Risk Factors Summary
Investing in our securities involves a high degree of risk. The following is a summary of the principal factors that make an investment in our securities speculative or risky, as more fully described below in the section titled “Risk Factors.” This summary should be read in conjunction with the “Risk Factors” section and should not be relied upon as an exhaustive summary of the material risks facing our business. In addition to this summary, you should consider the information set forth in the “Risk Factors” section and the other information contained in this Annual Report on Form 10-K before investing in our securities:
Risk Related to our Business, Operations and Our Industry
• The reduction, elimination or expiration of government subsidies and economic incentives for on-grid solar electricity applications could reduce demand for solar photovoltaic systems and harm our business.
• The inability of our products to comply with the minimum domestic content tax credit thresholds, inclusive of FEOC regulations, could negatively impact our business, financial condition and results of operations.
• Unfavorable macroeconomic and market conditions may adversely affect our industry, business and financial results.
• If demand for solar energy solutions does not grow or grows at a slower rate than we anticipate, our business will suffer.
• The solar industry is highly competitive, and we expect to face increased competition as new and existing competitors introduce products or develop alternative technologies.
• Changes in the United States trade environment, including the recent imposition of import tariffs, has and could adversely affect the amount or timing of our revenue, results of operations or cash flows.
• We may fail to capture customers as we design and develop new products, and update existing products.
• We depend upon a small number of outside contract manufacturers, and our business and operations could be disrupted if we encounter problems with these contract manufacturers.
• We depend on solar distributors, installers and providers of solar financing to assist in selling our products to customers, and if they fail to perform at the expected level, or at all, our business, financial condition and results of our operations could be harmed.
• We depend on limited-source suppliers for key components and products. If we are unable to source these components and products on a timely basis, we will not be able to deliver our products to our customers.
• If we or our contract manufacturers are unable to obtain raw materials in a timely manner or if the price of raw materials increases significantly, production time and product costs could increase, which may adversely affect our business.
• Our recent and planned expansion into existing and new markets could subject us to additional business, financial and competitive risks.
• Manufacturing problems could result in delays in product shipments, which would adversely affect our revenue, competitive position and reputation.
• The loss of, or events affecting, one of our major customers could reduce our sales and have an adverse effect on our business, financial condition and results of operations.
• If our products contain manufacturing or software defects, our business and financial results could be harmed.
• If we fail to retain our key personnel or if we fail to attract additional qualified personnel, we may not be able to maintain or achieve our anticipated level of growth and our business could suffer.
• Restructuring activities could disrupt our business and adversely affect our results of operations.
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Risk Related to our Intellectual Property and Technology
• We are dependent on information technology systems, infrastructure and data. We or third parties whom we interact with could be subject to breaches of information technology systems caused by system security risks, failure of data protection, cyber-attacks and erroneous or non-malicious actions or failures to act by employees or others, which could cause significant reputational, legal and financial damages.
• We are subject to stringent and evolving data privacy and security laws, contractual obligations, information security policies and other obligations governing the use, processing and transfer of personal information, and 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 may be subject to disruptions or failures in information technology systems and network infrastructures that could have a material adverse effect on our business and financial condition.
• If we fail to protect, or incur significant costs in enforcing, our intellectual property and other proprietary rights, our business and results of operations could be materially harmed.
• 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 failure to obtain the right to use necessary third-party intellectual property rights on reasonable terms, or our failure to maintain and comply with the terms and conditions applicable to these rights, could harm our business and prospects.
Risk Related to Legal Proceedings and Regulations
• Changes in current laws or regulations or the imposition of new laws or regulations, or new interpretations thereof, in the solar energy sector, by federal or state agencies in the United States or foreign jurisdictions could impair our ability to compete, and could materially harm our business, financial condition and results of operations.
• Our significant international operations subject us to additional risks that could adversely affect our business, results of operations and financial condition.
Risk Related to our Financial Condition and Liquidity
• Our gross profit may fluctuate over time, which could impair our ability to achieve or maintain profitability.
• We are under continuous pressure to reduce the prices of our products, which has adversely affected, and may continue to adversely affect, our gross margins.
• If we do not forecast demand for our products accurately, we may experience product shortages, delays in product shipment or excess product inventory, any of which will adversely affect our business and financial condition.
• A drop in the retail price of electricity derived from the utility grid or from alternative energy sources, or a change in utility pricing structures, may harm our business, financial condition and results of operations.
Risk Related to our Acquisition Activity
• As part of growing our business, we have made and expect to continue to make acquisitions. If we fail to successfully select, execute or integrate our acquisitions, then our business and operating results could be harmed.
Risk Related to our Debt and Equity Securities
• Our financial results may vary significantly from quarter to quarter due to a number of factors.
PART I
Item 1. Business
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Our Company
We are a global energy technology company originally founded in March 2006. We deliver smart, easy-to-use solutions that manage solar generation, storage and communication on one platform. Our intelligent microinverters work with virtually every solar panel made, and when paired with our smart technology, result in one of the industry’s best-performing clean energy systems.
For the first time in the evolution of our centuries-old grid, people can get paid for the clean energy they produce and share with their communities, helping to build a new energy future that harnesses the sun. This clean, free, abundant source of energy can power our lives and ultimately help greatly reduce our dependence on fossil fuels. As of December 31, 2025, we have shipped approximately 86.4 million microinverters, and more than 5.1 million Enphase residential and commercial systems have been deployed in over 160 countries.
We design, develop, manufacture and sell home energy solutions that manage energy generation, energy storage, and control and communications on one intelligent platform. We have revolutionized the solar industry by bringing a systems approach to solar technology and by pioneering a semiconductor-based microinverter that converts energy at the individual solar module level and, combined with our proprietary networking and software technologies, provides advanced energy monitoring and control. This is vastly different than a string inverter system using string modules, whether with or without an optimizer, which only converts the energy of the entire array of solar modules from a single high voltage electrical unit and lacks intelligence about the energy producing capacity of the solar array.
The Enphase ® Energy System brings a high technology, networked approach to solar generation plus energy storage, by leveraging our design expertise across power electronics, semiconductors and cloud-based software technologies. Our integrated approach to energy solutions maximizes a home’s energy potential while providing advanced monitoring and remote maintenance capabilities. The Enphase Energy System uses a single technology platform for seamless management of the whole solution, of IQ ® Microinverters, IQ ® Batteries, IQ ® Load Controllers, and IQ ® EV Charger, allowing rapid commissioning with the Enphase ® Installer App, consumption monitoring with our IQ ® Combiner™ device with our Enphase IQ ® Gateway™ device, and our Enphase ® App, a cloud-based energy management platform. System owners can use the Enphase App to monitor their home’s solar generation, energy storage and consumption from any web-enabled device. Unlike some of our competitors, who utilize a traditional inverter, or offer separate components of solutions, we have built-in system redundancy in both photovoltaic (“PV”) generation and energy storage, eliminating the risk that comes with a single point of failure. Further, the nature of our cloud-based, monitored system allows for remote firmware and software updates, enabling cost-effective remote maintenance and ongoing utility compliance.
We have transitioned from solar only systems to complete energy management solutions, which consist of solar, batteries, load control, electrical vehicle (“EV”) charging, compatibility with third-party generators, and grid services. This transition follows the rising global interest in the full electrification of homes and businesses through renewable sources of energy.
Our Strategy
Our objective is to build best-in-class home energy systems and deliver them to homeowners through our installer and distribution partners, enabled by a comprehensive digital platform. Key elements of our strategy include:
• Best-in-class customer experience. Our value proposition is to deliver products that are productive, reliable, smart, simple and safe, with superior customer service, to enable homeowners’ storage and energy independence. On the service front, our installer, distributor and module partners are our first line of association with our ultimate customer, the homeowner and business user. Our goals are to partner better with these service providers so that we can provide exceptional, high quality service to homeowners who have installed our products. We are convinced that continued reinforcement of customer experience improvements by providing 24x7 support can be a competitive advantage for us.
• Expand our product offerings. We distinguish ourselves from other inverter companies with our systems-based and high technology approach, as we continue to invest in research and development to develop all components of our home energy management systems and remain committed to providing our customers and partners with best-in-class power electronics, storage solutions, communications and load control, all managed by a cloud-based home energy management system.
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• Increase power and efficiency and reduce cost per watt. Our engineering team is focused on continuing to increase average power conversion efficiency and alternating current (“AC”) output power in order to pair with higher rated direct current (“DC”) modules while reducing costs per watt.
• Increase storage energy density and reduce installation time and cost per kWh . Our engineering team is focused on increasing the energy density of our battery capacity, quality and reducing installation time and cost per kilowatt hour (“kWh”) to make solar-plus-storage resilient, sustainable and affordable for the masses.
• Focus on the homeowner, distributor and installer partners. We are focused on making it easier for our distributors, installers and customers to do business and generating revenue through digitalization of the business-to-business and business-to-customer process of the distributor, installer and customer journey. Our key focus is to expand our digital presence through enhancing our array of tools on our digital platform to keep us continually connected with our installers and homeowners, as well as increasing the use of our online store significantly.
• Grow market share worldwide. We intend to capitalize on our market leadership in the microinverter category and our momentum with installers and homeowners to expand our market share position in our core markets. In addition, we hope to further increase our market share in the Europe, Asia Pacific and Latin America regions. Further, we intend to continue our expansion into new markets, including emerging markets, with new and existing products and local go-to-market capabilities.
Products
The Enphase Energy System, powered by IQ Microinverters, IQ Batteries and other products and services, is an integrated solar, storage and energy management offering that enables self-consumption and delivers our core value proposition of yielding more energy, simplifying design and installation, and improving system uptime and reliability.
IQ Microinverters . We ship IQ8™ Microinverters into 58 countries worldwide. Our IQ8P 3P™ Microinverters, with peak output power of 480 W AC, are designed to maximize energy production and can manage a continuous DC current of 14 amperes, supporting higher powered solar modules through increased energy harvesting. These microinverters are offered for residential and small commercial applications in North America and for grid-tied applications in South Africa, Mexico, Brazil, India, Thailand, the Philippines, France, Spain, Switzerland, Poland, Colombia, Panama, Costa Rica, Vietnam, Malaysia, Australia and 13 Caribbean countries. We began shipping our new IQ9N-3P™ Commercial Microinverter in December 2025. This is the first microinverter powered by advanced gallium nitride technology and designed for three-phase 480Y/277 V (wye) grid configurations, without using external transformers. The IQ9N-3P Commercial Microinverter helps simplify design complexity, lowers installation and balance of system costs, and improves system efficiency for 480 V commercial projects.
In 2025, we released a software update that enables homeowners with existing legacy IQ7™ Microinverter-based systems to expand their solar capacity with IQ8 Microinverters. This software facilitates seamless interoperability between legacy and current system architectures and is available in North America, Europe, Australia, South Africa, the Philippines and other key markets.
We ship our IQ8HC™ Microinverters, IQ8X™ Microinverters, IQ8P-3P Commercial Microinverters, IQ9N-3P™ Commercial Microinverters, IQ ® Battery 5Ps and IQ ® Battery 10Cs supplied from manufacturing facilities in the United States with higher domestic content than previous models, that when paired with other U.S.-made solar equipment could qualify for the domestic content bonus tax credit under the Inflation Reduction Act of 2022 (the “IRA”).
IQ Batteries. Our Enphase IQ Battery storage systems, with usable and scalable capacity of 10.1 kWh and 3.4 kWh for the United States, and 10.5 kWh and 3.5 kWh for Europe and other international countries, are based on our Ensemble OS™ software, which powers our grid-independent microinverter-based storage systems. We currently ship our Enphase IQ Battery storage systems to customers in the United States, Puerto Rico, Canada, Mexico, Australia, New Zealand, Belgium, Germany, the United Kingdom, Italy, Austria, France, the Netherlands, Luxembourg, Finland, Switzerland, Spain, Portugal, Sweden, Denmark and Greece. Enphase IQ Batteries in Europe can be installed with both single-phase and three-phase third-party solar energy inverters, enabling homeowners to upgrade their existing home solar systems with a residential battery storage solution that reduces costs while providing increased self-reliance.
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Our IQ ® Battery 5P is modular with 5 kWh capacity and provides a peak output power of 384 W. Our IQ Battery 5P is available for customers in the United States, Australia, New Zealand, Puerto Rico, Mexico, Canada, the United Kingdom, Italy, France, the Netherlands, Luxembourg, Belgium, Romania and India. We currently ship our IQ Battery 5P with FlexPhase™ technology, an all-in-one AC-coupled system that delivers reliable backup power and supports both single-phase and three-phase applications, to customers in Germany, Austria, Switzerland, Luxembourg, Poland, Spain, Portugal, France, the Netherlands, Belgium, Sweden, Denmark, Greece, Croatia, Slovenia, Slovakia, Latvia, Lithuania, Estonia, Romania, Australia, New Zealand and India.
We started shipping our fourth-generation Enphase Energy System, featuring the IQ ® Battery 10C, IQ ® Meter Collar and the IQ ® Combiner 6C into the United States in June 2025. The IQ Battery 10C is designed to be 30% more energy-dense, occupy 60% less wall space, and cost less than previous models. The IQ Meter Collar simplifies whole-home backup by providing microgrid interconnection device functionality, while the IQ ® Combiner 6C further streamlines installation by consolidating interconnection equipment into one enclosure. Together, these components are designed to simplify the entire backup installation process and enhance reliability. In August 2025, we announced the initial shipments of our IQ Battery 10C, supplied from manufacturing facilities in the United States, delivering additional value in growing third-party ownership (“TPO”) market.
In October 2025, we announced support in the United States for complete off-grid system configurations that are capable of operating without a utility connection when needed. The system requires the IQ Battery 5P with embedded grid-forming microinverters, IQ8 Series Microinverters with Sunlight JumpStart™ technology and a third-party standby AC generator, which all work together to power the home.
In December 2025, we launched our PowerMatch™ technology, a battery software upgrade. PowerMatch intelligently adjusts IQ ® Battery output to match a home’s real-time power needs, delivering more usable energy, longer battery life and greater long-term savings. The efficiency gains achieved with this technology can improve battery performance by as much as 40%.
