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Item 1. Business

2021-02-19 compared with 2017-02-06 · 294 added, 637 removed, 141 unchanged (87% of the section changed)

We have invented an intelligent inverter solution that has changed the way power is harvested and managed in a solar PV system.

Our direct current (“DC”) optimized inverter system maximizes power generation at the individual PV module level while lowering the cost of energy produced by the solar PV system and providing comprehensive and advanced safety features.

Our system consists of our power optimizers, inverters and cloud-based monitoring platform and addresses a broad range of solar market segments, from residential solar installations to commercial and small utility-scale solar installations.

Since we began commercial shipments in 2010, we have shipped approximately 3.4 gigawatts (“GW”) of our DC optimized inverter systems and our products have been installed in solar PV systems in 96 countries.

Historically, the solar PV industry used traditional string and central inverter architectures to harvest PV solar power.

However, traditional inverter architectures result in energy losses as well as systemic challenges in design flexibility, safety and monitoring.

More recently, microinverter technology was introduced in an attempt to resolve these challenges, but this technology has certain inherent limitations.

We believe that our DC optimized inverter system, consisting of an inverter and distributed power optimizers, best addresses all of these challenges.

Our system allows for superior power harvesting and module management relative to traditional inverter systems by deploying power optimizers at each PV module while maintaining a competitive system cost by keeping the AC inversion and grid interaction centralized using a simplified DC-AC inverter.

The entire system is monitored through our cloud-based monitoring platform that enables reduced system operation and maintenance (“O&M”) costs.

Our system enables each PV module to operate at its own maximum power point (“MPP”), rather than a system-wide average, enabling dynamic response to real-world conditions, such as atmospheric conditions, PV module aging, soiling and shading and offering improved energy yield relative to traditional inverter systems.

In addition to higher efficiency, our system’s installed cost per watt is competitive with traditional inverter systems of leading manufacturers and generally lower than comparable microinverter systems of leading manufacturers.

Furthermore, our architecture allows for complex rooftop system designs and enhanced safety and reliability.

Our technology and system architecture are protected by 72 awarded patents and 114 patent applications filed worldwide as of June 30, 2016.

We primarily sell our products directly to large solar installers and engineering, procurement and construction firms (“EPCs”) and indirectly to thousands of smaller solar installers through large distributors and electrical equipment wholesalers.

We are a leading provider of an optimized inverter solution that changed the way power is harvested and managed in photovoltaic (also known as PV) systems.

Our direct current or DC, optimized inverter system maximizes power generation while lowering the cost of energy produced by the PV system, for improved return on investment, or RoI.

Additional benefits of the DC optimized inverter system include comprehensive and advanced safety features, improved design flexibility, and improved operating and maintenance, or O&M, with module-level and remote monitoring.

The typical SolarEdge optimized inverter system consists of inverters, power optimizers, a communication device which enables access to a cloud based monitoring platform and in many cases, additional smart energy management solutions.

Our solutions address a broad range of solar market segments, from residential solar installations to commercial and small utility‑scale solar installations.

Since we began commercial shipments in 2010, we have shipped approximately 22.4 gigawatts (“GW”) of our DC optimized inverter systems and our products have been installed in solar PV systems in 133 countries.

Since introducing the optimized inverter solution in 2010, SolarEdge has expanded its activity to other areas of smart energy technology, both through organic growth and through acquisitions.

By leveraging world-class engineering capabilities and with a relentless focus on innovation, SolarEdge now offers energy solutions which include not only residential, commercial, and large scale PV systems but also product offerings in the areas of energy storage systems, or ESS, and backup, electric vehicle, or EV components and charging capabilities, home energy management, grid services and virtual power plants, lithium-ion batteries and uninterrupted power supply, known as UPS solutions.

We primarily sell our products indirectly to thousands of solar installers through large distributors and electrical equipment wholesalers and directly to large solar installers and engineering, procurement, and construction firms (“EPCs”).

Our customers include leading providers of solar PV systems to residential and commercial end users, key solar distributors, and electrical equipment wholesalers as well as several PV module manufacturers that offer PV modules with our power optimizer physically embedded into their modules.

We were founded in 2006 and began commercial shipments in 2010.

As of June 30, 2016, we have shipped approximately 12.5 million power optimizers and 513,000 inverters.

More than 265,000 installations, many of which may include multiple inverters, are currently connected to, and monitored through, our cloud-based monitoring platform.

Limitations of Existing Technologies

A solar PV system consists of PV modules, which produce direct current (“DC”) power when exposed to sunlight;

an inverter, which transforms the DC power into alternating current (“AC”) power that is required by the electricity grid;

and associated cabling, fuse boxes and mounting hardware.

Traditionally, solar PV systems connected strings of solar PV modules to one or more inverters for this energy conversion.

Traditional inverter architecture still constitutes the vast majority of the PV inverter market, especially for larger commercial and utility installations.

However, traditional inverter architecture suffers from significant inefficiencies leading to suboptimal power generation.

These challenges include:

Module mismatch.

Traditional inverter systems are unable to consistently produce maximum energy from PV modules.

Each PV module in a system has a unique power production profile driven by differences in manufacturing and installation parameters.

The architecture of traditional inverter systems does not allow each PV module to operate at its unique MPP.

When PV modules are wired in series in a traditional inverter architecture, the entire string’s output is reduced, sometimes correlated directly to the output of the lowest-performing PV module on the string.

Output reduction can result from subtle variations in PV module composition, atmospheric conditions, soiling, individual PV module locations and orientations, or varying levels of PV module degradation over time.

Partial shading.

Many real-world factors can cause a subset of the PV modules in a system to be partially shaded, which can significantly affect the power output of the entire string.

For instance, electric wires, a chimney or even adjacent solar panels may cast a shadow during particular hours of the day, or debris may accumulate.

This partial shading reduces the yield of a traditional solar PV system by decreasing, or in extreme cases eliminating, power output from the shaded modules.

Overall losses to system production from such partial shading can range from small to substantial.

Dynamic maximum power point tracking loss.

The MPP of a PV module shifts constantly throughout the day as a result of atmospheric conditions.

A traditional inverter system’s inability to coordinate output on a module-by-module basis makes it difficult for the system to respond dynamically to the shifting MPP.

This inability to respond to the shifting MPP can reduce the potential power output of a traditional solar PV system by 3-10%.

In addition to power losses, the traditional inverter architecture also has system design, installation and operational challenges, including:

Rooftop system design complexities.

A traditional inverter system requires each string to be of the same length, use the same type of PV modules and be positioned at the same angle toward the sun.

Consequently, rooftop asymmetries and obstructions result in either wasted roof space or inefficient duplication of system components.

Safety hazards.

Traditional inverter systems cannot shut down the DC output voltage at the PV module level.

The DC cables from these modules carry high voltages as long as the sun is shining, even when the traditional inverter or the grid connection has been shut down.

This poses serious risks to installers, fire fighters and anyone else who performs work on or around the installation.

Such safety hazards have recently prompted heightened safety installation and operation procedures and regulations in a growing number of geographies, compliance with which increases the cost of traditional PV systems.

No module level monitoring.

A traditional inverter system cannot track power output, temperature or any other attribute of a single PV module.

Consequently, a system operator cannot perform remote diagnostics, track performance of PV system components or receive alerts about individual PV module status, and may be unaware of specific module-level problems or breakdowns.

The first generation of module level power electronics (“MLPE”) was the microinverter.

This technology scaled down the traditional inverter to a size and power appropriate to a single PV module.

By creating control and monitoring at the module level, microinverters solved certain challenges of the traditional inverter system architecture.

However, microinverter architecture has its own limitations, such as:

Higher initial cost per watt and limited economies of scale.

Microinverters perform all the functionality of the traditional inverter, but at each PV module, and consequently a microinverter system has a higher initial upfront cost of components relative to traditional inverter architecture.

In addition, as every PV module must have its own microinverter, the cost per watt of a microinverter system does not decrease with scale.

As such, microinverters are generally more expensive than traditional inverter systems on a cost per watt basis for residential installations and not economically viable relative to traditional inverter systems for large commercial and utility installations.

Grid Code Compliance.

With the growing penetration of solar energy, many utilities in individual U.S.

states and Europe have adopted new sets of grid codes to preserve the stability of the electric grid.

These grid codes require solar PV inverters to respond dynamically to variances in grid-wide voltage, which typically requires inverter hardware and software to be reengineered.

The microinverter faces significant implementation challenges in complying with many of these new grid codes primarily due to its small size.

In most cases, adaptation to these new grid codes would require added costs and complexities, limiting the ability of microinverters to address some markets.

The PV industry is surveyed by IHS Markit, an analytics company, that ranked SolarEdge as the top PV inverter supplier world-wide, by revenues, the top single phase PV inverter supplier world-wide based on MegaWatt shipments, and the top inverter supplier for the residential market world-wide as of their published “IHS PV Inverter Market Tracker - Fourth Quarter 2020”.

As of December 31, 2020, we have shipped in the aggregate approximately 65.3 million power optimizers and 2.7 million inverters.

More than 1.9 million PV installations, many of which may include multiple inverters, are currently connected to and monitored through, our cloud-based monitoring platform.

The SolarEdge Solution.

Our DC optimized inverter system maximizes power generation at the individual PV module level while lowering the cost of energy produced by the solar PV system and providing comprehensive and advanced safety features.

Our solution consists of our power optimizers, inverters and cloud-based monitoring platform and addresses a broad range of solar market segments, from residential solar installations to commercial and small utility-scale solar installations.

The key advantages of our solution include:

Our solution consists of inverters, power optimizers, a communication device which enables access to our cloud-based monitoring platform and addresses a broad range of solar market segments, from residential solar installations to commercial and small utility‑scale solar installations.

Additional smart energy features and hardware that can be added to our solution includes a battery pack for storage of energy and a home energy automation system which enables greater savings for the system owner.

The key advantages of our solution over a traditional string inverter PV system include:

Maximized PV module power output.

Our power optimizers provide module-level MPP tracking and real-time adjustments of current and voltage to the optimal working point of each individual PV module.

Our power optimizers provide module‑level MPP tracking and real‑time adjustments of current and voltage to the optimal working point of each individual PV module.

This enables each PV module to continuously produce its maximum power potential independent of other modules in the same string, thus minimizing module mismatch and partial shading losses.

By performing these adjustments at a very high rate, our power optimizers also solve the dynamic MPP losses associated with traditional inverters.

Independent testing from Photon Laboratories as well as tests performed by PV Evolution Labs according to the National Renewable Energy Laboratory shade test have confirmed that our technology provides power harvesting that is superior to traditional inverter systems.

Optimized architecture with economies of scale.

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The cost savings that we have achieved on the inverter enable our system to be priced at a cost per watt that is comparable with traditional inverter systems of leading manufacturers.

As a PV system grows in size, our inverter benefits from economies of scale, making our technology viable for large commercial and utility-scale applications.

As a PV system grows in size, our inverter benefits from economies of scale, making our technology viable for large commercial and utility‑scale applications.

Enhanced system design flexibility.

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For example, some installers use remote tools to estimate the size and configuration of an installation in connection with the customer acquisition process.

This is especially common for high-volume residential arrays, where an exhaustive survey of rooftop obstructions would be uneconomical.

This is especially common for high‑volume residential arrays, where an exhaustive survey of rooftop obstructions would be uneconomical.

In some cases, installers discover that their preliminary design, based on remote tools, cannot be implemented due to unexpected shading or other obstructions.

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Continuous monitoring and control to reduce operation and maintenance costs.

