.8 million and $24.7 million available for additional borrowings under our Revolving Credit Facility.

In 2023, we also used approximately $4.7 million of cash to pay for expenses related to the identification, repair and replacement of the wire harnesses impacted in connection with the wire insulation shrinkback matter. We expect to continue spending significant amounts of cash in connection thereof. For more information, see Note 9 - Warranty Liability in our consolidated financial statements.

Year Ended December 31,

Net cash provided by (used in) operating activities $ 91,955 $ 39,455 $ (4,083)

Net cash provided by (used in) financing activities (67,167) (36,589) 20,602

Operating Activities

For the year ended December 31, 2023, cash provided by operating activities was $92.0 million, due to operating results that included $42.7 million of net income, which included $109.8 million of non-cash expense, along with an increase of $9.6 million in accounts payable and accrued expenses and other, and a decrease of $15.0 million in inventory. These cash inflows were partially offset by an increase of $80.3 million in accounts receivable and unbilled receivables, which is primarily driven by an increase in revenues, $5.2 million cash outflow related to warranty liability and a decrease of $1.0 million in deferred revenue.

For the year ended December 31, 2022, cash provided by operating activities was $39.5 million, due to operating results that included $143.0 million of net income, which included $65.6 million of non-cash income, an increase of $21.4 million in deferred revenue, and an increase of $10.7 million in accrued expenses and other. These cash inflows were partially offset by an increase in inventory of $36.9 million as a result of increasing our raw materials inventory to support growth and reduce the likelihood of supply chain issues from our raw materials suppliers, an increase of $22.4 million in accounts receivable and unbilled receivables, which is primarily driven by an increase in revenues, and a decrease of $11.0 million in accounts payable.

Investing Activities

For the year ended December 31, 2023, net cash used in investing activities was $10.8 million, of which $10.6 million was attributable to the purchase of property and equipment.

For the year ended December 31, 2022, net cash used in investing activities was $3.7 million, of which $3.2 million was attributable to the purchase of property and equipment.

Financing Activities

For the year ended December 31, 2023, net cash used in financing activities was $67.2 million, due to $51.5 million in payments on the Term Loan, $8.0 million in net payments on the Revolving Credit Facility, $2.6 million in distributions to our non-controlling interest holders and $3.9 million in taxes related to net share settled equity awards.

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For the year ended December 31, 2022, net cash used in financing activities was $36.6 million, primarily due to $58.0 million paid to terminate the TRA, as discussed in Note 18 of the consolidated financial statements, plus related fees of $1.9 million, $2.0 million in payments on the Term Loan, $7.1 million in net payments on the Revolving Credit Facility, $7.8 million in distributions to our non-controlling interest holders, $1.5 million of offering costs, and $1.3 million in taxes related to net share settled equity awards. These cash outflows are partially offset by $42.9 million received in connection with the issuance of Class A common stock sold in follow-on offering, net of underwriting discounts and commissions.

A discussion and analysis covering historical cash flows for the year ended December 31, 2021 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, 2021.

Debt Obligations

For a discussion of our debt obligations see Note 10 - Long-Term Debt in our consolidated financial statements included in this Annual Report on Form 10-K.

Surety Bonds

For a discussion of our surety bond obligations see Note 16 - Commitments and Contingencies in our consolidated financial statements included in this Annual Report on Form 10-K.

Product Warranty

For a discussion of our product warranties see Note 9 - Warranty Liability in our consolidated financial statements included in this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.

Revenue Recognition

We primarily recognize revenue over time as a result of the continuous transfer of control of our product to the customer using the output method based on units manufactured. This continuous transfer of control to the customer is supported by clauses in the contracts that provide right to payment of the transaction price associated with work performed to date on products that do not have an alternative use. We believe that recognizing revenue using the output method based on units manufactured best depicts the extent of transfer of control to the customer. If revenue were recognized at a point in time rather than over time, then for the year ended December 31, 2023, net income would be $17.1 million lower, and EPS - basic and diluted would decrease by $0.10.

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In certain instances the promised goods do have an alternative use. In these instances we recognize revenue when the customer obtains control of the product. Contracts of this nature typically include customer acceptance clauses, which results in revenue recognition occurring upon customer acceptance.

Depending on the size of project, the manufacturing process generally takes from less than one week to four months to complete production. The accounting for each contract involves a judgmental process of estimating total sales, costs, and profit for each performance obligation. Cost of revenue is recognized based on the unit of production. The amount reported as revenue is determined by adding a proportionate amount of the estimated profit to the amount reported as cost of revenue.

We have elected to adopt certain practical expedients and exemptions as allowed under the revenue recognition guidance such as (i) recording sales commissions as incurred because the amortization period is less than one year, (ii) excluding any collected sales tax amounts from the calculation of revenue, and (iii) accounting for shipping and handling activities that are incurred after the customer has obtained control of the product as fulfillment costs rather than a separate service provided to the customer for which consideration would need to be allocated.

Payable Pursuant to the Tax Receivable Agreement

As discussed in Note 18 to the consolidated financial statements, we were party to a TRA, dated January 29, 2021, under which we were contractually committed to pay the TRA Owners 85% of the amount of the tax benefits, if any, that we were deemed to realize, as a result of certain transactions. Amounts payable under the TRA were contingent upon, among other things, (i) generation of future taxable income over the term of the TRA and (ii) future changes in tax laws.

