−Removed: Risk factors which could cause actual results to differ from our expectations and which could negatively impact our financial condition and results of operations are discussed below and elsewhere in this Annual Report.
−Removed: The risks and uncertainties described below are not the only ones we face.
−Removed: If any of the risks or uncertainties described below or any additional risks and uncertainties actually occur, our business, results of operations and financial condition could be materially and adversely affected.
−Removed: In particular, forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified.
−Removed: See “Special Note Regarding Forward-Looking Statements.”
+Added: You should carefully consider the risks described below together with the other information set forth in this report, which could materially affect our business, financial condition and future results.
+Added: The risks described below are not the only risks facing our company.
+Added: Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.
Risks related to Our Business and Our Industry
We cannot be certain that we will sustain our current level of profitability in the future.
−Removed: We achieved a net profit of $84.2 million, $128.0 million and $145.0 million in the years ended December 31, 2017, 2018 and 2019, respectively.
−Removed: This high growth rate in profitability may not be sustainable over time.
−Removed: While we continue to grow our market share, our revenue growth is not expected to grow at the same pace that it has in past years.
−Removed: In addition, our revenue may decline for a number of possible reasons, many of which are outside our control, including a decline in demand for our products, increased competition, a decrease in the growth of the solar industry, or our failure to continue to capitalize on growth opportunities.
+Added: We achieved a net profit of $ $145.0 million and $140.3 million in the years ended December 31, 2019 and 2020, respectively.
+Added: Our revenue and profitability for the year ended December 31 st , 2020 did not grow as we previously anticipated mainly due to the adverse effects of COVID-19 on demands for our products, and on the global economy in general.
+Added: Furthermore, in the future, our revenues from both solar and non-solar business may not grow at the pace we anticipate, or may decline for a number of reasons, many of which are outside our control, including a decline in demand for our products, increased competition, a decrease in the growth of the solar industry, the short term and long term effects of COVID-19 on our industry and business, or our failure to continue to capitalize on growth opportunities.
If we fail to maintain sufficient revenue to support our operations, we may not be able to sustain profitability.
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Our entry into other adjacent markets through recent acquisitions is new and highly competitive and it is difficult to evaluate our future in these new markets as well.
−Removed: Much of our growth has occurred in recent periods.
The rapidly evolving and competitive nature of the solar industry makes it difficult to evaluate our current business and future prospects.
In addition, we have limited insight into emerging trends that may adversely affect our business, financial condition, results of operations and prospects.
−Removed: Our recent acquisitions in adjacent markets, such as UPSs, ESS and e-Mobility are new to us and these are highly competitive markets in which we will need to compete.
+Added: Our non-solar businesses in adjacent markets, such as UPSs, Battery and e-Mobility are new to us and these are highly competitive markets in which we will need to compete.
We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, including unpredictable and volatile revenues and increased expenses as we continue to grow our business.
−Removed: The viability and demand for solar energy solutions, UPS solutions, ESS and e-Mobility products, and in turn, our products, may be affected by many factors outside of our control, including:
+Added: The viability and demand for our products, may be affected by many factors outside of our control, including:
cost competitiveness, reliability and performance of solar PV systems compared to conventional and non-solar renewable energy sources and products;
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the emergence, continuance or success of, or increased government support for, other alternative energy generation technologies and products.
−Removed: If we do not manage these risks and overcome these difficulties successfully, our business and results of operations will suffer.
If demand for solar energy solutions does not continue to grow or grows at a slower rate than we anticipate, our business and results of operations will suffer.
−Removed: Our solution is utilized in solar PV installations.
−Removed: As a result, our future success depends on continued demand for solar energy solutions and the ability of solar equipment vendors to meet this demand.
−Removed: The solar industry is an evolving industry that has experienced substantial changes in recent years, and we cannot be certain that consumers and businesses, with respect to distributed solar solutions, or utilities, with respect to utility-scale solar projects, will adopt solar PV systems as an alternative energy source at levels sufficient to grow our business.
+Added: Our revenues are primarily derived from products utilized in solar PV installations.
+Added: Thus, our future success depends on continued demand for solar energy solutions and the ability of vendors to meet this demand.
+Added: The solar industry is an evolving industry that has experienced substantial changes in recent years, and we cannot be certain that consumers, businesses, or utilities will adopt solar PV systems as an alternative energy source at levels sufficient to grow our business.
If demand for solar energy solutions fails to develop sufficiently, demand for our products will decrease, which would have an adverse impact on our ability to increase our revenue and grow our business.
−Removed: The reduction, elimination or expiration of government subsidies and economic incentives for on-grid solar electricity applications could reduce demand for solar PV systems and harm our business.
−Removed: Federal, state, local and foreign government bodies provide incentives to owners, end users, distributors, system integrators and manufacturers of solar PV systems to promote solar electricity in the form of rebates, tax credits and other financial incentives such as system performance payments, payments of renewable energy credits associated with renewable energy generation and exclusion of solar PV systems from property tax assessments.
−Removed: The market for on-grid applications, where solar power is used to supplement a customer’s electricity purchased from the utility network or sold to a utility under tariff, often depends in large part on the availability and size of government and economic incentives that vary by geographic market.
−Removed: Because our customers’
−Removed: sales are typically into the on-grid market, the reduction, elimination or expiration of government subsidies and economic incentives for on-grid solar electricity may negatively affect the competitiveness of solar electricity relative to conventional and non-solar renewable sources of electricity, and could harm or halt the growth of the solar electricity industry and our business.
−Removed: For example, in 2015 the U.S congress passed a multi-year extension to the solar Investment Tax Credit (ITC), such extension helped exponentially grow the U.S solar market.
−Removed: As of January 1, 2020 the ITC is being gradually reduced from 30 percent to 26 percent for both residential and commercial in 2020 and is expected to reach 10 percent for commercial only in 2023.
−Removed: The reduction in the ITC could reduce the demand for solar energy solutions in the U.S which would have an adverse impact on our business, financial condition, and results of operations.
−Removed: In general subsidies and incentives may expire on a particular date, end when the allocated funding is exhausted or be reduced or terminated as solar energy adoption rates increase or as a result of legal challenges, the adoption of new statutes or regulations or the passage of time.
−Removed: These reductions or terminations often occur without warning.
−Removed: In addition, several jurisdictions have adopted renewable portfolio standards, which mandate that a certain portion of electricity delivered by utilities to customers come from a set of eligible renewable energy resources by a certain compliance date.
−Removed: Some programs further specify that a portion of the renewable energy quota must be from solar electricity.
−Removed: Under some programs, a utility can receive a “credit”
−Removed: for renewable energy produced by a third party by either purchasing the electricity directly from the producer or paying a fee to obtain the right to renewable energy generated but used by the generator or sold to another party.
−Removed: A renewable energy credit allows the utility to add this electricity to its renewable portfolio requirement total without actually expending the capital for generating facilities.
−Removed: However, there can be no assurances that such policies will continue.
−Removed: For example, in December 2015, Nevada's Public Utilities Commission increased the fixed service charge for net-metered solar customers and lowered compensation for net excess solar generation Proposals to extend compliance deadlines, reduce targets or repeal standards have also been introduced in a number of states.
−Removed: Reduction or elimination of renewable portfolio standards or successful efforts to meet current standards could harm or halt the growth of the solar PV industry and our business.
−Removed: Changes in the U.S.
−Removed: trade environment, including the recent imposition of import tariffs, could adversely affect the amount or timing of our revenues, results of operations or cash flows.
−Removed: Escalating trade tensions between the United States and China have led to increased tariffs and trade restrictions, including tariffs applicable to certain of our products.
−Removed: In January 2018, a tariff on imported solar modules and cells was adopted in the United States.
−Removed: The tariff, which does not apply directly to our products, except possibly with respect to power optimizers that are embedded onto solar panels in China, was initially set at 30%, with a gradual reduction over four years to 15%.
−Removed: In addition, in July 2018, a 10% tariff on a long list of products imported from China, including inverters and power optimizers was adopted in the United States under Section 301 of the Trade Act of 1974, and became effective on September 24, 2018.
−Removed: In June 2019, the USTR increased the rate of such tariffs from 10% to 25%.
−Removed: On January 15, 2020, the United States and China entered into an initial trade deal which preserves the bulk of the tariffs placed in 2018 and maintains a threat of additional sanctions should China breach the terms of the deal.
−Removed: In order to mitigate the negative effect of increased tariffs, we raised the price of our products sold in the United States in the third quarter of 2019.
−Removed: Despite the price increases, the tariffs had a negative effect on our gross margins.
−Removed: In response to the increased tariffs, we focused efforts and resources on opening an additional manufacturing facility in Vietnam.
−Removed: The tariffs and the possibility of additional tariffs in the future have created uncertainty in the industry.
−Removed: If the price of solar systems in the United States increases, the use of solar systems could become less economically feasible and could reduce our gross margins or reduce the demand of solar systems manufactured and sold, which in turn may decrease demand for our products.
−Removed: Additionally, existing or future tariffs may negatively affect key customers, suppliers, and manufacturing partners.
−Removed: Such outcomes could adversely affect the amount or timing of our revenues, results of operations or cash flows, and continuing uncertainty could cause sales volatility, price fluctuations or supply shortages or cause our customers to advance or delay their purchase of our products.
−Removed: It is difficult to predict what further trade-related actions governments may take, which may include additional or increased tariffs and trade restrictions, and we may be unable to quickly and effectively react to such actions.
−Removed: Changes to net metering policies may significantly reduce demand for electricity from solar PV systems and harm our business.
−Removed: Our business benefits from favorable net metering policies in most U.S.
−Removed: states and some European countries in which our customers operate.
−Removed: Net metering allows a solar PV system owner to pay his or her local electric utility only for power usage net of production from the solar PV system, transforming the conventional relationship between customers and traditional utilities.
−Removed: System owners receive credit for the energy that the solar installation generates to offset energy usage at times when the solar installation is not generating energy.
−Removed: Under a net metering program, the customer typically pays for the net energy used or receives a credit against future bills at the retail rate if more energy is produced than consumed.
−Removed: In some locations, customers are also reimbursed by the electric utility for net excess generation on a periodic basis.
−Removed: states have adopted some form of net metering.
−Removed: However, net metering programs have recently come under regulatory scrutiny in some U.S.
−Removed: states due to challenges alleging that net metering policies inequitably shift costs onto non-solar ratepayers by allowing solar ratepayers to sell electricity at rates that are too high for utilities to recoup their fixed costs.
−Removed: We cannot assure you that the programs will not be significantly modified going forward.
−Removed: If the value of the credit that customers receive for net metering is significantly reduced, end-users may be unable to recognize the same level of cost savings associated with net metering that current end-users enjoy.
−Removed: The absence of favorable net metering policies or of net metering entirely, or the imposition of new charges that only or disproportionately affect end-users that use net metering would significantly limit demand for solar PV systems that are sold by our customers and could have a material adverse effect on our business, financial condition, results of operations and future growth.
−Removed: Existing electric utility industry regulations, and changes to regulations, may present technical, regulatory, and economic barriers to the purchase and use of solar PV systems that may significantly reduce demand for our products or harm our ability to compete.