Our cloud-based monitoring platform provides full data visibility at the module level, string level, inverter level and system level.

The data can be accessed remotely by any web-enabled device, allowing comprehensive analysis, immediate fault detection and alerts.

Our cloud‑based monitoring platform provides full data visibility at the module level, string level, inverter level and system level.

The data can be accessed remotely by any web‑enabled device, allowing comprehensive analysis, immediate fault detection and alerts.

These monitoring features reduce O&M costs for the system owner by identifying and locating faults, enabling remote testing and reducing field visits.

Enhanced safety.

We have incorporated module-level safety mechanisms in our system to protect installers, electricians and firefighters.

Each power optimizer is configured to reduce output to 1 volt unless the power optimizer receives a fail-safe signal from a functioning inverter.

We have incorporated module‑level safety mechanisms in our system to protect installers, electricians and firefighters.

Each power optimizer is configured to reduce output to 1 volt unless the power optimizer receives a fail‑safe signal from a functioning inverter.

As a result, if the inverter is shut down (e.g., for system maintenance, due to malfunction, in the event of a fire or otherwise), the DC voltage throughout the system is reduced to a safe level.

In recent years, new safety standards have been introduced in the U.S.

and in Europe that require or encourage the installation of safety measures such as these.

Our DC optimized inverters comply with the applicable safety requirements of the areas in which they are sold, providing incremental cost savings to installers by eliminating the need for additional hardware such as DC breakers, switches or fire-proof ducts required by traditional inverter systems.

Our DC optimized inverters comply with the applicable safety requirements of the areas in which they are sold, providing incremental cost savings to installers by eliminating the need for additional hardware such as DC breakers, switches or fire‑proof ducts required by traditional inverter systems.

In the U.S., the SolarEdge SafeDC feature is compliant with NEC 2014 & NEC 2017 Rapid Shutdown functionality, section 690.12.

SolarEdge inverters also have a built-in protection designed to mitigate the effects of some arcing faults that may pose a risk of fire, in compliance with the UL1699B arc detection standard.

High reliability.

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We have designed our system to meet these stringent requirements.

Our power optimizers dissipate much less heat than microinverters because no DC-AC inversion occurs at the module level.

Our power optimizers dissipate much less heat than microinverters because no DC‑AC inversion occurs at the module level.

As a result, less heat is dissipated beneath the PV module, which improves lifetime expectancy and reliability of our power optimizers.

Our power optimizers’ high switching frequency allows the use of ceramic capacitors with a low, fixed rate of aging and a proven life expectancy in excess of 25 years.

Further, we use automotive-grade application specific integrated circuits (“ASICs”) that embed many of the required electronics into the ASIC.

Our power optimizers’

high switching frequency allows the use of ceramic capacitors with a low, fixed rate of aging and a proven life expectancy in excess of 25 years.

Further, we use automotive‑grade application specific integrated circuits (“ASICs”) that embed many of the required electronics into the ASIC.

This reduces the number of components and consequently the potential points of failure.

Our solution consists of a DC power optimizer, an inverter and a cloud-based monitoring platform that operate as a single integrated system:

Energy Storage.

Our DC optimized inverter system allows solar energy to be directly stored in batteries without any conversion, thereby eliminating energy losses that are associated with such conversions and improving the RoI of PV associated battery systems.

Energy Management.

Strategically located at the intersection between PV, home usage, and the grid, inverters are well positioned to act as smart energy managers.

Our smart inverters incorporate the management of PV energy, battery storage, smart devices, and grid interaction.

By enabling smart energy management in our inverter, system owners can not only store solar energy but also control the timing of their PV energy consumption in order to increase their energy independence, take advantage of lower time-of-use rates, reduce electric bills, and improve overall system RoI.

Distributed Energy Generation.

As the electric grid transitions from one based on centralized power stations to a network of distributed, renewable energy sources, our inverter acts as a local control system that can manage the energy resources underlying such distributed network.

Our inverters are a key part of developing a distributed and interactive grid that can help support grid stability.

One such example is inverter-enabled charging and discharging of batteries as part of a virtual power plant to help manage the load on the grid and grid stability.

Our PV Solar Products Offering

SolarEdge began its commercial sales with a product offering of a simplified inverter, power optimizers, and cloud-based monitoring platform.

As the solar energy industry has evolved, SolarEdge has developed innovative solutions to further enhance smart energy technology including inverters that include compatibility with batteries for increased self-consumption and storage, inverters that allow EV charging, smart meters, smart energy devices (sockets, water heater controllers, wireless relay) and smart PV modules.

This product expansion has enabled us to increase average revenue per installation, or ARPI.

SolarEdge Power Optimizer.

Our DC power optimizer is a highly reliable and efficient DC-to-DC converter which is connected by installers to each PV module or embedded by PV module manufacturers into their modules as part of the manufacturing process.

Our DC power optimizer is a highly reliable and efficient DC‑to‑DC converter which is connected by installers to each PV module or embedded by PV module manufacturers into their modules as part of the manufacturing process.

Our power optimizer increases energy output from the PV module to which it is connected by continuously tracking the MPP of each module and controlling its working point.

The power optimizer’s ability to track the MPP of each PV module and its ability to increase or decrease its output voltage, enables the inverter’s input voltage to remain fixed under a large variety of string configurations.

This feature enhances flexibility in PV system designs, enabling use of different string lengths in a single PV system connected to the same inverter, use of PV panels situated on multiple orientations connected to the same inverter and using varied PV module types in the same string.

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In turn, the inverter transmits this information to our monitoring server.

Each power optimizer is equipped with our proprietary safety mechanism which automatically reduces the output voltage of each power optimizer to 1V unless the power optimizer receives a fail-safe signal from a functioning inverter.

As a result, if the inverter is shut down (e.g., for system maintenance, due to malfunction, in the event of a fire or otherwise), the DC voltage throughout the system is reduced to a safe level.

Our power optimizers are designed to withstand high temperatures and harsh environmental conditions and contain multiple bypass features that localize failures and enable continued system operation in the vast majority of cases of power optimizer failure.

Our power optimizers are compatible with the vast majority of modules on the market today and carry a 25-year product warranty.

Our power optimizers are designed to be used with our inverters as well as third party inverters to provide power optimization.

Our power optimizers are compatible with the vast majority of modules on the market today and carry a 25‑year product warranty.

Our power optimizers are designed to be used with our inverters to provide power optimization.

Monitoring and safety features can also be achieved with third party inverters by adding supplemental communications hardware.

During fiscal 2014, 2015 and 2016 revenues derived from the sale of power optimizers represented 48.8%, 48.8% and 50.0% of total revenues, respectively.

During the year ended December 31, 2019 and the year ended December 31, 2020, revenues derived from the sale of power optimizers represented 44.5% and 42.9% of total revenues, respectively.

SolarEdge Inverter.

Our DC-to-AC inverters contain sophisticated digital control technology with efficient power conversion architecture resulting in superior solar power harvesting and high reliability and are designed to work exclusively with our DC power optimizers.

Our DC‑to‑AC inverters contain sophisticated digital control technology with efficient power conversion architecture resulting in superior solar power harvesting and high reliability and are designed to work exclusively with our DC power optimizers.

A proprietary power line communication receiver is integrated into each inverter, receiving data from our power optimizers, storing this data and transmitting it to our monitoring server when an internet connection exists.

Since each string which is equipped with our power optimizers provides fixed input voltage to our inverter, the inverter is able to operate at its highest efficiency at all times and therefore is more cost-efficient, energy efficient and reliable.

Like our power optimizers, our inverters are designed to withstand harsh environmental conditions.

Since the power rating of an inverter determines how many PV modules it can serve, larger installations require inverters with higher power ratings.

We currently offer our second generation of inverters which come in two models:

a one-phase inverter designed to address the residential market (2.2 kilowatts (“kW”) to 11.4 kW) and a three-phase inverter designed to address the residential market in certain European countries and the commercial market (4 kW to 33.3 kW).

In June 2016, we introduced an extended commercial solution that consists of various inverters, sized 25kW, 27.6kW, and 33.3kW for the Europe, Middle East, Africa and Asia Pacific markets and 14.4kW and 33.3kW for the North American market.

These inverters which are identical in size and enclosure as other SolarEdge inverters are designed for commercial installations, reduce the number of required inverters and increase the system return on investment.

The vast majority of our inverters are sold with a 12-year warranty that is extendable to 20 or 25 years for an additional cost.

During fiscal 2014, 2015 and 2016, revenues derived from the sale of inverters represented 46.6%, 48.3 % and 45.7% of total revenues, respectively.

We have completed the development of and are currently ramping up shipments of our HD-Wave technology inverter.

The HD-Wave inverter technology provides significant improvements in efficiency, while decreasing the magnetics and cooling components in order to reduce inverter size and cost.

We currently offer a single‑phase inverter designed to address the residential market (1 kilowatt (“kW”) to 11.4 kW) which is based on our HD-Wave technology and a three‑phase inverter designed to address the residential market in certain European countries and Australia as well as the commercial market (4 kW to 100 kW).

Our single-phase inverters support a range of smart energy capabilities.

In 2020, we launched our EnergyHub inverter and home backup solution for the U.S.

residential market.

The EnergyHub contains built in consumption monitoring, embedded revenue-grade production metering and integrated arc fault protection and rapid shutdown and is ready for a battery.

In Europe, we launched our three-phase grid-tied inverter with battery storage.

We also introduced our new commercial three-phase 120kw inverter with Synergy technology with enhanced power capabilities which is designed to enable quick and easy installation and inventory management for the commercial market.

The vast majority of our inverters are sold with a 12‑year warranty that is extendable to 20 or 25 years for an additional cost.

During the year ended December 31, 2019 and the year ended December 31, 2020 revenues derived from the sale of inverters represented 43.9% and 44.0% of total revenues, respectively.

EV Charging Inverter.

SolarEdge’s EV charging inverter offers homeowners the ability to charge electric vehicles up to six times faster than a standard Level 1 charger through an innovative solar boost mode that utilizes grid and PV charging simultaneously.

This inverter is the world’s first EV charger with an integrated PV inverter.

Reducing the burden of installing separately a standalone EV charger and a PV inverter, the EV charging inverter eliminates the need for additional wiring, conduit and a breaker installation.

By installing an inverter that has an integrated EV charge, no additional dedicated circuit breaker is needed, saving space and ruling out a potential upgrade to the main distribution panel.

StorEdge Solutions.

Our StorEdge solution is a DC coupled solution that is used to increase energy independence and maximize self-consumption for homeowners by utilizing a battery which is sold separately by third party manufacturers, to store and supply power as needed.

Our StorEdge solution is an on-grid solution that is used to increase energy independence and maximize self-consumption and backup capabilities for homeowners by utilizing a battery to store and supply solar power as needed.

The solution is based on a single inverter for both solar PV and storage.

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Existing SolarEdge systems can be upgraded to our StorEdge solution.

SolarEdge Monitoring Software.

Our cloud-based monitoring platform collects power, voltage, current and system data sent from our inverters and power optimizers and allows users to view the data at the module level, string level, inverter level and system level from any browser or from most smart phones and tablets.

Our StorEdge inverter with HD-Wave technology and backup interface is designed to support connection to backup generators or up to three StorEdge inverters with each inverter DC coupled to two batteries.

In the first quarter of 2020, we launched a new backup StorEdge interface that raises available backup power and eliminates pre-defining loads for simplified energy management.

SolarEdge Software.

We offer a variety of professional software tools from system design to monitoring:

Our “Designer platform”

is a free web-based tool that helps solar professionals to plan, build and validate our residential and commercial systems from inception to installation.