IQ ® PowerPack 1500 . The IQ PowerPack 1500™portable energy system is now available in the United States and Canada. This product is a 1,500 Wh smart, go-anywhere portable energy system that can power most small appliances in the home, at work, or outdoors. It is designed to provide battery backup, helping to ensure essential electronics stay up and running during power outages.
IQ ® Balcony Solar System. We launched our IQ Balcony Solar System in Germany and Belgium in May 2025. This system is designed for plug-and-play installation and enables apartment residents and homeowners with limited roof space to generate solar energy from balconies, patios and small outdoor areas. Our IQ Balcony Solar System includes Enphase IQ8HC Microinverters, our IQ ® Balcony Gateway™ device and other components.
IQ ® Energy Management. We introduced the IQ ® Energy Router™ family of devices in Germany, Austria, Switzerland, France, Belgium and the Netherlands. The IQ Energy Router enables the integration of select third‑party EV chargers and heat pumps into Enphase solar and battery systems. These devices monitor and control energy usage between the Enphase Energy System, EV chargers and heat pumps, working in coordination with our system intelligence to deploy AI‑based solar production forecasting, consumption forecasting and an optimization engine to maximize self‑consumption.
Building on the foundation of the IQ Energy Router, we introduced IQ Energy Management technology in France in May 2025. This solution integrates with Enphase solar and battery systems to enable smart management of variable electricity rates and supports integration with select third‑party EV chargers, heat pumps and resistive electric water heaters—helping homeowners optimize energy consumption and costs. We recently expanded IQ Energy Management capabilities to include support for select electric water heaters in Belgium, the Netherlands and Switzerland.
IQ EV Chargers . Our IQ EV chargers are compatible with most EVs sold in North America. Customers are able to purchase Enphase-branded EV chargers, which support both J1772 and North American Charging Standard connectors with a charging power range between 32 amperes and 64 amperes.
Our smart IQ EV Chargers sold in the United States and Canada are equipped with Wi-Fi and include smart control and monitoring capabilities. Our IQ EV Charger is designed to seamlessly integrate into our solar and battery systems to help homeowners maximize electricity cost savings by charging directly from solar energy.
Our most advanced residential charger to date, the IQ ® EV Charger 2 supports up to 22 kW of three-phase charging and can operate either as a standalone charger or fully integrated with our IQ Microinverters and IQ Batteries. We ship the IQ EV Charger 2 into 14 countries in Europe and recently expanded across Europe to now
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include Greece, Romania, Ireland and Poland. In June 2025, we started shipping IQ EV Charger 2 to Australia and New Zealand. We also started shipping the IQ EV Charger 2 to the United States and Canada in December 2025.
The new CS-100 EV Charger, our most powerful EV charger to date, is designed to provide up to 19.2 kW of continuous power, and is available for customers with commercial fleet EVs in the United States.
We announced a new IQ ® Bidirectional EV Charger architecture in September 2025, featuring vehicle-to-home and vehicle-to-grid capability. This charger is expected to connect to the DC port of the EV and lets homeowners charge their EV, power their home seamlessly during outages, and share energy with the grid – all managed through the Enphase App.
Grid Services or Virtual Power Plants. Grid services or virtual power plant (“VPP”) programs are managed by regional utilities and use energy stored in home batteries to help power communities when it is needed most, like during periods of peak electricity demand. This reduces reliance on costly and polluting power plants for electricity and, in return, provides incentives to homeowners from their own utilities. Incentive programs may serve as a discount on the purchase of an Enphase Energy System with IQ Batteries or as ongoing payments to participating homeowners. We are currently participating in incentive programs across the United States, Canada and Europe.
Solargraf ® . We offer our Solargraf Design and Proposal™ platform, a cloud-based solar and battery design, proposal software and permitting service for both residential and commercial customers. Solargraf is offered in the United States, Canada, Brazil, Germany, Austria, the Netherlands, France, Australia, Japan and India. In 2025, we introduced updates to the Solargraf platform, including integrations with leading TPO financing providers, enabling finance‑ready proposal generation within the platform. The platform also received independent validation from the National Renewable Energy Laboratory (“NREL”) for accuracy in system modeling.
We also offer digital platforms that support installers and cleantech asset owners across the project lifecycle. Our on-demand service platform matches cleantech asset owners with a local network of independent professionals for installation, maintenance and repair services. In addition, our Enphase Appointments Program provides qualified solar appointments to installers to help increase volumes and improve customer acquisition efficiency.
Enphase Care. We also launched a new offering, the Enphase Care™ service, an optional service and maintenance plan that complements the standard Enphase hardware limited warranties. Enphase Care provides continuous system monitoring through the Enphase App, remote diagnostics and troubleshooting, and priority access to Enphase support personnel to help customers maintain reliable long-term performance of Enphase Energy Systems. Where a covered Enphase component requires in-person service, Enphase Care includes $0 on-site labor for covered repairs performed by Enphase-trained technicians.
Customers and Sales
We currently offer solutions targeting the residential and commercial markets in the United States, Canada, Mexico, Puerto Rico, Europe, Australia, New Zealand, India, Thailand, Central America, the Caribbean and certain Asian countries. We primarily sell to solar distributors who combine our products with others, including solar module products and racking systems, and resell to installers in each target region. In addition to our solar distributors, we sell directly to select large installers, original equipment manufacturers (“OEM”) and strategic partners. Our OEM customers include solar module manufacturers who integrate our microinverters with their solar module products and resell to both distributors and installers. Strategic partners include a variety of companies, including industrial equipment suppliers, module companies, energy suppliers and developers of third-party solar finance offerings (such as TPOs).
We also sell certain products to homeowners through third-party marketplaces, and offer additional products and services through our online store, primarily to support our warranty programs and product upgrade initiatives. In the years ended December 31, 2025, 2024 and 2023, one customer accounted for approximately 39%, 48% and 40%, respectively, of our net revenues. Our revenue generated from the United States market has represented 81%, 70% and 64% of our net revenues for the years ended on December 31, 2025, 2024 and 2023, respectively.
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Competition
The markets for our products are highly competitive and we compete with central and string inverter manufacturers, storage system manufacturers and new technologies that compete with our business. The principal areas in which we compete with other companies include:
• product performance and features;
• total cost of ownership;
• breadth of product line;
• local sales and distribution capabilities;
• module compatibility and interoperability;
• reliability and duration of product warranty;
• technological expertise;
• brand recognition;
• customer service and support;
• compliance with industry standards and certifications;
• compliance with current and planned local electrical codes;
• integration with storage offerings;
• size and financial stability of operations;
• size of installed base; and
• local manufacturing and product content.
In an installation consisting of a traditional central inverter, the solar PV modules are connected in series strings. In a large installation, there are multiple series strings connected in parallel. The aggregated voltage from each of these strings is then fed into a large central inverter. We believe that traditional string inverters have a number of design and performance challenges limiting innovation and their ability to reduce the cost of solar power systems, including the following:
• Productivity limits . If solar modules are wired using a traditional central inverter—a group or “string” of modules are wired in series, then an entire string’s output is limited by the output of the lowest-performing module. Because of its string design, there is a single point of failure risk with the traditional string inverter approach.
• Reli a bility issues . Traditional string inverters are the single most common component of solar installations to fail, resulting in system downtime and adversely impacting total energy output. As a result, string inverters typically carry warranties of only 8 to 12 years.
• Complex design and installation requirements . The string inverter-based solar PV installation requires greater effort on the part of the installer, both in terms of design and on-site labor. String inverter installations require string design and calculations for safe and reliable operation, as well as specialized equipment such as DC combiners, conduits and disconnects. In addition, the use of high-voltage DC requires specialized knowledge and training and safety precautions to install string inverter technology.
• Safety issues . String inverter solar PV installations have a wide distribution of high-voltage (600 volts to 1,000 volts) DC wiring. If damaged, DC wires can generate sustained electrical arcs, reaching temperatures of more than 5,000°F. This creates the risk of fire for solar PV installation owners and injury for installers and maintenance personnel.
These challenges of traditional string inverters have a direct impact on the cost and expected return on investment of solar installations to both installers and system owners:
• Installer . Solar PV installers aim for simple installation design, fast installation times and maximum system performance and predictability. The installation of high-voltage DC string inverter technology, however, requires significant preparation, precautionary safety measures, time-consuming string calculations,
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extensive design expertise and specialized installation equipment, training and knowledge. Together, these factors significantly increase complexity and cost of installation and limit overall productivity for the installer.
• System owner . Solar power system owners aim for high energy production, low cost, high reliability, and low maintenance requirements, as well as reduced fire risks. With traditional string inverters, owners often are unable to optimize the size or shape of their solar PV installations due to string design limitations. As such, they experience performance loss from shading and other obstructions, can face frequent system failures and lack the ability to effectively monitor the performance of their solar PV installation. In addition, string inverter installations operate at high-voltage DC, which bears significant fire risks. Further, due to their large size, string inverter installations can affect architectural aesthetics of the house or commercial building.
Several of our existing and potential competitors are significantly larger than us and may have greater financial, marketing, distribution and customer support resources and may have significantly broader brand recognition, especially in certain markets. In addition, some of our competitors have more resources and experience in developing or acquiring new products and technologies and in creating market awareness for these offerings. Further, certain competitors may be able to develop new products more quickly than we can 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 may have caused and could in the future cause us to lose sales or market share or require us to lower prices of our products in order to compete effectively.
Competitors in the inverter market include, among others, SolarEdge Technologies, Inc. (“SolarEdge”), Huawei Technologies Co. Ltd., (“Huawei”), Tesla, Inc. (“Tesla”), Sungrow Power Supply Co., Ltd., Growatt New Energy Co., Ltd and other companies offering microinverters and/or string inverters with and without solar optimizers. We believe that our microinverter solutions offer significant advantages and competitive differentiation relative to traditional central or string inverter technology, even when supplemented by DC-to-DC optimizers on the roof.
Competitors in the storage market include Tesla, SolarEdge, Huawei, BYD Company Limited (“BYD”), Franklin Solar Battery and other producers of battery cells and integrated storage systems. Competitors in the EV charger market include Wallbox N.V., ChargePoint Holdings, Inc., Tesla and EVBox Group, among others.
Manufacturing, Quality Control and Supply Chain Management
We utilize a sourcing strategy that emphasizes global procurement of materials and product manufacturing in lower cost regions. We outsource the manufacturing of some of our products to third-party contract manufacturers. We utilize Flex Ltd. and affiliates (“Flex”), Salcomp Manufacturing India PVT and Sunwoda Electric Co. Ltd. to assemble and test certain of our IQ microinverters, IQ Battery storage systems, EV chargers and IQ Gateway products. Prices for such services are agreed to by the parties on a quarterly basis, and under our agreements we are obligated to purchase manufactured products and raw materials that cannot be resold upon the termination of the applicable agreements. DHL, Flex and other service providers also provide receiving, kitting, storage, transportation, inventory visibility and other value-added logistics services. In addition, we rely on several unaffiliated companies to supply certain components used in the fabrication of our products.
In November 2025, we commenced Enphase manufacturing at our Arlington, Texas facility previously operated by Salcomp Manufacturing USA Corp. This in-house facility, together with our contract manufacturer relationship with Flex, provides us with strategic manufacturing capabilities and enhanced operational flexibility in the United States. We are currently shipping both residential and commercial IQ Microinverters and IQ Batteries with higher domestic content from the U.S.-based manufacturing facilities in South Carolina and Texas, where we have added several new production lines across the two sites. Moving manufacturing to the United States allows us to benefit from certain incentives under the IRA, improve service to our customers by reducing delivery times, diversifying our supply chain and supporting solar projects to qualify for the Domestic Content Bonus Credit.
We are committed to delivering products and services that meet consistently high standards of quality. We maintain rigorous quality‑control practices across all aspects of our operations, including design, research, production, and sales. To ensure that our products and services satisfy our internal benchmarks and specifications, we have implemented comprehensive quality‑control procedures throughout our business processes. We also provide post‑installation support services to our customers and homeowners.
Quality control is a cross‑functional responsibility shared by teams across supply chain management, quality assurance, safety and compliance. These teams are responsible for establishing quality‑control standards,
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implementing inspection procedures for raw materials and finished products, and evaluating supplier performance. They also oversee the handling of customer complaints and ensure adherence to applicable laws as well as international and national standards.
Customer Service
We continue to cultivate an organizational focus on customer satisfaction and are committed to providing a best-in-class customer experience. We maintain high levels of customer engagement through our global customer support group, the Enphase Community and the Enphase App. We continue to provide 24/7 support for installers and Enphase system owners worldwide through phone, online chat and email channels. We invest in ongoing training for our customer service agents and in advanced artificial intelligence tools designed to improve system diagnostics, enhance the quality and consistency of customer responses, and reduce average wait times to under two minutes. We also continue to expand our network of field service technicians in the United States, Europe and Australia to provide direct homeowner support. In addition, we have established an inside sales team to assist customers with services and system upgrades. Our Net Promoter Score (commonly referred to as “NPS”) improved to 78% in both 2025 and 2024, compared to 76% in 2023, reflecting the impact of these customer service initiatives.
Research and Development
We plan to continue to devote substantial resources to research and development with the objective of developing new products and systems and increasing the value or reducing the cost of existing products and systems. Our research and development roadmap identifies new product features and defines improvement targets for existing products that enhance the benefit of our energy management solutions to our customers and support our growth plans. We measure the effectiveness of our research and development using metrics that include product cost, performance and reliability, homeowner and installer experience, as well as development cost and performance to schedule.
Intellectual Property
We operate in an industry in which innovation, investment in new ideas and protection of our intellectual property rights are critical for success. We protect our technology through a variety of means, including through patent, trademark, copyright and trade secrets laws in the United States and similar laws in other countries, confidentiality agreements and other contractual arrangements. As of December 31, 2025, we have approximately 400 global patents and 200 pending patent applications. The majority of our patents are expiring on an ongoing basis between the present and approximately 2045, but there is not a material portion of our patent portfolio expiring in the near future.
We have licensed certain technologies for application in hardware and software in our products. Such licenses are generally fully-paid, royalty-free licenses. Given the volume and pace of new patents worldwide, it may become necessary in the future to license intellectual property on terms that are yet unknown to us, and that may be less favorable than licenses in the past. In addition, we license open source software from various third parties for use in hardware and software. Such open source software is licensed under open source licenses, and we take efforts to maintain compliance with such licenses.