On November 29, 2022, the Company entered into an amendment to the TRA (the “TRA Amendment”), pursuant to which the parties thereto agreed to grant the Company a right to terminate the TRA until December 31, 2022 (the “TRA Termination Right”) in exchange for a termination consideration of $58.0 million payable in cash (the “TRA Termination Consideration”). The Company exercised its TRA Termination Right, and the TRA was terminated on December 6, 2022.

As of the effective date of the TRA Amendment, we concluded it was probable that the expected payments related to the payable pursuant to the TRA had changed.As a result of this change, the Company remeasured the payable pursuant to the TRA to $58.0 million. We analyzed the relevant accounting guidance and considered the nature of the TRA termination and the involved parties in order to determine if the transaction should be recorded as a gain in the Consolidated Statement of Operations or as a stockholder contribution. Ultimately, we determined that, despite the involvement of the Company’s founder, the transaction was performed at arm's length,both parties received the same payment based upon ownership percentage, and therefore, the gain should be recorded in the Consolidated Statement of Operations as of the effective date of the TRA Amendment. If the transaction had been accounted for as a stockholder contribution rather than a gain in the Consolidated Statement of Operations, then for the year ended December 31, 2022 net income would have been $110.9 million lower, EPS - basic would have decreased by $0.96 and EPS - diluted would have decreased by $0.70.

Equity-Based Compensation

2021 Long-term Incentive Plan

The Company recognizes equity-based compensation expense based on the equity award’s grant date fair value. The determination of the fair value of equity awards issued to employees of the Company is based upon the closing market price of the Company's common stock on the day prior to the grant date. Equity-based compensation expense related to performance stock units is recognized if it is probable that the performance conditions will be satisfied. The Company accounts for forfeitures as they occur. The grant date fair value of each unit is amortized on a straight-line basis over the requisite service period, including those units with

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graded vesting. However, the amount of equity-based compensation at any date is at least equal to the portion of the grant date fair value of the award that is vested.

Income Taxes

We record valuation allowances against our deferred tax assets when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In making such determination, we consider all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and results of operations. We routinely evaluate the realizability of our deferred tax assets by assessing the likelihood that our deferred tax assets will be recovered based on all available positive and negative evidence. Estimating future taxable income is inherently uncertain and requires judgment. In projecting future taxable income, we consider our historical results and incorporate certain assumptions, including revenue growth and operating margins, among others. As of December 31, 2023, we had $468.2 million of deferred tax assets, net of a $1.0 million valuation allowance related to land and other non-amortizable intangibles. Other than the valuation allowance related to land and other non-amortizable intangibles, we expect to realize future tax benefits related to the utilization of these assets. If we determine in the future that we will not be able to fully utilize all or part of these deferred tax assets, we would increase our valuation allowance through earnings in the period the determination was made, which would have an adverse effect on our results of operations and earnings in future periods.

Product Warranty

General Warranty

The Company offers an assurance type warranty for its products against manufacturer defects and does not contain a service element. For these assurance type warranties, a provision for estimated future costs related to warranty expense is recorded when they are probable and reasonably estimable. This provision is based on historical information on the nature, frequency and average cost of claims for each product line. When little or no experience exists for an immature product line, the estimate is based on comparable product lines. Specific reserves are established once an issue is identified with the amounts for such reserves based on the estimated cost of correction. These estimates are re-evaluated on an ongoing basis using best-available information and revisions to estimates are made as necessary. These estimates are inherently uncertain given our relatively short history of sales, and actual results that differ from our assumptions and judgments could have a material adverse effect on our business, financial condition and results of operations.

Wire Insulation Shrinkback Warranty

The Company has been notified by certain customers that a subset of wire harnesses used in its EBOS solutions is presenting unacceptable levels of wire insulation shrinkback. Based upon the Company’s ongoing assessment, the Company currently believes the wire insulation shrinkback is related to defective red wire manufactured by Prysmian. As of December 31, 2023, based on the Company’s continued analysis, which included better visibility into the scope of affected sites and potential solutions, including identification, repair and replacement of harnesses, the Company determined that a potential range of loss was both probable and reasonably estimable and updated its estimate of potential losses from previously provided estimates. Based on the Company’s continued analysis of information available as of the date of this Annual Report, the estimate of potential losses remains unchanged from the estimate provided as of September 30, 2023. As no amount within the current range of loss appears to be a better estimate than any other amount, the Company has recorded a warranty liability and related expense representing the low end of the range of potential loss of $59.7 million. The high-end of the range of potential loss is $184.9 million, which is $125.2 million higher than the amount we have recorded. As of December 31, 2023, the Company recorded a warranty liability of $54.9 million related to this matter. The Company recorded total warranty expense related to this matter of $59.2 million and $0.5 million, respectively, during years ended December 31, 2023 and 2022.

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The estimated range is based on several assumptions, including the potential magnitude of EPC’s labor cost to identify and perform the repair and replacement of impacted harnesses, estimated failure rates, materials replacement cost, planned remediation method, inspection costs, and other various assumptions. These assumptions are highly subjective and require significant management judgment. As a result, these assumptions could prove to be materially different from our current estimate, causing us to incur substantial unanticipated expense to identify, repair or replace the defective wire or to compensate customers. As additional information has become available or becomes available, the Company has increased and may continue to increase or decrease its estimated warranty liability and related expense from its current estimate, and such increase or decrease may be material.