Our “Mapper app”

provides SolarEdge installers with an efficient, streamlined process for registering the physical layout of new PV sites in the SolarEdge monitoring platform.

Installers use the Mapper app to scan SolarEdge power optimizer and inverter barcodes, creating a virtual map of the PV site in the monitoring platform to help facilitate remote diagnostics.

Making installations quick and simple, our “SetApp”

is used to activate and configure SolarEdge inverters during commissioning directly through a smartphone.

In 2020 we launched the mySolarEdge application that enables system owners to easily track their real-time system production and household energy consumption, as well as view their inverter status for quick troubleshooting from their mobile phones.

Our cloud‑based monitoring platform collects power, voltage, current and system data sent from our inverters and power optimizers and allows users to view the data at the module level, string level, inverter level and system level from most browsers or from most smart phones and tablets.

The monitoring software continuously analyzes data and flags potential problems.

The monitoring software includes features which are used on a routine basis by integrators, installers, maintenance staff, and system owners to improve a solar PV system’s performance by maximizing solar power harvesting and reducing O&M costs by increasing system up-time and detecting PV module performance issues more effectively.

The monitoring software includes features which are used on a routine basis by integrators, installers, maintenance staff, and system owners to improve a solar PV system’s performance by maximizing solar power harvesting and reducing O&M costs by increasing system up‑time and detecting PV module performance issues more effectively.

Connection to the monitoring server is completed during installation by the installer.

The installer then receives full access to system data through the monitoring software and can select the amount of data to be shared with the system owner.

Smart Energy Management.

There are currently two separate energy technology industries that exist today, solar energy production and automation technology.

Inverters are taking on an expanded role in energy management and automation, and in order to address these market needs, we are developing and providing automation products.

This line of products, when used with the SolarEdge solution, is designed to allow system owners to increase self-consumption by shifting energy usage to match peak solar PV production as well as offer a convenient, wireless control option over various building and/or home devices.

An example of this solution, would be using excess solar PV energy to heat water or the ability to remotely turn on or off certain power sources such as lighting or electrical appliances.

The introduction of these products is dependent upon certification and region specific needs and as such, these products are not yet available in all of the geographies in which SolarEdge operates.

Grid Services.

As PV and storage continue to proliferate around the world, energy production is transitioning from a centralized system to a distributed network model, where energy is produced close to the location in which it is consumed and stored.

This model creates an opportunity for new interconnected and decentralized energy networks offering improved grid reliability and stability, new energy services and reduction of grid infrastructure costs.

SolarEdge grid services deliver near real-time aggregative control and data reporting, enabling the pooling of distributed energy resources such as photovoltaic systems, battery storage, electric vehicle chargers, and loads, in the cloud for the creation of virtual power plants.

The SolarEdge grid services and VPP solution provides sophisticated management platforms to enable real-time, aggregated control of available energy resources to meet ever-changing supply needs and demand.

Our distributed energy resources management system or DERMS application and APIs are used by utilities for countering peak demand events.

In 2020, SolarEdge generated revenues from selling grid services in the U.S., Europe and Australia, including services provided to independent system operators, energy retailers, national installers and others.

Product Roadmap

Our products reflect the innovation focus and capabilities of our technology departments.

Our product roadmap is divided into five categories:

power optimizers, inverters, monitoring services, energy storage and smart energy management

Our products reflect the innovation focus and capabilities of our technology departments as well as the importance we place on creating value for our customers.

Our core solar product roadmap is divided into five categories:

power optimizers, inverters, software, energy storage, and smart energy management.

Power Optimizers.

We currently sell our third generation power optimizer which was designed for fully automated assembly and which is based on our third generation ASIC.

A key element of our reliability strategy, and a significant differentiator relative to our competitors, is our use of proprietary ASICs to control, among other things, our power optimizer’s power conversion, safety features, and PV module monitoring.

Instead of using large numbers of discrete components, our power optimizer uses a single proprietary ASIC, thus reducing the total number of components in an electrical circuit and thereby improving reliability.

We are in the final stages of testing our fourth generation ASIC and we expect to begin commercial shipments of our fourth generation power optimizers in the first half of calendar 2017.

In 2021, we expect to launch our fourth generation power optimizer which uses fourth generation ASIC that will provide higher efficiency and incorporates a new safety mechanism for PV systems including connector level fault detection.

In addition, we are also continuing to develop the necessary subsystems for the fifth generation ASIC which will be used in our fifth generation power optimizer.

Each new ASIC generation has reduced the number of components required and meaningfully improved the efficiency of the power optimizer.

Each new ASIC generation reduces the number of components required and meaningfully improved the efficiency of the power optimizer.

The efficiency improvement reduces the energy losses which in turn reduces the amount of heat dissipation.

This enables design of a more cost effective and usually smaller enclosure and also keeps the electronics cooler, thereby improving the power optimizer’s reliability.

This enables design of a more cost-effective and usually smaller enclosure and also keeps the electronics cooler, thereby improving the power optimizer’s reliability.

Our inverter roadmap includes both new products as well as additional capabilities for existing inverters.

Our inverter roadmap is intended to serve three purposes:

(i) expand addressable market by developing new and larger inverters designed specifically for larger commercial installations and utility-scale projects;

(ii) improve the electronics to increase the total power throughput without changing the existing enclosure, thereby reducing the actual cost per watt and increasing economies of scale and (iii) improve ease of installation by integrating additional functionality required in certain installations in order to reduce costs of additional hardware and labor costs.

As part of our inverter roadmap, we plan to apply our HD-Wave technology to three-phase inverters and we are in the development process for doing so.

Monitoring Services.

Our cloud-based monitoring platform is continuously growing by the amount of data aggregated.

(i) expand addressable markets by developing new and larger inverters designed specifically for larger commercial installations and utility‑scale projects;

(ii) improve the electronics to increase the total power throughput while minimally changing the existing enclosure, thereby reducing the actual cost per watt and increasing economies of scale and (iii) improve ease of installation by integrating additional functionality required in certain installations in order to reduce costs of additional hardware and subcontractors’

We continue to expand our software offering with introduction of new tools and new features to our current tools.

This includes both professional web-based software and system owner applications such as the fleet management, the site designer tool, mySolarEdge consumer app and installer applications.

Our cloud‑based monitoring platform is continuously growing by the amount of data aggregated.

We are continuously developing tools to accommodate our growth and further enhance our service offering.

Specifically, we plan to increase data compression in order to enable support for a rapidly increasing number of field systems while using low-cost equipment.

In addition, we plan to improve our reporting systems and enable users to obtain self-generated customized reports.

Specifically, we plan to improve our reporting systems and enable users to obtain self‑generated customized reports.

We also expect to expand algorithms that detect and pinpoint problems that can affect power production in field systems.

We further plan to add more capabilities through our public application program interface to allow users to build and integrate our system into their own systems and to allow users to build and share useful applications based on monitoring data gathered by our software.

Energy Storage and Shifting.

SolarEdge is working to continue to expand its third-party battery compatibility for the residential market.

For the commercial market, we plan to expand our StorEdge product offering to the commercial and industrial sector.

Energy Storage.

We are working to continue to expand our on-grid and backup offering for the residential market including by introducing our own home battery which is expected to launch during the second quarter of 2021, while also developing our own battery for the commercial market segment.

Smart Energy Management

There are currently two separate energy technology industries that exist today, solar energy production and building automation technology.

We believe that inverters will be taking on an expanded role in energy management and automation, and in conjunction with this assumption we are developing building automation products that can combine both of these industries.

This line of products, when used with the SolarEdge solution, will be designed to allow system owners to increase self-consumption by shifting energy usage to match peak solar PV production as well as offer a convenient, wireless control option over various building and home devices.

An example of this solution, would be using excess solar PV energy to heat water or the ability to remotely turn on or off certain power sources such as lighting or electrical appliances.

The introduction of these products is dependent upon certification and region specific needs and as such, cannot yet be specified.

Our smart energy management offering manages and controls PV production, home consumption, storage, home generator and grid interaction, and is designed to automatically use excess PV power to increase self-consumption of solar energy and reduce energy bills and carbon footprints.

The offering controls electrical loads such as, pool pumps, fans, lighting and other home appliances by using several accessories such as a smart socket, smart switch relays and more, and is able to divert excess solar energy to heat water.

We are developing new features and capabilities for the smart energy suite which is constantly evolving.

Specifically, we have current plans to add the ability to control additional energy loads and are developing capabilities for the commercial segment.

We also plan on expanding the availability of our smart energy products, including smart energy management devices, to new geographies and use cases.

Products from Non-Solar Businesses

During the year ended December 31, 2018, we expanded our product offering by completing the acquisition of the assets of a business for the development, manufacturing and sale of uninterrupted power supply or UPSs (“Critical Power”) as well as the acquisition of Kokam Co., Ltd.

(“Kokam”), a provider of Lithium-ion cells, batteries and energy storage solutions.

In January 2019, we further expanded our product offering by completing the acquisition of approximately 99.9% of SolarEdge Automation Machines SPA (“SolarEdge Automation Machines”) and its wholly owned subsidiary SolarEdge eMobility SPA (“SolarEdge e-Mobility”) (formerly S.M.R.E Spa and I.E.T Spa, respectively).

SolarEdge Automation Machines manufactures automated machinery for industrial applications and SolarEdge e-Mobility develops, manufactures and sells end-to-end e-Mobility solutions for electric and hybrid vehicles used in motorcycles and light commercial vehicles.

These acquisitions allow us to offer a variety of products and solutions in addition to the SolarEdge solution, in adjacent markets.

UPS products .

Our Critical Power product offering includes a range of UPS and power supply solutions for use in various applications including datacenters, communications, defense, healthcare, industrial, financial, transportation, government and, retail.

The products include modular UPS solutions ranging from 10 kW to 1.2 MW, modular power systems for the telecommunications market, and different control and management solutions.

In the year ended December 31, 2020, we launched our advanced three-phase modular product family to the U.S.

market with an offering for both 208V and 480V targeting industrial, health and IT/data centers applications.

Lithium-ion batteries and related products .

Founded in 1989, Kokam, develops, manufactures and sells premium lithium-ion battery cells, batteries and energy storage solutions.

Kokam’s patented cell manufacturing technology allows us to provide energy solutions of improved performance, safety, and reliability which can integrate with a wide-variety of industries, including Energy Storage Systems known as ESS, UPS, EVs, and marine.

This year we began development of an additional factory in Korea for the manufacturing of 2GW of cells which is expected to be completed in the first half of 2022.

Products for e-Mobility .

Through the acquisition of SolarEdge e-Mobility and SolarEdge Automation Machines, SolarEdge added to its product offering components for e-Mobility, automated production machines and telematics software.

These solutions include innovative powertrain technology integrated with the gearbox, engine, battery, BMS, software, electronics and batteries for light goods vehicles, light commercial vehicles and e-motorcycles.

In the year ended December 31, 2020, we delivered full electrical powertrain kits which consist of batteries, inverters, motor and a vehicle control unit for pre-production validation by an automotive manufacturer and expect to ramp delivery of additional powertrain kits in 2021.

We recently announced that we were selected and will begin to supply full electrical powertrain units and batteries for the production of the Fiat E-Ducato light commercial vehicle.

New Products or Product Categories

We continuously evaluate opportunities to expand our product offerings and services to our customers.

We may from time to time develop new products or services that are a natural extension of our existing business, or may 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 synergistic opportunities.

Sales and Marketing Strategy

Since commencing sales activities in early 2010, our strategy has been to focus on markets where electricity prices, irradiance and government policies make solar PV installations economically viable.