We continually assess the need for patent protection for those aspects of our technology that we believe provide significant competitive advantages. A majority of our patents relate to DC to AC power conversion, energy storage devices and related energy environments.
With respect to proprietary know-how that is not patentable and processes for which patents are difficult to enforce, we rely on trade secret protection and confidentiality agreements to safeguard our interests. We believe that many elements of our microinverter and storage 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 own or have rights to various trademarks and service marks in the United States and in other countries, including Enphase, the Enphase “e”, IQ, and many other marks. We rely on both registration of our marks as well as common law protection where available.
All of our research and development personnel have entered into confidentiality and proprietary information agreements with us. These agreements address intellectual property protection and require our employees to assign to us all of the inventions, designs and technologies they develop during the course of employment with us.
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We also require our customers and business partners to enter into confidentiality agreements before we disclose any sensitive aspects of our technology or business plans.
As part of our overall strategy to protect our intellectual property, we may take legal actions to prevent third parties from infringing or misappropriating our intellectual property or from otherwise gaining access to our technology.
Government Regulations
Our business activities are subject to a changing patchwork of laws and regulations that prevail at the federal, state, regional and local levels as well as in foreign jurisdictions. For example, substantially all of our import operations are subject to complex trade and customs laws, regulations and tax requirements such as sanctions orders or tariffs set by governments through mutual agreements or unilateral actions. In addition, countries may from time to time adversely modify or impose additional duties, tariffs or other restrictions on the import or export of our fully manufactured products or the material components needed to make our products. Changes in tax policies or trade regulations, the disallowance of tax deductions on imported merchandise, or the imposition of new tariffs on imported products, could have an adverse effect on our business and results of operations.
We are also subject to other complex foreign and U.S. laws and regulations related to anti-bribery and corruption, antitrust or competition, and data privacy and security, such as the EU General Data Protection Regulation, among others. In addition, our business and operations are currently subject to environmental laws in various jurisdictions around the world, including the Waste Electrical and Electronic Equipment and Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment regulations adopted by the EU. We are also subject to disclosure and related requirements that apply to the presence of “conflict minerals” in our products or supply chain. We have policies and procedures in place to promote compliance with these laws and regulations. To date, our compliance actions and costs relating to these laws, rules and regulations have not resulted in a material cost or effect on our capital expenditures, earnings or competitive position. Government regulations are subject to change, and accordingly we are unable to assess the possible effect of compliance with future requirements or whether our compliance with existing regulations will materially impact our business in the future.
Uncertainty related to tariffs and global trade policies continues to affect our operations, the solar industry, and our customers. We have relocated a significant portion of our manufacturing to the United States while continuing to utilize contract manufacturing in China and India; however, certain critical components remain sourced from outside the United States.
For example, lithium iron phosphate ("LFP") battery cells used in our energy storage systems are still supplied exclusively by two vendors located in China. While we are actively exploring alternative suppliers outside of China, the global supply chain for LFP battery cells remains heavily concentrated in China, and identifying qualified suppliers with the necessary expertise and capacity remains challenging.
An escalation in trade tensions or the implementation of broader tariffs, trade restrictions or retaliatory measures on our products or components originating from countries outside the United States could adversely impact our ability to source necessary components, manufacture products at competitive cost, or sell our products at prices customers are willing to pay. Any such developments could materially and adversely affect our business operations, results of operations and cash flows.
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Government Incentives
U.S. federal, state and local government bodies, as well as non-U.S. government bodies provide supportive policies and incentives to owners, distributors, system integrators and manufacturers of solar energy and battery storage systems to promote the use of these resources 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 energy systems from property tax assessments. The market for on‑grid rooftop solar applications, where solar power, possibly coupled with battery storage, 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-issued subsidies and economic incentives, which help to catalyze customer acceptance of solar energy as an alternative to utility-provisioned power. The modifications to, or disallowance of, government subsidies or economic incentives could have an adverse effect on our business and results of operations. Among other government-established incentives, net energy metering (“NEM”) and related policies have supported the growth of on-grid rooftop solar and storage products, and changes to such policies may significantly reduce demand for electricity from our solar and storage service offerings. NEM tariffs provide customers with compensation for exporting excess solar generation to the electrical grid.
One Big Beautiful Bill Act. In July 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted, introducing material changes to certain federal clean energy tax credit programs that are significant to our business and may impact our financial condition, results of operations and future prospects.
The OBBBA scales back the Investment Tax Credit (the “ITC”) available under Section 25D of the Internal Revenue Code of 1986, as amended (the “Code”), for residential solar and storage systems purchased through cash or loans. Under the new law, the Section 25D credit expired on December 31, 2025. In addition, the OBBBA imposes new timing requirements for eligibility under Section 48E of the Code, which governs ITCs for leased solar and storage systems. Specifically, solar-only projects that do not commence construction within 12 months of the OBBBA’s enactment must be placed in service by December 31, 2027 in order to remain eligible for the credit. Energy storage projects are not subject to this placed-in-service deadline; however, the ITC for storage systems will begin to phase down in 2034 — decreasing to 75% in 2034, 50% in 2035 and phasing out entirely by 2036.
The OBBBA also amends the domestic content bonus credit rules for Section 48E projects. Projects commencing construction after June 16, 2025 must meet a 45% domestic cost threshold, up from 40%.
Additionally, the OBBBA introduces new compliance requirements under the Foreign Entity of Concern (“FEOC”) provisions for both Section 48E and the Advanced Manufacturing Production Tax Credit (“AMPTC”) under Section 45X of the Code. These provisions establish an escalating threshold of non-FEOC content that must be met by solar and storage projects beginning construction in 2026 and by manufactured components produced beginning in 2026.
On July 7, 2025, the President issued an Executive Order directing the Secretary of the Treasury to issue updated guidance within 45 days on the “beginning of construction” requirements applicable to Section 48E projects. In August 2025, Treasury and the IRS issued revised “beginning of construction” guidance for clean energy tax credits that only applies to projects above 1MW. The Executive Order also requires the Secretary to implement the FEOC restrictions set forth in the OBBBA. Additional guidance around FEOC is still forthcoming and is expected to be finalized in 2026, which could make existing requirements more stringent.
These legislative and regulatory developments have impacted and may in the future negatively impact our eligibility for certain tax credits, the attractiveness of our offerings to solar and storage system lease providers, or the overall demand for our products. If we are unable to meet the revised domestic content or FEOC requirements, our ability to qualify for these incentives could be impaired, which may adversely affect our revenue, gross margins, business operations and competitive position.
In December 2022, the California Public Utilities Commission (“CPUC”) approved a NEM policy, called Net Energy Metering 3.0 (“NEM 3.0”), which went into effect starting April 15, 2023. The new policy substantially reduces the compensation that solar customers can earn by selling excess solar energy to the electric grid. The average hourly export rate in California under NEM 3.0 is approximately $0.05/kWh to $0.08/kWh compared to the prior average of $0.25/kWh to $0.35/kWh under Net Energy Metering 2.0 (“NEM 2.0”). In November 2023, the CPUC also adopted changes to its “Virtual NEM” and “NEM Aggregation” programs that prohibit multi-meter commercial or agricultural property owners from netting solar energy generated at or adjacent to those properties against import charges recorded on the meters at the property, except for residential account holders in a multi-family residential property. Both of these policy changes in California reduced demand for solar PV systems in the
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years ended December 31, 2025, 2024 and 2023 and may continue to do so. However, the reduction in export compensation under NEM 3.0, coupled with rising utility rates, may encourage deployment of battery energy storage with solar PV systems and mitigate some of the demand reductions.
Seasonality
Historically, the majority of our revenue are from the North American and European regions which experience higher sales of our products in the second, third and fourth quarters and have been affected by seasonal customer demand trends, including weather patterns and construction cycles. The first quarter historically has had softer customer demand in our industry, due to these same factors. Although these seasonal factors are common in the solar sector, historical patterns should not be considered a reliable indicator of our future sales activity or performance.
Environment and Climate Change
We have understood the climate change threat from the beginning and have been creating clean energy technologies needed to directly combat it, protect our environment and enable sustainable development. We recognize our ability to do so rests on our capacity to understand, anticipate and successfully navigate various types of climate risk. Our strategy is advancing solutions to meet any number of climate risk mitigation opportunities – solar energy equipment, battery storage, EV charging, smart load management and integration with grid modernization efforts.
We align our risk assessment and climate strategy with the recommendations of the Taskforce for Climate-Related Financial Disclosures (“TCFD”), as all existing and emerging climate risk disclosure regulations are modeled on this framework. We issued our fifth TCFD aligned Environmental, Social and Governance Report in 2025 and plan to follow up with another aligned report in 2026.
We believe that sound corporate governance is critical to helping us achieve our goals, including with respect to designing products that address both energy generation and consumption. We continue to evolve a governance framework that exercises appropriate oversight of responsibilities at all levels throughout the company and manages its affairs consistent with high principles of business ethics and advancing a sustainable future for all.
Human Capital Resources
As of December 31, 2025, we had 2,872 full-time employees. Of the full-time employees, 1,300 were engaged in sales and marketing, 1,081 were engaged in research and development, 254 in general and administration, 148 in manufacturing and 89 in solar system configuration design and permitting services. Of these employees, 1,743 were in India, 717 in the United States, 202 in Europe, 133 in New Zealand, 21 in Australia, 21 in China and 35 in other countries.
None of our employees are represented by a labor union; however, our employees in France are represented by a collective bargaining agreement. We have not experienced any employment-related work stoppages, and we consider our relations with our employees to be good.
Culture
Supporting our purpose of “Advancing a sustainable future for all,” all employees are expected to uphold the following core values that drive our culture:
• Customer First
• Integrity
• Innovation
• Teamwork
• Quality
These core values are represented by how we work together, how we perform and how we all get rewarded. Values are reinforced in new hire training, culture workshops and everyday interactions.
Talent
Our talent and culture are critical to our success. Our human capital management philosophy and objectives focus on creating a high-performance culture in which our employees deliver, succeed and lead. We achieve our
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objectives through various employee engagement and talent development efforts. Our employee engagement efforts include our quarterly all-employee town hall meetings, through which we aim to keep our employees well-informed and to increase transparency, and employee engagement events, through which we foster teamwork, networking, and enhance our workplace culture. We have established relationships with top universities worldwide, professional associations and industry groups to build a talent pipeline and established the Enphase Learning Academy to provide employees with regularly scheduled and on demand relevant technical and professional programs.
Compensation Philosophy
Our compensation philosophy creates the framework for our rewards strategy. We have a pay-for-performance culture that ties compensation to the performance of the individual and our company. We provide competitive compensation programs that focus on the following five key elements:
• Pay-for-performance: Reward and recognize leading contributors and high potential employees by paying market competitive total direct compensation, which includes base salary, quarterly bonus or commission, and stock-based compensation
• External market-based research: Pay levels that are competitive with respect to the labor markets and industries in which we compete for talent
• Internal equity: Maintaining internally consistent and non-discriminatory pay and pay practices
• Fiscal responsibility: Providing programs in line with economic conditions and our company’s financial health
• Legal compliance: Ensure the organization is legally compliant with employee compensation laws in all states and countries in which we operate
Health and Wellness
We invest in our employees through high-quality benefits and various health and wellness initiatives. Our benefits packages provide a balance of protection along with the flexibility to meet the individual needs of our employees. Our flexible workplace philosophy allows employees in certain countries and locations to work in a remote or hybrid mode as business necessitates. Our focus remains on the wellbeing of our employees and business partners by providing technology to our employees, end-customers and business partners to help them do their best work. We will continue to monitor our global workplace practices, and will make further changes to our business operations as may be necessary to retain and broaden our talent pool of employees.
Available Information
We file electronically with the U.S. Securities and Exchange Commission (“SEC”), our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act can be accessed on our Investor Relations website at investor.enphase.com . Alternatively, you may access these reports at the SEC’s website at www.sec.gov . We make available, free of charge, copies of these reports as soon as reasonably practicable after filing these reports with the SEC or otherwise furnishing it to the SEC. The contents of our websites are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
Item 1A. Risk Factors
We have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition or results of operations. The risks described below are not the only ones we face. Additional risks not presently known to us or that we currently believe are not material may also significantly impair our business operations. Our business could be harmed by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. In assessing these risks, you should also refer to the other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. See also “Forward-Looking Statements” in the forepart of this Annual Report on Form 10-K.
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Risks Related to our Business, Operations and Our Industry
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.
Our business and the broader solar and energy storage industry depend significantly on government-issued subsidies and economic incentives that promote the adoption and cost competitiveness of solar photovoltaic (“PV”) and energy storage systems for on-grid applications. These incentives include, among others, ITCs, feed-in tariffs (“FiTs”), NEM programs, rebates, and other policies that vary by jurisdiction. Many of these programs are subject to expiration, phase-outs, funding limitations, or policy changes, and some have already been reduced or eliminated in key markets.
For example, the IRA and subsequent legislation, including the OBBBA, introduced significant changes to ITC eligibility and domestic content requirements. The Section 25D credit for residential solar and storage systems expired on December 31, 2025. In addition, the OBBBA imposes new timing requirements for eligibility under Section 48E of the Code, which governs ITCs for leased solar and storage systems. Specifically, solar-only projects that do not commence construction within 12 months of the OBBBA’s enactment must be placed in service by December 31, 2027 in order to remain eligible for the credit. Energy storage projects are not subject to this placed-in-service deadline; however, the ITC for storage systems will begin to phase down in 2034 — decreasing to 75% in 2034, 50% in 2035 and phasing out entirely by 2036. If we are unable to meet revised compliance thresholds or if these incentives are further reduced or eliminated, the cost competitiveness of our products may decline, which could reduce demand for our offerings, adversely affect our revenue and margins, and harm our business.
Outside the United States, several European countries, including Germany, Belgium, Austria and the Netherlands, have adopted reductions in or ended their NEM or FiT programs. Certain countries have proposed or enacted higher grid fees or taxes levied on renewable energy. These and related developments have significantly impacted the solar industry in Europe and may adversely affect the future demand for solar energy solutions in those markets.