As of December 31, 2023, a 10% increase in harness installation costs, failure rate, materials replacement cost, and inspection costs would have resulted in an increase of the low end of the range of potential losses of $2.4 million, $1.2 million, $1.4 million, and $0.6 million, respectively. A 10% increase in harness installation costs and materials replacement cost would have resulted in an increase of the high end of the range of potential loss of $12.0 million and $5.8 million, respectively. Additionally, changes to the planned remediation method could also have a material impact on the warranty liability.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in steel, aluminum and copper prices and customer concentrations. We do not hold or issue financial instruments for trading purposes.

Concentrations of Major Customers

Our customers include EPCs, utilities, solar developers, and solar module manufacturers, but we derive the majority of our revenue from the sale of products to EPCs. Our EPC customers typically construct multiple projects for several different owners. One customer contributed approximately 36.3% of our total revenue for the year ended December 31, 2023 and 37.5% of accounts receivable as of December 31, 2023. Our five largest customers contributed approximately 56.9% of our total revenue for the year ended December 31, 2023 and 65.5% of accounts receivable as of December 31, 2023. The majority of our contracts require customer deposits ranging from 10 to 20% of the contract value. We continually evaluate our reserves for potential credit losses and establish reserves for such losses. The loss of this large customer or any significant customer could have a material adverse effect on our financial conditions and results of operations.

Commodity Price Risk

We are subject to risk from fluctuating market prices of certain commodity raw materials, including copper, that are used in our products. Prices of these raw materials may be affected by supply restrictions, inflation or other market factors from time to time, and we do not enter into hedging arrangements to mitigate commodity risk. Significant price increases for these raw materials could reduce our operating margins if we are unable to recover such increases from our customers, in the form of increased prices, which could harm our business, financial condition and results of operations.

Interest Rate Risk

As of December 31, 2023, our long-term debt totaled $183.8 million. We have interest rate exposure with respect to the entire balance as it is all variable interest rate debt. A 100 basis point increase/decrease in interest rates would impact our expected annual interest expense for the next 12 months by approximately $1.8 million.

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Item 8. Financial Statements and Supplementary Data

The financial statements required by this item are included in this Annual Report on Form 10-K beginning on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Management’s Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term as defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the U.S.

As of December 31, 2023, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Based on this assessment, our management concluded that, as of December 31, 2023, our internal control over financial reporting was effective based on those criteria.

Attestation Report of the Registered Public Accounting Firm

BDO USA, P.C, the independent registered public accounting firm that audited our financial statements included elsewhere in this Form 10-K, has issued an attestation report on our internal control over financial reporting. That report appears in "Item 8. Financial Statements and Supplementary Data" and is incorporated by reference to this Item 9A.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the fourth quarter of 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Item 9B. Other Information

Director Appointment

On February 27, 2024, the Board appointed Brandon Moss, the Company’s Chief Executive Officer, as a member of the Board based on Mr. Moss’s skills, qualifications and contributions to the Company and the Board since he began serving as Chief Executive Officer. Mr. Moss will serve as a Class III director until the Company’s Annual Meeting of Stockholders to be held in 2024, and until such time as his successor is duly elected and qualified, or until his earlier death, resignation or removal. In connection with Mr. Moss’s appointment the Board increased the number of directors on the Board from seven to eight.

The Company is not aware of any related party transactions or relationships between Mr. Moss and the Company that would require disclosure under Item 404(a) of Regulation S-K. Mr. Moss was not appointed as a director based on any arrangement or understanding between Mr. Moss and any other persons.

CAO Appointment

On February 27, 2024, the Company appointed Inez Lund as its Chief Accounting Officer, effective March 1, 2024. In this position, Ms. Lund will assume the role of the Company’s principal accounting officer from Dominic Bardos, who will continue to serve as the Company’s Chief Financial Officer.

Ms. Lund, age 58, has most recently served as the Company’s Controller since December 2021, and initially joined the Company in May 2021 as Tax Director. Before joining the Company, Ms. Lund was Senior Manager, Global Compliance and Reporting at Ernst & Young LLP between December 2019 and May 2021. From September 2014 to December 2019, Ms. Lund held several positions with American International Group, Inc., including Associate Director of Tax and Manager, AIG Global Investments Tax Group. Ms. Lund earned a Master’s degree in Professional Accountancy and a Bachelor’s degree in Accounting from University of Nebraska, Lincoln.

In connection with Ms. Lund’s appointment as Chief Accounting Officer of the Company, the Board has approved the following compensation for Ms. Lund, effective as of March 1, 2024: (i) an annual base salary of $300,000; (ii) an annual bonus with a target opportunity equal to 50% of base salary; and (iii) an equity award with respect to fiscal year 2024, with a target value equal to $205,000. The foregoing equity award will be granted in the form approved by the Compensation Committee of the Board under, and subject to, the terms and conditions of the Shoals Technologies Group, Inc. 2021 Long-Term Incentive Plan, and will vest in accordance with the applicable award agreements. Ms. Lund will also be entitled to participate in the Shoals Technologies Group, Inc. Executive Severance Plan.