Today, our products have been installed in 96 countries, including the U.S., Canada, Belgium, France, Germany, Italy, the Netherlands, the United Kingdom, Israel, Australia Japan, Singapore and China.

Our solar business strategy is to focus on penetrating new geographic regions and increasing our market share.

More specifically, we focus on markets where electricity prices, irradiance and government policies make solar PV installations economically viable.

Our solar products have been installed in 133 countries.

We target our sales and marketing efforts to the largest distributors, electrical equipment wholesalers, EPC contractors and installers in each of the countries where we operate.

In the U.S., Germany, Italy, the United Kingdom and Australia, our products are carried and actively sold by most of the top solar PV distributors as well as the largest electrical distribution companies that are active in solar PV.

In the U.S., Germany, Italy, the Netherlands, Poland and Australia, our products are carried and actively sold by most of the top solar PV distributors as well as the largest electrical distribution companies that are active in solar PV.

We anticipate that an increasing percentage of solar PV equipment sales will also occur through electrical equipment wholesalers who sell to a broad range of electrical contractors, and we are focused on cultivating these global relationships.

As of June 30, 2016, according to the data available on our monitoring portal, approximately 13,009 installers around the world have installed SolarEdge solar PV systems, including an average of approximately 330 new installers per month since the beginning of fiscal 2016.

We also sell our power optimizers to several PV module manufacturers that offer PV modules with our power optimizer physically embedded into their modules.

Additionally, we have a number of programs focused on educating installers and other industry professionals about our technology, and we use a combination of road shows, webinars and partner trainings to show them how best to design, sell and implement our technology in their projects.

As of December 31, 2020, according to data available on our monitoring platform, over 37,400 installers around the world have installed SolarEdge solar PV systems.

We also sell our power optimizers pre-installed onto several PV modules for manufacturers that offer PV modules with our power optimizer physically embedded into their modules.

Additionally, as further detailed below, we have a number of programs focused on educating installers and other industry professionals about our technology, and we use a combination of road shows, webinars, and partner trainings to educate them how best to design, sell, and implement our technology in their projects.

Most of this activity was converted to on-line platforms during 2020 to enable continued training, education and marketing during the global pandemic such as the SolarEdge first Global Virtual Solar Show and additional virtual roadshows.

Our battery business strategy focuses on utilizing Kokam’s battery technology in our residential and commercial solar products and using any remaining manufacturing capacity for generating revenues from the sale of battery cells, modules and systems to other applications including ESS, e-mobility, marine and other applications.

In the future we intend to further integrate our batteries into the UPS products and our other applications.

Our Customers

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and worldwide.

In fiscal 2016, three of our customers (two distributors and one large installer) represented32.5% of our revenues.

We fill orders primarily as they are received and as such, do not have significant backlog.

In 2020, one of our customers, Consolidated Electrical Distributors Inc.

(CED) represented 14.8% of our revenues.

None of our other customers accounted for more than ten percent of our revenues in the year ended December 31, 2020.

Training and Customer Support

We offer our installer base a comprehensive package of customer support and training services which include pre-sales support, ongoing trainings, and technical support before, during, and after installation.

We offer our installer base a comprehensive package of customer support and training services which include pre‑sales support, ongoing trainings, and technical support before, during, and after installation.

We also provide customized support programs to PV module manufacturers, large installers and distributors to help prioritize and track support issues, thereby enabling short cycle times for issue resolution.

In 2016, we conducted approximately 281 training events in 20 countries, with an aggregate of approximately 7,003 attendees.

We offer a wide variety of training, including hands-on and on-demand video sessions and online product and training materials.

We support our commercial system customers with design consulting throughout their sales process and installation.

Our technical support organization includes local expert teams, call centers in the USA, Germany, Australia, Netherlands and Israel, and an online service portal.

Our toll-free call centers are open Monday through Friday from 9:00 a.m.

In 2020, as COVID-19 related lockdowns made in-person training events impractical in many countries, we adjusted our training methodologies to a hybrid approach combining hands-on and digital learning techniques.

As a result, we were able to significantly increase our overall training reach, with approximately 900 training events (both in-person and digital) attracting approximately 58,000 participants from 90 countries.

This year we introduced the EDGE Academy, an intuitive web-based learning portal that aims to help SolarEdge installers improve their installation skills and minimize installation time.

Using digital-learning, installers can complete a certification program in one of 12 available languages to become a certified SolarEdge installer.

Each program is valid for two years.

Since its launch in the fourth quarter of 2020, over 8,700 installers worldwide have successfully completed the training program, becoming certified SolarEdge installers.

In addition to over 200 new product training videos published on our YouTube channel in 2020 in multiple languages, we have also developed new mobile learning tools that improve the ability of our installers to quickly and efficiently install our products.

Over the past year, more than 11,000 SolarEdge installers have increased their technical know-how and enhanced their installation techniques by using these tools, which were designed to assist them specifically at the time of system installation.

In addition to the above, we support our commercial system customers with design consulting throughout their sales process and installation.

Our technical support organization includes local expert teams, call centers, an online service portal and live chat service.

Our toll‑free call and live chat centers are open Monday through Friday at least from 9:00 a.m.

in every region in which we sell our products.

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All support cases are monitored via a customer relationship management system in order to ensure service, track closure of all customer issues and further improve our customer service.

Our call centers have access to our cloud-based monitoring platform database, which enables real-time remote diagnostics.

Customer service and satisfaction has been a key component of our business and we expect it to continue to be integral to our success in the future.

We maintain high levels of customer engagement through our call centers in California, Germany and Israel.

In addition to our call centers, we have field service engineers located in the geographies where we are active, and support our customers with commissioning of large projects, introduction of new technologies and features and on-the-job training of new installers.

As of June 30, 2016, our customer support and training organization consisted of 91 employees worldwide.

Our call centers have access to our cloud‑based monitoring platform database, which enables real‑time remote diagnostics.

Customer service and satisfaction continues to be a key component of our business and we consider it integral to our success in the future.

We maintain high levels of customer engagement through our call centers in California, Australia, Japan, Israel, India and Bulgaria.

As of December 31, 2020, our customer support and training organization consisted of 435 full time employees worldwide.

Our Technology

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Our advanced technologies are explained in more detail below.

As part of our growth strategy, we have acquired companies that have technologies that can leverage our expertise in power electronics and power optimization.

By combining acquired resources with our current research and development teams, we are expanding our activity into other essential areas such as e-Mobility, battery storage and energy storage systems.

Power optimizers

Our power optimizers are DC/DC step up/step down (buck-boost) converters designed and developed to operate in harsh outdoor environments at very high conversion efficiency.

Our power optimizers are DC/DC step up/step down (buck‑boost) converters designed and developed to operate in harsh outdoor environments at very high conversion efficiency.

Our power optimizers include proprietary power electronics customized to efficiently convert power from the PV module to the inverter.

The conversion topology and components are all designed for the power optimizer specifications and verified for consistent performance and reliability in numerous lab tests and simulations.

A key factor in the performance of our power optimizer is determined by the digital control algorithms and closed-loop mechanism.

The power optimizer’s control is built into our advanced ASIC which is responsible for all critical digital control functions of the power optimizer, including detailed power analysis, digital control of the power conversion subsystem and power line communications and networking.

The components are selected and the conversion topology is designed for the power optimizer specifications, and the power optimizer design is verified for consistent performance and reliability in numerous lab tests and simulations.

A key factor in the performance of our power optimizer is determined by the digital control algorithms and closed‑loop control mechanism.

Since each power optimizer handles the power and voltage of a single module, we are able to reach a high degree of semiconductor integration by leveraging low cost silicon in standard semiconductor packages.

As a result, much of the functionality of our power optimizer can be integrated into a standard ASIC instead of discrete electronic components, resulting in lower costs and higher reliability.

As a result, much of the functionality of our power optimizer can be integrated into a standard ASIC instead of use of discrete electronic components, resulting in lower costs and higher reliability.

The ASIC performs the critical power analysis and power conversion control functions of the power optimizer.

The power analysis function processes the status and working parameters at the power optimizer’s input and output and together with advanced digital control and state machine logic, controls the power conversion function.

In addition, our digital control system uses technology that allows the solar PV installation to anticipate and adapt to changing operating conditions and protect against system anomalies.

The power analysis functions process the state and working parameters at the power optimizer’s input and output, and together with advanced digital control and state machine logic, control the power conversion function.

In addition, our digital control system uses technology that allows the solar PV installation to anticipate and adapt to changing operating conditions, and to protect itself against system anomalies.

Each power optimizer in the array is connected to the inverter by a power line communications networking link.

Our power line communications link uses a proprietary networking technology that we developed, utilizing the existing DC wiring between the power optimizers and the inverter to transmit and receive data between these devices.

Our inverter is designed for single-stage DC/AC conversion.

Using our inverter in combination with the power optimizers will allow the control loop to maintain a fixed DC voltage level at its input thereby allowing for longer, uneven and multi-faceted strings while also enabling custom, cost efficient and reliable inverter design and component selection.

Most of our inverters are designed for single‑stage DC/AC conversion.

Using our inverter in combination with the power optimizers allows the inverter control loop to maintain a regulated DC voltage level at its input, thereby allowing for long, uneven, and multi‑faceted strings while also enabling custom, cost efficient, and reliable inverter design and component selection.

All of the power components, as well as the main magnetic components for our inverters, can then be optimized for DC/AC inversion at high efficiency.

The digital control algorithms of our inverters are implemented using programmable digital signal processors which allow for flexibility and adaptation of control loops for various grids and for the requirements and standards of various grid operators across geographies.

We have already implemented the control mechanisms necessary to support advanced grid codes and standards that are required to support high penetration of solar energy into the grid.

Our inverters’

digital control algorithms are implemented using programmable digital signal processors which allow for flexibility and adaptation of control loops for various grids and for the requirements and standards of different grid operators across geographies.

We have already implemented the control mechanisms necessary to support advanced grid codes and standards that are required to support high penetration of solar energy into utility grids.

In 2020, we developed and manufactured our own DSP (ASIC) in our inverters which enables us to improve our control loops, increase our cost savings and be less dependent on third party suppliers in our manufacturing process.

The DSP (ASIC) performs the critical power analysis and power conversion control functions of the inverter.

The power analysis functions process the state and working parameters at the power inverter’s input and output, and together with advanced digital control and state machine logic controls the power conversion function.

In addition, our digital control system uses technology that allows the inverter to anticipate and adapt to changing operating conditions, and to protect itself against system anomalies as well as comply with applicable regulations in the different regions in which we operate.

Our DSP (ASIC) is also in charge of the power line communications (PLC) networking link.

We have developed and continue to develop in house design and manufacturing capabilities for magnetic components in order to decrease dependence on suppliers, reduce costs and have better control over our production processes.

Manufacturing

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outsource, automate, and localize.

We have entered into outsourcing contracts with two of the world’s leading global electronics manufacturing service providers, Jabil Circuit, Inc.

and Flextronics Industrial Ltd.

By using these contract manufacturers rather than building our own manufacturing infrastructure, we are able to access advanced manufacturing equipment, processes, skills and capacity on a “capital light” budget.

Our contract manufacturers are responsible for funding the capital expenses incurred in connection with the manufacture of our products, except with regard to end of line testing equipment and other specific manufacturing equipment utilized in assembling our products or sub-components.

We currently contract to have our solar products manufactured by two of the world’s leading global electronics manufacturing service providers, Jabil Circuit, Inc.

(“Jabil”) and Flex Ltd.