−Removed: Federal, state, local and foreign government regulations and policies concerning the electric utility industry, and internal policies and regulations promulgated by electric utilities, heavily influence the market for electricity generation products and services.
−Removed: These regulations and policies often relate to electricity pricing and the interconnection of customer-owned electricity generation, and governments and utilities continuously modify these regulations and policies.
−Removed: These regulations and policies could deter purchases of renewable energy products, including solar PV systems sold by our customers.
−Removed: This could result in a significant reduction in the potential demand for our products.
−Removed: For example, utilities commonly charge fees to larger, industrial customers for disconnecting from the electric grid or for having the capacity to use power from the electric grid for back-up purposes.
−Removed: These fees could increase the cost to use solar PV systems sold by our customers and make them less desirable, thereby harming our business, prospects, financial condition and results of operations.
−Removed: In addition, depending on the region, electricity generated by solar PV systems competes most effectively with expensive peak-hour electricity from the electric grid, rather than the less expensive average price of electricity.
−Removed: Modifications to the utilities’
−Removed: peak hour pricing policies or rate design, such as to a flat rate, could require the price of solar PV systems and their component parts to be lower in order to compete with the price of electricity from the electric grid.
−Removed: Changes in current laws or regulations applicable to us or the imposition of new laws and regulations in the U.S., Europe, or other jurisdictions in which we do business could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Any changes to government or internal utility regulations and policies that favor electric utilities could reduce the competitiveness of solar PV systems sold by our customers and cause a significant reduction in demand for our products and services.
−Removed: For example, regulators in certain U.S.
−Removed: states have been asked to consider proposals to assess fees on consumers purchasing energy from solar PV systems or imposing a new charge that would disproportionately impact solar PV system owners who utilize net metering, either of which would increase the cost of solar PV energy to those consumers and could reduce demand for our products.
−Removed: Any similar government or utility policies adopted in the future that discourage the growth of solar PV systems could reduce demand for our products and services and adversely impact our growth.
−Removed: In addition, changes in our products or changes in export and import laws and implementing regulations may create delays in the introduction of new products in international markets, prevent our customers from deploying our products internationally or, in some cases, prevent the export or import of our products to certain countries altogether.
−Removed: Any such event could have a material adverse effect on our business, financial condition, and results of operations.
A drop in the retail price of electricity derived from the utility grid or from alternative energy sources may harm our business, financial condition, results of operations, and prospects.
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relief of transmission constraints that enable local centers to generate energy less expensively;
−Removed: reductions in the price of natural gas;
+Added: reductions in the price of natural gas, or alternative energy resources other than solar;
utility rate adjustment and customer class cost reallocation;
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Many end-users depend on financing to fund the initial capital expenditure required to develop, build, or purchase a solar PV system.
−Removed: As a result, an increase in interest rates or a reduction in the supply of project debt financing or tax equity investments, could reduce the number of solar projects that receive financing or otherwise make it difficult for our customers or their customers, the end-users, to secure the financing necessary to develop, build, purchase, or install a solar PV system on favorable terms, or at all, and thus lower demand for our products which could limit our growth or reduce our net sales.
+Added: As a result, an increase in interest rates or a reduction in the supply of project debt financing or tax equity investments, could reduce the number of solar projects that receive financing or otherwise make it difficult for our customers or the end-users, to secure the financing necessary to develop, build, purchase, or install a solar PV system on favorable terms, or at all, and thus lower demand for our products which could limit our growth or reduce our net sales.
In addition, we believe that a significant percentage of end-users install solar PV systems as an investment, funding the initial capital expenditure through financing.
An increase in interest rates could lower such end-user’s return on investment on a solar PV system, increase equity return requirements or make alternative investments more attractive relative to solar PV systems, and, in each case, could cause such end-users to seek alternative investments.
+Added: Furthermore, the continuous effects of COVID-19 on the economy may influence the end-users willingness to invest in solar PV systems to our detriment, both due to end-users’
+Added: economic uncertainly as well as the market’s unwillingness to extend favorable financial terms to the end-users.
The market for our products is highly competitive and we expect to face increased competition as new and existing competitors introduce power optimizers, inverters, solar PV system monitoring and other smart energy products, which could negatively affect our results of operations and market share.
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Currently, our DC optimized inverter system competes with products from traditional inverter manufacturers, and microinverter manufacturers, as well as emerging technology companies offering alternative MLPE products.
−Removed: Over the past few years, several new entrants to the inverter and MLPE market including low-cost Asian manufacturers, have recently announced plans to ship or have already shipped products in markets in which we sell our products, including most recently, with respect to sales in Australia and in Europe.
+Added: Over the past few years, several new entrants to the inverter and MLPE market including low-cost Asian manufacturers, have announced plans to ship or have already shipped products in markets in which we sell our products, including, with respect to sales in Australia and in Europe.
We expect competition to intensify as new and existing competitors enter the market.
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The solar industry has undergone challenging business conditions in past years, including downward pricing pressure for PV modules, mainly as a result of overproduction, and reductions in applicable governmental subsidies, contributing to demand decreases.
−Removed: Although the solar industry has recovered from this downturn, there is no assurance that the solar industry will not suffer significant downturns in the future, which will adversely affect demand for our solar products and our results of operations.
+Added: Therefore, there is no assurance that the solar industry will not suffer significant downturns in the future, which will adversely affect demand for our solar products and our results of operations.
Defects or performance problems in our products could result in loss of customers, reputational damage, and decreased revenue, and we may face warranty, indemnity, and product liability claims arising from defective products.
1 unchanged sentence
Errors, defects, or poor performance can arise due to design flaws, defects in raw materials or components or manufacturing difficulties, which can affect both the quality and the yield of the product.
−Removed: In the first three quarters of 2019, we indeed experienced an increased number of single-phase inverter failures and heightened call center activity which we attributed to releasing new products and capabilities which is typically characterized by an initial period of stabilization until manufacturing processes are fully mature.
−Removed: Any actual or perceived errors, defects, or poor performance in our products could result in the replacement or recall of our products, shipment delays, rejection of our products, damage to our reputation, lost revenue, diversion of our engineering personnel from our product development efforts, and increases in customer service and support costs, all of which could have a material adverse effect on our business, financial condition, and results of operations.
+Added: Any actual or perceived errors, defects, or poor performance in our products could result in the replacement or recall of our products, or components thereof, shipment delays, rejection of our products, damage to our reputation, lost revenue, diversion of our personnel from our product development efforts, and increases in customer service and support costs, all of which could have a material adverse effect on our business, financial condition, and results of operations.
Furthermore, defective components may give rise to warranty, indemnity, or product liability claims against us that exceed any revenue or profit we receive from the affected products.
−Removed: We offer a minimum 12-year limited warranty for our inverters, extendable to twenty five years for an additional cost, and a 25-year limited warranty for our power optimizers.
+Added: In most cases, we offer a minimum 12-year limited warranty for our inverters, extendable to twenty five years for an additional cost, and a 25-year limited warranty for our power optimizers.
Our limited warranties cover defects in materials and workmanship of our products under normal use and service conditions.
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Our failure to accurately predict future claims could result in unexpected volatility in, and have a material adverse effect on, our financial condition.
−Removed: If one of our products were to cause injury to someone or cause property damage, including as a result of product malfunctions, defects, or improper installation, then we could be exposed to product liability claims.
+Added: If one of our products were to cause injury to someone or cause property damage then we could be exposed to product liability claims.
We could incur significant costs and liabilities if we are sued and if damages are awarded against us.
1 unchanged sentence
The successful assertion of a product liability claim against us could result in potentially significant monetary damages, penalties or fines, subject us to adverse publicity, damage our reputation and competitive position, and adversely affect sales of our products.
−Removed: In addition, product liability claims, injuries, defects, or other problems experienced by other companies in the residential solar industry could lead to unfavorable market conditions for the industry as a whole, and may have an adverse effect on our ability to attract new customers, thus harming our growth and financial performance.
−Removed: If we do not forecast demand for our products accurately, we may experience product shortages, delays in product shipment, excess product inventory, or difficulties in planning expenses, which will adversely affect our business and financial condition.
−Removed: Our products are manufactured according to our estimates of customer demand, which requires us to make multiple forecasts and assumptions relating to demand from solar PV installers and distributors, their end customers, and general market conditions.
−Removed: Because we sell a large portion of our products to larger solar installers and various distributors, who in turn sell to local installers, who in turn sell to their end customers, the system owner, we have limited visibility as to end customer demand and it is difficult to forecast future end-user demand to plan our operations.
−Removed: If we overestimate demand for our products, or if purchase orders are cancelled or shipments are delayed, we may have excess inventory that we cannot sell.
−Removed: Conversely, if we underestimate demand, we may not have sufficient inventory to meet end customer demand or to ramp up production at our contract manufacturers in a timely manner, or we could incur additional costs, lose market share, damage relationships with our distributors and end customers and forego potential revenue opportunities.
−Removed: For example, in late 2017, and during the years ended December 31, 2018 and 2019, we had high customer demand and certain component shortages which forced us to shorten transportation time from our factories in China by using air freight rather than less expensive ocean freight.
−Removed: We face risks related to actual or threatened health epidemics and other outbreaks, which could significantly disrupt our manufacturing and operations.
−Removed: Our business could be adversely impacted by the effects of a widespread outbreak of contagious disease, including the recent outbreak of respiratory illness caused by a novel coronavirus first identified in Wuhan, China.
−Removed: Any widespread outbreak of contagious diseases, and other adverse public health developments, could cause disruption to our suppliers and contract manufacturers located in China and elsewhere and have a material and adverse effect on our business operations.
−Removed: Our suppliers and manufacturers could be disrupted by worker absenteeism, quarantines, office and factory closures, disruptions to ports and other shipping infrastructure, or other travel or health-related restrictions.
−Removed: If our suppliers or manufacturers are so affected, our supply chain, manufacturing and product shipments will be delayed, which could adversely affect our business, operations and customer relationships.
−Removed: In addition, the macroeconomic effects of the coronavirus outbreak in China and other markets could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and likely impact our operating results.
−Removed: Our business is also highly dependent on travel of our sales, operations, quality and reliability and other managers and employees.
−Removed: Limitations placed on travel, both to China and other regions in Asia or elsewhere could significantly limit our ability to continue to market our products, establish relationships with new customers, lead training of installers and oversee and maintain quality control of our manufacturing lines.
−Removed: Although the impact of the coronavirus outbreak on our business and operations remains uncertain, the continued spread of the coronavirus or the occurrence of other epidemics and the imposition of related public health measures and travel restrictions may adversely impact our business, financial condition, operating results and cash flows.
−Removed: We are dependent on ocean transportation to deliver our products in a cost efficient manner.
−Removed: If we are unable to use ocean transportation to deliver our products, our business and financial condition could be materially and adversely impacted.
−Removed: We rely on commercial ocean transportation for the delivery of a large percentage of our products to our customers.
−Removed: We also rely on more expensive air transportation when ocean transportation is not available or compatible with the delivery time requirements of our customers or when we are unable to meet the growing volume demands of our customers and need to accelerate delivery times.