Ms. Lund does not have any family relationships with any director, executive officer or person nominated or chosen by the Company to become a director or executive officer of the Company. The Company is not aware of any related transactions or relationships between Ms. Lund and the Company that would require disclosure under Item 404(a) of Regulation S-K. There are no arrangements or understandings between Ms. Lund and any other person pursuant to which Ms. Lund was selected as an officer of the Company.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

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Item 10. Directors, Executive Officers and Corporate Governance

The information required to be disclosed by this item is incorporated by reference to the Company’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Annual Report.

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

PART IV

Item 15. Exhibit and Financial Statement Schedules

(a)(1) Financial Statements.

The financial statements and supplementary data required by this item are included after the Signature page of this Annual Report on Form 10-K beginning on page F-1.

(a)(2) Financial Statement Schedules.

All schedules have been omitted because they are not required or because the required information is given in the Financial Statements or Notes thereto.

(a)(3) Exhibits.

The exhibits listed in the Exhibit Index below are filed or incorporated by reference as part of this Annual Report.

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EXHIBIT INDEX

Incorporated by Reference

Number Description of Document Form Filing Date Exhibit No.

10.12†* Form of RSU Grant Notice and Award Agreement (Tier A)

10.13†* Form of PSU Grant Notice and Award Agreement (Tier A)

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EXHIBIT INDEX

Incorporated by Reference

Number Description of Document Form Filing Date Exhibit No.

21.1* Subsidiaries of the Registrant

23.1* Consent of BDO USA, P.C., as to Shoals Technologies Group, Inc.

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EXHIBIT INDEX

Incorporated by Reference

Number Description of Document Form Filing Date Exhibit No.

97.1* Shoals Technologies Group, Inc. Clawback and Recoupment Policy

101.SCH* Inline XBRL Taxonomy Extension Schema Document

101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document

________

* Filed herewith

** Furnished herewith

† Indicates a management contract or compensatory plan.

Item 16. Form 10–K Summary

None

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on February 28, 2024.

Shoals Technologies Group, Inc.

By: /s/ Brandon Moss

Name: Brandon Moss

Title: Chief Executive Officer and Director

* * * *

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated.

Signature Title Date

Brandon Moss

/s/ Dominic Bardos Chief Financial Officer February 28, 2024

Dominic Bardos (Principal Financial and Accounting Officer)

/s/ Brad Forth Chair of the Board of Directors February 28, 2024

Brad Forth

/s/ Ty Daul Member of the Board of Directors February 28, 2024

Ty Daul

/s/ Lori Sundberg Member of the Board of Directors February 28, 2024

Lori Sundberg

/s/ Toni Volpe Member of the Board of Directors February 28, 2024

Toni Volpe

/s/ Peter Wilver Member of the Board of Directors February 28, 2024

Peter Wilver

/s/ Jeannette Mills Member of the Board of Directors February 28, 2024

Jeannette Mills

/s/ Robert Julian Member of the Board of Directors February 28, 2024

Robert Julian

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INDEX TO FINANCIAL STATEMENTS

Shoals Technologies Group, Inc.

Consolidated Balance Sheets F-6

Consolidated Statements of Operations F-7

Consolidated Statements of Cash Flows F-10

Notes to Consolidated Financial Statements F-12

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Shoals Technologies Group, Inc.

Portland, Tennessee

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Shoals Technologies Group, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in members’ / stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Warranty Liability related to Wire Insulation Shrinkback

As described in Note 9 to the consolidated financial statements, the Company has been notified by certain customers that a subset of wire harnesses used in its electrical balance of systems (“EBOS”) solutions is

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presenting unacceptable levels of pull back of wire insulation at connection points (“wire insulation shrinkback”). Based upon the Company’s ongoing assessment, the Company currently believes the wire insulation shrinkback is related to defective red wire from a specific manufacturer. As of December 31, 2023, the Company recorded a warranty liability related to this matter of $54.9 million.

We identified the warranty liability related to the wire insulation shrinkback as a critical audit matter because of certain significant assumptions used by management to estimate the warranty liability, specifically, the magnitude of engineering, procurement, and construction firms’ (“EPC’s”) labor costs, estimated failure rates, and planned remediation methods. Auditing these assumptions involved especially complex and subjective auditor judgment due to the nature and extent of audit effort required to address this matter.

The primary procedures we performed to address this critical audit matter included:

•Evaluating the time period associated with the defective red wire and verifying the sites included in management’s estimate are within the affected time period.

•Verifying a sample of sites included in management’s estimate to confirm the accuracy of the number of harnesses and affected wire.

•Vouching the EPC’s labor rates to external quotes. Recalculating the estimated labor costs using labor rates and the number of impacted harnesses and evaluating the impact on the liability calculation.

•For a sample of sites, agreeing the failure rates to external inspection reports and testing the impact of those on the liability calculation.

•Evaluating management’s designation of planned remediation methods across the population of affected sites.

/s/ BDO USA, P.C.

We have served as the Company's auditor since 2017.

Austin, Texas

February 28, 2024

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Shoals Technologies Group, Inc.

Portland, Tennessee

Opinion on Internal Control over Financial Reporting

We have audited Shoals Technologies Group, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in members’ / stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”) and our report dated February 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that

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controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, P.C.