(“Flex”).

By using contract manufacturers, we are able to access advanced manufacturing equipment, processes, skills and capacity on a “capital light”

Our contract manufacturers are responsible for funding the capital expenses incurred in connection with the manufacture of our products, except with regard to end-of-line testing equipment and other specific manufacturing equipment utilized in assembling our products or sub-components which are financed and owned by the company.

We expect to continue this funding arrangement in the future, with respect to any expansions to such existing lines.

Further, contracting with global providers such as Jabil and Flextronics gives us added flexibility to manufacture certain products in China, closer to target markets in Asia and the North American west coast and other products in Hungary, closer to target markets in Europe and the North American east coast, potentially increasing responsiveness to customers while reducing costs and delivery times.

We have completed the development of our first proprietary automated assembly line for use at the Hungary Flextronics manufacturing plant and it is in operation and manufacturing approximately 4,000 power optimizers per day.

This automated assembly line can also be replicated and deployed to additional production facilities.

We are investing resources in additional automated assembly lines as well as in automated machinery for subassembly of certain components used in our products, and we will own and be responsible for funding all of the capital expenses related thereto.

The current and expected capital expenses associated with these automated assembly lines and other machinery are not significant and will be funded out of our cash flows.

In addition, we are in the process of designing an automatic assembly line for the production of embedded optimizers.

Further, contracting with global providers such as Jabil, and Flex gives us added flexibility to manufacture certain products in China and Vietnam, closer to target markets in Asia and the North American west coast, as well as other products in Hungary, closer to target markets in Europe and the North American east coast, in each case, potentially increasing responsiveness to customers while reducing costs and delivery times.

In the third quarter of 2020, we began commercial shipments to the U.S.

of optimizers and inverters from our manufacturing facility located in the North of Israel “Sella 1”.

The proximity of Sella 1 to our R&D team and labs, enables us to accelerate new product development cycles as well as define equipment and manufacturing processes of newly developed products which can then be adopted by our contract manufacturers world-wide.

We expect Sella 1 manufacturing levels to continue to increase until the second quarter of 2021 when we expect Sella 1 to reach full manufacturing capabilities.

We have developed propriety automated assembly lines for the manufacturing of our power optimizers.

These assembly lines, currently operating in all of our manufacturing facilities enable the manufacturing of more than 5,000 optimizers per machine per day.

We invest resources in additional automated assembly lines as well as in automated machinery for subassembly and self-manufacturing of certain components used in our products, and we own and are responsible for funding all of the capital expenses related thereto.

The current and expected capital expenses associated with these automated assembly lines and other machinery is funded out of our cash flows.

We source our raw materials through various component manufacturers and invest resources in continued cost-reduction efforts as well as verifying second and third sources so as to limit dependence on sole suppliers.

Our Korean subsidiary, Kokam, has a manufacturing facility for lithium-ion cells and batteries that has the capacity to manufacture up to 150 MWH per annum.

In 2020, we began construction of “Sella 2”, a 2GWh Li-Ion battery factory in Korea.

The new factory is being constructed to meet the growing global demand for Li-Ion batteries, specifically in the energy storage system (ESS) and e-mobility markets.

Sella 2 is expected to begin operation in the first half of 2022.

SolarEdge e-Mobility has a manufacturing and assembly facility in Umbertide, Italy for our e-Mobility division.

Reliability and Quality Control

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Our power optimizers are designed to be as reliable as the PV module itself and capable of withstanding the same operating and environmental conditions.

Our reliability methodology includes a multi-level plan with design analysis, sub-system testing of critical components by Accelerated Life Testing, and integrative testing of design prototypes by Highly Accelerated Life Testing and large sample groups.

As part of our reliability efforts, we subject components to industry standard conditions and tests including in accelerated life chambers that simulate burn-in, thermal cycling, damp-heat and other stresses.

We also test complete products in stress tests and in the field.

Our reliability methodology includes a multi‑level plan with design analysis, sub‑system testing of critical components by Accelerated Life Testing, and integrative testing of design prototypes by Highly Accelerated Life Testing and large sample groups.

As part of our reliability efforts, we subject components to industry standard conditions and tests including in accelerated life chambers that simulate burn‑in, thermal cycling, damp‑heat, and other stresses.

We also conduct out of box audits (OBA) on our finished products.

In addition, on-line reliability tests (ORT) are conducted on our optimizers and we test complete products in stress tests and in the field.

Our rigorous testing processes have helped us to develop highly reliable products.

In order to verify the quality of each of our products when it leaves the manufacturing plant, each component, sub-assembly, and final product are tested multiple times during production.

These tests include Automatic Optical Inspection, In-Circuit Testing, Board- and Component-Level Functional Testing, Safety Testing and Integrative Stress Testing.

We employ a serial number-driven manufacturing process auditing and traceability system that allows us to control production line activities, verify correct manufacturing processes and to achieve item-specific traceability.

As a part of our quality and reliability approach, failed products from the field are returned and subjected to root cause analysis, the results of which are used to improve our product and manufacturing processes and further reduce our field failure rate.

In order to verify the quality of each of our products when it leaves the manufacturing plant, each component, sub‑assembly, and final product are tested multiple times during production.

These tests include Automatic Optical Inspection, In‑Circuit Testing, Board‑

Functional Testing, Safety Testing, and Integrative Stress Testing.

We employ a serial number‑driven manufacturing process auditing and traceability system that allows us to control production line activities, verify correct manufacturing processes and to achieve item‑specific traceability.

Certifications

Our products and systems comply with the applicable regulatory requirements of the jurisdictions in which they are sold as well as all other major markets around the world, collectively covering approximately 80% of the global solar PV market as measured by MW capacity shipped.

Our products and systems comply with the applicable regulatory requirements of the jurisdictions in which they are sold as well as all other major markets around the world.

These include safety regulations, electromagnetic compatibility standards and grid compliance.

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We measure the effectiveness of our research and development by metrics including product unit cost, efficiency, reliability, power output, and ease of use.

We have a strong research and development team with wide-ranging experience in power electronics, semiconductors, power line communications and networking, and software engineering.

We have a strong research and development team with wide‑ranging experience in power electronics, semiconductors, power line communications and networking, chemical, mechanical and software engineering.

In addition, many members of our team have expertise in solar technologies.

As of June 30, 2016, our research and development organization had a headcount of 244 people.

Our research and development expense, net totaled, $18.3 million $22.0 million and $33.2 million for fiscal 2014, 2015 and 2016, respectively.

As of December 31, 2020, our research and development organization had a headcount of 904 employees.

Intellectual Property

The success of our business depends, in part, on our ability to maintain and protect our proprietary technologies, information, processes and know-how.

The success of our business depends, in part, on our ability to maintain and protect our proprietary technologies, information, processes, and know‑how.

We rely primarily on patent, trademark, copyright and trade secrets laws in the U.S.

and similar laws in other countries, confidentiality agreements and procedures and other contractual arrangements to protect our technology.

As of June 30, 2016, we had 53 issued U.S.

patents, 19 issued non-U.S.

patents, 57 patent applications pending for examination in the U.S.

and 57 patent applications pending for examination in other countries, all of which are related to U.S.

applications.

A majority of our patents relate to DC power optimization and DC to AC conversion for alternative energy power systems, power system monitoring and control and management systems.

As of December 31, 2020, SolarEdge had 363 issued patents, world-wide and 354 patent applications pending for examination.

A majority of our patents relate to DC power optimization and DC to AC conversion for alternative energy power systems, power system monitoring and control, battery technology and management systems.

Our issued patents are scheduled to expire between 2021 and 2039.

We continually assess opportunities to seek patent protection for those aspects of our technology, designs, and methodologies and processes that we believe provide significant competitive advantages.

We rely on trade secret protection and confidentiality agreements to safeguard our interests with respect to proprietary know-how that is not patentable and processes for which patents are difficult to enforce.

We believe that many elements of our manufacturing processes involve proprietary know-how, technology or data that are not covered by patents or patent applications, including technical processes, test equipment designs, algorithms and procedures.

We rely on trade secret protection and confidentiality agreements to safeguard our interests with respect to proprietary know‑how that is not patentable and processes for which patents are difficult to enforce.

We believe that many elements of our manufacturing processes involve proprietary know‑how, technology, or data that are not covered by patents or patent applications, including technical processes, test equipment designs, algorithms, and procedures.

All of our research and development personnel are required to enter into confidentiality and proprietary information agreements with us.

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Our customers and business partners are required to enter into confidentiality agreements before we disclose any sensitive aspects of our technology or business plans.

The markets for our products are competitive, and we compete with manufacturers of traditional inverters and manufacturers of other MLPE.

The markets for our solar products are competitive, and we compete with manufacturers of traditional inverters, as well as manufacturers of other MLPE systems.

The principal areas in which we compete with other companies include:

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total cost of ownership;

PV module compatibility and interoperability;

reliability and duration of product warranty;

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size of installed base.

Recent market trends show an increased focus on safety features in rooftop installations, and the emergence of standards that are evolving to address such concerns.

In particular, the arc fault detection and interruption (AFCI) and rapid shutdown (RSD) standards in the US market, have led to the introduction of module-level rapid-shutdown devices from our competitors.

We believe the existence of rapid shutdown capabilities built into our optimizers positions us well in this regard, and could serve as a competitive advantage.

Additionally, in 2020 we have seen PV module manufacturers introduce larger PV modules with higher power levels reaching over 600W.

This market trend, which comes as a result of PV cell manufacturers introducing larger cell sizes such as M10 and M12 as well as different module build configurations, leads to market interest in higher power rating optimizers, micro inverters, and other MLPE devices.

The increasing demand for storage and battery solutions is an additional noteworthy market trend which is expected to increase the attachment rate of storage to PV installations in the coming years.

Our DC optimized inverter system competes principally with products from traditional inverter manufacturers, such as SMA Solar Technology AG, ABB Ltd.

and Huawei Technologies Co.

as well as from new Chinese inverter manufacturers.

as well as from other Chinese inverter manufacturers.

In the North American residential market, we compete with traditional inverter manufacturers, as well as microinverter manufacturers such as Enphase Energy, Inc.

In addition, several new entrants to the MLPE market, including low-cost Asian manufacturers, have recently announced plans to ship or have already shipped similar products.

In addition, several new entrants to the MLPE market, including low‑cost Asian manufacturers, have recently announced plans to ship or have already shipped similar products.

We believe that our DC optimized inverter system offers significant technology and cost advantages that reflect a competitive differentiation over traditional inverter systems and microinverter technologies.

The markets for our lithium-ion products are competitive as well, and we compete with global cell and battery manufacturers in the ESS market.

Our energy storage solutions compete with products from global manufactures such as LG Chem, Samsung SDI, BYD and Panasonic.

In the UPS market, our UPS products compete with products and solutions from global UPS providers such as Schneider Electric, Eaton and Vertiv.

The vehicle e-Mobility component market is dominated primarily by manufacturers such as Robert Bosch GmbH, ZF Friedrichshafen AG, Dana Incorporated and Magna International.

As the global e-Mobility market expands, major automotive manufacturers, such as Toyota, Honda, Tesla, General Motors, and Ford, have increased their investments in the electric and hybrid vehicle components in order to increase their market share.

Government Incentives

federal, state, and local government bodies as well as non-U.S.

government bodies, provide incentives to owners, end users, distributors 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 for renewable energy credits associated with renewable energy generation and exclusion of solar PV systems from property tax assessments.

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 these government subsidies and economic incentives, which vary by geographic market and from time to time.