Among other government-established incentives, NEM and related policies have supported the growth of on-grid rooftop solar products, and changes to such policies may reduce demand for electricity from our solar service offerings. NEM is a tariffed utility rate program that permits a consumer to sell the excess solar energy that the consumer’s solar panels produce to the electric utility company at a predetermined price. For example, in California, CPUC approved NEM 3.0, which substantially reduced the compensation that solar customers can earn by selling excess solar energy to the electric grid. The average hourly export rate under NEM 3.0 is approximately $0.05/kWh to $0.08/kWh compared to the prior average of $0.25/kWh to $0.35/kWh under NEM 2.0. CPUC also adopted changes to its “Virtual NEM” and “NEM Aggregation” programs that prohibit multi-meter commercial or agricultural property owners from netting solar energy generated at or adjacent to those properties against import charges recorded on the meters at the property, except for residential account holders in a multi-family residential property. These types of modifications to NEM policies have impacted and could further harm our business, both in California, where we have derived a significant portion of historical revenues in the United States, and in other jurisdictions if similar changes are adopted.
Because our customers’ sales of solar power 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 rooftop solar electricity relative to centralized sources of electricity (including from conventional thermal or utility-scale renewable generation) and could harm or halt the growth of the solar electricity industry and our business. In addition, our ability to successfully penetrate new geographic markets may depend on new countries adopting and maintaining tax credits, tax incentives, NEM policies, or other programs to promote solar electricity and storage, to the extent such incentives or programs are not currently in place. Furthermore, electric utility companies may establish rate structures or interconnection requirements that could be harmful to the solar industry and adversely affect our sales and our overall business.
The inability of our products to comply with the minimum domestic content tax credit thresholds, inclusive of FEOC regulations, could negatively impact our business, financial condition and results of operations.
Recent legislative and regulatory changes, including those introduced under the OBBBA and related executive actions, impose stricter domestic content requirements and FEOC restrictions on projects seeking to qualify for ITCs, AMPTC and other clean energy incentives. For example, projects commencing construction after June 16, 2025 must meet a 45% domestic cost threshold, and beginning in 2026, escalating non-FEOC content requirements will apply to solar and storage projects and to manufactured components.
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Our microinverters and residential battery systems incorporate components sourced globally, and certain critical parts may originate from suppliers located in jurisdictions that could be designated as FEOCs. If we are unable to meet these domestic content or non-FEOC compliance thresholds, our products may not qualify for applicable tax credits, including the AMPTC, which could reduce the attractiveness of our offerings to installers, developers and customers. Failure to comply with these requirements could adversely affect demand for our products, limit our ability to compete in key markets, and negatively impact our revenue, gross margins, business operations and competitive position. Furthermore, evolving guidance and definitions under the OBBBA create uncertainty, which may require us to adjust our supply chain strategy and increase compliance costs.
Unfavorable macroeconomic and market conditions may adversely affect our industry, business and financial results.
Our business depends on the overall demand for our solar energy products and on the economic health and willingness of our customers and potential customers to make capital commitments to purchase our products and services. As we have a growing global footprint, we are subject to risk and exposure from the evolving macroeconomic environment, including the effects of increased global inflationary pressures, tariffs and interest rates, fluctuations in foreign currency exchange rates, potential economic slowdowns or recessions, geopolitical pressures and potential regulatory changes through future legislative or executive action, which may cause, and has caused, customers to delay purchasing our products and services or to not purchase at all. In addition, a number of the risks associated with our business, which are disclosed in these risk factors, may increase in likelihood, magnitude or duration, and we may face new risks that we have not yet identified.
Unfavorable macroeconomic and market conditions can result and have previously resulted in sustained periods of decreased demand. Macroeconomic and market conditions could be adversely affected by a variety of political, economic or other factors in the United States and international markets, which could, in turn, adversely affect spending levels of installers and end users and could create volatility or deteriorating conditions in the markets in which we operate. Macroeconomic uncertainty or weakness could result in:
• reduced demand for our products as a result of constraints on capital spending for residential solar energy systems by our customers;
• increased price competition for our products that may adversely affect revenue, gross margin and profitability;
• decreased ability to forecast operating results and make decisions about budgeting, planning and future investments;
• business and financial difficulties faced by our suppliers, distributors or other partners, including impacts to material costs, sales, liquidity levels, ability to continue investing in their businesses, ability to import or export goods, ability to meet development commitments and manufacturing capability; and
• increased overhead and production costs as a percentage of revenue.
Reductions in customer spending in response to unfavorable or uncertain macroeconomic and market conditions, globally or in a particular region where we operate, as well as uncertainty in the regulatory landscape, would adversely affect our business, results of operations and financial condition.
If demand for solar energy solutions does not grow or grows at a slower rate than we anticipate, our business will suffer.
Our IQ Microinverters and IQ Battery storage systems are utilized in solar PV installations, which provide on-site distributed power generation. 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 over the years, and we cannot be certain that consumers and businesses will adopt solar PV systems as an alternative energy source at levels sufficient to continue to grow our business. Traditional electricity distribution is based on the regulated industry model under which businesses and consumers obtain their electricity from a government regulated utility. For alternative methods of distributed power to succeed, businesses and consumers must adopt new purchasing practices. The viability and continued growth in demand for solar energy solutions and, in turn, our products, may be impacted by many factors outside of our control, including:
• market acceptance of solar PV systems based on our product platform;
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• availability and amount of government subsidies and incentives to support the development and deployment of solar energy solutions;
• cost competitiveness, reliability and performance of solar PV systems compared to conventional and non-solar renewable energy sources and products;
• our ability to timely introduce and complete new designs and timely qualify and certify our products;
• in the United States, our ability to comply with domestic content and non-FEOC requirements;
• the extent to which the electric power industry and broader energy industries are deregulated to permit broader adoption of solar electricity generation;
• the cost and availability of key raw materials and components used in the production of solar PV systems;
• prices of traditional utility-provided energy sources;
• whether installers, system owners and solar financing providers will adopt our solutions;
• the ability of prospective system owners to obtain long-term financing for solar PV installations based on our product platform on acceptable terms or at all;
• levels of investment by end-users of solar energy products, which tend to decrease when economic growth slows; and
• the emergence, continuance or success of, or increased government support for, other alternative energy generation technologies and products.
If demand for solar energy solutions does not grow, demand for our customers’ products from residential homeowners and commercial businesses will decrease, which would have an adverse impact on our ability to increase our revenue and grow our business.
Further, our success depends on continued demand for solar energy solutions and the ability of solar equipment vendors to meet this demand. Supply chain disruptions, increased interest rates and higher inflation, have caused and may continue to cause various negative effects, including an inability to meet the needs of our existing or potential end customers. If demand for solar energy solutions decreases or does not grow, demand for our customers’ products as well as demand for our products will decrease, which would have an adverse impact on our ability to increase our revenue and grow our business.
The solar industry is highly competitive, and we expect to face increased competition as new and existing competitors introduce products or develop alternative technologies, which could negatively impact our business, financial condition and results of operations.
We compete primarily against central and string inverter manufacturers, as well as against new solutions and emerging technologies that directly compete with our business. A number of companies have developed or are developing microinverters and other products that will compete directly with our solutions in the module-level power electronics market. We also compete against manufacturers of energy storage systems and EV chargers for our solutions in these markets.
Competitors in the inverter market include, among others, SolarEdge, Huawei, Tesla, Sungrow Power Supply Co., Ltd., Growatt New Energy Co., Ltd and other companies offering string inverters with and without solar optimizers. Competitors in the storage market include Tesla, SolarEdge, Huawei, BYD, Franklin Solar Battery, and other producers of battery cells and integrated storage systems market. Competitors in the EV charger market include Wallbox, ChargePoint, Tesla and EVBox Group, among others.
Several of our existing and potential competitors are significantly larger than we are and may have greater financial, marketing, distribution and customer support resources and may have significantly broader brand recognition, especially in certain markets. In addition, some of our competitors have more resources and experience in developing or acquiring new products and technologies and creating market awareness for these offerings. Further, certain competitors may be able to develop new products more quickly than we can 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 may have caused and could in the future cause us to lose sales or market share or require us to lower prices of our products in order to compete effectively. Suppliers of solar products, particularly solar modules, have experienced eroding prices over the last several years and as a result many have faced margin compression and
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declining revenues. If we have to reduce our prices, or if we are unable to offset any future reductions in our average selling prices (“ASPs”) by increasing our sales volume, reducing our costs and expenses or introducing new products, our revenue and gross profit would suffer.
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.
We also may face competition from some of our customers or potential customers who evaluate our capabilities against the merits of manufacturing products internally. Other solar module manufacturers could also develop or acquire competing inverter technology or attempt to develop components that directly perform DC-to-AC conversion in the module itself. Due to the fact that such customers may not seek to make a profit directly from the manufacture of these products, they may have the ability to manufacture competitive products at a lower cost than we would charge such customers. As a result, these customers or potential customers may purchase fewer of our systems or sell products that compete with our systems, which would negatively impact our revenue and gross profit.
Changes in the United States trade environment, including the imposition of import tariffs, has and could adversely affect the amount or timing of our revenue, results of operations or cash flows.
The United States has imposed significant new tariffs on nearly all products and components imported into the United States and could propose additional tariffs or increases to those already in place. A subset of our products is sourced from China and India, and certain components necessary to manufacture our products in the United States, including our microinverters, batteries and related accessories, are imported from China, India, Taiwan, Vietnam and Japan, 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 United States or abroad, we cannot predict the impact, if any, that these changes could have to our business, financial condition and results of operations.
It is unknown what effect any such new tariffs or retaliatory actions will have on the solar industry and our customers. We have moved a significant portion of our manufacturing to the United States, while retaining limited contract manufacturing in China and India. However, certain components necessary for our products are still required to be imported from outside the United States. Our LFP battery cells for our storage products are supplied solely via our two suppliers in China. Although we are in the process of searching for other vendors outside of China for future supplies, the expertise and industry for the LFP battery cell is primarily in China, and it will require significant effort to identify qualified suppliers with the right expertise to develop our battery cells. The resulting environment of retaliatory trade or other practices or additional trade restrictions or barriers, if implemented on a broader range of products or components from outside 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.
Further, 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 may 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 the U.S. and other 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 trade actions, such changes could have a material effect on our business, financial condition, results of operations or cash flows.
Trade disputes, trade restrictions, tariffs and other geopolitical tensions between the United States and other countries may also exacerbate unfavorable macroeconomic conditions including inflationary pressures, foreign exchange volatility, financial market instability, and economic recessions or downturns, which may also
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negatively impact customer demand for our products or services, delay purchases or renewals, limit expansion opportunities with customers, limit our access to capital, or otherwise negatively impact our business and operations. Ongoing tariff, trade restrictions and macroeconomic uncertainty has and may continue to contribute to volatility in the price of our common stock.
We may fail to capture customers as we design and develop new products and update existing products.
We are pursuing opportunities in energy management and energy storage that are highly competitive markets. We have made investments in our infrastructure, increased our operating costs and forgone other business opportunities in order to seek opportunities in these areas and will continue to do so. Any new product is subject to certain risks, including component sourcing, strategic partner selection and execution, customer acceptance, competition, product differentiation, market timing, challenges relating to economies of scale in component sourcing and the ability to attract and retain qualified personnel. There can be no assurance that we will be able to develop and grow these or any other new concepts to a point where they will become profitable or generate positive cash flow. If we fail to execute on our plan with respect to new product introductions, or fail to adequately update our legacy products, we may fail to generate revenue in the quantities or timeline projected, thus, having a materially impact on our operating results and financial .
We continue to develop new generations of our IQ Microinverters, IQ Batteries and EV charging products for both the residential and small commercial market. Developing new products or next generation products is complex and requires significant preparation, precautionary safety measures, time-consuming string calculations, extensive design expertise and specialized installation equipment, training and knowledge. Together, these factors significantly increase complexity and cost of installation and limit overall productivity for the installer. Our installers may not have sufficient resources or expertise necessary to sell our products at the prices, in the volumes and within the time frames that we expect, which could hinder our ability to expand our operations and harm our revenue and operating results.
We depend upon a small number of outside contract manufacturers, and our business and operations could be disrupted if we encounter problems with these contract manufacturers.
We outsource the manufacturing of some of our products to third-party contract manufacturers. These outside manufacturers assemble and test our IQ Microinverter, IQ Battery storage systems, EV chargers and IQ Gateway products. Prices for such services are agreed to by the parties on a quarterly basis, and we are obligated to purchase manufactured products and raw materials that cannot be resold upon the termination of the related agreement. As of December 31, 2025, our related purchase obligations (including amounts related to component inventory procured by our primary contract manufacturers on our behalf) were approximately $252.3 million. The timing of purchases in future periods could differ materially from our estimates due to fluctuations in demand requirements related to varying sales levels as well as changes in economic conditions.
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. We do not have long-term supply contracts with our contract manufacturing partners. Consequently, these manufacturers are not obligated to supply products to us for any period, in any specified quantity or at any certain price. If any of these suppliers reduce or eliminate the supply of the components to us in the future, our revenue, business, financial condition and results of operations would be adversely impacted.
Further, the revenue that our contract manufacturers generate from our orders may represent a relatively small percentage of their overall revenue. 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, some of our products continue to be manufactured outside of the United States. We believe that the location of these facilities outside of the United States increases our supply risk, including the risk of supply interruptions or reductions in manufacturing quality or controls.
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, which may not be available to us on favorable terms, if at all. 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. Any significant interruption in manufacturing would require us to reduce our supply of products to our customers, which in turn would reduce our revenue, harm our relationships with our customers and cause us to forgo potential revenue opportunities.
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We depend on solar distributors, installers and providers of solar financing to assist in selling our products to customers, and if they fail to perform at the expected level, or at all, our business, financial condition and results of our operations could be harmed.
We primarily sell our solutions through solar distributors, as well as directly to solar equipment installers and developers of third-party solar finance offerings (such as TPOs). These relationships with third parties are generally non-exclusive. As a result, many of these third parties, or customers, also use or market and sell products from our competitors, which may reduce our sales. These customers may generally terminate their relationships with us at any time, or with short notice, and further may fail to devote the 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. In addition, participants in the solar industry are becoming increasingly focused on vertical integration of the solar financing and installation process, which may lead to an overall reduction in the number of potential parties who may purchase and install our products.