−Removed: Our ability to deliver our products via ocean transportation could be adversely impacted by shortages in available cargo capacity, changes by carriers and transportation companies in policies and practices, such as scheduling, pricing, payment terms and frequency of service or increases in the cost of fuel, taxes and labor, disruptions to ports and other shipping facilities as a result of the coronavirus or other epidemics, and other factors, such as labor strikes and work stoppages, not within our control.
−Removed: If we are unable to use ocean transportation and are required to substitute more expensive air transportation, our financial condition and results of operations could be materially and adversely impacted.
+Added: In addition, product liability claims, injuries, defects, or other problems experienced by other companies in the residential solar industry could lead to unfavorable market conditions for the industry as a whole.
We depend upon a small number of outside contract manufacturers.
Our operations could be disrupted if we encounter problems with these contract manufacturers.
−Removed: While we are developing our own internal manufacturing capabilities, we rely upon our contract manufacturers to manufacture all of our products.
+Added: While we are manufacturing a small portion of our products in Israel, we still heavily rely upon our contract manufacturers to manufacture most of our products.
We mainly rely on two contract manufacturers.
−Removed: Any change in our relationship with our contract manufacturers or changes to contractual terms of our agreements with the contract manufacturers could adversely affect our financial condition and results of operations.
+Added: Any change in our relationship or contractual terms with our contract manufacturers, or changes in our contract manufacturers’
+Added: ability to comply with their contractual obligations could adversely affect our financial condition and results of operations.
Our reliance on a small number of contract manufacturers makes us vulnerable to possible capacity constraints and reduced control over component availability, delivery schedules, manufacturing yields and costs.
−Removed: Even once we begin manufacturing in our facility in northern Israel, the expected production volumes will not be sufficient to relive our significant dependence on our contract manufacturers.
+Added: Even though we have commenced manufacturing in our facility in Israel, the expected production volumes will not be sufficient to relieve our significant dependence on our contract manufacturers.
In addition, we will remain heavily dependent on suppliers of the components needed for our manufacturing.
The revenues that our contract manufacturers generate from our orders represent a relatively small percentage of their overall revenues.
−Removed: As a result, fulfilling our orders may not be considered a priority in the event of constrained ability to fulfill all of their customer obligations in a timely manner.
−Removed: In addition, the facilities in which our products are manufactured are located outside of the U.S., currently in China, Vietnam and Hungary.
+Added: As a result, fulfilling our orders may not be considered a priority in the event of constrained ability to fulfill all of their customer obligations in a timely manner, especially in light of restrictions imposed by COVID -19.
+Added: In addition, the facilities in which our products are manufactured are located outside of the U.S., currently in China, Vietnam, Israel, and Hungary.
The location of these facilities outside of key markets such as the U.S.
increases shipping time, thereby causing a long lead time between manufacturing and delivery.
−Removed: If any of our contract manufacturers were unable or unwilling to manufacture our products in required volumes and at high quality levels or renew existing terms under supply agreements, we would have to identify, qualify, and select acceptable alternative contract manufacturers.
−Removed: An alternative contract manufacturer may not be available to us when needed or may not be in a position to satisfy our quality or production requirements on commercially reasonable terms, including price.
−Removed: Any significant interruption in manufacturing would require us to reduce our supply of products to our customers or increase our shipping costs to make up for delays in manufacturing, which in turn could reduce our revenues, harm our relationships with our customers and damage our reputation with local installers and potential end-users, and cause us to forego potential revenue opportunities.
+Added: If either of our contract manufacturers were unable or unwilling to manufacture our products in required volumes and at high quality levels or renew existing terms under supply agreements, we would have to identify, qualify, and select acceptable alternative contract manufacturers, which may not be available to us when needed or may not be in a position to satisfy our quality or production requirements on commercially reasonable terms.
+Added: Any significant interruption in manufacturing would require us to reduce our supply of products to our customers or increase our shipping costs to make up for delays in manufacturing, which in turn could reduce our revenues, harm our relationships with our customers, subject us to liquidated damages for late deliveries, and damage our reputation with local installers and potential end-users, all of which will cause us to forego potential revenue opportunities.
+Added: Further, the ramp of a new contract manufacturer is time consuming and draining on the resources of our operations team.
We may experience delays, disruptions, or quality control problems in our manufacturing operations.
−Removed: Our product development, manufacturing, and testing processes are complex and require significant technological and production process expertise.
−Removed: Such processes involve a number of precise steps from design to production.
−Removed: Any change in our processes could cause one or more production errors, requiring a temporary suspension or delay in our production line until the errors can be researched, identified, and properly addressed and rectified.
+Added: Our product development, manufacturing, and testing processes are complex and require significant technological and production process expertise, involving a number of precise steps from design to production.
+Added: Any change in our processes could cause one or more production errors, requiring a temporary suspension or delay in our production line until the errors can be identified and properly rectified.
This may occur particularly as we introduce new products, modify our engineering and production techniques, and/or expand our capacity.
−Removed: In addition, our failure to maintain appropriate quality assurance processes could result in increased product failures, loss of customers, increased warranty reserve, increased production, and logistical costs and delays.
+Added: In addition, our failure to maintain appropriate quality assurance processes could result in increased product failures, loss of customers, increased warranty reserve, increased costs and delays.
Any of these developments could have a material adverse effect on our business, financial condition, and results of operations.
We depend on a limited number of suppliers for key components and raw materials in our products to adequately meet anticipated demand.
−Removed: Due to the limited number of such suppliers, any cessation of operations or production or any shortage, delay, price change, imposition of tariffs or duties, or other limitation on our ability to obtain the components and raw materials we use could result in sales delays, higher costs associated with air shipments, cancellations, and loss of market share.
+Added: Due to the limited number of such suppliers, any changes or shortages in raw materials or key components we use could result in sales delays, higher costs associated with air shipments, cancellations, and loss of market share.
We depend on limited or single source suppliers for certain key components and raw materials used to manufacture our products, making us susceptible to quality issues, shortages, and price changes.
−Removed: Any of these limited or single source suppliers could stop producing our components or supplying our raw materials, cease operations or be acquired by, or enter into exclusive arrangements with, one or more of our competitors.
−Removed: As a result, these suppliers could stop selling to us at commercially reasonable prices, or at all.
−Removed: Because there are a limited number of suppliers of solar PV system components, e-Mobility components and raw materials used to manufacture our products, including for manufacturing lithium-ion batteries, it may be difficult to quickly identify alternate suppliers or to qualify alternative components or raw materials on commercially reasonable terms, and our ability to satisfy customer demand may be adversely affected.
+Added: Any of these limited or single source suppliers could stop supplying, or offering at commercially reasonable prices, our components or raw materials, cease operations or be acquired by, or enter into exclusive arrangements with our competitors.
+Added: Because there are a few suppliers of raw materials used to manufacture our products, it may be difficult to timely identify and/or qualify alternate suppliers on commercially reasonable terms;
+Added: therefore our ability to satisfy customer demand may be adversely affected.
Transitioning to a new supplier or redesigning a product to accommodate a new component manufacturer would result in additional costs and delays.
These outcomes could harm our business or financial performance.
−Removed: Managing our supplier and contractor relationships is particularly difficult when we are introducing new products and when demand for our products is increasing, especially if demand increases more quickly than we expect.
+Added: Managing our supplier and contractor relationships is particularly difficult when we are introducing new products.
+Added: For example, as we begin to ramp assembly and production of powertrain kits for the automotive industry, we are heavily reliant on third party suppliers that need to be approved through rigorous testing and validation processes for use in our supply chain.
+Added: Once selected, it is timely and costly to replace such vendors.
Any interruption in the supply of limited source components or raw materials for our products would adversely affect our ability to meet scheduled product deliveries to our customers, could result in lost revenue or higher expenses associated with increased air shipments required to meet customer demand in a timely manner, and would harm our business.
−Removed: For example, during 2017, 2018 and to a lesser extent in 2019, the solar industry suffered from component shortages which affected our ability to timely receive components within lead time and caused an extension of certain lead times by our suppliers.
−Removed: This shortages resulted in a delay in cost reduction activities, which negatively impacted our gross margin, as well as necessitated expedited air shipments that had an impact on our operating margins.
−Removed: Failure by our contract manufacturers or our component or raw material suppliers to use ethical business practices and comply with applicable laws and regulations may adversely affect our business.
−Removed: We do not control our contract manufacturers or suppliers or their business practices.
−Removed: Accordingly, we cannot guarantee that they follow ethical business practices such as fair wage practices and compliance with environmental, safety, and other local laws.
−Removed: A lack of demonstrated compliance could lead us to seek alternative manufacturers or suppliers, which could increase our costs and result in delayed delivery of our products, product shortages, or other disruptions of our operations.
−Removed: Violation of labor or other laws by our manufacturers or suppliers or the divergence of a supplier’s labor or other practices from those generally accepted as ethical in the U.S.
−Removed: or other markets in which we do business could also attract negative publicity for us and harm our business.
−Removed: Our results of operations may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our results of operations for a particular period to fall below expectations, resulting in a decline in the price of our common stock.
−Removed: Our quarterly results of operations are difficult to predict and may fluctuate significantly in the future.
−Removed: We have experienced seasonal and quarterly fluctuations in the past as a result of seasonal fluctuations in our customers’
−Removed: For example, our customers’
−Removed: and end-users’
−Removed: ability to install solar energy systems is affected by weather, as for example during the winter months in Europe and the northeastern U.S.
−Removed: Such installation delays can impact the timing of orders for our products.
−Removed: Further, given that we are operating in an industry that is affected by fluctuations as a result of economic factors such as tariff changes, the true extent of these fluctuations may have been masked by our recent growth rates and consequently may not be readily apparent from our historical results of operations and may be difficult to predict.
−Removed: Our financial performance, sales, working capital requirements, and cash flow may fluctuate, and our past quarterly results of operations may not be good indicators of future performance.
−Removed: Any substantial decrease in revenues would have an adverse effect on our financial condition, results of operations, cash flows, and stock price.
−Removed: We rely on distributors and large installers to assist in selling our products, and the failure of these customers to perform as expected could reduce our future revenue.
−Removed: We currently sell a substantial percentage of our products through distributors, who in turn sell to local installers, and through direct sales to large installers.
−Removed: We do not have exclusive arrangements with these third party distributors and large installers.
−Removed: Many of our distributors also market and sell products from our competitors, and all of our large installer customers also use products from our competitors.
−Removed: These distributors and large installers may terminate their relationships with us at any time and with little or no notice.
−Removed: Further, these distributors and large installers may fail to devote resources necessary to sell our products at the prices, in the volumes, and within the time frames that we expect, or may focus their marketing and sales efforts on products of our competitors.
−Removed: Termination of agreements with current distributors or large installers, failure by these distributors or large installers to perform as expected, or failure by us to cultivate new distributor or large installer relationships, could hinder our ability to expand our operations and harm our revenue and results of operations.
−Removed: The loss of one or more members of our senior management team or other key personnel or our failure to attract additional qualified personnel may adversely affect our business and our ability to achieve our anticipated level of growth.
−Removed: We depend on the continued services of our senior management team, including our chief executive officer and chief financial officer, and other key personnel, each of whom would be difficult to replace.