In general, the amount and availability of these incentives and subsidies to encourage the development of solar PV energy have been declining and are expected to continue to decline.

government bodies, provide incentives to owners, end users, distributors, and manufacturers of solar PV systems to promote solar electricity in the form of rebates, tax credits, lower VAT rate and other financial incentives such as system performance payments, payments for renewable energy credits associated with renewable energy generation, and exclusion of solar PV systems from property tax assessments.

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 these government subsidies and economic incentives, which vary from time to time by geographic market and.

Import Tariffs

Escalating trade tensions between the United States and China have led to increased tariffs and trade restrictions, including tariffs applicable to some of our products.

As of June 2019, the U.S.

trade representative (“USTR”) imposed import tariffs of 25% on a long list of products imported from China, including inverters and power optimizers.

On January 15, 2020, the United States and China entered into an initial trade deal, which preserves the 2018 tariffs and indicates additional sanctions may be imposed if China breaches the terms of the deal.

In order to mitigate the negative effect of increased tariffs, we increased our manufacturing capabilities at our Vietnam manufacturing facility beginning in the fourth quarter of 2019 and throughout 2020.

We also began manufacturing in Sella 1.

As of December 31, 2020, the majority of our products being imported to the U.S.

are manufactured in Vietnam, Israel and Hungary and are therefore not subject to the aforementioned tariffs.

The solar energy market is subject to seasonal and quarterly fluctuations affected by weather.

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where the climate is particularly cold and snowy, it is typical to see a decline in PV installations and this decline can impact the timing of orders for our products.

As of June 30, 2016, we had 608 full-time employees.

Of these full-time employees, 244 were engaged in research and development, 143 in sales and marketing, 175 in operations and support and 46 in general and administrative capacities.

Of our employees, 376 were based in Israel, 94 were based in the U.S., 47 were based in China, 33 were based in Germany and an additional 58 were based elsewhere.

None of our employees are represented by a labor union.

Sustainable, Responsible and Transparent Business Practices

In 2020, we made significant progress in our Environmental, Social and Governance (ESG) performance and disclosure.

We published our newly articulated social purpose:

“To power the future of energy so we can all enjoy better living and a cleaner, greener future.”

This is supported by our social mission:

“Shaping the future of sustainable energy production, energy storage and e-mobility through innovation”, our core values of innovation, excellence and integrity and a comprehensive sustainability strategy with 2025 targets in several areas.

Our second annual Sustainability Report, published in 2020, meets the requirements of leading global sustainability disclosure standards, GRI (Global Reporting Initiative) and SASB (Sustainability Accounting Standards Board) aligning our disclosure with leading corporations around the world and with the expectations of investors and other stakeholders.

Our sustainability strategy, includes three pillars:

Powering Clean Energy :

Accelerating the uptake of clean energy, delivering new smart energy, innovative solutions and improving the lifecycle impacts of our products.

In 2020, we estimated that the cumulative sustainability impact of SolarEdge’s systems, based on 16.2 GW of optimized inverter systems shipped worldwide, translates into the prevention of 12.6 million metric tons of greenhouse gas emissions equivalent to powering 2.1 million homes with electricity for a full year, every year.

In 2019, we supplied PV inverter systems equivalent to supplying annual electricity consumption for more than 737,000 homes, delivering an estimated avoidance of 4.4 million metric tons of greenhouse gas emissions annually.

Powering People:

Maintaining leading responsible employment practices, upholding human rights and investing in communities.

In 2020, we increased our workforce to support SolarEdge’s business growth, and maintained responsible employment practices, including a focus on safety.

We published a new position on Human Rights and contributed to our communities in line with our commitment to donate to causes that support technology education and other social causes in areas in which we have a presence.

Powering Business:

Maintaining and reinforcing ethical conduct throughout our value chain, advancing climate resilience, improving the efficiency of our resource consumption and ethical sourcing of raw materials and components.

In 2020, we published our Approach to Environmental Stewardship and Climate Resilience and commenced the process of lifecycle analysis of our key products.

Our sustainability strategy aligns directly with 10 United Nations Sustainable Development Goals (SDGs), and our products and activities are most critical to achievement of SDG #7, Affordable Clean Energy.

Supporting our sustainability strategy are 10 measurable ESG targets that we commit to delivering by 2025.

Human Capital

We believe our success depends on our ability to attract and retain outstanding employees at all levels of our business.

As of December 31, 2020, we had 3,174 full‑time employees.

Of these full‑time employees, 904 were engaged in research and development, 445 in sales and marketing, 1,549 in operations, production and support, and 276 in general and administrative capacities.

Of our employees, 1,675 were based in Israel, 398 were based in Korea, 224 were based in the U.S., 180 were based in China, 235 were based in Italy, and an additional 462 were based elsewhere.

Except for our SolarEdge Automation Machines employees and the employees of SolarEdge e-Mobility, none of our employees are represented by a labor union.

We have not experienced any employment-related work stoppages, and we consider relations with our employees to be good.

As a rapidly growing business, we rely on the success of our recruitment efforts to attract and retain technically skilled people who can support our ongoing innovation and expansion.

We aim to be inclusive in our hiring practices focusing on the best talent for the role, welcoming all genders, nationalities, ethnicities, abilities and other dimensions of diversity.

Employee benefits:

We aim to provide our employees with competitive salary and benefits that enable them to achieve a good quality of life and plan for the future.

Our benefits differ according to local norms and market preferences, but typically include all salary and social benefits required by local law (including retirement saving programs, paid vacation and sick leave) and many additional benefits that go beyond legal requirements in local markets.

Leadership, Training and Development:

We aim to provide our employees with advanced professional and development skills so that they can perform effectively in their roles and build their capabilities and career prospects for the future.

We maintain a leadership program for managers and team leaders and deliver advanced professional training for sales, research and development and other functional teams as part of our extensive training program each year.

Diversity, Equity and Inclusion:

During the past three years, we have more than doubled the total number of women in our organization, adding women at all levels.

We are striving to increase the presence of women in executive and management positions as part of our 2025 target to promote gender parity and equal pay.

Workplace safety:

We believe that all accidents and injuries at work are preventable and we aim to ensure a zero-injury culture across our offices and operations.

We comply with applicable occupational health and safety regulations and are certified to Occupational Health and Safety Quality Management Standard ISO 45001:2018.

Our injury rates are low.

Corporate Information

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Our website is www.solaredge.com .

We file annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission (the “SEC”), pursuant to the Securities Exchange Act of 1934 (the “Exchange Act”).

You may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C.

You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330.

Our reports, proxy statements and other documents filed electronically with the SEC are available at the website maintained by the SEC at www.sec.gov .

We also make available, free of charge on the Investor Relations portion of our website at www.solaredge.com , our annual, quarterly, and current reports, and, if applicable, amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the SEC.

We use the Investor Relations portion of our website at www.solaredge.com , as a routine channel of distribution of important information such as press releases, analyst presentations, corporate governance practices and corporate responsibility information, financial information including our annual, quarterly, and current reports, our proxy statements, and, if applicable, amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the SEC.

We also make available on the Investor Relations portion of our website at www.solaredge.com our earnings presentation and other important information, which we encourage you to review.

RISK F ACTORS

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.

The risks and uncertainties described below are not the only ones we face.

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.

In particular, forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified.

See “Special Note Regarding Forward-Looking Statements.”

Risks Related to Our Business and Our Industry

We cannot be certain that we will sustain profitability in the future.

We incurred net losses of $21.4 million for fiscal 2014, and we achieved a net profit of $21.1 million and $76.6 million in fiscal 2015 and 2016, respectively.

We expect to incur additional costs and expenses related to the continued development and expansion of our business, including in connection with marketing and developing our products, expanding into new product markets and geographies, maintaining and enhancing our research and development operations and hiring additional personnel.

In addition, as a public company, we incur significant additional legal, accounting and other expenses that we did not incur as a private company.

We do not know whether our revenues will grow rapidly enough to absorb these costs, and our limited operating history makes it difficult to assess the extent of these expenses or their impact on our results of operations.

Further, revenue growth may slow or 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 market share, 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.

Our limited operating history makes it difficult to evaluate our current business and future prospects.

We have only been in existence since 2006 and our first full fiscal year of commercial shipments was 2011.

Much of our growth has occurred in recent periods.

Our limited operating history, combined with the rapidly evolving and competitive nature of our 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.

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.

The viability and demand for solar energy solutions, and in turn, 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;

availability and amount of government subsidies and incentives to support the development and deployment of solar energy solutions;

the extent to which the electric power industry and broader energy industries are deregulated to permit broader adoption of solar electricity generation;

prices of traditional carbon-based energy sources;

levels of investment by end-users of solar energy products, which tend to decrease when economic growth slows;

the emergence, continuance or success of, or increased government support for, other alternative energy generation technologies and products.

If we do not manage these risks and overcome these difficulties successfully, our business will suffer.

If demand for solar energy solutions does not continue to grow or grows at a slower rate than we anticipate, our business will suffer.

Our solution is utilized in solar PV installations.

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.

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.

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.

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.

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.

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.

Because our customers’ 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.

These 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.

These reductions or terminations often occur without warning.

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.

Some programs further specify that a portion of the renewable energy quota must be from solar electricity.

Under some programs, a utility can receive a “credit” 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.

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.

However, there can be no assurances that such policies will continue.

For example, in May 2014, Ohio froze renewable portfolio requirements at current levels.

Proposals to extend compliance deadlines, reduce targets or repeal standards have also been introduced in a number of states.

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.

Changes to net metering policies may significantly reduce demand for electricity from solar PV systems and harm our business.

Our business benefits from favorable net metering policies in several U.S.

states, Canadian provinces and European countries in which our customers operate.

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.

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.

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.

In some locations, customers are also reimbursed by the electric utility for net excess generation on a periodic basis.

states have adopted some form of net metering.

However, net metering programs have recently come under regulatory scrutiny in some U.S.

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.

We cannot assure you that the programs will not be significantly modified going forward.

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.

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.

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.

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.

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.

These regulations and policies could deter purchases of renewable energy products, including solar PV systems sold by our customers.

This could result in a significant reduction in the potential demand for our products.

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.

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.

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.

Modifications to the utilities’ 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.

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.

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.

For example, regulators in certain U.S.

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.

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.

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.

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.

Decreases in the retail prices of electricity from the utility grid would make the purchase of solar PV systems less economically attractive and would likely lower sales of our products.

The price of electricity derived from the utility grid could decrease as a result of:

• construction of a significant number of new power generation plants, including plants utilizing natural gas, nuclear, coal, renewable energy or other generation technologies;

• relief of transmission constraints that enable local centers to generate energy less expensively;

• reductions in the price of natural gas;

• utility rate adjustment and customer class cost reallocation;

• energy conservation technologies and public initiatives to reduce electricity consumption;

• development of smart-grid technologies that lower the peak energy requirements of a utility generation facility;

• development of new or lower-cost energy storage technologies that have the ability to reduce a customer’s average

• cost of electricity by shifting load to off-peak times;

• development of new energy generation technologies that provide less expensive energy.

Moreover, technological developments in the solar components industry could allow our competitors and their customers to offer electricity at costs lower than those that can be achieved by us and our customers, which could result in reduced demand for our products.

If the cost of electricity generated by solar PV installations incorporating our systems is high relative to the cost of electricity from other sources, our business, financial condition and results of operations may be harmed.

An increase in interest rates or tightening of the supply of capital in the global financial markets could make it difficult for end-users to finance the cost of a solar PV system and could reduce the demand for solar systems and thus demand for our products.

Many end-users depend on financing to fund the initial capital expenditure required to develop, build or purchase a solar PV system.