Austin, Texas

February 28, 2024

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Shoals Technologies Group, Inc.

Consolidated Balance Sheets

(in thousands, except shares and par value)

December 31,

Assets

Current Assets

Liabilities and Stockholders’ Equity

Current Liabilities

Warranty liability—current portion 31,099 560

Long-term debt—current portion 2,000 2,000

Warranty liability, less current portion 23,815 —

Commitments and Contingencies (Note 16)

Stockholders’ Equity

Non-controlling interests — 9,615

Total Liabilities and Stockholders’ Equity $ 843,993 $ 594,895

See accompanying notes to consolidated financial statements.

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Shoals Technologies Group, Inc.

Consolidated Statements of Operations

(in thousands, except per share amounts)

Year Ended December 31,

Operating expenses

Payable pursuant to the tax receivable agreement adjustment — (6,675) (1,663)

Gain on termination of tax receivable agreement — 110,883 —

Loss on debt repayment — — (15,990)

Less: net income attributable to non-controlling interests 2,687 15,402 1,596

Earnings (Loss) per share of Class A common stock:

Weighted average shares of Class A common stock outstanding:

See accompanying notes to consolidated financial statements.

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Shoals Technologies Group, Inc.

Consolidated Statements of Changes in Members’ / Stockholders’ Equity (Deficit)

(in thousands, except shares)

Shares Amount Shares Amount

Net income prior to the Organizational Transactions 2,675 — — — — — — — 2,675

Activity subsequent to the Organizational Transactions:

Exchange of Class B to Class A common stock — 7,870,042 — (7,870,042) — — — — —

Equity-based compensation — — — — — 9,481 — — 9,481

Activity under stock compensation plan — — — — — (3,755) — 3,618 (137)

Distributions to non-controlling interests — — — — — — — (4,837) (4,837)

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Shoals Technologies Group, Inc.

Consolidated Statements of Changes in Members’ / Stockholders’ Equity (Deficit) (continued)

(in thousands, except shares)

Shares Amount Shares Amount

Vesting of restricted stock units — 40,665 — — — — — — —

Reallocation of non-controlling interests — — — — — (7,240) — 7,240 —

Equity-based compensation — — — — — 17,913 — — 17,913

Activity under equity-based compensation plan — — — — — (6,719) — 5,422 (1,297)

Distributions to non-controlling interests — — — — — — — (7,762) (7,762)

Vesting of restricted stock units — 480,116 — — — — — — —

Reallocation of non-controlling interests — — — — — (6,604) — 6,604 —

Equity-based compensation — — — — — 20,862 — — 20,862

Activity under equity-based compensation plan — — — — — (4,567) — 687 (3,880)

Distributions to non-controlling interests — — — — — — — (2,628) (2,628)

Vesting of restricted / performance stock units — 792,713 — — — — — — —

Reallocation of non-controlling interests — — — — — 10,361 — (10,361) —

See accompanying notes to consolidated financial statements.

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Shoals Technologies Group, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

Cash Flows from Operating Activities

Amortization/write off of deferred financing costs 2,165 1,365 5,969

Provision for credit losses 296 200 —

Provision for obsolete or slow-moving inventory 5,041 2,073 (1,418)

Payable pursuant to the tax receivable agreement adjustment — 6,675 1,663

Gain on termination of tax receivable agreement — (110,883) —

Gain on sale of assets — — 52

Changes in assets and liabilities, net of business acquisition:

Warranty liability (5,202) — —

Net Cash Provided by (Used in) Operating Activities 91,955 39,455 (4,083)

Cash Flows from Investing Activities

Purchases of property, plant and equipment (10,578) (3,154) (4,126)

Acquisition of a business, net of cash acquired — — (12,909)

Cash Flows from Financing Activities

Distributions to non-controlling interests (2,628) (7,762) (4,837)

Deferred financing costs — — (94)

Purchase of LLC Interests with proceeds from IPO — — (124,312)

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Shoals Technologies Group, Inc.

Consolidated Statements of Cash Flows (continued)

(in thousands)

Year Ended December 31,

Purchase of LLC Interests with proceeds from follow-on offering — — (281,064)

Payment of debt assumed in acquisition — — (1,537)

Early termination payment of tax receivable agreement — (58,000) —

Payment of fees for tax receivable agreement termination — (1,870) —

Net Cash Provided by (Used in) Financing Activities (67,167) (36,589) 20,602

Year Ended December 31,

Supplemental Cash Flows Information:

Non-cash investing and financing activities:

Income tax receivable from merger due to former owner $ — $ — $ 3,842

Deferred tax asset and additional paid-in capital from ConnectPV $ — $ — $ 238

Class A common stock issued in ConnectPV acquisition $ — $ — $ 6,500

See accompanying notes to consolidated financial statements.

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Shoals Technologies Group, Inc.

Notes to Consolidated Financial Statements

1. Organization and Business

Shoals Technologies Group, Inc. (the “Company”) was formed as a Delaware corporation on November 4, 2020 for the purpose of facilitating an initial public offering (“IPO”) and other related organizational transactions to carry on the business of Shoals Parent LLC and its subsidiaries (“Shoals Parent LLC”). Shoals Parent LLC was a Delaware limited liability company.