−Removed: The loss of any such personnel could have a material adverse effect on our business and ability to implement our business strategy.
−Removed: In August 2019, we announced the untimely death of Mr.
−Removed: Guy Sella, our chairman, chief executive officer and co-founder.
−Removed: While the Company’s short term performance has continued as planned and on target, we cannot ensure that his loss will not negatively impact the long term strategy execution and continued innovative planning of our Company, which was led in large part by him.
−Removed: All of our employees, including our senior management, are free to terminate their employment relationships with us at any time.
−Removed: We do not maintain key-person insurance for any of our employees, including senior management.
−Removed: Additionally, our ability to attract qualified personnel, including senior management and key technical personnel, is critical to the execution of our growth strategy.
−Removed: Competition for qualified senior management personnel and highly skilled individuals with technical expertise is extremely intense, and we face challenges identifying, hiring, and retaining qualified personnel in all areas of our business.
−Removed: In addition, integrating new employees into our team could prove disruptive to our operations, require substantial resources and management attention, and ultimately prove unsuccessful.
−Removed: Our failure to attract and retain qualified senior management and other key technical personnel could limit or delay our strategic efforts, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
−Removed: If we fail to protect, or incur significant costs in defending our intellectual property and other proprietary rights, our business and results of operations could be materially harmed.
−Removed: Our success depends to a significant degree on our ability to protect our intellectual property and other proprietary rights.
−Removed: We rely on a combination of patent, trademark, copyright, trade secret, and unfair competition laws, as well as confidentiality and license agreements and other contractual provisions with our customers, suppliers, employees, and others, to establish and protect our intellectual property and other proprietary rights.
−Removed: Our ability to enforce these rights is subject to general litigation risks, as well as uncertainty as to the enforceability of our IP rights in various countries.
−Removed: When we seek to enforce our rights, we may be subject to claims that our IP rights are invalid or not enforceable.
−Removed: Our assertion of IP rights may result in another party seeking to assert claims against us, which could harm our business.
−Removed: Our inability to enforce our IP rights under any of these circumstances can harm our competitive position and business.
−Removed: We have applied for patents in the U.S., Europe, and China, some of which have been issued.
−Removed: We cannot guarantee that any of our pending applications will be approved or that our existing and future intellectual property rights will be sufficiently broad to protect our proprietary technology, and any failure to obtain such approvals or finding that our intellectual property rights are invalid or unenforceable could force us to, among other things, rebrand or re-design our affected products.
−Removed: In countries where we have not applied for patent protection or where effective intellectual property protection is not available to the same extent as in the U.S., we may be at greater risk that our proprietary rights will be misappropriated, infringed, or otherwise violated.
−Removed: Our intellectual property may be stolen or infringed upon.
−Removed: In fact, as further detailed in Item 3 –
−Removed: “Legal Proceedings”
−Removed: we are engaged in a number of legal proceedings related to intellectual property.
−Removed: Litigation proceedings are inherently uncertain, and adverse rulings may occur, including monetary damages, or injunction stopping us from manufacturing or selling certain products, or requiring other remedies.
−Removed: These lawsuits are intended to protect our significant investment in our intellectual property but they also may consume management and financial resources for long periods of time and may not result in favorable outcome for us, which may adversely affect our business, results of operations or financial condition.
−Removed: Third parties may assert that we are infringing upon their intellectual property rights, which could divert management’s attention, cause us to incur significant costs, and prevent us from selling or using the technology to which such rights relate.
−Removed: Our competitors and other third parties hold numerous patents related to technology used in our industry.
−Removed: From time to time, we may also be subject to claims of intellectual property right infringement and related litigation, and, if we gain greater recognition in the market, we face a higher risk of being the subject of claims that we have violated others’
−Removed: intellectual property rights.
−Removed: For example, in September 2018, our German subsidiary, SolarEdge Technologies GmbH received a complaint filed by SMA Solar Technology AG.
−Removed: The complaint, filed in the District Court Düsseldorf, Germany, alleges that SolarEdge's 12.5kW - 27.6kW inverters infringe two of plaintiff’s patents.
−Removed: In November 2019, the first instance court accepted the claim of infringement for one of the two patents and we have filed an appeal to the Appeals Court Dusseldorf and are challenging the validity of the allegedly infringed patent in the German Patent Court.
−Removed: Also, in November 2019 the first instance court stayed the infringement proceedings regarding the other one of the two patents since it considered it to be highly likely that the patent would be invalid.
−Removed: Although we are certain that we have meritorious defenses to the claims, responding to such claims can be time consuming, can divert management’s attention and resources and may cause us to incur significant expenses in litigation or settlement.
−Removed: While we believe that our products and technology do not infringe in any material respect upon any valid intellectual property rights of third parties, we cannot be certain that we would be successful in defending against any such claims.
−Removed: If we do not successfully defend or settle an intellectual property claim, we could be liable for significant monetary damages and could be prohibited from continuing to use certain technology, business methods, content, or brands.
−Removed: To avoid a prohibition, we could seek a license from the applicable third party, which could require us to pay significant royalties, increasing our operating expenses.
−Removed: If a license is not available at all or not available on reasonable terms, we may be required to develop or license a non-violating alternative, either of which could require significant effort and expense.
−Removed: If we cannot license or develop a non-violating alternative, we would be forced to limit or stop sales of our offerings and may be unable to effectively compete.
−Removed: Any of these results would adversely affect our business, financial condition, and results of operations.
−Removed: We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.
−Removed: We enter into agreements with our employees pursuant to which they agree that any inventions created in the scope of their employment or engagement are assigned to us or owned exclusively by us, depending on the jurisdiction, without the employee retaining any rights.
−Removed: A significant portion of our intellectual property has been developed by our employees in the course of their employment for us.
−Removed: Under the Israeli Patent Law, 5727-1967 (the “Patent Law”), inventions conceived by an employee during the scope of his or her employment with a company are regarded as “service inventions,”
−Removed: which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights.
−Removed: The Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee (the “Committee”), a body constituted under the Patent Law, shall determine whether the employee is entitled to remuneration for his or her inventions.
−Removed: Recent decisions by the Committee and the Israeli Supreme Court have created uncertainty in this area, as the Israeli Supreme Court held that employees may be entitled to remuneration for their service inventions despite having specifically waived any such rights.
−Removed: Further, the Committee has not yet determined the method for calculating this Committee-enforced remuneration.
−Removed: Although our employees have agreed that any rights related to their inventions are owned exclusively by us, we may face claims demanding remuneration in consideration for such acknowledgement.
−Removed: As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such claims, which could negatively affect our business.
−Removed: The loss of, or events affecting, one of our major customer could reduce our sales and have a material adverse effect on our business, financial condition, and results of operations.
−Removed: For the year ended December 31, 2019, our major customer, which is also our largest customer was Consolidated Electrical Distributors Inc.
−Removed: (CED), and accounted for 20.4% of our revenues.
+Added: For example, we expect raw material shortages due to increased lead time which may affect our ability to timely receive certain components within the previously expected lead times.
+Added: These shortages may result in a delay in sales, higher costs associated with air shipments, cancellations, and loss of market share.
+Added: We rely on distributors and large installers to assist in selling our products, and the failure of these customers to perform as expected could reduce our future revenues.
+Added: For the year ended December 31, 2020, our largest customer was Consolidated Electrical Distributors Inc.
+Added: or CED, accounted for 14.8% of our revenues.
Our next five largest customers for the year ended December 31, 2020 together accounted for 30.7% of our revenues.
Our customers’
−Removed: decisions to purchase our products are influenced by a number of factors outside of our control, including retail energy prices and government regulation and incentives, among others.
−Removed: In addition, these customers may decide to no longer use our products and services for other reasons which may be out of our control.
−Removed: Although we have agreements with some of our largest customers, these agreements do not have long-term purchase commitments and are generally terminable by either party after a relatively short notice period.
+Added: decisions to purchase our products are influenced by a number of factors outside of our control.
+Added: The agreements we have with some of our largest customers do not have long-term purchase commitments and are generally cancellable by either party after a relatively short notice period.
The loss of, or events affecting, one or more of these customers could have a material adverse effect on our business, financial condition, and results of operations.
−Removed: Consolidations in the solar industry among our current or potential customers or distributors may adversely affect our competitive position.
+Added: In addition, we do not have exclusive arrangements with our third party distributors and large installers.
+Added: Many of our distributors, and large installers, also market and sell products from our competitors.
+Added: These distributors and large installers may terminate their relationships with us at any time and with little or no notice.
+Added: Further, these distributors and large installers may fail to devote resources necessary to sell our products at the prices, in the volumes, and within the time frames that we expect, or may focus their marketing and sales efforts on products of our competitors.
+Added: Termination of agreements with current distributors or large installers, failure by these distributors or large installers to perform as expected, or failure by us to cultivate new distributor or large installer relationships, could hinder our ability to expand our operations and harm our revenue and results of operations.
+Added: Mergers in the solar industry among our current or potential customers may adversely affect our competitive position .
There has been an increase in consolidation activity among distributors, large installers, and other strategic partners in the solar industry.
−Removed: For example, in June 2016, Tesla Motors (TSLA) announced that it had submitted a proposal to acquire all of the outstanding shares of common stock of SolarCity Corporation.
−Removed: In June 2018, Enphase Energy (ENPH) announced its acquisition of SunPower’s (SPWR) microinverter business.
−Removed: This trend could further increase our reliance on a small number of customers for a significant portion of our sales and may negatively impact our competitive position in the solar market.
+Added: For example, in October 2020, Sunrun, a leading provider of residential solar, battery storage and energy services, acquired Vivint Solar.
+Added: If this consolidation continues, it will further increase our reliance on a small number of customers for a significant portion of our sales and may negatively impact our competitive position in the solar market.
Our planned expansion into new geographic markets or new product lines or services could subject us to additional business, financial, and competitive risks.
−Removed: In the year ended December 31, 2019, we sold our products in different countries, including the U.S., Belgium, France, Germany, Israel, Italy, the Netherlands, the United Kingdom, Australia, Japan, Korea, Sweden, Poland and Brazil among others.
−Removed: We have in the past, and may in the future, evaluate opportunities to expand into new geographic markets and introduce new product offerings and services that are a natural extension of our existing business.
−Removed: We also may from time to time engage in acquisitions of businesses or product lines with the potential to strengthen our market position, enable us to enter attractive markets, expand our technological capabilities, or provide synergy opportunities.
+Added: We have in the past, and may in the future, evaluate opportunities to expand into new geographic markets and introduce new product offerings and services.
+Added: We also may from time to time engage in acquisitions of businesses or product lines with the potential to strengthen and expand our market position, our technological capabilities, or provide synergy opportunities.
For example, we intend to continue to introduce new products targeted at large commercial and utility-scale installations and to continue to expand into other international markets.
−Removed: Our success operating in these new geographic or product markets, or in operating any acquired business, will depend on a number of factors, including our ability to develop solutions to address the requirements of the large commercial and utility-scale solar PV markets, timely qualification and certification of new products for large commercial and utility-scale solar PV installations, acceptance of power optimizers in solar PV markets in which they have not traditionally been used, our ability to manage increased manufacturing capacity and production, and our ability to identify and integrate any acquired businesses.