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.

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.

The market for our products is highly competitive and we expect to face increased competition as new and existing competitors introduce power optimizer, inverter and solar PV system monitoring products, which could negatively affect our results of operations and market share.

The market for solar PV solutions is highly competitive.

We principally compete with traditional inverter manufacturers as well as microinverter manufacturers.

Currently, our DC optimized inverter system competes with products from traditional inverter manufacturers, and microinverter manufacturers, as well as emerging technology companies offering alternative optimizer, or other MLPE products.

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.

We expect competition to intensify as new and existing competitors enter the market.

Several of our existing and potential competitors are significantly larger, have greater financial, marketing, distribution, customer support and other resources, are longer established, and have better brand recognition.

Further, certain competitors may be able to develop new products more quickly than us, may partner with other competitors to provide combined technologies and competing solutions and may be able to develop products that are more reliable or that provide more functionality than ours.

In addition, some of our competitors have the financial resources to offer competitive products at aggressive or below-market pricing levels, which could cause us to lose sales or market share or require us to lower prices for our products in order to compete effectively.

If we have to reduce our prices by more than we anticipated, or if we are unable to offset any future reductions in our average selling prices by increasing our sales volume, reducing our costs and expenses or introducing new products, our revenues and gross profit would suffer.

Developments in alternative technologies or improvements in distributed solar energy generation may have a material adverse effect on demand for our offerings.

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.

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.

Our industry has historically been cyclical and experienced periodic downturns.

Our future success partly depends on continued demand for solar PV systems in the end-markets we serve, including the residential and commercial sectors in the United States and Europe.

The solar industry has historically been cyclical and has experienced periodic downturns which may affect the demand for equipment that we manufacture.

The solar industry has undergone challenging business conditions in recent years, including downward pricing pressure for PV modules, mainly as a result of overproduction, and reductions in applicable governmental subsidies, contributing to demand decreases.

Although the solar industry is experiencing a slow recovery, 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.

Although our products meet our stringent quality requirements, they may contain undetected errors or defects, especially when first introduced or when new generations are released.

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.

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.

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.

We offer a minimum 12-year limited warranty for our inverters 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.

As a result, we bear the risk of warranty claims long after we have sold products and recognized revenue.

While we do have accrued reserves for warranty claims, our estimated warranty costs for previously sold products may change to the extent future products are not compatible with earlier generation products under warranty.

Our warranty accruals are based on our assumptions and we do not have a long history of making such assumptions.

As a result, these assumptions could prove to be materially different from the actual performance of our systems, causing us to incur substantial unanticipated expense to repair or replace defective products in the future or to compensate customers for defective products.

Our failure to accurately predict future claims could result in unexpected volatility in, and have a material adverse effect on, our financial condition.

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.

We could incur significant costs and liabilities if we are sued and if damages are awarded against us.

Further, any product liability claim we face could be expensive to defend and could divert management’s attention.

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.

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.

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.

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.

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.

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.

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.

For example, in fiscal 2014, unexpectedly high customer demand forced us to shorten transportation time from our factories in China and Hungary by using air freight rather than less expensive ocean freight.

We are dependent on ocean transportation to deliver our products in a cost efficient manner.

If we are unable to use ocean transportation to deliver our products, our business and financial condition could be materially and adversely impacted.

We rely on commercial ocean transportation for the delivery of a large percentage of our products to our customers in North America.

We also rely on more expensive air transportation when ocean transportation is not available or compatible with the delivery time requirements of our customers.

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, and other factors, such as labor strikes and work stoppages, not within our control.

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.

In the first calendar quarter of 2015, contentious negotiations between the Pacific Maritime Association and the International Longshore & Warehouse Union resulted in port slowdowns caused port congestion and major delays in the transfer of cargo in the United States West Coast.

Accordingly, in the quarter ended March 31, 2015 we shipped a higher percentage of our products to our customers in North America via air transportation.

Material interruptions in service or stoppages in transportation, such as the aforementioned dispute, whether caused by strike, work stoppage, lock-out, slowdown or otherwise, could materially and adversely impact our business, results of operations and financial condition.

We depend upon a small number of outside contract manufacturers.

Our operations could be disrupted if we encounter problems with these contract manufacturers.

We do not have internal manufacturing capabilities, and currently rely upon two contract manufacturers to build all of our products.

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.

The revenues that our contract manufacturers generate from our orders represent a relatively small percentage of their overall revenues.

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.

In addition, the facilities in which our products are manufactured are located outside of the U.S., currently in China 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.

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.

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.

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.

We may experience delays, disruptions or quality control problems in our manufacturing operations.

Our product development, manufacturing and testing processes are complex and require significant technological and production process expertise.

Such processes involve a number of precise steps from design to production.

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.

This may occur particularly as we introduce new products, modify our engineering and production techniques, and/or expand our capacity.

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 logistics 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.

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, 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.

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.

As a result, these suppliers could stop selling to us at commercially reasonable prices, or at all.

Because there are a limited number of suppliers of solar PV system components and raw materials used to manufacture our products, 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.

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.

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 and would harm our business.

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.

We do not control our contract manufacturers or suppliers or their business practices.

Accordingly, we cannot guarantee that they follow ethical business practices such as fair wage practices and compliance with environmental, safety and other local laws.

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.

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.

or other markets in which we do business could also attract negative publicity for us and harm our business.

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.

Our quarterly results of operations are difficult to predict and may fluctuate significantly in the future.

We have experienced seasonal and quarterly fluctuations in the past as a result of seasonal fluctuations in our customers’ business.

For example, our customers’ and end-users’ ability to install solar energy systems is affected by weather, as for example during the winter months in Europe and the northeastern U.S.

Such installation delays can impact the timing of orders for our products.

Further, given that we are an early-stage company operating in a rapidly growing industry, 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.

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.

Any substantial decrease in revenues would have an adverse effect on our financial condition, results of operations, cash flows and stock price.

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.

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.

We do not have exclusive arrangements with these third party distributors and large installers.

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.

These distributors and large installers may terminate their relationships with us at any time and with little or no notice.

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.

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.

If we fail to retain our key personnel or if we fail to attract additional qualified personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.

Our future success and ability to implement our business strategy depends, in part, on our ability to attract and retain key personnel, and on the continued contributions of members of our senior management team and key technical personnel, each of whom would be difficult to replace.

All of our employees, including our senior management, are free to terminate their employment relationships with us at any time.

Competition for highly skilled individuals with technical expertise is extremely intense, and we face challenges identifying, hiring and retaining qualified personnel in many areas of our business.

Integrating new employees into our team could prove disruptive to our operations, require substantial resources and management attention and ultimately prove unsuccessful.

An inability to retain our senior management and other key personnel or to attract additional qualified 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.

The requirements of being a public company may strain our resources and divert management’s attention

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the listing requirements of the NASDAQ Global Select Market, and other applicable securities rules and regulations.

Compliance with these rules and regulations requires significant legal and financial compliance and demands on our systems and resources and makes some activities more difficult, time-consuming or costly than if we were a private company.

As certain additional securities rules and regulations become applicable to us, our legal and financial compliance costs may increase.

The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure controls and procedures and internal control over financial reporting.

To maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight are required.

As a result, management’s attention may be diverted from other business concerns, which could harm our business and results of operations.

We may need to hire more employees in the future which would increase our costs and expenses.

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.

Our success depends to a significant degree on our ability to protect our intellectual property and other proprietary rights.

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, to establish and protect our intellectual property and other proprietary rights.

We have applied for patents in the U.S., Europe and China, some of which have been issued.

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.

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.

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.

Our competitors and other third parties hold numerous patents related to technology used in our industry.

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’ intellectual property rights.

Regardless of their merit, 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.

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.

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.

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.

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.

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.

Any of these results would adversely affect our business, financial condition and results of operations.

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.

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.

A significant portion of our intellectual property has been developed by our employees in the course of their employment for us.

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,” which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights.

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.

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.

Further, the Committee has not yet determined the method for calculating this Committee-enforced remuneration.

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.

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.

The loss of, or events affecting, one of our major customers could reduce our sales and have a material adverse effect on our business, financial condition and results of operations.

For fiscal 2016, three of our major customers in the U.S.

together, accounted for 32.5% of our revenues.

Our next five largest customers for fiscal 2016, together, accounted for 22 % of our revenues.

Our customers’ 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.

In addition, these customers may decide to no longer use our products and services for other reasons which may be out of our control.

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.

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.

For example, in April 2016 one of our customers, SunEdison (SUNEQ), filed for reorganization under Chapter 11 of the U.S.

bankruptcy laws.

Consolidations in the solar industry among our current or potential customers or distributors 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.

For example, in July 2016 SunEdison (SUNEQ) announced its intention to purchase Vivint Solar for $2 billion, in March 2016 Vivint Solar announced it is terminating the merger due to SunEdison’s “willful breach of the merger agreement”.

In June 2016, Tesla Motors (TSLA) announced that it has submitted a proposal to acquire all of the outstanding shares of common stock of SolarCity Corporation (SCTY).

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.

Our planned expansion into new markets could subject us to additional business, financial and competitive risks.

In fiscal 2016, we sold our products to approximately 220 direct customers in 45 countries, including the U.S., Canada, Belgium, France, Germany, Israel, Italy, the Netherlands, the United Kingdom, Australia, Japan and China.

We intend to introduce new products targeted at large commercial and utility-scale installations and to expand into other international markets.

Our success in these new product and geographic markets 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 and our ability to manage increased manufacturing capacity and production.

Further, these solar PV markets 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.

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.

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.

and foreign laws, regulations and trade standards, including the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”).

Failure to develop and introduce these new products successfully 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.

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.

We have experienced significant growth in recent periods with our annual product sales growing rapidly from approximately 8,400 inverters and approximately 181,000 power optimizers in fiscal 2011, our first full fiscal year of commercial shipments, to annual product sales exceeding 224,000 inverters and 5.7 million power optimizers in fiscal 2016.

We intend to continue to expand our business significantly within existing and new markets.

This growth has placed, and any future growth may place, a significant strain on our management, operational and financial infrastructure.

In particular, we will be required to expand, train and manage our growing employee base and scale and otherwise improve our IT infrastructure in tandem with that headcount growth.

Our management will also be required to maintain and expand our relationships with customers, suppliers and other third parties and attract new customers and suppliers, as well as manage multiple geographic locations.

Our current and planned operations, personnel, IT 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.

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.

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.

This could also result in declines in quality or customer satisfaction, increased costs, difficulties in introducing new offerings or other operational difficulties.

Any failure to effectively manage growth could adversely impact our business and reputation.

Covenants in our credit facility may limit our flexibility in responding to business opportunities and competitive developments and increase our vulnerability to adverse economic or industry conditions.

We have a revolving line of credit from Silicon Valley Bank (“SVB”).

The SVB credit facility restricts our ability to take certain actions such as borrow money, grant liens, pay dividends, dispose of assets, or engage in certain transactions.

Our credit agreement with SVB also requires us to maintain certain EBITDA and liquidity levels.

These restrictions may limit our flexibility in responding to business opportunities, competitive developments and adverse economic or industry conditions.

In addition, our obligations under the credit facility are secured by substantially all of our assets, including all of our intellectual property, which limits our ability to provide collateral for additional financing.

Nevertheless, we and our subsidiaries may incur substantial additional debt in the future and any debt instrument we enter into in the future may contain similar restrictions or collateral packages.

A breach of any of these covenants, or a failure to pay principal or interest when due, could result in a variety of adverse consequences, including the acceleration of our indebtedness.