We typically provide our distributors and installers with training and other programs, including accreditations and certifications; however, these programs may not be effective or utilized consistently. Further, newer distributors and installers may require extensive training and may take significant time and resources to achieve productivity. Our distributors and installers may subject us to lawsuits, potential liability and reputational harm if, for example, any were to misrepresent the functionality of our platform or products to customers, improperly install our products, fail to perform services to our customers’ expectations, or violate laws or our policies. In addition, our distributors and installers may utilize our platform to develop products and services that could potentially compete with products and services that we offer currently or in the future. Concerns over competitive matters or intellectual property ownership could constrain the growth and development of these relationships or result in the termination of one or more relationships. If we fail to effectively manage and grow our network of distributors and installers, or properly monitor the quality and efficacy of their service delivery, our ability to sell our products and provide our services may be impacted, and our operating results may be .
Our future performance depends on our ability to effectively manage our relationships with our existing customers, as well as to attract additional customers that will be able to market and support our products effectively, especially in markets in which we have not previously distributed our products. Market dynamics are creating increased risks, as the solar industry is increasingly moving toward third-party ownership models such as leasing and power purchase agreements. With the enactment of the OBBBA, these models may become predominant, reducing demand for direct purchases from installers. If we fail to adapt to these trends, or if customers terminate agreements, experience financial distress, or fail to perform, our revenue and operating results could be materially harmed.
We depend on limited-source suppliers for key components and products. If we are unable to source these components and products on a timely basis, we will not be able to deliver our products to our customers.
We depend on sole-source and limited-source suppliers for key components of our products, such as our ASICs and lithium-ion batteries. Any of the sole-source and limited-source suppliers upon whom we rely could experience quality and reliability issues, stop producing our components, cease operations, face climate-related disruptions, or be acquired by, or enter into exclusive arrangements with, our competitors. We generally do not have long-term supply agreements with our suppliers, and our purchase volumes may currently be too low for us to be considered a priority customer by most of our suppliers. As a result, most of these suppliers could stop selling to us at commercially reasonable prices, or at all. Any such quality or reliability issue, or interruption or delay may force us to seek similar components or products from alternative sources, which may not be available on commercially reasonable terms, in a timely manner, or at all. Switching suppliers may require that we redesign our products to accommodate new components and may potentially require us to re-qualify our products, which would be costly and time-consuming. Any interruption in the quality or supply of sole-source or limited-source components for our products would affect our ability to meet scheduled product deliveries to our customers and could result in revenue or higher expenses and would our business.
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If we or our contract manufacturers are unable to obtain raw materials in a timely manner or if the price of raw materials increases significantly, production time and product costs could increase, which may adversely affect our business.
The manufacturing and packaging processes used by us and our contract manufacturers depend on raw materials such as copper, aluminum, silicon and petroleum-based products. From time to time, suppliers may extend lead times, limit supplies or increase prices due to capacity constraints or other factors. Certain of our suppliers have the ability to pass along to us directly or through our contract manufacturers any increases in the price of raw materials. If the prices of these raw materials rise significantly, we may be unable to pass on the increased cost to our customers. While we may from time to time enter into hedging transactions to reduce our exposure to wide fluctuations in the cost of raw materials, the availability and effectiveness of these hedging transactions may be limited. Due to all these factors, our results of operations could be adversely affected if we or our contract manufacturers are unable to obtain adequate supplies of raw materials in a timely manner or at reasonable cost. In addition, from time to time, we or our contract manufacturers may need to reject raw materials that do not meet our specifications, resulting in potential delays or declines in output. Furthermore, problems with our raw materials may give rise to compatibility or performance issues in our products, which could lead to an increase in product warranty . or may arise from raw materials supplied by third parties that are beyond our detection or control, which could lead to additional product warranty that may affect our business and results of operations.
Our recent and planned expansion into existing and new markets could subject us to additional business, financial and competitive risks.
We currently offer solar energy systems targeting the residential and commercial markets throughout the world, and we intend to continue to expand into other international markets. Our success in new geographic and product markets will depend on a number of factors, such as:
• acceptance of microinverters, batteries and EV chargers in markets in which they have not traditionally been used;
• our ability to compete in new product markets to which we are not accustomed;
• availability of government subsidies and economic incentives for solar energy solutions;
• our ability to reduce production costs in order to price our products competitively;
• accurate forecasting and effective management of inventory levels in line with anticipated product demand;
• our ability to manage manufacturing capacity and production;
• willingness of our potential customers to incur a higher upfront capital investment than may be required for competing solutions;
• timely qualification and certification of new products, and ability to comply with local regulations;
• our customer service capabilities and responsiveness; and
• timely hiring of skilled employees and the efficient execution of our project plan.
Failure to address these new markets successfully, to generate sufficient revenue from these markets to offset associated research and development, marketing, and manufacturing and regulatory costs, or to otherwise effectively anticipate and manage the risks and challenges associated with our potential expansion into new product and geographic markets, could adversely affect our revenue and our ability to achieve or sustain profitability.
Manufacturing problems could result in delays in product shipments, which would adversely affect our revenue, competitive position and reputation.
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We have in the past and may in the future 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 expand our capacity. In addition, our failure to maintain appropriate quality assurance processes could result in increased product failures, loss of customers, increased production costs and delays. Any of these developments could have a material adverse effect on our business, financial condition and results of operations.
A disruption could also occur in one of our contract manufacturers’ facilities due to any number of reasons, such as equipment failure, contaminated materials, process deviations, the effects of climate change and related extreme weather events, or social, geopolitical or health factors, including pandemics or widespread health epidemics such as the COVID-19 pandemic, which could adversely impact manufacturing yields or delay product shipments. In addition, we may face periods of constrained supply for key components necessary for the manufacture of our products. A constrained supply environment could affect component availability, lead times and cost and could increase the likelihood of unexpected cancellations or delays of previously committed supply of key components. As a result, we could incur additional costs that would adversely affect our gross profit, and product shipments to our customers could be delayed beyond the schedules requested, which would negatively affect our revenue, competitive position and reputation.
Additionally, manufacturing yields depend on a number of factors, including the stability and manufacturability of the product design, manufacturing improvements gained over cumulative production volumes, and the quality and consistency of component parts. Capacity constraints, raw materials shortages, logistics issues, labor shortages and changes in customer requirements, manufacturing facilities or processes have historically caused, and may in the future cause, reduced manufacturing yields, negatively impacting the gross profit on, and our production capacity for, those products. Moreover, an increase in the rejection and rework rate of products during the quality control process before, during or after manufacture would result in our experiencing lower yields, gross profit and production capacity. Furthermore, counterfeit parts in our supply chain have been and continue to be a concern, since any counterfeit part can be a lower quality product, which may affect our system reliability.
The risks of these types of manufacturing problems are further increased during the introduction of new product lines, which has from time to time caused, and may in the future cause, temporary suspension of product lines while problems are addressed or corrected. Since our business is substantially dependent on a limited number of product lines, any prolonged or substantial suspension of an individual product line could result in a material adverse effect on our revenue, gross profit and competitive position as well as our distributor and customer relationships.
The loss of, or events affecting, one of our major customers could reduce our sales and have an adverse effect on our business, financial condition and results of operations.
We sell primarily to solar distributors who combine our products with others, including solar modules products and racking systems, and resell to installers in each target region. In addition to our solar distributors, we sell directly to select large installers, OEMs and strategic partners.
Our customers’ decisions to purchase our products are influenced by a number of factors outside of our control, including, among others, retail energy prices, the macroeconomic environment, government regulation, incentives and liquidity constraints of solar installers. Although we have agreements with our customers, these agreements generally do not have long-term purchase commitments and are generally terminable by either party after a relatively short notice period. In addition, these customers may decide to no longer use, or to reduce the use of, our products and services for other reasons that may be out of our control. We may also be affected by events impacting our large customers that result in them decreasing their orders with us or impairing their ability to pay for our products, whether due to a decrease in demand from the end markets they serve or the deterioration in the financial condition or bankruptcy of any such customer or the solar installers they resell to, or a significant decrease in their business. During the year ended December 31, 2024, one of our customers filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. We evaluated the carrying amount of a customer intangible asset related to that customer and determined that the carrying amount as of December 31, 2025 is recoverable. However, the accounts receivable related to that customer of $6.2 million was written-off during the year ended
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December 31, 2025. We regularly monitor and evaluate the credit status of our customers and attempt to adjust sales terms as appropriate, which may not be successful. The loss of, or events affecting, any of our large customers has had from time to time, and could in the future have a material adverse effect on our business, financial condition and results of operations.
If our products contain manufacturing or software defects, our business and financial results could be harmed.
We design and make complex products and they may contain undetected or latent errors or defects. Complex hardware and software systems, such as our products, can often contain undetected errors when first introduced or as new versions are released. In the past, we have experienced latent defects only discovered once the microinverters or batteries are deployed in the field. Changes in our supply chain or the failure of our suppliers to otherwise provide our Texas manufacturing facility or our third-party contract manufacturers with components or materials that meet our specifications could introduce defects into our products. As we grow our product volumes, the chance of manufacturing defects could increase. In addition, new product introductions or design changes made for the purpose of cost reduction, performance improvement or improved reliability could introduce new design defects that may impact the performance and life of our products. Any design or manufacturing or other of our products to perform as expected could cause us to incur significant service and re-engineering costs, the attention of our engineering personnel from product development efforts and significantly and affect installer and customer , market acceptance and our business reputation. Furthermore, if we are to correct manufacturing or other of products in a manner to our customers, our results of operations, customer and our business reputation could be affected.
Since some of our products are electricity-producing devices, it is possible that our systems could result in injury, whether by product malfunctions, defects, improper installation, or other causes. We rely on third party installers to install our products according to our installation guides and with local laws. Any significant installation problems could cause us significant harm, including, the occurrence of significant service costs, diverting the attention of our engineering personnel from product development efforts and adversely affecting installer and customer satisfaction, market acceptance and our business reputation, and could subject us to litigation and regulatory costs.
In addition, due to the high energy density of lithium-ion cells, mishandling, inappropriate storage or delivery, non-compliance with safety instructions or field failures can potentially cause a battery cell to rapidly release its stored energy, which may in turn cause a thermal event that can ignite nearby materials, including other lithium-ion cells. As the use of lithium-ion batteries becomes more widespread, these events may occur more often, causing damage to property, injury, lawsuits and adverse publicity, which may adversely affect our reputation, results of operations or financial condition.
If we fail to retain our key personnel or if we fail to attract additional qualified personnel, we may not be able to maintain or 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 personnel in areas such as engineering, marketing and sales, any of whom would be difficult to replace. For example, we are highly dependent on our president and chief executive officer, Badrinarayanan Kothandaraman. Mr. Kothandaraman possesses technical knowledge of our business, operations and strategy, and he has substantial experience and contacts that help us implement our goals, strategy and plan. If we lose his services or if he decides to join a competitor or otherwise compete directly or indirectly with us, our business, operating results and financial condition could be materially harmed.
All of our employees, including our senior management, are free to terminate their employment relationships with us at any time. Competition for highly skilled executives and employees in the technology industry is intense, and our competitors have targeted individuals in our organization that have desired skills and experience. If we are not able to continue to attract, train and retain our leadership team and our qualified employees necessary for our business, the progress of our product development programs could be hindered, and we could be materially adversely affected. To help attract, retain and motivate our executives and qualified employees, we use stock-based incentive awards, including restricted stock units. If the value of such stock awards does not appreciate as measured by the performance of the price of our common stock, or if our share-based compensation otherwise ceases to be viewed as a valuable benefit, our ability to attract, retain and motivate our executives and employees could be , which could our business and results of operations. Also, if the value of our stock awards
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increases substantially, this could potentially create substantial personal wealth for our executives and employees and affect our ability to retain our personnel. In addition, any restructuring plans may adversely impact our ability to attract and retain key employees.
Additionally, our ability to attract qualified personnel, including senior management and key technical personnel, is critical to the execution of our growth strategy. Competition for qualified senior management personnel and highly skilled individuals with technical expertise is extremely intense, and we face challenges identifying, hiring and retaining qualified personnel in all areas of our business. In addition, integrating new employees into our team could prove disruptive to our operations, require substantial resources and management attention and ultimately prove unsuccessful. Our failure to attract and retain qualified senior management and other key technical personnel could limit or delay our strategic efforts, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Restructuring activities could disrupt our business and adversely affect our results of operations.
We have taken steps, including reducing our global workforce, streamlining our operations and internal reorganizations, to increase operational efficiencies and execution, reduce operating costs, and better align our workforce and cost structure with current market conditions. We may take similar steps in the future as we seek to realize operating synergies, meet our strategic priorities and profitability objectives, or to reflect more closely changes in our business needs. These changes could be disruptive to our business, including our research and development efforts, and could result in significant expense, including accounting charges for inventory and technology-related write-offs, workforce reduction costs and charges relating to consolidation of excess facilities. Substantial expense or charges resulting from restructuring activities could adversely affect our results of operations and use of cash in those periods in which we undertake such actions.
Any failure by management to properly manage growth could have a material adverse effect on our business, operating results and financial condition.
Our business has experienced periods of rapid growth in the past, and in the future, we may continue to grow our business rapidly. Growth in our business could place significant demands on our management, operations, systems, accounting, internal controls and financial resources, and it may also negatively impact our ability to retain key personnel. If we experience difficulties in any of these or other areas, we may not be able to expand our business successfully or effectively manage our growth. Any failure by management to manage our growth and to respond to changes in our business could have a material adverse effect on our business, financial condition and results of operations.
Our business has been and could continue to be affected by seasonal trends and construction cycles .
We have been and could continue to be subject to industry-specific seasonal fluctuations. Historically, the majority of our revenue are from the North American and European regions, which experience higher sales of our products in the second, third and fourth quarters and have been affected by seasonal customer demand trends, including weather patterns and construction cycles. The first quarter historically has had softer customer demand in our industry, due to these same factors. In the United States, customers will sometimes make purchasing decisions towards the end of the year in order to take advantage of tax credits or for budgetary reasons. In addition, construction levels are typically slower in colder and wetter months. In European countries with FiTs, the construction of solar PV systems may be concentrated during the second half of the calendar year, largely due to the annual reduction of the applicable minimum FiT and the fact that the coldest winter months are January through March. Accordingly, our business and quarterly results of operations could be affected by seasonal fluctuations in the future.