−Removed: Further, we expect these new solar PV markets and the additional markets we have entered as a result of our recent acquisitions to have different characteristics from the markets in which we currently sell products, and our success will depend on our ability to adapt properly to these differences.
−Removed: These differences may include differing regulatory requirements, including tax laws, trade laws, labor regulations, tariffs, export quotas, customs duties, or other trade restrictions, limited or unfavorable intellectual property protection, international, political or economic conditions, restrictions on the repatriation of earnings, longer sales cycles, warranty expectations, product return policies and cost, performance and compatibility requirements.
+Added: Our success operating in these new markets, or in operating any acquired business, will depend on a number of factors, including our ability to develop solutions to address the requirements of the large commercial and utility-scale solar PV markets, timely certification of new products for large commercial and utility-scale solar PV installations, acceptance of power optimizers in solar PV markets in which they have not traditionally been used, our ability to manage increased manufacturing capacity and production, and to identify and integrate any acquired businesses.
+Added: Further, we expect these new solar PV markets and the additional markets we have entered to have different characteristics from the markets in which we currently sell products, and our success will depend on our ability to adapt properly to these differences.
+Added: These differences include differing regulatory requirements, including tax laws, trade laws, labor regulations, tariffs, export quotas, customs duties, or other trade restrictions, limited or unfavorable intellectual property protection, international, political or economic conditions, restrictions on the repatriation of earnings, longer sales cycles, warranty expectations, product return policies and cost, performance and compatibility requirements.
In addition, expanding into new geographic markets will increase our exposure to presently existing risks, such as fluctuations in the value of foreign currencies and difficulties and increased expenses in complying with U.S.
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Failure to develop and introduce these new products successfully, to successfully integrate acquired businesses or to otherwise manage the risks and challenges associated with our potential expansion into new product and geographic markets, could adversely affect our revenues and our ability to sustain profitability.
−Removed: If we fail to manage our recent and future growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges.
+Added: If we fail to build our non-solar businesses and future growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges.
We have experienced significant growth in recent periods with our annual product sales growing rapidly from approximately 152,500 inverters and approximately 3.6 million power optimizers in the fiscal year ending June 30, 2015, to annual product sales exceeding 663,000 inverters and 15.5 million power optimizers in the year ended December 31, 2020.
4 unchanged sentences
Our current and planned operations, personnel, customer support, IT, information systems, and other systems and procedures might be inadequate to support our future growth and may require us to make additional unanticipated investment in our infrastructure.
−Removed: Our success and ability to further scale our business will depend, in part, on our ability to manage these changes in a cost-effective and efficient manner.
+Added: Our success and ability to further scale our business will depend, in part, on our ability to manage these changes in an efficient manner.
If we cannot manage our growth, we may be unable to take advantage of market opportunities, execute our business strategies, or respond to competitive pressures.
1 unchanged sentence
Any failure to effectively manage growth could adversely impact our business and reputation.
−Removed: Fluctuations in currency exchange rates may negatively impact our financial condition and results of operations.
−Removed: Although our financial results are reported in U.S.
−Removed: dollars, 48.7% of our revenues in the year ended December 31, 2019 were generated in currencies other than the U.S.
−Removed: In addition, a significant portion of our operating expenses are accrued in New Israeli Shekels (primarily related to payroll) and, to a lesser extent, the Euro and other currencies.
−Removed: Our profitability is affected by movements of the U.S.
−Removed: dollar against the Euro, and, to a lesser extent, the New Israeli Shekel, Korean Won and other currencies in which we generate revenues, incur expenses, and maintain cash balances.
−Removed: Foreign currency fluctuations may also affect the prices of our products.
−Removed: Our prices are denominated primarily in U.S.
−Removed: If there is a significant devaluation of a particular currency, the prices of our products will increase relative to the local currency and may be less competitive.
−Removed: Despite our efforts to minimize foreign currency risks, primarily by maintaining cash balances in New Israeli Shekels, significant long-term fluctuations in relative currency values, in particular a significant change in the relative values of the Euro and, to a lesser extent, the New Israeli Shekel, Korean Won and other currencies, against the U.S.
−Removed: dollar could have an adverse effect on our profitability and financial condition.
−Removed: From time to time, we may enter into forward contracts to hedge the exchange impacts on assets and liabilities denominated in Israeli Shekels, Euros and other currencies.
−Removed: As of December 31, 2019, we had no derivative instruments.
−Removed: We may use derivative financial instruments, such as foreign exchange forward contracts and put and call options, to mitigate the risk of changes in foreign exchange rates on accounts receivable and forecast cash flows denominated in certain foreign currencies.
−Removed: We may not be able to purchase derivative instruments adequate to fully insulate ourselves from foreign currency exchange risks.
−Removed: Additionally, our hedging activities may also contribute to increased losses as a result of volatility in foreign currency markets.
−Removed: If foreign exchange currency markets continue to be volatile, such fluctuations in foreign currency exchange rates could materially and adversely affect our profit margins and results of operations in future periods.
−Removed: Also, the volatility in the foreign currency markets may make it difficult to hedge our foreign currency exposures effectively.
−Removed: We may have exposure to greater than anticipated tax liabilities.
−Removed: The determination of our worldwide provision for income taxes and other tax liabilities requires estimation and significant judgment, and there are many transactions and calculations where the ultimate tax determination is uncertain.
−Removed: Like many other multinational corporations, we are subject to tax in multiple jurisdictions, both in the U.S.
−Removed: and outside the U.S.
−Removed: Our determination of our tax liability may be subject to audit and review by applicable tax authorities.
−Removed: Any adverse outcome of any such audit or review could affect our business, and the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the periods for which such determination is made.
−Removed: While we have established reserves based on assumptions and estimates that we believe are reasonable to cover such eventualities, these reserves may prove to be insufficient.
−Removed: In addition, our future income taxes could be adversely affected by earnings being lower than anticipated, or by the incurrence of losses, in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, by changes in the valuation of our deferred tax assets and liabilities, as a result of gains on our foreign exchange risk management program, or changes in tax laws, regulations, or accounting principles, as well as certain discrete items.
−Removed: Various levels of government, such as U.S.
−Removed: federal and state legislatures, and international organizations, such as the Organization for Economic Co-operation and Development (“OECD”) and the European Union, are increasingly focused on tax reform and other legislative or regulatory action to increase tax revenue.
−Removed: Any such tax reform or other legislative or regulatory actions could increase our effective tax rate and may even create a double taxation event.
−Removed: Any unauthorized access to, or disclosure or theft of personal information we gather, store, or use could harm our reputation and subject us to claims or litigation.
+Added: Conversely, the global pandemic and resulting economic downturn in many regions requires our ability to be flexible and decrease expenses where growth has slowed down.
+Added: While we had anticipated 2020 to yield a more rapid level of growth and profitability, we had to rapidly adjust to the effects of COVID-19 by reducing the ramp rate of our manufacturing, slow down hiring plans and in some cases put on hold certain plans for growth and development.
+Added: Our ability to react quickly to market conditions is not always in our control and any inability to do so could also adversely impact our business.
+Added: We may not have the ability to raise the funds necessary to settle conversion of our Convertible Senior Notes or Notes in cash or to repurchase the Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion of the Notes or to repurchase the Notes.
+Added: Holders of the Notes have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change (as defined in the Indentures governing their respective Notes) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any.
+Added: In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted.
+Added: We may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Notes surrendered or Notes being converted.
+Added: In addition, our ability to repurchase the Notes or to pay cash upon conversions of the Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness.
+Added: Our failure to repurchase Notes at a time when the repurchase is required by the indenture governing such notes or to pay cash upon conversion of the Notes as required by such indenture would constitute a default under such indenture.
+Added: A default under the indenture governing the Notes or the fundamental change itself could also lead to a default under agreements governing our future indebtedness.
+Added: If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversion of the Notes.
+Added: Any unauthorized access to, disclosure, or theft of personal information we gather, store, or use could harm our reputation and subject us to claims or litigation.
Our business and operations may be impacted by data security breaches and cybersecurity attacks, including attempts to gain unauthorized access to confidential data.
We receive, store, and use certain personal information of our customers, and the end-users of our customers’
−Removed: solar PV systems, including names, addresses, e-mail addresses, credit information, and energy production statistics.
+Added: solar PV systems.
We also store and use personal information of our employees.
−Removed: We take steps to protect the security, integrity, and confidentiality of the personal information we collect, store, and transmit, however, we have been subject to cybersecurity attacks and other information technology system disruptions in the past and, there is no guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this information despite our efforts.
+Added: We take steps to protect the security, integrity, and confidentiality of the personal information we process;
+Added: however, we have been subject to cybersecurity attacks and other information technology system disruptions in the past and, there is no guarantee that inadvertent or unauthorized access, use or disclosure will not occur despite our efforts.
Because techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we and our suppliers or vendors may be unable to anticipate these techniques or to implement adequate preventative or mitigation measures.
3 unchanged sentences
Finally, any perceived or actual unauthorized access to, or use or disclosure of, such information could harm our reputation, substantially impair our ability to attract and retain customers, and have an adverse impact on our business, financial condition, and results of operations.
−Removed: We could be adversely affected by any violations of the FCPA, the U.K.
−Removed: Bribery Act, and other foreign anti-bribery laws.
−Removed: The FCPA generally prohibits companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business.
−Removed: Other countries in which we operate also have anti-bribery laws, some of which prohibit improper payments to government and non-government persons and entities.
−Removed: Our policies mandate compliance with these anti-bribery laws.
−Removed: However, we currently operate in and intend to further expand into, many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices.
−Removed: In addition, due to the level of regulation in our industry, our entry into certain jurisdictions requires substantial government contact where norms can differ from U.S.
−Removed: It is possible that our employees, subcontractors, agents, and partners may take actions in violation of our policies and anti-bribery laws.
−Removed: Any such violation, even if prohibited by our policies, could subject us to criminal or civil penalties or other sanctions, which could have a material adverse effect on our business, financial condition, cash flows, and reputation.
−Removed: Third parties might attempt to gain unauthorized access to our network or seek to compromise our products and services.
−Removed: From time to time, we face attempts by others to gain unauthorized access through the Internet or to introduce malicious software to our information technology (IT) systems.
−Removed: Additionally, malicious hackers may attempt to gain unauthorized access and corrupt the processes of hardware and software products that we manufacture and services we provide.
+Added: Third parties, our employees, or our vendors might gain unauthorized access to our network or seek to compromise our products and services.
+Added: From time to time, we face attempts by others to gain unauthorized access through the Internet, introduce malicious software to our information technology (IT) systems, or corrupt the processes of hardware and software products that we manufacture and services we provide.
We or our products may be a target of computer hackers, organizations or malicious attackers who attempt to gain access to our network or data centers or those of our customers or end users;
1 unchanged sentence
or interrupt our systems or those of our customers or others.
+Added: Furthermore, we are susceptible to similar attempts by our own employees or vendors who have access to our networks.
From time to time, we encounter intrusions or attempts at gaining unauthorized access to our network.