Our assets and cash flow may not be sufficient to fully repay borrowings if some or all of our indebtedness is accelerated.

Acceleration could result in the foreclosure by the lenders on our assets that secure the credit facility.

Furthermore, there can be no assurance that we will be able to enter into new debt instruments on acceptable terms.

If we are unable to satisfy financial covenants and other terms under existing or new credit arrangements or obtain waivers or forbearance from our lenders or if we are unable to obtain refinancing or new financings for our working capital, equipment and other needs on acceptable terms if and when needed, our business would be adversely affected.

Fluctuations in currency exchange rates may negatively impact our financial condition and results of operations.

Although our financial results are reported in U.S.

dollars, U.S.

dollar revenues accounted for 76.0 % of our revenues in fiscal 2016.

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.

Our profitability is affected by movements of the U.S.

dollar against the Euro, and, to a lesser extent, the New Israeli Shekel and other currencies in which we generate revenues, incur expenses and maintain cash balances.

Foreign currency fluctuations may also affect the prices of our products.

Our prices are denominated primarily in U.S.

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.

Despite our efforts to minimize foreign currency risks, primarily by entering into forward hedging transactions to sell Euro for U.S.

dollars at a predefined rate, and 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 and other currencies, against the U.S.

dollar could have an adverse effect on our profitability and financial condition.

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.

We receive, store and use certain personal information of our customers, and the end-users of our customers’ solar PV systems, including names, addresses, e-mail addresses, credit information and energy production statistics.

We also store and use personal information of our employees.

We take steps to protect the security, integrity and confidentiality of the personal information we collect, store and transmit, but 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.

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.

Unauthorized use or disclosure of, or access to, any personal information maintained by us or on our behalf, whether through breach of our systems, breach of the systems of our suppliers or vendors by an unauthorized party, or through employee or contractor error, theft or misuse, or otherwise, could harm our business.

If any such unauthorized use or disclosure of, or access to, such personal information were to occur, our operations could be seriously disrupted and we could be subject to demands, claims and litigation by private parties, and investigations, related actions, and penalties by regulatory authorities.

In addition, we could incur significant costs in notifying affected persons and entities and otherwise complying with the multitude of foreign, federal, state and local laws and regulations relating to the unauthorized access to, or use or disclosure of, personal information.

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.

We could be adversely affected by any violations of the FCPA, the U.K.

Bribery Act and other foreign anti-bribery laws.

The FCPA generally prohibits companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business.

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.

Our policies mandate compliance with these anti-bribery laws.

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.

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.

It is possible that our employees, subcontractors, agents and partners may take actions in violation of our policies and anti-bribery laws.

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.

Risks Related to Operations in Israel

Conditions in Israel affect our operations and may limit our ability to develop, produce and sell our products.

Although we are incorporated in Delaware, our headquarters and research and development center are located in Israel.

Accordingly, political, economic and military conditions in Israel directly affect us.

Israel has been involved in a number of armed conflicts and has been the target of terrorist activity.

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.

Israel also faces threats from Hezbollah militants in Lebanon, 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.

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.

In the event of war, we and our Israeli subcontractors and suppliers may cease operations, which may cause delays in the distribution and sale of our products.

Some of our directors, executive officers and employees in Israel are obligated to perform annual reserve duty in the Israeli military and are subject to being called for additional active duty under emergency circumstances.

In the event that our principal executive office is damaged as a result of hostile action, or hostilities otherwise disrupting the ongoing operation of our offices, our ability to operate could be materially adversely affected.

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.

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.

These restrictions may limit materially our ability to obtain manufactured components and raw materials or to sell our products.

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.

The tax benefits that are available to us under Israeli law require us to meet various conditions and may be terminated or reduced in the future, which could increase our costs and taxes.

Our Israeli subsidiary is eligible for certain tax benefits provided to “Benefited Enterprises” under the Israeli Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”.) In order to remain eligible for the tax benefits for “Benefited Enterprises” we must continue to meet certain conditions stipulated in the Investment 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.

The standard corporate tax rate for Israeli companies was increased to 26.5% in 2014 and 2015 and decreased back to 25% in 2016 and thereafter.

Additionally, if we increase our activities outside of Israel through acquisitions, for example, our expanded activities might not be eligible for inclusion in future Israeli tax benefit programs.

The Israeli government may furthermore independently determine to reduce, phase out or eliminate entirely the benefit programs under the Investment Law, regardless of whether we then qualify for benefits under those programs at the time, which would also adversely affect our global tax rate and our results of operations.

The terms of Israeli government grants that we have received restrict our ability to transfer technologies outside of Israel, and we may be required to pay penalties in such a case or upon the sale of our Company.

In fiscal 2016, we received a total of $0.2 million from the Office of the Chief Scientist in the Israel Ministry of Economy (“OCS”).

We do not expect to receive additional grants from the OCS in fiscal 2016.

The terms of the previous grants require us to pay royalties at a rate of 4% to 4.5% on sales of products developed under these grants, up to the total grant amount, linked to the U.S.

dollar and bearing interest at an annual rate of LIBOR applicable to dollar deposits.

Even after payment in full, we will still be required to comply with the requirements of the Israeli Encouragement of Industrial Research and Development Law, 1984 (the “R&D Law”), and related regulations, with respect to those past grants.

When a company develops know-how, technology or products under an OCS grant, the grant terms and the R&D Law restrict the transfer outside of Israel of such know-how without the prior approval of the OCS.

Consequently, if aspects of our technologies are deemed to have been developed with OCS funding, the discretionary approval of an OCS committee would be required for any transfer to third parties outside of Israel of know-how related to those aspects of our technologies.

The OCS may impose conditions on any arrangement under which it permits us to transfer technology or development out of Israel or may not grant such approval at all.

Any transfer of OCS-supported technology or know-how outside of Israel may require payment of significant amounts to the OCS, depending on the value of the transferred technology or know-how, the amount of OCS support, the time of completion of the OCS-supported research project and other factors.

These restrictions and requirements for payment may impair our ability to sell our technology assets outside of Israel.

Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel of technology or know-how developed with OCS funding (such as a merger or similar transaction) would be reduced by any amounts that we are required to pay to the OCS.

It may be difficult to enforce a judgment of a U.S.

court against our officers and directors, to assert U.S.

securities laws claims in Israel or to serve process on our officers and directors.

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.

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.

It also may be difficult for you to effect service of process on these persons in the U.S.

or to assert U.S.

securities law claims in original actions instituted in Israel.

Israeli courts may refuse to hear a claim based on an alleged violation of U.S.

securities laws on the grounds that Israel is not the most appropriate forum in which to bring such a claim.

In addition, even if an Israeli court hears a claim, it may determine that Israeli law and not U.S.

law is applicable to the claim.

law is found to be applicable, the content of applicable U.S.

law must be proven as a fact by expert witnesses, which can be a time consuming and costly process.

Further, an Israeli court may not enforce a judgment awarded by a U.S.

or other non-Israeli court.

Certain matters of procedure will also be governed by Israeli law.

There is little binding case law in Israel that addresses these matters.

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.

Risks Related to the Ownership of Our Common Stock

We cannot assure you that our stock price will not decline or not be subject to significant volatility.

The trading price of our common stock has been volatile since our initial public offering.

Since shares of our common stock were sold in our initial public offering in March 2015 at a price of $18.00 per share, during fiscal year 2016, the reported high and low prices of our common stock has ranged from $15.02 to $38.11 per share.

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.

As a result, our share price may experience significant volatility and may not necessarily reflect the value of our expected performance.

Among other factors that could affect our stock price are:

the addition or loss of significant customers;

changes in laws or regulations applicable to our industry, products or services;

speculation about our business in the press or the investment community;

price and volume fluctuations in the overall stock market;

volatility in the market price and trading volume of companies in our industry or companies that investors consider comparable;

share price and volume fluctuations attributable to inconsistent trading levels of our shares;

our ability to protect our intellectual property and other proprietary rights;

sales of our common stock by us or our significant stockholders, officers and directors;

the expiration of contractual lock-up agreements;

the development and sustainability of an active trading market for our common stock;

success of competitive products or services;

the public’s response to press releases or other public announcements by us or others, including our filings with the Securities and Exchange Commission (the “SEC”), announcements relating to litigation or significant changes to our key personnel;

the effectiveness of our internal controls over financial reporting;

changes in our capital structure, such as future issuances of debt or equity securities;

our entry into new markets;

tax developments in the U.S., Europe or other markets;

strategic actions by us or our competitors, such as acquisitions or restructurings;

changes in accounting principles.

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.

These fluctuations often have been unrelated or disproportionate to the operating performance of those 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.

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.

In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation.

We may be the target of this type of litigation in the future.

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.

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.

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.

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.

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.

Our certificate of incorporation and by-laws contain provisions that could depress the trading price of our common stock by discouraging, delaying or preventing a change of control of our Company or changes in our management that the stockholders of our Company may believe advantageous.

These provisions include:

authorizing “blank check” preferred stock that our board of directors could issue to increase the number of outstanding shares to discourage a takeover attempt;

providing for a classified board of directors with staggered, three-year terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;

not providing for cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

limiting the ability of stockholders to call a special stockholder meeting;

prohibiting stockholders from acting by written consent;

establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings;

the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2 / 3 % in voting power of all the then-outstanding shares of common stock of the Company entitled to vote thereon, voting together as a single class;

providing that our board of directors is expressly authorized to amend, alter, rescind or repeal our by-laws;

requiring the affirmative vote of holders of at least 66 2 / 3 % of the voting power of all of the then outstanding shares of common stock, voting as a single class, to amend provisions of our certificate of incorporation relating to the management of our business, our board of directors, stockholder action by written consent, advance notification of stockholder nominations and proposals, calling special meetings of stockholders, forum selection and the liability of our directors, or to amend, alter, rescind or repeal our by-laws.

In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law (“DGCL”), which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder becomes an “interested” stockholder.

Our certificate of incorporation includes a forum selection clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for any stockholder (including any beneficial owner) to bring (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or employees to us or to our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or our certificate of incorporation or by-laws, or (iv) any action asserting a claim governed by the internal affairs doctrine, will be a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware);

in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing provisions.

This forum selection provision may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

It is also possible that, notwithstanding the forum selection clause that is included in our certificate of incorporation, a court outside of Delaware could rule that such a provision is inapplicable or unenforceable.

We do not intend to pay any cash dividends on our common stock in the foreseeable future.

We have never declared or paid any dividends on our common stock.

We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future.

Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws and provisions of our debt instruments 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.

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.

If we fail to establish and maintain an effective system of integrated internal controls, we may not be able to report our financial results accurately, which could have a material adverse effect on our business, financial condition and results of operations.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently.

Section 404 of the Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls and requires attestations of the effectiveness of internal controls by independent auditors.

We need to implement substantial control systems and procedures in order to satisfy the reporting requirements under the Exchange Act and applicable NASDAQ Global Select Market requirements, among other items.

Establishing these internal controls will be costly and may divert management’s attention.

Evaluation by us of our internal controls over financial reporting may identify material weaknesses that may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC or violations of NASDAQ Global Select Market rules.

There also could be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.

Confidence in the reliability of our financial statements also could suffer if we or our independent registered public accounting firm were to report a material weakness in our internal controls over financial reporting.

This could have a material adverse effect on our business, financial condition and results of operations and could also lead to a decline in the price of our common stock.

UNRESOLVED STA FF COMMENTS

Not applicable.

All such postings and filings are available on our Investor Relations website free of charge.

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.

What changed 10-K/A

Item 1. Business