If we are unsuccessful in continuing to expand our direct-to-consumer sales channel by driving purchases through our website or third-party websites, our business and results of operation could be harmed.
Although we primarily sell our solutions and products directly to solar distributors, who resell to installers and integrators, and the developers of third-party solar financing offerings, who then in turn integrate our products into complete solar PV installations for residential and commercial system owners, we have recently invested significant resources in our direct-to-consumer sales channel through our website and third-party websites, and our future growth relies, in part, on our ability to attract consumers through this channel. Expanding our direct-to-consumer sales model will require significant expenditures in marketing, software development and infrastructure. Further, the success of direct-to-consumer sales through our website is also subject to general business regulations and laws, as well as federal, state, foreign and provincial regulations and laws specifically governing the internet and e-
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commerce. These regulations and laws may cover taxation, tariffs, privacy, data protection, pricing, distribution, electronic contracts and other communications, consumer protection and intellectual property. These laws and regulations can be complex, difficult to interpret and may change over time. Continued regulatory limitations and other obstacles interfering with our ability to sell our products directly to consumers could have a negative and material impact our business, prospects, financial condition and results of operations.
Further, the expansion of our direct-to-consumer channel could alienate some of our existing distributors and installers and cause a reduction in sales from these third parties. Our existing distributors and installers may perceive themselves to be at a disadvantage based on the direct-to-consumer sales offered through our website. Due to these and other factors, conflicts in our sales channels could arise and cause our existing distributors and installers to divert resources away from the promotion and sale of our products. If we are unable to successfully continue to drive traffic to, and increase sales through, our website, our business and results of operations could be harmed.
Risks Related to our Intellectual Property and Technology
We are dependent on information technology systems, infrastructure and data. We or third parties whom we interact with could be subject to breaches of information technology systems caused by system security risks, failure of data protection, cyber-attacks and erroneous or non-malicious actions or failures to act by employees or others, which could cause significant reputational, legal and financial damages.
Like many companies, in the ordinary course of business we process, use, transfer, generate, disclose, secure, transmit and store a wide variety of confidential and proprietary information including personal information and sensitive information relating to our business, products and services. The secure maintenance of this information is critical to our business and reputation. Despite our implementation of security measures, our systems are vulnerable to damages from computer viruses, computer denial-of-service attacks, ransomware, supply chain attacks, worms and other malicious software programs or other attacks, covert introduction of malware to computers and networks, unauthorized access, including impersonation of authorized users, social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), efforts to discover and exploit any security vulnerabilities or securities weaknesses and other similar issues and . In particular, ransomware attacks are becoming increasingly prevalent – particularly for companies like ours that interact with infrastructure or manufacturing – and can lead to significant in our operations, and ability to provide our products or services. Although we make significant efforts to maintain the confidentiality, and availability of our information technology and related systems and have implemented measures to manage the risk of a security or , there can be no assurance that our security efforts and measures will be , or that attempted security or would not be or .
Remote work for some workers presents increased risks to our information technology and related systems, as these workers utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations.
The techniques used in attempted cyber-attacks and intrusions are sophisticated and constantly evolving and may be difficult to detect for long periods of time. Recent techniques include artificial intelligence (“AI”) tools and coordinated attacks, which increases the volume and sophistication of cybersecurity attacks. We may be unable to anticipate these techniques or implement adequate preventative measures. Although to date we are not aware of any material breaches of our systems that could have material adverse effect on our business, attacks and intrusions on our systems will continue and we may experience a breach of our systems that compromises valuable company information or customer data including personal information. In addition, hardware, software, or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. Intentional or non-malicious by employees or others may pose a risk that data, including our intellectual property, trade secrets or personal information of our employees, customers or users, or other business partners may be to persons or to the public, or that risks of or of this information could occur. Furthermore, if we experience a significant data security , we could be to reputational and significant costs, including to rebuild our systems, modify our products and services, , respond to government enforcement actions, pay or take other remedial steps, any of which could affect our business, results of operations and financial condition. In addition, we may be required to incur significant costs to protect
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damage caused by these disruptions or security breaches in the future. These risks, as well as the number and frequency of cybersecurity events globally, may also be heightened during times of geopolitical tension or instability.
Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
We may also rely on and share information with contractors and third-party providers to conduct our business and provide our products and services. Although such contractors and third-party providers take steps designed to secure data and prevent security incidents, as required by our contracts with them, our ability to monitor these third-parties’ information security practices and potential security incidents is limited, and these third-parties may not have adequate information security measures in place. These third-party providers may experience a significant data security breach, which may also detrimentally affect our business, ability to provide our products and services, results of operations and financial condition.
The cost and operational consequences of implementing further data protection measures could be significant and theft of our intellectual property or proprietary business information could require substantial expenditures to remedy. Further, we cannot be certain that (a) our liability insurance will be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks and other related breaches; (b) such coverage will cover any indemnification claims against us relating to any incident, will continue to be available to us on economically reasonable terms, or at all; and (c) any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition or large deductible or co-insurance requirements, could affect our reputation, business, financial condition and results of operations.
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 was 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 access to, or use or disclosure of, personal information. Finally, any perceived or actual access to, or use or disclosure of, such information could our reputation, substantially our ability to attract and retain customers and have an impact on our business, financial condition and results of operations.
We are subject to stringent and evolving data privacy and security laws, contractual obligations, information security policies and other obligations governing the use, processing and transfer of personal information, and 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’ energy systems, including names, addresses, e-mail addresses, phone numbers, energy system details and energy information. We also store and use personal information of our employees. We take steps to protect the confidentiality, integrity and accessibility 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.
We are subject to a variety of local, state, national and international laws, directives and regulations that apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data in the different jurisdictions in which we operate, including, for example, comprehensive regulatory systems in the United States, Europe and Brazil. It remains unclear what additional requirements will be codified in future laws, how those laws will be enforced, and how these legal shifts impact our operations and risk. We may be required to modify our data practices and policies, at potentially substantial additional costs and expenses. Complying with these forthcoming and future laws, regulations, amendments to or re-interpretations of existing laws and regulations, and contractual or other obligations relating to privacy, data protection, data transfers, data localization, or information security may
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require us to make changes to our services to enable us or our customers to meet new legal requirements, incur substantial operational costs, modify our data practices and policies, and restrict our business operations. Additionally, certain privacy and other laws impose obligations to provide notification of security breaches of computer databases that contain personal information to affected individuals, state officers and others. Any actual or perceived failure by us to comply with these laws, regulations or other obligations may lead to significant fines, penalties, regulatory investigations, lawsuits, significant costs for remediation, damage to our reputation, or other liabilities.
We may be subject to disruptions or failures in information technology systems and network infrastructures that could have a material adverse effect on our business and financial condition.
We rely on the efficient and uninterrupted operation of complex information technology systems and network infrastructures to operate our business. In addition, our cloud-based monitoring service, which our installers and end-user customers use to track and monitor the performance of their energy systems, is dependent on cloud-based hosting services, along with the availability of internet or cellular data services at end-user premises. Despite testing by us, real or perceived errors, failures or bugs in our customer solutions, software or technology or the technology or software we license from third parties, including open source software, may not be found until our customers use our products. Real or perceived errors, failures or bugs in our products could result in negative publicity, loss of or delay in market acceptance of our products, harm to our brand, weakening of our competitive position or by customers for sustained by them. A , infiltration or of our information technology systems, third-party cloud hosting platforms or end-user data services as a result of software or hardware , system implementations or upgrades, computer viruses, cyber-attacks, third-party security , employee/human , theft or , , power , natural or could cause of data security, of our service, of intellectual property and data and the release and of sensitive competitive information and partner, customer and employee personal data. We have been and may in the future be subject to attempts from outside parties through our electronic systems (such as “phishing” e-mail communications to our finance, technical or other personnel), which could put us at risk for from , theft or other if our internal controls do not operate as intended. Any such future events could further our competitive position, result in a of customer confidence, cause us to incur significant costs to remedy any and ultimately materially affect our business and financial condition.
If we fail to protect, or incur significant costs in enforcing, 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 patent and trademark registrations in the United States and in other countries, many 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. This includes an inherent risk that our registered or unregistered trademarks or trade-names that we own or use may be challenged, infringed, circumvented, declared generic, lapsed or determined to be on or dilutive of other marks, and that we may not be to protect our rights, all of which may cause material impact on our marketing abilities. Our patent protection depends on compliance with various required procedures, document submissions, fee payments, and other requirements imposed by national patent offices, and our patent protection could be reduced or eliminated for non-compliance with these requirements, our engagement of reputable law firms and other professionals to help us comply with such requirements. Even where we do comply with such requirements and the full length of patent protection, patent terms are finite in length – generally 20 years from the earliest non-provisional priority filing date – which may be to protect our competitive position on our products. In countries where we have not applied for patent protection or where intellectual property protection is not available to the same extent as in the U.S., we may be at risk that our proprietary rights will be , or otherwise .
To protect our unregistered intellectual property, including our trade secrets and know-how, we rely in part on trade secret laws and confidentiality and invention assignment agreements with our employees and independent contractors. We also require other third parties who may have access to our proprietary technologies and
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information to enter into non-disclosure agreements. Such measures, however, provide only limited protection, and we cannot assure that our confidentiality and non-disclosure agreements will prevent unauthorized disclosure or use of our confidential information, especially after our employees or third parties end their employment or engagement with us, or provide us with an adequate remedy in the event of such disclosure. Furthermore, competitors or other third parties may independently discover our trade secrets, copy or reverse engineer our products or portions thereof, or develop similar technology. If we fail to protect our intellectual property and other proprietary rights, or if such intellectual property and proprietary rights are infringed, misappropriated or otherwise violated, our business, results of operations or financial condition could be materially harmed.
In the future, we may need to take legal action to prevent third parties from infringing upon or misappropriating our intellectual property or from otherwise gaining access to our technology. Protecting and enforcing our intellectual property rights and determining their validity and scope could result in significant litigation costs and require significant time and attention from our technical and management personnel, which could significantly harm our business. In addition, we may not prevail in such proceedings. An adverse outcome of any such proceeding may reduce our competitive advantage or otherwise harm our financial condition and our business.
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, and claims of patent or other intellectual property right infringement or violation have been litigated against our competitors. We may also be subject to such claims and litigation. Regardless of their merit, responding to such claims can be time consuming, divert management’s attention and resources, and may cause us to incur significant expenses. While we believe that our products and technology do not infringe upon any intellectual property rights of third parties, we cannot be certain that we would be successful in defending against any such claims. Furthermore, patent applications in the United States and most other countries are confidential for a period of time before being published, so we cannot be certain that we are not third parties’ patent rights or that we were the first to conceive or protect covered by our patents or patent applications. An outcome with respect to any intellectual property claim could our proprietary rights and us to do one or more of the following:
• obtain from a third-party claiming infringement a license to sell or use the relevant technology, which may not be available on reasonable terms, or at all;
• stop manufacturing, selling, incorporating or using products that embody the asserted intellectual property;
• pay substantial monetary damages;
• indemnify our customers under some of our customer contracts; or
• expend significant resources to redesign the products that use the infringing technology, or to develop or acquire non-infringing technology.
Any of these actions could result in a substantial reduction in our revenue and could result in losses over an extended period of time.
Our failure to obtain the right to use necessary third-party intellectual property rights on reasonable terms, or our failure to maintain and comply with the terms and conditions applicable to these rights, could harm our business and prospects.
We have licensed, and in the future we may choose or be required to license, technology or intellectual property from third parties in connection with the development and marketing of our products. We cannot assure you that such licenses will be available to us on commercially reasonable terms, or at all, and our inability to obtain such licenses could require us to substitute technology of lower quality or of greater cost.
Further, such licenses may be non-exclusive, which could result in our competitors gaining access to the same intellectual property. The licensing or acquisition of third-party intellectual property rights is a competitive area, and other established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources or greater development or commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We could encounter delays and incur significant costs, in product or service introductions while we attempt to develop alternative products or services, or redesign our products or services, to avoid infringing third-party patents or
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proprietary rights. Failure to obtain any such licenses or to develop a workaround could prevent us from commercializing products or services, and the prohibition of sale or the threat of the prohibition of sale of any of our products or services could materially affect our business and our ability to gain market acceptance for our products or services.
In addition, we incorporate open source software code in our proprietary software. Use of open source software can lead to greater risks than use of third-party commercial software, since open source licensors generally do not provide warranties or controls with respect to origin, functionality or other features of the software. Further, companies that incorporate open source software into their products have, from time to time, faced claims challenging their use of open source software and compliance with open source license terms. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software or claiming noncompliance with open source licensing terms. Some open source software licenses require users who distribute open source software as part of their products to publicly disclose all or part of the source code in their software and make any derivative works of the open source code available for limited fees or at no cost. Although we monitor our use of open source software, open source license terms may be ambiguous, and many of the risks associated with the use of open source software cannot be eliminated. If we were found to have used open source software, we may be required to release our proprietary source code, re-engineer our software, the sale of certain products in the event re-engineering cannot be on a timely basis, or take other remedial action. Furthermore, if we are to obtain or maintain licenses from third parties or to comply with open source licenses, we may be subject to third-party of intellectual property or ownership of our proprietary source code. There is little legal precedent in this area and any actual or claimed requirement to our proprietary source code or pay for of contract could our business and could help third parties, including our competitors, develop products and services that are similar to or than ours. Any of the above could our business and put us at a competitive .
Emerging issues related to the development and use of artificial intelligence could give rise to legal or regulatory action, damage our reputation, or otherwise materially harm of our business.
Our development and use of AI technology in our products and operations remains in the early phases. While we aim to develop and use AI responsibly and attempt to mitigate ethical and legal issues presented by its use, we may ultimately be unsuccessful in identifying or resolving issues before they arise. AI technologies are complex and rapidly evolving, and the technologies that we develop or use may ultimately be flawed. Moreover, AI technology is subject to rapidly evolving domestic and international laws and regulations, which could impose significant costs and obligations on us. This includes actual and pending orders and laws by the U.S. federal government, the European Union and other jurisdictions in which we operate. Emerging regulations may also pertain to data privacy, data protection, and the ethical use of AI, as well as clarifying intellectual property considerations. Our use of AI could give rise to legal or regulatory action or increased scrutiny or liability, and may damage our reputation or otherwise materially harm our business.
