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Item 1A. Risk Factors

2025-05-08 compared with 2024-11-07 · 20 added, 61 removed, 5 unchanged (94% of the section changed)

1 unchanged sentence

Other than the risk factors set forth below, there have been no material changes to the risk factors previously disclosed in the 2024 Form 10-K.

Disruption to our business operations as a result of war and hostilities in Israel and other conditions in Israel that affect our operations may limit our ability to develop, produce and sell our products and have a material adverse effect on our business, financial condition, and results of operation s .

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 and is currently involved in a number of armed conflicts, including recent escalation of the conflict with Iran, and is the target of terrorist activity, including threats from Hezbollah militants in Lebanon, Iranian militia in Syria, and others.

The state of hostility disrupts day-to-day civilian activity and negatively affects our business conditions.

Violence between Hamas and Israel started on October 7, 2023 when the terrorist group launched an unprecedented attack on Israel.

On October 8, 2023 the Israeli Government declared that the Security Cabinet of the State of Israel approved a war situation in Israel.

Hezbollah (an Islamist militia and political group based in Lebanon) also launched missile, rocket, and shooting attacks against Israeli military sites, troops, and towns in northern Israel in October 2023.Since our headquarters and most of our employees operate from Israel, the state of war has disrupted and is continuing to disrupt our business operations.

This situation has impacted the availability of our workforce, as approximately 10% of our workforce in Israel, where we are headquartered, have been called into active reserve duty.

Several of our employees who reside close to the southern or northern boarders of Israel have been forced to evacuate their homes and have relocated to temporary housing.

Since the education system is partially operating, many of our employees with small children are working from home.

Due to the recency of these events, and their ongoing and evolving nature, the extent of the adverse effect on our business operations is still unknown.

While our offices and facilities are open worldwide, including in Israel, and, to date, we have not had disruptions to our ability to manufacture and deliver products and services to customers a prolonged war or an escalation of the current conditions in Israel could materially adversely affect our business, financial condition, and results of operations.

On September 17, 2024, the Israeli cabinet declared the return of displaced Israeli residents to their homes, in the North of the country as a war goal, which has caused an intensification of fighting.

The potential deterioration of Israel’s economy, as a direct and indirect result of these terrorist attacks and the military campaigns in Gaza and Lebanon that has resulted from them, could have a material adverse effect on us and our ability to effectively conduct our operations.

In addition, any future ongoing armed conflict, political instability or violence in the region may impede our ability to manage our business effectively, operate our manufacturing plant in northern Israel, engage in research and development, or otherwise adversely affect our business or operations.

In the event of escalation of the current war situation or others, we may be forced to 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 disrupt the ongoing operation of our offices, our ability to operate could be materially adversely affected.

Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism.

Although according to the Israeli Property Tax and Compensation Fund Regulation (Compensation Payment) (War Damage and Indirect Damage), 1973 the Israeli government should compensate physical loss or damage to the said property due to War or Terror risks on actual values, we cannot assure you that such government coverage will be maintained or that it will sufficiently cover our full potential damages.

Any losses or damages incurred by us could have a material adverse effect on our business.

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 instability in neighboring states results 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.

In addition, there have been increased efforts by activists to cause companies and consumers to boycott Israeli goods and cooperation with Israeli-related entities based on Israel’s military operations in Gaza and Israeli government policies.

Any current or future 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.

In that regard, since the start of the war on Hamas, we have become aware of pressure being placed on our customers not to engage in business with us due to our affiliation with Israel.

In addition, foreign policy could be negatively impacted with regard to Israel.

If these pressures intensify or continue to occur, they could impact our business with suppliers and customers which could in turn adversely impact our reputation, results of operations or financial condition.

Additionally, in 2023, the Israeli government announced plans to significantly reduce the Israeli Supreme Court's judicial oversight, including reducing its ability to strike down legislation that it deems unreasonable, and plans to increase political influence over the selection of judges.

Although the Israeli Supreme Court partially struck down these plans, the current government has vowed to make other changes to law that limit the powers of the Supreme Court.

If such government plans are eventually enacted, they may cause operational challenges for us since we are headquartered in Israel and many of our employees are located in Israel.

In response to the foregoing developments, individuals, organizations and institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment in Israel due in part to the reluctance of foreign investors to invest or transact business in Israel, and lead to increased volatility in foreign exchange rates involving the Israeli new shekel, downgrades in the credit rating of Israel, increased volatility in securities markets, and other changes in macroeconomic conditions.

All of these risks have been compounded by the current wars against Hamas and Hezbollah.

The loss of key executives, and our ability to retain key personnel and attract additional qualified personnel

On August 26, 2024, the Company's former CEO, Zvi Lando resigned, and the Board of Directors appointed its former CFO, Ronen Faier to the position of interim CEO.

In conjunction with this transition, the Board of Directors also appointed Ariel Porat, formerly the Company’s Senior Vice President of Finance, to serve as CFO.

Executive leadership and senior management transitions, reductions in workforce and employee turnover can be time consuming, difficult to manage, create instability, cause disruption to our business and result in the loss of institutional knowledge, and any of these outcomes could impede the execution of our day-to-day operations and our ability to fully implement our business and growth strategy.

These impacts could also make it more difficult to attract and retain talent.

The failure to successfully hire and retain key executives and employees or the further loss of any key executives, senior management and employees could have a significant impact on our operations, including declining product identity and competitive differentiation, eroding employee morale and productivity or an inability to maintain internal controls, regulatory or other compliance related requirements, any and all of which could in turn adversely impact our business, financial condition, and results of operations.