1 unchanged sentence
however, there can be no guarantee that such impacts will not be material in the future.
−Removed: While we seek to detect and investigate all unauthorized attempts and attacks against our network and products, and to prevent their recurrence where practicable through changes to our internal processes and tools and/or changes to our products, we remain potentially vulnerable to additional known or unknown threats.
+Added: While we seek to detect and investigate all unauthorized attempts and attacks against our network and products, and to prevent their recurrence where practicable, we remain potentially vulnerable to additional known or unknown threats.
In addition to intentional third-party cyber-security breaches, the integrity and confidentiality of Company and customer data may be compromised as a result of human error, product defects, or technological failures.
1 unchanged sentence
Our entry into business engagements with military bodies as our customers in the lithium-ion battery and energy storage business embodies a risk for potentially large-scale and uncapped liability.
−Removed: As a result of the Kokam Acquisition, a small portion of our business involves the sale of products to military customers.
−Removed: Our sales to military customers often involve standard form contracts, which are less subject to negotiation than the agreements we enter into in our ordinary course of business.
+Added: As a result of the acquisition of Kokam, we sell a small portion of our products to military customers.
+Added: Our sales to military customers often involve standard form contracts, which may not be subject to negotiation.
In particular, certain of these contracts involve unlimited damages provisions that could result in large-scale liabilities.
−Removed: We may not have sufficient insurance coverage to cover business continuity.
−Removed: We rely on a limited number of contracted manufacturers to manufacture our products as well as on component manufacturers which are sometimes a single source.
−Removed: As a result, a sustained or repeated interruption in the manufacturing of our products by such outsourced providers due to fire, flood, war, pandemic or nature disasters, and/or an interruption in the provision of the required components for our business by these components manufacturers may interfere with our ability to sell our products to our customers in a timely manner.
−Removed: The described nature of our business and our size, makes it difficult to insure some or all of such possible loss of profit, which may adversely affect our financial results.
Our business could be materially adversely affected as a result of the risks associated with acquisitions and investments.
−Removed: In particular, we may not succeed in making additional acquisitions or be effective in integrating such acquisitions.
−Removed: As part of our growth strategy, we have made a significant number of acquisitions.
−Removed: We may continue to make acquisitions and investments in the future as part of our growth strategy.
+Added: In particular, we may not succeed in future acquisitions or be effective in integrating such acquisitions.
+Added: As part of our growth strategy, we have made a number of acquisitions, and may continue to make acquisitions and investments in the future.
We frequently evaluate the tactical or strategic opportunities available related to complementary businesses, products or technologies.
There can be no assurance that we will be successful in making additional acquisitions.
−Removed: Even if we are successful in making additional acquisitions, integrating an acquired company’s business into our operations or investing in new technologies may (1) result in unforeseen operating difficulties and large expenditures and (2) absorb significant management attention that would otherwise be available for the ongoing development of our business, both of which may result in the loss of key customers or personnel and expose us to unanticipated liabilities.
−Removed: Further, we may not be able to retain the key employees that may be necessary to operate the business we acquire and we may not be able to attract, in a timely manner, new skilled employees and management to replace them.
+Added: Even if we are successful in making additional acquisitions, integrating an acquired company’s business into ours or investing in new technologies may result in unforeseen operating difficulties and large expenditures and absorb significant management attention that would otherwise be available for the ongoing development of our business, both of which may result in the loss of key customers or personnel and expose us to unanticipated liabilities.
+Added: Further, we may not be able to retain the key employees that may be necessary to operate the businesses we acquire and we may not be able to attract, in a timely manner, new skilled employees and management to replace them.
We may not be able to consummate acquisitions or investments that we have identified as crucial to the implementation of our strategy for other commercial or economic reasons.
1 unchanged sentence
For those and other reasons, we may ultimately fail to consummate an acquisition, even if we announce the intended acquisition.
−Removed: If our goodwill or other intangible assets become impaired, our financial condition and results of operations could be negatively affected.
−Removed: Due to our latest acquisitions, goodwill and other intangible assets totaled approximately $203.7 million, or approximately 13.6% of our total assets, as of December 31, 2019.
−Removed: We test our goodwill for impairment at least annually, or more frequently if an event occurs indicating the potential for impairment, and we assess on an as-needed basis whether there have been impairments in our other intangible assets.
−Removed: We make assumptions and estimates in this assessment which are complex and often subjective.
−Removed: These assumptions and estimates can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy or our internal forecasts.
−Removed: To the extent that the factors described above change, we could be required to record additional non-cash impairment charges in the future, which could negatively affect our financial condition and results of operations.
−Removed: Environmental obligations and liabilities could have a substantial negative impact on our business, financial condition, and results of operations.
−Removed: The manufacturing, assembly storage, transportation and disposal of our products require the use of hazardous materials that are subject to a broad array of environmental, health, and safety laws and regulations in the jurisdictions in which we operate such as RoHS (Restriction of Hazardous Substance), REACH (Registration, Evaluation, Authorization and Restriction of Chemicals), WEEE (Waste Electrical and Electronic Equipment) Directive, Conflict Minerals Regulation, California’s Proposition 65 (known as the Safe Drinking Water and Toxic Enforcement Act of 1986), K-REACH (Korean REACH) and more.
−Removed: Failure to comply with these laws and regulations may result in regulatory fines, penalties and legal liabilities, suspension of production of our products, adjustments or alterations to our manufacturing processes and damage to our reputation all of which may adversely impact our business and financial condition and result of operations.
Lithium-Ion used in our battery cells and packs can potentially catch fire or vent smoke and cause damage or injury
−Removed: The battery cells and packs produced by our subsidiary, Kokam make use of lithium-ion cells.
+Added: The battery cells and packs produced by our subsidiary, Kokam and the SolarEdge home battery which is expected to launch during the second quarter of 2021 make use of lithium-ion cells.
We regularly test our products and take safety measures when manufacturing, selling and installing battery cells and packs.
1 unchanged sentence
As the use of lithium-ion batteries becomes more widespread, these events may occur more often, causing damage to property, injury, lawsuits and adverse publicity, which may adversely affect our reputation, results of operations or financial condition.
−Removed: Risks Related to Operations in Israel
Conditions in Israel affect our operations and may limit our ability to develop, produce and sell our products.
−Removed: Although we are incorporated in Delaware, our headquarters and research and development center are located in Israel.
+Added: Our headquarters and research and development center are located in Israel.
Accordingly, political, economic, and military conditions in Israel directly affect us.
−Removed: Israel has been involved in a number of armed conflicts and has been the target of terrorist activity.
−Removed: Ongoing state of hostility, varying in degree such as rocket fire from the Gaza Strip, including against civilian targets, has occurred on an irregular basis, disrupting day-to-day civilian activity and negatively affecting business conditions.
−Removed: Israel also faces threats from Hezbollah militants in Lebanon, and others.
+Added: Israel has been involved in a number of armed conflicts and is the target of terrorist activity.
+Added: Ongoing state of hostility, varying in degree such as rocket fire from the Gaza Strip, has occurred on an irregular basis, disrupting day-to-day civilian activity and negatively affecting business conditions.
+Added: Israel also faces threats from Hezbollah militants in Lebanon, Iranian militia in Syria, and others.
We cannot predict whether or when such armed conflicts or attacks may occur or the extent to which such events may impact us.
−Removed: Any future armed conflict, political instability or violence in the region may impede our ability to manage our business effectively or to engage in research and development, or may otherwise adversely affect our business or operations.
+Added: Any future armed conflict, political instability or violence in the region may impede our ability to manage our business effectively, operate our manufacturing plant in northern Israel, to engage in research and development, or otherwise adversely affect our business or operations.
In the event of war, we may be forced to cease operations, which may cause delays in the distribution and sale of our products.
2 unchanged sentences
Additionally, several countries principally in the Middle East, restrict doing business with Israeli companies, and additional countries and groups may impose similar restrictions if hostilities in Israel or political instability in the region continue or increase.
−Removed: If recent regime changes and civil wars in neighboring states result in the establishment of fundamentalist Islamic regimes or governments more hostile to Israel, or if Egypt or Jordan abrogates its respective peace treaty with Israel, Israel could be subject to additional political, economic, and military confines, and our operations and ability to sell our products to countries in the region could be materially adversely affected.
−Removed: These restrictions may limit materially our ability to obtain manufactured components and raw materials or to sell our products.
+Added: If instability in neighboring states results in the establishment of fundamentalist Islamic regimes or governments more hostile to Israel, or if Egypt, Turkey, or Jordan abrogates its respective peace treaty with Israel, Israel could be subject to additional political, economic, and military confines, and our operations and ability to sell our products to countries in the region could be materially adversely affected.
Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or significant downturn in the economic or financial condition of Israel, could have a material adverse effect on our business, financial condition, and results of operations.
3 unchanged sentences
Beginning in January 2019, and with respect to its taxable results from 2019 onwards, our Israeli subsidiary further elected to apply the terms of the Investments Law as per “Preferred Enterprise”
−Removed: or “Preferred Technological Enterprise”
+Added: (“PE”) or “Preferred Technological Enterprise”
(“PTE”).
In order to remain eligible for the tax benefits for “Benefited Enterprises”
−Removed: with respect to our Israeli subsidiary’s taxable results until 2018 and with respect to its taxable results from 2019 for “Preferred Enterprise”
−Removed: or “Preferred Technological Enterprise”, we must continue to meet certain conditions stipulated in the Investments Law and its regulations, as amended.
+Added: with respect to our Israeli subsidiary’s taxable results until 2018 and with respect to its taxable results from 2019 for PE or PTE, we must continue to meet certain conditions stipulated in the Investments Law and its regulations, as amended.
If these tax benefits are reduced, cancelled, or discontinued, our Israeli taxable income would be subject to regular Israeli corporate tax rates and we may be required to refund any tax benefits that we have already received, plus interest and penalties thereon.
−Removed: The standard corporate tax rate for Israeli companies was 24% in 2017 and decreased further to 23% as of January 1, 2018 and onward.
+Added: The statutory corporate tax rate for Israeli companies is 23% as of January 1, 2018 and onward.
Additionally, if we increase our activities outside of Israel through acquisitions or otherwise through our Israeli subsidiary, our existing or expanded activities might not be eligible for inclusion in existing or future Israeli tax benefit programs.
3 unchanged sentences
securities laws claims in Israel, or to serve process on our officers and directors.
−Removed: The majority of our directors and executive officers reside outside of the U.S., and most of our assets and most of the assets of these persons are located outside of the U.S.
+Added: The majority of our directors and executive officers, their assets, and most of our assets are located outside of the U.S.
Consequently, a judgment obtained against any of these persons, including a judgment based on the civil liability provisions of the U.S.
federal securities laws, may not be collectible in the U.S.
−Removed: It also may be difficult for you to effect service of process on these persons in the U.S.
+Added: It also may be difficult to effect service of process on these persons in the U.S.
or to assert U.S.
1 unchanged sentence
Israeli courts may refuse to hear a claim based on an alleged violation of U.S.
−Removed: securities laws on the grounds that Israel is not the most appropriate forum in which to bring such a claim.
+Added: securities laws on the grounds of forum non conveniens .