The software we use in providing system configuration recommendations or potential energy savings estimates to customers relies in part on third-party information that may not be accurate or up-to-date; this may therefore generate inaccurate recommendations or estimates, resulting in a loss of reputation and customer confidence.
We provide our customers online tools to help them determine proper system sizing and configurations, estimates of bill savings and potential revenues resulting from executing a specific curtailment strategy. These estimates are in turn based on a number of factors such as customer tariff structures, estimated wholesale electricity prices, future economic conditions and estimates of the reduction in electricity usage as a result of a curtailment activity. If the estimates we provide prove to be significantly different from actual payments or savings received by our customers, it may result in the loss of reputation and/or customer confidence.
Risks related to Legal Proceedings and Regulations
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Changes in current laws or regulations or the imposition of new laws or regulations, or new interpretations thereof, in the solar energy sector, by federal or state agencies in the United States or foreign jurisdictions could impair our ability to compete and could materially harm our business, financial condition and results of operations.
There has been, and will continue to be, regulatory uncertainty in the clean energy sector generally and the solar energy sector in particular. Changes in current laws or regulations, or the imposition of new laws and regulations in the United States and around the world, could materially and adversely affect our business, financial condition and results of operations. In addition, any changes to the laws and implementing regulations affecting the clean energy sector may create delays in the introduction of new products, prevent our customers from deploying our products or, in some cases, require us to redesign our products. In addition, changes in our products or changes in export and import laws and implementing regulations may delay 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, resulting in a material adverse effect on our business, financial condition and results of operations.
For example, the recently enacted OBBBA scales back the use of the ITC for residential solar, tightens domestic content rules, imposes new non-FEOC requirements, and imposes new deadlines for projects to qualify for the ITC. Such actions could result in a decrease in demand for our technology offerings in the United States and other geographical markets, which would harm our business, financial condition and results of operations.
Our significant international operations subject us to additional risks that could adversely affect our business, results of operations and financial condition.
We have significant international operations, including in emerging markets such as India, and we are continuing to expand our international operations as part of our growth strategy. As of December 31, 2025, approximately 61% of our total employees were located in India, where we primarily conduct our research and development activities, procurement, customer support services, and other general and administrative support functions.
In addition, during 2025, we continued to expand our operations into new European countries, although revenue from our operations in Europe declined year over year, with approximately 14% of our net revenues derived from Europe for the year ended December 31, 2025, as compared to approximately 23% of our net revenues from the same region for the year ended December 31, 2024. Our current international operations have placed, and will continue to place, a strain on our employees, management systems and other resources.
Our international operations may fail to succeed due to risks inherent in operating businesses internationally, such as:
• adverse social, political and economic conditions, such as inflation, tariffs and rising interest rates;
• our lack of familiarity with commercial and social norms and customs in countries which may adversely affect our ability to recruit, retain and manage employees in these countries;
• difficulties and costs associated with staffing and managing foreign operations;
• the potential diversion of management’s attention to oversee and direct operations that are geographically distant from our U.S. headquarters;
• compliance with multiple, conflicting and changing governmental laws and regulations, including environmental, employment, tax, privacy and data protection laws and other regulatory requirements;
• legal systems in which our ability to enforce and protect our rights may be different or less effective than in the United States and in which the ultimate result of dispute resolution is more difficult to predict;
• tariffs, export controls and other non-tariff barriers such as quotas and local content rules;
• more limited protection for intellectual property rights in some countries;
• adverse tax consequences, including as a result of transfer pricing adjustments involving our foreign operations;
• effects of adverse changes in currency exchange rates;
• higher incidence of corruption or unethical business practices;
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• restrictions on the transfer of funds;
• natural disasters (including as a result of climate change), acts of war or terrorism, and public health emergencies, including the COVID-19 pandemic; and
• uncertain economic, legal and political conditions in Europe, Asia and other regions where we do business, including, for example, as a result of the ongoing military conflicts in Ukraine, the Gaza Strip and nearby areas, and any changes in China-Taiwan and U.S.-China relations.
We also rely on some third-party contract manufacturers outside the United States to manufacture, support and ship our products. Physical, regulatory, technological, market, reputational, and legal risks related to climate change in these regions and globally are increasing in impact and diversity and the magnitude of any short-term or long-term adverse impact on our business or results of operations remains unknown. The physical impacts of climate change, including as a result of certain types of natural disasters occurring more frequently or with more intensity or changing weather patterns, could disrupt our supply chain, result in damage to or closures of our facilities, and could otherwise have an adverse impact on our business, operating results, and financial condition.
The success of our international sales and operations will depend, in large part, on our ability to anticipate and manage these risks effectively. Our failure to manage any of these risks could harm our international operations, reduce our international sales, and could give rise to liabilities, costs or other business difficulties that could adversely affect our operations and financial results.
From time to time we are involved in a number of legal proceedings and, while we cannot predict the outcomes of such proceedings and other contingencies with certainty, some of these outcomes could adversely affect our business and financial condition.
We are, or may become, involved in legal proceedings, government and agency investigations, and consumer, employment, tort and other litigation. We cannot predict with certainty the outcomes of these legal proceedings. For example, in 2024 and early 2025, we and certain of our officers and directors were named as defendants in putative securities class action lawsuits purportedly brought on behalf of holders of our common stock as well as related shareholder derivative lawsuits purportedly filed on our behalf. These lawsuits, which are discussed further in Part I, Item 3 of this Annual Report on Form 10-K, are currently pending. We anticipate that we may be a target for lawsuits in the future, as we have been in the past. Any litigation to which we are a party may result in an onerous or unfavorable judgment that may not be reversed on appeal, or we may decide to settle lawsuits on similarly unfavorable terms. Any such negative outcome could result in payments of substantial monetary and accordingly our business could be . The results of lawsuits and cannot be predicted with certainty. Regardless of the final outcome, these , and associated indemnification obligations, are and can impose a significant on management and employees, and we may receive preliminary, interim, or final rulings in the course of , which could our business.
We could be adversely affected by any violations of the FCPA, the U.K. Bribery Act, and other foreign anti-bribery laws.
The U.S. FCPA generally prohibits companies and their intermediaries from making improper payments to non-U.S. government officials for the purpose of obtaining or retaining business. Other countries in which we operate also have anti-bribery laws and regulations, including the EU and Brazil, some of which prohibit improper payments to government and non-government persons and entities, and others (e.g., the FCPA, the U.K. Bribery Act) extend their application to activities outside of their country of origin. Our policies mandate compliance with all applicable anti-bribery laws. We currently operate in, and may further expand into, key 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 new jurisdictions through internal growth or acquisitions requires substantial government contact where norms can differ from U.S. standards. Additionally, the costs of complying with these laws (including the costs of , auditing and monitoring) could affect our current or future business. Although, we implement policies and procedures and conduct training designed to facilitate compliance with these anti- laws, thereby mitigating the risk of of such laws, our employees, subcontractors, agents and partners may take actions in of our policies and anti- laws. Any such , even if prohibited by our policies, could subject us to or civil or other sanctions, which could have a material effect on our business, financial condition, cash flows and reputation.
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Expectations relating to ESG considerations and related reporting obligations may expose our business to potential liabilities, increased costs, and reputational harm.
Many stakeholders including governments, regulators, investors, employees and business partners are focused on corporate environmental, social and governance (“ESG”) considerations such as greenhouse gas emissions, natural resource management, human rights and human capital management practices. Any failure, perceived or otherwise, to comply with existing and emerging ESG-related laws and regulations in the United States, Europe and elsewhere, or to meet varied and evolving stakeholder expectations or standards with respect to ESG issues could result in legal and regulatory proceedings and may harm our business, reputation, financial condition and results of operations.
Risks Related to our Financial Condition and Liquidity
Our gross profit may fluctuate over time, which could impair our ability to achieve or maintain profitability.
Our gross profit has varied in the past and is likely to continue to vary significantly from period to period. Our gross profit may be adversely affected by numerous factors, some of which are beyond our control, including:
• changes in customer, geographic or product mix;
• increased price competition, including the impact of customer and competitor discounts and rebates;
• the impact of inflation and higher interest rates;
• the reduction, elimination or expiration of government subsidies and economic incentives for on-grid solar electricity applications;
• our ability to reduce and control product costs, including our ability to make product cost reductions in a timely manner to offset declines in our product prices;
• warranty costs and reserves, including warranty claim rates, proactive steps to address certain component defects in specific products, and changes resulting from changes in estimates related to the long-term performance of our products, product replacement costs and warranty claim rates, as well as changes in the discount rates;
• loss of cost savings due to changes in component or raw material pricing or charges incurred due to inventory holding periods if product demand is not correctly anticipated;
• introduction of new products;
• ordering patterns from our distributors;
• price reductions on older products to sell remaining inventory;
• component shortages and related expedited shipping costs;
• our ability to reduce production costs, such as through technology innovations, in order to offset price declines in our products over time;
• changes in shipment volume;
• changes in distribution channels;
• excess and obsolete inventory and inventory holding charges;
• expediting costs incurred to meet customer delivery requirements;
• tariffs imposed on components imported to the United States and necessary for the manufacture of our products; and
• fluctuations in foreign currency exchange rates.
Fluctuations in gross profit may adversely affect our ability to manage our business or achieve or maintain profitability.
We are under continuous pressure to reduce the prices of our products, which has adversely affected, and may continue to adversely affect, our gross margins.
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The solar power industry has been characterized by declining product prices over time. We have reduced the prices of our products in the past, and we expect to continue to experience pricing pressure for our products in the future, including from our major customers. When seeking to maintain or increase their market share, our competitors may also reduce the prices of their products. In addition, our customers may have the ability or seek to internally develop and manufacture competing products at a lower cost than we would otherwise charge, which would add additional pressure on us to lower our selling prices. If we are unable to offset any future reductions in our ASPs by increasing our sales volume, reducing our costs and expenses or introducing new products, our gross margins will be adversely affected.
Given the general downward pressure on prices for our products driven by competitive pressure and technological change, a principal component of our business strategy is reducing the costs to manufacture our products to remain competitive. If our competitors are able to drive down their manufacturing costs faster than we can or increase the efficiency of their products, or decide to lower prices of their products to try to win market share, our products may become less competitive even when adjusted for efficiency, and we may be forced to sell our products at a price lower than our cost. Further, if raw materials costs and other third-party component costs were to increase, we may not meet our cost reduction targets. If we cannot effectively remain price competitive, this could result in lost market share and lower gross margins.
If we do not forecast demand for our products accurately, we may experience product shortages, delays in product shipment or excess product inventory, any of which will adversely affect our business and financial condition.
We manufacture our products according to our estimates of customer demand. This process requires us to make multiple forecasts and assumptions relating to the demand of our distributors, their end customers and general market conditions. Because we sell most of our products to distributors, who in turn sell to their end customers, we have limited visibility as to end-customer demand. We depend significantly on our distributors to provide us visibility into their end-customer demand, and we use these forecasts to make our own forecasts and planning decisions. If the information from our distributors turns out to be incorrect, then our own forecasts may also be inaccurate. Furthermore, we do not have long-term purchase commitments from our distributors, installers or end customers, and our sales are generally made by purchase orders that may be canceled, changed or deferred without notice to us or penalty. As a result, it is difficult to forecast future customer demand to plan our operations.
If we overestimate demand for our products, or if purchase orders are canceled or shipments are delayed, we may have excess inventory that we cannot sell. We may have to make significant provisions for inventory write-downs based on events that are currently not known, and such provisions or any adjustments to such provisions could be material. We may also become involved in disputes with our suppliers who may claim that we failed to fulfill forecast or minimum purchase requirements. Conversely, if we underestimate demand, we may not have sufficient inventory to meet end-customer demand, and we may lose market share, damage relationships with our distributors and end customers and forgo potential revenue opportunities. Obtaining additional supply in the face of product shortages may be costly or impossible, particularly in the event of supply chain and our outsourced manufacturing processes, which could prevent us from fulfilling orders in a timely and cost- manner or at all. In addition, if we our production requirements, we or our contract manufacturers may purchase excess components and build excess inventory. If our contract manufacturers, at our request, purchase excess components that are unique to our products and are to recoup the costs of such excess through resale or return or build excess products, we could be required to pay for these excess parts or products and recognize related inventory write-downs.
In addition, we plan our operating expenses, including research and development expenses, hiring needs and inventory investments, in part on our estimates of customer demand and future revenue. If customer demand or revenue for a particular period is lower than we expect, we may not be able to proportionately reduce our fixed operating expenses for that period, which would harm our operating results for that period.
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A drop in the retail price of electricity derived from the utility grid or from alternative energy sources, or a change in utility pricing structures, may harm our business, financial condition and results of operations.
We believe that a system owner’s decision to purchase a solar PV system is strongly influenced by the cost of electricity generated by solar PV installations relative to the retail price of electricity from the utility grid and the cost of other renewable energy sources, including electricity from solar PV installations using central inverters. Decreases in the retail prices of electricity from the utility grid would make it more difficult for all solar PV systems to compete. In particular, growth in unconventional natural gas production and an increase in global liquefied natural gas capacity are expected to keep natural gas prices relatively low for the foreseeable future. Persistent low natural gas prices, lower prices of electricity produced from other energy sources, such as nuclear power or coal-fired plants, or improvements to the utility infrastructure could reduce the retail price of electricity from the utility grid, making the purchase of solar PV systems less economically attractive and depressing sales of our products. In addition, energy conservation technologies and public initiatives to reduce demand for electricity also could cause a fall in the retail price of electricity from the utility grid.
Moreover, technological developments by our competitors in the solar industry, including manufacturers of central inverters and DC-to-DC optimizers, could allow these competitors or their partners to offer electricity at costs lower than those that can be achieved from solar PV installations based on our product platform, which could result in reduced demand for our products. Additionally, as increasing adoption of distributed generation places pressure on traditional utility business models or utility infrastructure, utilities may change their pricing structures to increase the cost of installation or operation of solar distributed generation. Such measures can include grid access fees, costly or lengthy interconnection studies, limitations on distributed generation penetration levels, or other measures. If the cost of electricity generated by solar PV installations incorporating our solutions is high relative to the cost of electricity from other sources, our business, financial condition and results of operations may be harmed.