Political uncertainty may have an adverse impact on our business.

As described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, we are subject to various legal, compliance and regulatory risks, including with respect to the availability of economic incentives in certain jurisdictions in which we operate.

Elections in various countries, including the United States and throughout Europe, may further exacerbate these risks.

The lead up to these elections and their outcomes could result in sharp shifts in domestic, economic, and foreign policy approaches or significant changes in, and uncertainty with respect to, legislation and regulation directly affecting us and our business, including tax incentives for the solar industry.

Actions taken by new administrations may have an adverse effect on our industry and business, which could result in a material adverse effect on our business, financial condition, results of operations and future growth.

We have incurred significant losses and expect to incur losses in the future, which could restrict our liquidity and ability to service our debt

The Company’s accumulated deficit totaled $715.28 million as of September 30, 2024 and we expect to incur losses in future periods.

These losses could restrict our operations and make it more difficult for us to service our debt obligations and satisfy our liquidity needs.

These outcomes could increase our vulnerability to general adverse economic, industry or competitive conditions;

limit our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate;

limit our ability to raise additional debt or equity capital in the future;

and restrict us from exploiting business opportunities, any or all of which could adversely affect our business, financial condition, and results of operations.Our future operations are also dependent on the success of the Company’s development and commercialization efforts and, ultimately, upon the market acceptance of the Company’s products.

Our failure to develop and commercialize its products successfully, or to achieve market acceptance for our products, could have an adverse effect on our business, financial condition, and results of operations and subject us to further losses.

Additional impairments of the carrying value of our long-lived assets, goodwill or other intangible assets could adversely affect our financial condition and results of operations.

Our long-lived assets, goodwill and other intangible assets represent a significant portion of our total assets.

We test our goodwill and such assets for impairment at least annually, or more frequently if an event occurs indicating the potential for impairment, and we assess on an as-needed basis whether there have been impairments in our other intangible assets, which include complex, and often subjective, assumptions and estimates.

These assumptions and estimates can be affected by a variety of external factors such as industry and economic trends, and internal factors such as changes in our business strategy or our internal forecasts.

To the extent that the factors described above change, we could be required to record additional non-cash impairment charges in the future, which could negatively affect our financial condition and results of operations

During the three months ended September 30, 2024, we concluded indicators of impairment existed due to a sustained decline in the Company's stock price and, as a result, the Company’s market capitalization.

Therefore we performed an interim impairment test of long-lived assets, goodwill and other intangible assets, which resulted in an impairment charge and disposals related to certain tangible assets of $207.4 million and a goodwill impairment charge of $2.3 million (see Notes 7, 8 and 9 to the financial statements for additional information).

Changes in the United States trade environment, including the imposition of import tariffs, could adversely affect the amount or timing of our revenue, results of operations or cash flows.

The United States has recently imposed significant new tariffs on nearly all products and components imported into the United States, including an incremental 145% tariff applicable to goods from China, and could propose additional tariffs or increases to those already in place.

A subset of certain key components, necessary for the production of our products are sourced from China, among other countries.

It is unknown whether and to what extent these tariffs will remain in place or if other new laws or regulations will be adopted.

Due to broad uncertainty regarding the timing, content and extent of any regulatory changes in the U.S.

or abroad, we cannot predict the impact, if any, that these tariffs or other changes to trade policy could have on our business, financial condition and results of operations.

Furthermore, in the U.S., these measures could be altered at any time through presidential action, judicial orders, or a bipartisan congressional response, and the resulting uncertainty surrounding domestic and foreign trade and tariff policies may amplify the impact of these developments.

In light of the aforementioned we are exploring alternative suppliers outside of China, however, there is no assurance that we will be successful in identifying suitable alternatives, or that such alternatives, if identified, will not result in increased costs or reduced operational efficiency.

It is unknown what effect any such new tariffs or retaliatory actions will have on the solar industry and our customers.

We have most of our contract manufacturing the U.S.

However, certain components necessary for our products are currently required to be imported from outside the U.S.

The resulting environment of escalating trade tension, retaliatory trade tension, or other trade actions, restrictive measures, additional trade restrictions, or barriers, if implemented on a broader range of products or components from outside the United States, or with respect to products shipped from the United States, could harm our ability to obtain necessary product components or to sell our products at prices customers are willing to pay, which could have a material adverse effect on our business, prospects, results of operations and cash flows.

Furthermore, if the price of solar power systems in the United States increases, as well as the cost of manufacturing our products in the United States, the use of solar power systems could become less economically feasible and could reduce our gross margins or reduce the demand of solar power systems manufactured and sold, which in turn may decrease demand for our products.

Additionally, existing or future tariffs could negatively affect key partners, suppliers and manufacturers.

Such outcomes could adversely affect the amount or timing of our revenue, results of operations or cash flows, and continuing uncertainty could cause sales volatility, price fluctuations or supply shortages or cause our customers to advance or delay their purchase of our products.

It is difficult to predict what further trade-related actions governments may take, which may include additional or increased tariffs and trade restrictions, and we may be unable to quickly and effectively react to such actions.

As additional new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or if affected countries take retaliatory trade actions, such changes could have a material adverse effect on our business, financial condition, results of operations or cash flows.

SOLAREDGE TECHNOLOGIES INC.

| 2025 Form 10-Q | 16

Unregistered Sales of Equity Securities and Use of Proceeds.

D efaults upon Senior Securities.

Defaults upon Senior Securities.

Mine Safety Disclosures

1 unchanged sentence

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-Q

Item 1A. Risk Factors