The Company is headquartered in Portland, Tennessee and is a manufacturer of electrical balance of systems (“EBOS”) solutions and components for solar, battery storage and electric vehicle charging applications, selling to customers primarily in the United States as well as internationally.

Initial Public Offering and Organizational Transactions

On January 29, 2021, the Company completed an IPO of 11,550,000 shares of Class A common stock at a public offering price of $25.00 per share, including shares issued pursuant to the underwriters’ over-allotment option. The Company received $278.8 million in proceeds, net of underwriting discounts and commissions of $9.9 million, which was used to purchase 6,315,790 newly-issued membership interests (“LLC Interests”) from Shoals Parent LLC and 5,234,210 LLC Interests from Dean Solon, our founder (the “Founder”), and Class B unit holder in Shoals Parent LLC at a price per interest equal to the IPO price of $25.00 per share.

In connection with the IPO, the Company and Shoals Parent LLC completed a series of transactions (the “Organizational Transactions”) including the following:

•the limited liability company agreement (the “LLC Agreement”) of Shoals Parent LLC was amended and restated to, among other things, (i) provide for a new single class of LLC Interests in Shoals Parent LLC, (ii) exchange all of the then existing membership interests of the holders of Shoals Parent LLC membership interests for LLC Interests and (iii) appoint the Company as the sole managing member of Shoals Parent LLC;

•the Company’s certificate of incorporation was amended and restated to, among other things, (i) provide for Class A common stock with voting and economic rights (ii) provide for Class B common stock with voting rights but no economic rights and (iii) issue 78,300,817 shares of Class B common stock to the former Class B and Class C members of Shoals Parent LLC (the “Continuing Equity Owners”) on a one-to-one basis with the number of LLC Interests they own; and

•the acquisition, by merger, of Shoals Investment CTB or the former Class A member of Shoals Parent LLC (the “Class A Shoals Equity Owners”), for which the Company issued 81,977,751 shares Class A common stock as merger consideration (the “Merger”).

Follow-On and Secondary Offerings

On July 16, 2021, the Company completed a secondary offering consisting of 4,989,692 shares of Class A common stock offered by the selling stockholders and 10,402,086 shares of Class A common stock offered by the Company. The Company used the proceeds of the sale of Class A common stock to purchase an equal number of LLC Interests and Class B common stock from our founder and management.

On December 6, 2022, the Company completed a secondary offering consisting of 27,900,000 shares of Class A common stock offered by the selling stockholders and 2,000,000 shares of Class A common stock offered by the Company. The Company used the proceeds of the sale of Class A common stock together with cash on hand, to make a payment of $58.0 million to terminate the Tax Receivable Agreement (“TRA”). See Note 18 - Payable Pursuant to the Tax Receivable Agreement.

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Shoals Technologies Group, Inc.

Notes to Consolidated Financial Statements

On March 10, 2023, the selling stockholders, which consisted of certain entities controlled by the Founder, completed a secondary offering consisting of 24,501,650 shares of Class A common stock. Following the closing of the secondary offering, the founder no longer owned any shares of our Class B common stock or LLC Interests. The Company did not receive any proceeds from the sale of shares of our Class A common stock by the selling stockholders in this offering.

Termination of Tax Receivable Agreement

On November 29, 2022, the Company entered into an amendment to the TRA (the “TRA Amendment”), dated as of January 29, 2021, pursuant to which the parties thereto agreed to grant the Company a right to terminate the TRA until December 31, 2022 (the “TRA Termination Right”) in exchange for a termination consideration of $58.0 million, payable in cash. The Company exercised its TRA Termination Right, and the TRA was terminated on December 6, 2022.

Entity Simplification

In March 2023, following the secondary offerings described above, all Continuing Equity Owners, 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, and prior to the July 1, 2023 contribution described below, all of the LLC Interests in Shoals Parent LLC were held by the Company, no other holders own LLC Interests and no Class B common stock is outstanding.

On July 1, 2023, the Company contributed 100% of its LLC Interests of Shoals Parent LLC to its wholly-owned subsidiary Shoals Intermediate Parent. Following the contribution, Shoals Parent LLC became a disregarded single member limited liability company, eliminating the umbrella-partnership C corporation structure (“Up-C structure”). Effective July 1, 2023, the Company owned 100% of Shoals Parent LLC together with its wholly-owned subsidiary, Shoals Intermediate Parent.

As of December 31, 2023, Shoals Technologies Group, Inc. owns directly or indirectly four subsidiaries: Shoals Intermediate Parent, Shoals Technologies Group, LLC, Shoals International, LLC and Shoals Energy Spain, S.L.

2. Summary of Significant Accounting Policies

Basis of Accounting and Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

Non-Controlling Interests

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Shoals Technologies Group, Inc.

Notes to Consolidated Financial Statements

The non-controlling interests on the consolidated statements of operations represented a portion of earnings or loss attributable to the economic interests in the Company’s former subsidiary, Shoals Parent LLC, formerly held by the Continuing Equity Owners. Non-controlling interests on the consolidated balance sheets represented the portion of net assets of the Company attributable to the Continuing Equity Owners, based on the portion of the LLC Interests owned by such unit holders. As of July 1, 2023, the Company, along with wholly-owned subsidiary Shoals Intermediate Parent, owned 100% of Shoals Parent LLC. Effective December 31, 2023, Shoals Parent LLC merged with and into Shoals Intermediate Parent with Shoals Intermediate Parent as the surviving corporation. See “Entity Simplification” in Note 1.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. Significant estimates include revenue recognition, allowance for credit losses, useful lives of property, plant and equipment and other intangible assets, impairment of long-lived assets, allowance for obsolete or slow moving inventory, payable pursuant to the TRA, valuation allowance on deferred tax assets, equity-based compensation expense and warranty liability.