In addition, even if an Israeli court hears a claim, it may determine that Israeli law and not U.S.
1 unchanged sentence
law is found to be applicable, the content of applicable U.S.
−Removed: law must be proven as a fact by expert witnesses, which can be a time consuming and costly process.
+Added: law must be proven as a fact by expert witnesses, which can be a lengthy and costly process.
Further, an Israeli court may not enforce a judgment awarded by a U.S.
2 unchanged sentences
There is little binding case law in Israel that addresses these matters.
−Removed: As a result of the difficulty associated with enforcing a judgment against any of these persons in Israel, you may not be able to obtain or enforce a judgment against many of our directors and executive officers.
+Added: As a result of the difficulty associated with enforcing a judgment against any of these persons in Israel, judgment against many of our directors and executive officers may be unachievable or unenforceable.
+Added: Developments in alternative technologies or improvements in distributed solar energy generation may have a material adverse effect on demand for our offerings.
+Added: Significant developments in alternative technologies, such as advances in other forms of distributed solar PV power generation, storage solutions, such as batteries, the widespread use or adoption of fuel cells for residential or commercial properties or improvements in other forms of centralized power production, may have a material adverse effect on our business and prospects.
+Added: Any failure by us to adopt new or enhanced technologies or processes, or to react to changes in existing technologies, could result in product obsolescence, the loss of competitiveness of our products, decreased revenue and a loss of market share to competitors.
+Added: Risks Related to Legal, Compliance and Regulations
+Added: The reduction, elimination or expiration of government subsidies and economic incentives for on-grid solar electricity applications could reduce demand for solar PV systems and harm our business.
+Added: Federal, state, local and foreign government bodies provide incentives to promote solar electricity in the form of rebates, tax credits or exemptions and other financial incentives.
+Added: The market for on-grid applications, where solar power is used to supplement a customer’s electricity purchased from the utility network or sold to a utility under tariff, often depends in large part on the availability and size of government and economic incentives.
+Added: Because our customers’
+Added: sales are typically into the on-grid market, the reduction, elimination or expiration of government subsidies and incentives for on-grid solar electricity may negatively affect the desirability of solar electricity and could harm or halt the growth of the solar electricity industry and our business.
+Added: For example, in 2015 the U.S.
+Added: congress passed a multi-year extension to the solar Investment Tax Credit (ITC), such extension helped grow the U.S.
+Added: solar market.
+Added: As of January 1, 2021, the ITC is reduced from 30 percent to 26 percent for both residential and commercial projects and is expected to reach 10 percent for commercial projects in 2024.
+Added: The reduction in the ITC could reduce the demand for solar energy solutions in the U.S.
+Added: which would have an adverse impact on our business, financial condition, and results of operations.
+Added: Furthermore, due to the continued economic downturn from COVID-19, many of the institutions utilizing ITC may significantly pull back or no longer have the ability to invest, meaning that financing for solar projects may become seriously diminished.
+Added: In general subsidies and incentives may expire on a particular date, end when the allocated funding is reduced or terminated due to, inter alia , legal challenges, adoption of new statutes or regulations or the passage of time.
+Added: These reductions or terminations often occur without warning.
+Added: In addition, several jurisdictions have adopted renewable portfolio standards mandating that a certain portion of electricity delivered by utilities to customers come from a set of eligible renewable energy resources, such as solar, by a certain compliance date.
+Added: Under some programs, a utility can receive a “credit”
+Added: for renewable energy produced by a third party by either purchasing the electricity directly from the producer or paying a fee to obtain the right to renewable energy generated but used or sold by the generator.
+Added: A renewable energy credit allows the utility to add this electricity to its renewable portfolio requirement without actually expending the capital for generating facilities.
+Added: However, there can be no assurances that such policies will continue.
+Added: Reduction or elimination of renewable portfolio standards or successful efforts to meet current standards could harm or halt the growth of the solar PV industry and our business.
+Added: Changes to net metering policies may reduce demand for electricity from solar PV systems and harm our business.
+Added: Our business benefits from favorable net metering policies in most U.S.
+Added: states and some European countries.
+Added: Net metering allows a solar PV system owner to pay his or her electric utility only for power usage net of production from the solar PV system.
+Added: System owners receive credit for the energy that the solar installation generates to offset energy usage at times when the solar installation is not generating energy.
+Added: Under a net metering program, the customer typically pays for the net energy used or receives a credit against future bills if more energy is produced than consumed.
+Added: states have adopted some form of net metering.
+Added: Yet, net metering programs have recently come under regulatory scrutiny in some U.S.
+Added: states due to allegations that net metering policies inequitably shift costs onto non-solar ratepayers by allowing solar ratepayers to sell electricity at rates that are too high for utilities to recoup their fixed costs.
+Added: For example, in 2019, Louisiana Public Service Commissions adopted net metering policies aiming at lowering the solar customers’
+Added: We cannot assure you that the programs will not be significantly modified going forward.
+Added: If the value of the credit that customers receive for net metering is reduced, end-users may be unable to recognize the current level of cost savings associated with net metering.
+Added: The absence of favorable net metering policies or of net metering entirely, or the imposition of new charges that only or disproportionately affect end-users that use net metering would significantly limit demand for our products and could have a material adverse effect on our business, financial condition, results of operations and future growth.
+Added: Existing electric utility industry regulations, and changes to regulations, may present technical, regulatory, and economic barriers to the purchase and use of solar PV systems that may significantly reduce demand for our products or harm our ability to compete.
+Added: Federal, state, local and foreign government regulations and policies concerning the electric utility industry, and internal policies and regulations promulgated by electric utilities, heavily influence the market for electricity generation products and services.
+Added: These regulations and policies could deter purchases of solar PV systems sold by our customers, significantly reducing the potential demand for our products.
+Added: For example, utilities commonly charge fees to larger, industrial customers for disconnecting from the electric grid or for having the capacity to use power from the electric grid for back-up purposes.
+Added: These fees could increase the cost to use solar PV systems sold by our customers and make them less desirable, thereby harming our business, prospects, financial condition and results of operations.
+Added: In addition, depending on the region, electricity generated by solar PV systems competes most effectively with expensive peak-hour electricity from the electric grid, rather than the less expensive average price of electricity.
+Added: Modifications to the utilities’
+Added: peak hour pricing policies or rate design, such as to a flat rate, could require the price of solar PV systems and their component parts to be lower in order to compete with the price of electricity from the electric grid.
+Added: Changes in current laws or regulations applicable to us or the imposition of new laws and regulations in the U.S., Europe, or other jurisdictions in which we do business could have a material adverse effect on our business, financial condition and results of operations.
+Added: Any changes to government or internal utility regulations and policies that favor electric utilities could reduce the competitiveness of solar PV systems sold by our customers and cause a significant reduction in demand for our products and services.
+Added: In addition, changes in our products or changes in export and import laws and implementing regulations may create delays in the introduction of new products in international markets, prevent our customers from deploying our products internationally or, in some cases, prevent the export or import of our products to certain countries altogether.
+Added: Any such event could have a material adverse effect on our business, financial condition, and results of operations.
+Added: General Risks
+Added: The ongoing COVID-19 pandemic, and global measures taken in response thereto have adversely impacted, and may continue to adversely impact, our operations and financial results.
+Added: The COVID-19 pandemic has had, and may continue to have, a material adverse impact on our supply chain, operations, and customer demand.
+Added: As a result of the COVID-19 pandemic, governmental authorities worldwide have imposed mandatory closures, stay-at-home orders, and social distancing protocols that significantly limit the movement of people, goods, and services or otherwise restrict normal business operations or consumption patterns.
+Added: Our compliance with these measures has disrupted, and depending on the duration of such measures may continue to disrupt, our business and operations, as well as that of our key customers and suppliers for an indefinite period of time.
+Added: Additionally, to support the health and well-being of our employees, our work force has had to spend a significant amount of time working remotely which has impacted our day-to-day operations, our ability to meet customers and create future sales and business opportunities.
+Added: The COVID-19 pandemic has resulted in slower growth and demand for our products and may continue to impact our revenues in the following quarters mainly contingent on the duration of the global economic downturn.
+Added: In addition, since the outbreak and the restrictions on travel, our employees and management have been unable to travel to customers, manufacturing facilities and to suppliers.
+Added: Our marketing activities, exhibitions and shows have also been cancelled or postponed, or have been held virtually.
+Added: The full extent the effects COVID-19 will have on our business depend on numerous evolving factors that we may not be able to currently accurately predict, including:
+Added: the duration and scope of the pandemic;
+Added: governmental, business and individuals’
+Added: actions that have been and continue to be taken in response to the pandemic;
+Added: the effect on our customers and customer demand for our products, disruptions or restrictions on our employees’
+Added: ability to work and travel, availability and long-term effectiveness of COVID-19 vaccination, especially in light of its recent mutation which has made the virus exponentially more contagious.
+Added: More generally, the COVID-19 pandemic raises the possibility of an extended global economic downturn and has caused volatility in financial markets, which may continue to adversely affect demand for our products and could adversely affect our results and financial condition in subsequent quarters.
+Added: For example, some of our customers could potentially experience financial difficulties, which in turn could make it difficult for us to collect receivables as well as cause a decrease in the demand for our products which could negatively affect our revenues.
+Added: Additionally, some of our suppliers may experience delivery delays or financial difficulties which could result in supply constraints and increased costs or delays to our productions.
+Added: The unprecedented and continuously evolving nature of the COVID-19, other pandemics or epidemics, could also have the effect of amplifying many of the other risks described in this Item 1A, Risk Factors .
+Added: We are dependent on ocean transportation to deliver our products in a cost efficient manner.
+Added: If we are unable to use ocean transportation to deliver our products, our business and financial condition could be materially and adversely impacted.
+Added: We rely on ocean transportation for the delivery of the majority of our products to our customers.
+Added: We also rely on more expensive air transportation when ocean transportation is not available or compatible with the delivery time requirements of our customers or when we are unable to meet the growing volume demands of our customers and need to accelerate delivery times.
+Added: Our ability to deliver our products via ocean transportation could be adversely impacted by shortages in available cargo capacity, changes by carriers and transportation companies in policies and practices, such as scheduling, pricing, payment terms and frequency of service or increases in the cost of fuel, taxes and labor, disruptions to ports and other shipping facilities as a result of the COVID-19 or other epidemics, and other factors not within our control.
+Added: If we are unable to use ocean transportation and are required to substitute more expensive air transportation, our financial condition and results of operations could be materially and adversely impacted.
+Added: Fluctuations in currency exchange rates may negatively impact our financial condition and results of operations.
+Added: Although our financial results are reported in U.S.
+Added: dollars, 52.2% of our revenues in the year ended December 31, 2020 were generated in currencies other than the U.S.
+Added: In addition, a significant portion of our operating expenses are accrued in New Israeli Shekels (primarily related to payroll), the Euro and to a lesser extent the Korean Won and other currencies.
+Added: As detailed in the Foreign currency Exchange Risk under Item 7A -Quantitative and Qualitative Disclosures About Market Risk, our profitability is affected by movements of the U.S.