Cash and Cash Equivalents

The Company considers cash and cash equivalents to include cash on hand, cash held in demand deposit accounts, and all highly liquid financial instruments purchased with a maturity of three months or less.

Restricted Cash

Restricted cash is included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the consolidated statements of cash flows. Restricted cash is restricted as to withdrawal or use. Prior to the termination of the TRA, tax distributions paid by Shoals Parent LLC to the Company were restricted under the LLC Agreement for future payments under the TRA and totaled $4.6 million as of December 31, 2021. There was no restricted cash as of December 31, 2022 or December 31, 2023.

A reconciliation of cash, cash equivalents and restricted cash to the consolidated statements of cash flows is as follows (in thousands):

As of December 31,

Restricted cash included in other current assets — — —

Restricted cash included in other assets — — 4,551

Total cash, cash equivalents and restricted cash $ 22,707 $ 8,766 $ 9,557

Accounts Receivable and Allowance for Credit Losses

Accounts receivable is comprised of amounts billed to customers, net of an allowance for credit losses. The allowance for credit losses is estimated by management and is based on historical experience, current conditions and reasonable forecasts. Periodically, management reviews the accounts receivable balances of its

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Shoals Technologies Group, Inc.

Notes to Consolidated Financial Statements

customers and adjusts the allowance based on current circumstances and charges off uncollectible receivables when all attempts to collect have failed, although collection efforts may continue.

Unbilled Receivables

Unbilled receivables arise when the Company recognizes revenue for amounts which cannot yet be billed under terms of the contract with the customer.

Inventory

Inventories consist of raw materials, work in process, and finished goods. Inventories are stated at the lower of cost or net realizable value. Cost is calculated using the first-in first-out method. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values.

Property, Plant, and Equipment

Property, plant, and equipment acquired in acquisitions are recorded at fair value at the date of acquisition; all other property, plant and equipment are recorded at cost, net of accumulated depreciation. Improvements, betterments and replacements which significantly extend the life of an asset are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Repair and maintenance costs are expensed as incurred.

A gain or loss on the sale of property, plant and equipment is calculated as the difference between the cost of the asset disposed of, net of accumulated depreciation, and the sales proceeds received. A gain or loss on an asset disposal is recognized in the period that the sale occurs.

Impairment of Long-Lived Assets

When events, circumstances or operating results indicate that the carrying values of long-lived assets might not be recoverable through future operations, the Company prepares projections of the undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the projections indicate that the recorded amounts are not expected to be recoverable, such amounts are reduced to estimated fair value. Fair value is estimated based upon internal evaluation of each asset that includes quantitative analyses of net revenue and cash flows, review of recent sales of similar assets and market responses based upon discussions in connection with offers received from potential buyers. Management determined there was no impairment for the years ended December 31, 2023, 2022 and 2021.

Goodwill

Goodwill is assessed using either a qualitative assessment or quantitative approach to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount. The qualitative assessment evaluates factors including macroeconomic conditions, industry-specific and company-specific considerations, legal and regulatory environments, and historical performance. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative assessment is performed. Otherwise, no further assessment is required. The quantitative approach compares the estimated fair value of the reporting units to its carrying amount, including goodwill. Impairment is indicated if the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, and an impairment charge is recognized for the differential.

The Company completes its annual goodwill impairment test as of October 1 each year. For the years ended December 31, 2023, 2022 and 2021, the Company performed a qualitative assessment of its goodwill and determined no impairment. Since the Company’s formation on May 9, 2017, the Company has not had any goodwill impairment.

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Shoals Technologies Group, Inc.

Notes to Consolidated Financial Statements

Amortizable and Other Intangible Assets

The Company amortizes identifiable intangible assets consisting of customer relationships, developed technology, trade names, backlog and noncompete agreements because these assets have finite lives. The Company’s intangible assets with finite lives are amortized on a straight‐line basis over the estimated useful lives. The basis of amortization approximates the pattern in which the assets are utilized over their estimated useful lives. The Company reviews for impairment indicators of finite-lived intangibles, as described in the “Impairment of Long-Lived Assets” significant accounting policy.

Deferred Offering Costs

Deferred offering costs consist primarily of registration fees, filing fees, listing fees, specific legal and accounting costs and transfer agent fees, which are direct and incremental fees related to the IPO and secondary offerings.

Deferred Financing Costs

Costs incurred to issue debt are capitalized and recorded net of the related debt and amortized using the effective interest method as a component of interest expense over the terms of the related debt agreement.

Revenue Recognition

The Company recognizes revenue primarily from the sale of EBOS systems and components. The Company determines its revenue recognition through the following steps: (i) identification of the contract or contracts with a customer, (ii) identification of the performance obligations within the contract, (iii) determination of the transaction price, (iv) allocation of the transaction price to the performance obligations within the contract, and (v) recognition of revenue as the performance obligation has been satisfied.