+Added: dollar against the Euro, and, to a lesser extent, the New Israeli Shekel, Korean Won and other currencies in which we generate revenues, incur expenses, and maintain cash balances.
+Added: Foreign currency fluctuations may also affect the prices of our products which are denominated primarily in U.S.
+Added: If there is a devaluation of a particular currency, the prices of our products will increase relative to the local currency and may be less competitive.
+Added: Despite our efforts to minimize foreign currency risks, primarily by maintaining cash balances in New Israeli Shekels, significant long-term fluctuations in relative currency values, in particular a significant change in the relative values of the Euro and, New Israeli Shekel, Korean Won and other currencies, against the U.S.
+Added: dollar could have an adverse effect on our profitability and financial condition.
+Added: From time to time, we may enter into forward contracts to hedge the exchange impacts on assets and liabilities denominated in Israeli Shekels, Euros and other currencies.
+Added: As of December 31, 2020, we have used derivative financial instruments to hedge the Company’s exposure to currencies other than the U.S.
+Added: dollar, mainly put and call options to sell Euro for U.S.
+Added: dollars and put and call options to sell Australian dollars (“AUD”) for U.S dollars, forward contracts to sell AUD for U.S.
+Added: dollars, forward contracts to sell Euro for U.S.
+Added: dollars and forward contracts to sell U.S.
+Added: dollars for South Korean Won (“KRW”).
+Added: These derivative instruments are not designated as cash flow hedges.
+Added: Additionally, our hedging activities may also contribute to increased losses as a result of volatility in foreign currency markets.
+Added: If foreign exchange currency markets continue to be volatile, such fluctuations in foreign currency exchange rates could materially and adversely affect our profit margins and results of operations in future periods.
+Added: Also, the volatility in the foreign currency markets may make it difficult to hedge our foreign currency exposures effectively.
+Added: Risks Related To Intellectual Property
+Added: If we fail to protect, or incur significant costs in defending our intellectual property and other proprietary rights, our business and results of operations could be materially harmed.
+Added: Our success depends to a significant degree on our ability to protect our intellectual property and other proprietary rights.
+Added: We rely on a combination of patent, trademark, copyright, trade secret, and unfair competition laws, as well as confidentiality and license agreements and other contractual provisions with our customers, suppliers, employees, and others, to establish and protect our intellectual property and other proprietary rights.
+Added: Our ability to enforce these rights is subject to litigation risks, as well as uncertainty as to the enforceability of our IP rights in various countries.
+Added: When we seek to enforce our rights, we may be subject to claims that our IP rights are invalid or not enforceable.
+Added: Our assertion of IP rights may result in another party seeking to assert claims against us, which could harm our business.
+Added: Our inability to enforce our IP rights under any of these circumstances can harm our competitive position and business.
+Added: We have applied for patents in the U.S., Europe, and China, some of which have been issued.
+Added: We cannot guarantee that any of our pending applications will be approved or that our existing and future intellectual property rights will be sufficiently broad to protect our proprietary technology, and any failure to obtain such approvals or finding that our intellectual property rights are invalid or unenforceable could force us to, among other things, rebrand or re-design our affected products.
+Added: In countries where we have not applied for patent protection or where effective intellectual property protection is not available to the same extent as in the U.S., we may be at greater risk that our proprietary rights will be misappropriated, infringed, or otherwise violated.
+Added: Our intellectual property may be stolen or infringed upon.
+Added: In fact, as further detailed in Item 3 –
+Added: “Legal Proceedings”
+Added: we are engaged in a number of legal proceedings related to intellectual property.
+Added: Litigation proceedings are inherently uncertain, and adverse rulings may occur, including monetary damages, or injunction stopping us from manufacturing or selling certain products, or requiring other remedies.
+Added: These lawsuits are intended to protect our significant investment in our intellectual property but they also may consume management and financial resources for long periods of time and may not result in favorable outcome for us, which may adversely affect our business, results of operations or financial condition.
+Added: Third parties may assert that we are infringing upon their intellectual property rights, which could divert management’s attention, cause us to incur significant costs, and prevent us from selling or using the technology to which such rights relate.
+Added: Our competitors and other third parties hold numerous patents related to technology used in our industry.
+Added: From time to time, we may also be subject to claims of intellectual property right infringement and related litigation, and, as we gain greater recognition in the market, we face a higher risk of being the subject of claims of violation of others’
+Added: intellectual property rights.
+Added: For example in May 2019, we were served with three lawsuits by Huawei Technologies Co., Ltd., a Chinese entity (“Huawei”), against our two Chinese subsidiaries and our equipment manufacturer in China.
+Added: The lawsuits, filed in the Guangzhou intellectual property court, alleged infringement of three patents and asked for an injunction of manufacture, use, sale and offer for sale, and damages.
+Added: In August, 2020 a first-instance judgment was issued ordering the three defendants to collectively pay damages in the amount of approximately $1.55 million (including court fees) with respect of one of the patents and we have filed an appeal with the Supreme People’s Court.
+Added: The judgement is not enforceable until a final judgement of the higher courts is available.
+Added: In addition, in February 2020, a preliminary injunction was rendered by the Guangzhou intellectual property court applying to seven inverter models.
+Added: In line with the court’s mandate, SolarEdge took immediate action to make software changes to meet the court order and also appealed the decision.
+Added: Although we are certain that we have meritorious defenses to the claims, responding to such claims can be time consuming, divert management’s attention and resources and may cause us to incur significant expenses in litigation or settlement.
+Added: While we believe that our products and technology do not infringe in any material respect upon any valid intellectual property rights of third parties, we cannot be certain that we would be successful in defending against any such claims.
+Added: If we do not successfully defend or settle an intellectual property claim, we could be liable for significant monetary damages and could be prohibited from continuing to use certain technology, business methods, content, or brands.
+Added: To avoid a prohibition, we could seek a license from the applicable third party, which could require us to pay significant royalties, increasing our operating expenses.
+Added: If a license is not available at all or not available on reasonable terms, we may be required to develop or license a non-violating alternative, either of which could require significant effort and expense.
+Added: If we cannot license or develop a non-violating alternative, we could be forced to modify, limit or, in extreme cases, stop manufacturing and sales of our offerings in the relevant country and may be unable to effectively compete.
+Added: Any of these results could adversely affect our business, financial condition, and results of operations.
+Added: We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.
+Added: We enter into agreements with our employees pursuant to which they agree that any inventions created in the scope of their employment or engagement are assigned to us or owned exclusively by us, depending on the jurisdiction, without the employee retaining any rights.
+Added: A significant portion of our intellectual property has been developed by our employees in the course of their employment for us.
+Added: Under the Israeli Patent Law, 5727-1967 (the “Patent Law”), inventions conceived by an employee during the scope of his or her employment with a company are regarded as “service inventions,”
+Added: which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights.
+Added: The Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee (the “Committee”), a body constituted under the Patent Law, shall determine whether the employee is entitled to remuneration for his or her inventions.
+Added: Case law clarifies that the right to receive consideration for “service inventions”
+Added: can be waived by the employee and that in certain circumstances, such waiver does not necessarily have to be explicit.
+Added: The Committee will examine, on a case-by-case basis, the general contractual framework between the parties, using interpretation rules of the general Israeli contract laws.
+Added: Further, the Committee has not yet determined the method for calculating this Committee-enforced remuneration, , but rather uses the criteria specified in the Patent Law.
+Added: Although our employees have agreed that any rights related to their inventions are owned exclusively by us, we may face claims demanding remuneration in consideration for such acknowledgement.
+Added: As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such claims, which could negatively affect our business.
+Added: If our goodwill or other intangible assets become impaired, our financial condition and results of operations could be negatively affected.
+Added: Due to our latest acquisitions, goodwill and other intangible assets totaled approximately $208.3 million, or approximately 8.5% of our total assets, as of December 31, 2020.
+Added: We test our goodwill for impairment at least annually, or more frequently if an event occurs indicating the potential for impairment, and we assess on an as-needed basis whether there have been impairments in our other intangible assets.
+Added: We make assumptions and estimates in this assessment which are complex and often subjective.
+Added: These assumptions and estimates can be affected by a variety of external factors such as industry and economic trends, and internal factors such as changes in our business strategy or our internal forecasts.
+Added: To the extent that the factors described above change, we could be required to record additional non-cash impairment charges in the future, which could negatively affect our financial condition and results of operations.
Risks Related to the Ownership of Our Common Stock
1 unchanged sentence
Shares of our common stock were sold in our initial public offering in March 2015 at a price of $18.00 per share, and during the year ended December 31, 2020, the reported high and low prices of our common stock ranged from $67.02 to $335.8 per share.
−Removed: The price of our stock may change in response to fluctuations in our results of operations in future periods and also may change in response to other factors, including factors specific to companies in our industry, many of which are beyond our control.
+Added: As further detailed in the Performance Graph in Item 5 below, the price of our Common Stock in 2020 was highly volatile and may fluctuate in response to our results of operations in future periods or due to other factors, including factors specific to companies in our industry, many of which are beyond our control.
As a result, our share price may experience significant volatility and may not necessarily reflect the value of our expected performance.
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the expiration of contractual lock-up agreements;
−Removed: the development and sustainability of an active trading market for our common stock;
success of competitive products or services;
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tax developments in the U.S., Europe, or other markets;
+Added: conversion of all or portion of the Notes;
strategic actions by us or our competitors, such as acquisitions or restructurings;
changes in accounting principles.
−Removed: Further, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.
−Removed: These fluctuations often have been unrelated or disproportionate to the operating performance of those companies.
+Added: Further, the stock markets have experienced extreme price and volume fluctuations unrelated or disproportionate to the operating performance of affected companies.
In addition, the stock prices of many renewable energy companies have experienced wide fluctuations that have often been unrelated to the operating performance of those companies.
−Removed: These broad market and industry fluctuations, as well as general economic, political, and market conditions such as recessions, interest rate changes, or international currency fluctuations, may cause the market price of our common stock to decline.
+Added: These broad market and industry fluctuations, as well as general economic, political, and market conditions such as recessions, changes in U.S.
+Added: regulations and policies with respect to renewable energy , interest rate changes, or international currency fluctuations, may cause the market price of our common stock to decline.
In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation.
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Securities litigation against us could result in substantial cost and divert our management’s attention from other business concerns, which could seriously harm our business.
−Removed: The price of our common stock could decline if securities analysts or other third parties publish inaccurate or unfavorable research about us or if one or more of our analysts ceases to cover us or to regularly publish reports about us.
−Removed: The trading of our common stock is likely to be influenced by the reports and research that industry or securities analysts publish about us, our business, our market, or our competitors.
−Removed: If one or more securities or industry analysts downgrades our common stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline.
−Removed: If one or more securities or industry analysts ceases to cover the Company or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Provisions in our certificate of incorporation and by-laws may have the effect of delaying or preventing a change of control or changes in our management.
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We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future.
−Removed: Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws and organizational documents, after taking into account our financial condition, results of operations, capital requirements, general business conditions, and other factors that our board of directors may deem relevant.
+Added: Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws and organizational documents.
As a result, capital appreciation in the price of our common stock, if any, may be your only source of gain on an investment in our common stock.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.