The Company’s contracts with customers predominately are accounted for as one performance obligation, as the majority of the obligations under the contracts relate to a single project. For each contract entered into, the Company determines the transaction price based on the consideration expected to be received. The transaction price identified is allocated to each distinct performance obligation to deliver a good or service based on the relative standalone selling prices. Management has concluded that the prices negotiated with each individual customer are representative of the standalone selling price of the product.

The Company primarily recognizes revenue over time as a result of the continuous transfer of control of its product to the customer using the output method based on units manufactured. This continuous transfer of control to the customer is supported by clauses in the contracts that provide rights to payment of the transaction price associated with work performed to date on products that do not have an alternative use to the Company. Management believes that recognizing revenue using the output method based on units manufactured best depicts the extent of transfer of control to the customer.

In certain instances the promised goods do have an alternative use. In these instances revenue is recognized when the customer obtains control of the product. Contracts of this nature typically include customer acceptance clauses, which results in revenue recognition occurring upon customer acceptance.

The Company has elected to adopt certain practical expedients and exemptions as allowed under the new revenue recognition guidance such as (i) recording sales commissions as incurred because the

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Shoals Technologies Group, Inc.

Notes to Consolidated Financial Statements

amortization period is less than one year, (ii) excluding any collected sales tax amounts from the calculation of revenue, and (iii) accounting for shipping and handling activities that are incurred after the customer has obtained control of the product as fulfillment costs rather than a separate service provided to the customer for which consideration would need to be allocated (see Shipping and Handling).

Shipping and Handling

The Company accounts for shipping and handling related to contracts with customers as costs to fulfill its promise to transfer the associated products. Accordingly, payment by the Company’s customers for shipping and handling costs for delivery of the Company’s products are recorded as a component of revenue in the accompanying consolidated statements of operations. Shipping and handling expenses are included as a component of cost of revenue as incurred and totaled $5.2 million, $7.0 million and $5.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Concentrations

The Company has cash deposited at certain financial institutions which, at times, may exceed the limits provided by the Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses on such amount and believes it is not subject to significant credit risk related to cash balances. As of December 31, 2023, $22.3 million of the Company’s bank balances were in excess of FDIC insurance limits.

The Company had the following revenue concentrations representing approximately 10% or more of revenue for the years ended December 31, 2023, 2022 and 2021 and related accounts receivable concentrations as of December 31, 2023 and 2022:

Revenue % AccountsReceivable % Revenue % AccountsReceivable % Revenue %

Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company follows a fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs may be used to measure fair value, as follows:

•Level 1 – Quoted prices in active markets for identical assets or liabilities.

•Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 – Unobservable inputs that are supported by little or no market activity that are significant to the fair value of the assets or liabilities.

The fair values of the Company’s cash and cash equivalents, accounts receivable, and accounts payable approximate their carrying values due to their short maturities. The carrying value of the Company’s

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Shoals Technologies Group, Inc.

Notes to Consolidated Financial Statements

long-term debt approximates fair value and is considered level 2, as it is based on current market rates at which the Company could borrow funds with similar terms.

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820-10 for nonfinancial assets and liabilities measured at fair value on a nonrecurring basis. As it relates to the Company, this applies to certain nonfinancial assets and liabilities acquired in business combinations.

Income Taxes

Pre-IPO Income Taxes

Shoals Parent LLC was treated as a partnership and was not subject to federal income tax; rather, Shoals Parent LLC’s taxable income was passed through to its members and subject to federal income tax at the member level.

Shoals Parent LLC and its subsidiary LLCs were generally not subject to state income tax; however, Shoals Technologies Group, LLC and Shoals Technologies, LLC paid various state and franchise taxes.

Post-IPO Income Taxes

The Company is taxed as a corporation for U.S. federal and state income tax purposes. Prior to July 1, 2023, the Company’s sole material asset was Shoals Parent LLC, which was a limited liability company that was taxed as a partnership for US federal and certain state and local income tax purposes. Shoals Parent LLC’s net taxable income and related tax credits, if any, were passed through to its members and included in the member’s tax returns.

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are calculated by applying existing tax laws and the rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the year of the enacted rate change.

In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that the deferred tax assets will be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations.

The Company accounts for uncertainty in income taxes using a recognition and measurement threshold for tax positions taken or expected to be taken in a tax return, which are subject to examination by federal and state taxing authorities. The tax benefit from an uncertain tax position is recognized when it is more likely than not that the position will be sustained upon examination by taxing authorities based on the technical merits of the position. The amount of the tax benefit recognized is the largest amount of the benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The effective tax rate and the tax basis of assets and liabilities reflect management’s estimates of the ultimate outcome of various tax uncertainties. The Company recognizes penalties and interest related to uncertain tax positions within the income tax expense financial statement caption in the accompanying consolidated statements of operations. The Company did not have any material interest and penalties during the years ended December 31, 2023, 2022 and 2021.

SHLS US Equity

SHLS · 10-K · period ended 2023-12-31

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibit and Financial Statement Schedules

Item 16. Form 10–K Summary

SHLS US Equity☆

SHLS · 10-K · period ended 2023-12-31

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibit and Financial Statement Schedules

Item 16. Form 10–K Summary

SHLS US Equity