Our portfolio of marketable securities is subject to market, interest and credit risk that may reduce its value.
As of December 31, 2025, we held $1,038.5 million of investments in marketable securities. These investments consisted primarily of U.S. Treasuries, U.S. Government agency securities, commercial paper and corporate notes and bonds. We currently do not use derivative financial instruments to adjust our investment portfolio risk or income profile. These investments, as well as any cash deposited in bank accounts, are subject to general credit, liquidity, market and interest rate risks, which may be exacerbated by unusual events, such as the COVID-19 pandemic and the U.S. debt ceiling crisis, which affected various sectors of the financial markets and led to global credit and liquidity issues. If the global credit market experiences volatility or deteriorates, our investment portfolio may be impacted and some or all of our investments may experience other-than-temporary impairment, which could adversely impact our operating results and position.
Risks Related to our Acquisition Activity
We have made and expect to continue to make acquisitions. If we fail to successfully select, execute or integrate our acquisitions, then our business and operating results could be harmed and our stock price could decline.
From time to time, we will undertake acquisitions to add new product lines and technologies, gain new sales channels or enter new sales territories. For example, in 2021, we acquired Sofdesk, the solar design business of DIN, 365 Pronto, and ClipperCreek, Inc., and in 2022, we acquired SolarLeadFactory, LLC and GreenCom Networks AG. Acquisitions involve numerous risks and challenges, including but not limited to the following:
• integrating the companies, assets, systems, products, sales channels and personnel that we acquire;
• higher than anticipated acquisition and integration costs and expenses;
• reliance on third parties to provide transition services for a period of time after closing to ensure an orderly transition of the business;
• growing or maintaining revenues to justify the purchase price and the increased expenses associated with acquisitions;
• entering into territories or markets with which we have limited or no prior experience;
• establishing or maintaining business relationships with customers, vendors and suppliers who may be new to us;
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• overcoming the employee, customer, vendor and supplier turnover that may occur as a result of the acquisition;
• disruption of, and demands on, our ongoing business as a result of integration activities including diversion of management's time and attention from running the day to day operations of our business;
• inability to implement uniform standards, disclosure controls and procedures, internal controls over financial reporting and other procedures and policies in a timely manner;
• inability to realize the anticipated benefits of or successfully integrate with our existing business the businesses, products, technologies or personnel that we acquire; and
• potential post-closing disputes.
As part of undertaking an acquisition, we may also significantly revise our capital structure or operational budget, such as issuing common stock that would dilute the ownership percentage of our stockholders, assuming liabilities or debt, utilizing a substantial portion of our cash resources to pay for the acquisition or significantly increasing operating expenses. Our acquisitions have resulted and may in the future result in charges being taken in an individual quarter as well as future periods, which results in variability in our quarterly earnings. In addition, our effective tax rate in any particular quarter may also be impacted by acquisitions. Following the closing of an acquisition, we may also have disputes with the seller regarding contractual requirements and covenants, purchase price adjustments, contingent payments or for indemnifiable losses. Any such disputes may be time consuming and distract management from other aspects of our business. In addition, if we increase the pace or size of acquisitions, we will have to expend significant management time and effort into the transactions and integrations, and we may not have the proper human resources bandwidth to ensure successful integrations and accordingly, our business could be or the benefits of our acquisitions may not be realized.
As part of the terms of an acquisition, we may commit to pay additional contingent consideration if certain revenue or other performance milestones are met. We are required to evaluate the fair value of such commitments at each reporting date and adjust the amount recorded if there are changes to the fair value.
We cannot ensure that we will be successful in selecting, executing and integrating acquisitions. Failure to manage and successfully integrate acquisitions could materially harm our business and operating results. In addition, if stock market analysts or our stockholders do not support or believe in the value of the acquisitions that we choose to undertake, our stock price may decline.
We invest in companies for both strategic and financial reasons but may not realize a return on our investments.
We have made, and continue to seek to make, investments in companies around the world to further our strategic objectives and support our key business initiatives. These investments may include equity or debt instruments of public or private companies and may be non-marketable at the time of our initial investment or otherwise. We do not restrict the types of companies in which we seek to invest. These companies may range from early-stage companies that are often still defining their strategic direction to more mature companies with established revenue streams and business models. If any company in which we invest fails, we could lose all or part of our investment in that company. If we determine that an other-than-temporary decline in the fair value exists for an equity or debt investment in a public or private company in which we have invested, we will need to write down the investment to its fair value and recognize the related write-down as an investment loss. The performance of any of these investments could result in significant impairment charges and gains (losses) on other equity or debt investments. For example, we recorded a fair value write-down of $9.8 million and charges of $23.0 million within other income, net, on the consolidated statements of operations for the years ended December 31, 2025 and 2024, respectively, as we determined that the carrying values of the investments were not recoverable. We must also analyze accounting and legal issues when making these investments. If we do not structure these investments properly, we may be subject to certain accounting impact, such as potential consolidation of financial results.
Furthermore, if the strategic objectives of an investment have been achieved, or if the investment or business diverges from our strategic objectives, we may seek to dispose of the investment. Our non-marketable equity investments in private companies are not liquid, and we may not be able to dispose of these investments on favorable terms or at all. The occurrence of any of these events could harm our results. Gains or losses from equity
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securities could vary from expectations depending on gains or losses realized on the sale or exchange of securities and impairment charges related to debt instruments as well as equity and other investments.
An impairment in the carrying value of goodwill or other intangible and long-lived assets could negatively affect our operating results.
We record goodwill from the purchase consideration paid in excess of the fair value of the net assets recorded in connection with a business acquisition. We may not realize all the economic benefit from our business acquisitions, which could result in an impairment of goodwill or intangible assets. As of December 31, 2025, goodwill and intangible assets, net, were approximately $214.8 million and $22.3 million, respectively. We test goodwill and intangible assets, net, for impairment at least annually during the fourth quarter of each fiscal year or between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Goodwill is tested at the reporting unit level, which we have determined to be the same as the entity as a whole (entity level). We first perform a qualitative assessment to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying value. If, after assessing the qualitative factors, we determine that it is more likely than not that the fair value of our reporting unit is less than it’s carrying value, an impairment analysis will be performed. For example, we recorded an impairment charge of $3.5 million and $3.8 million in the years ended December 31, 2024 and 2023, respectively, as management has evaluated that the carrying amount of certain intangible assets were not recoverable.
Qualitative factors include industry and market consideration, overall financial performance, share price trends and market capitalization and company-specific events. We may be required to record a significant charge in our financial statements during the period in which any impairment of our goodwill or amortizable intangible assets is determined, which would negatively impact our operating results.
Risks Related to our Debt and Equity Securities
Our financial results may vary significantly from quarter to quarter due to a number of factors, which may lead to volatility in our stock price.
Our quarterly revenue and results of operations have varied in the past and may continue to vary significantly from quarter to quarter. As a result, the trading price of our common stock has been, and is likely to continue to be, volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. We have been subject to securities class action litigation as a result of our stock price volatility, which could result in substantial cost and diversion of our management’s attention from other business concerns, which could seriously harm our business. In addition, the trading prices of the securities of solar companies in general have been highly volatile, and the volatility in market price and trading volume of securities is often unrelated or disproportionate to the financial performance of the companies issuing the securities.
Other factors affecting the market price of our common stock, some of which are beyond our control, include:
• changes in laws, regulations and policies applicable to our business and products, particularly those relating to government incentives for solar energy applications;
• seasonal and other fluctuations in demand for our products;
• the timing, volume and product mix of sales of our products, which may have different ASPs or profit margins;
• changes in our pricing and sales policies or the pricing and sales policies of our competitors;
• our ability to design, manufacture and deliver products to our customers in a timely and cost-effective manner and that meet customer requirements;
• our ability to manage our relationships with our contract manufacturers, customers and suppliers;
• quality control or yield problems in our manufacturing operations;
• the impact of supply chain disruptions on our business, sales and results of operations;
• the anticipation, announcement or introductions of new or enhanced products by our competitors and ourselves;
• reductions in the retail price of electricity;
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• our exposure to the credit risks of our customers, particularly in light of the fact that some of our customers are relatively new entrants to the solar market without long operating or credit histories, and the impact of inflation and higher interest rates;
• the failure by any major customer to pay for orders, whether due to liquidity issues, bankruptcy or otherwise;
• the impact of tariffs on the solar industry in general and our products in particular;
• the amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our business operations;
• the impact of government-sponsored programs on our customers;
• our ability to estimate future warranty obligations due to product failure rates, claim rates or replacement costs;
• our ability to forecast our customer demand and manufacturing requirements, and manage our inventory;
• fluctuations in foreign currency exchange rates;
• announcement of acquisitions or dispositions of our assets or business operations;
• issuances of our common stock or equity-linked securities such as the Convertible Notes;
• changes in our management;
• technical factors in the public trading market for our common stock that may produce price movements that may or may not comport to macro, industry or company-specific fundamentals, including, without limitation, the sentiment of retail investors (including as may be expressed on financial trading and other social media sites), the amount and status of short interest in our securities, rising interest rates, inflation, access to margin debt, trading in options and other derivatives on our common stock and any related hedging or other technical trading factors; and
• general social, geopolitical, environmental or health factors, including pandemics or widespread health epidemics such as the COVID-19 pandemic.
The above factors are difficult to forecast, and these, as well as other factors, could materially and adversely affect our quarterly and annual results of operations. Any failure to adjust spending quickly enough to compensate for a revenue shortfall could magnify the adverse impact of this revenue shortfall on our results of operations. Moreover, our results of operations may not meet our announced guidance or the expectations of research analysts or investors, in which case the price of our common stock could decrease significantly. There can be no assurance that we will be able to successfully address these risks.
Conversion of our Convertible Notes may dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock, adversely affect our financial condition and operating results.
In March 2021, we issued and sold a total of $575.0 million aggregate principal amount of our 0.0% convertible senior notes due 2028 (the “Notes due 2028”) and $632.5 million aggregate principal amount of our 0.0% convertible senior notes due 2026 (the “Notes due 2026”).
The conversion of some or all of the Convertible Notes may dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions. In addition, the anticipated conversion of the Convertible Notes into shares of our common stock could depress the price of our common stock.
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Servicing our debts requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debts.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the Convertible Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debts, including the Convertible Notes, and make necessary capital expenditures. If we are unable to generate cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness, including the Convertible Notes, will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of those activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, including our obligations under the Convertible Notes.
We may not have the ability to raise the funds necessary to settle conversions of the Convertible Notes or repurchase the Convertible Note upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Convertible Notes.
Holders of our Convertible Notes will have the right to require us to repurchase their Convertible Notes upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any. Fundamental change is defined in the Convertible Notes Indenture entered into in connection with the financing and consists of events such as an acquisition of a majority of our outstanding common stock, an acquisition of our company or substantially all of our assets, the approval by our stockholders of a plan of liquidation or dissolution, or our common stock no longer being listed on the Nasdaq Global Select Market or the Nasdaq Global Market. Upon conversion of the Convertible Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Convertible Notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make such repurchase of the Convertible Notes. In addition, our ability to repurchase the Convertible Notes or to pay cash upon conversion of the Convertible Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our to repurchase notes at a time when the repurchase is required by the relevant indenture or to pay any cash payable on future conversions of the notes as required by the relevant indenture would constitute a under the relevant indenture. A under the indenture or a fundamental change itself could also lead to a under agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Convertible Notes or make cash payments upon conversion of the Convertible Notes.
The convertible note hedge and warrant transactions and/or their early termination may affect the value of our common stock.
In connection with the offering of the Notes due 2028 and Notes due 2026, we entered into privately negotiated convertible note hedge transactions pursuant to which we have the option to purchase approximately the same number of shares of our common stock initially issuable upon conversion of the Notes due 2028 and Notes due 2026, at a price approximately the same as the initial conversion price of the Notes due 2028 and Notes due 2026. These transactions are expected to reduce the potential dilution with respect to our common stock upon conversion of the Notes due 2028 and Notes due 2026. Separately, we also entered into privately negotiated warrant transactions to acquire the same number of shares of our common stock initially issuable upon conversion of the Notes due 2028 and Notes due 2026 (subject to customary anti-dilution adjustments) at an initial strike price of approximately $370.33 and $397.91 per share for Notes due 2028 and Notes due 2026, respectively. If the market value per share of our common stock, as measured under the warrants, exceeds the strike price of the warrants, the warrants will have a dilutive effect on the ownership interests of existing stockholders and on our earnings per share, unless we elect, subject to certain conditions, to settle the warrants in cash. However, we may not have enough available cash or be able to obtain financing at the time of settlement.
In addition, the existence of the convertible note hedge and warrant transactions may encourage purchasing and selling share of our common stock, or other of our securities and instruments, in open market and/or privately negotiated transactions in order to modify hedge positions. Any of these activities could adversely affect the value of our common stock and the value of the Notes due 2028 and Notes due 2026.
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Changes in current accounting methods, standards, or regulations applicable to the Convertible Notes due 2028 and Notes due 2026 could have a material impact on our reported financial results, future financial results, future cash flows, and/or our stock price.
In August 2020, the FASB issued Account Standard Update (“ASU”) 2020-06, “Debt - Debt with Conversion and Other Options (subtopic 470-20),” effective January 1, 2022, the Notes due 2028 and the Notes due 2026 were accounted for as a single liability measured at its amortized cost. Interest expense associated with the Notes due 2028 and the Notes due 2026 recorded in the consolidated statements of operations is close to the coupon rate interest expense. Further, for the diluted earnings per share calculation, the treasury stock method is no longer permitted for the Notes due 2028 and Notes due 2026. The if-converted method is used for the calculation of the diluted earnings per share calculation, when accounting for the shares issuable upon conversion of the Notes due 2028 and Notes due 2026, which will adversely affect our diluted earnings per share. However, if the principal amount of the Notes due 2028 and Notes due 2026 being converted is required to be paid in cash and only the excess is permitted to be settled in shares, the if-converted method will produce a similar result as the “treasury stock” method which was applied prior to the adoption of ASU 2020-06.
We may not be able to raise additional capital to execute on our current or future business opportunities on favorable terms, if at all, or without dilution to our stockholders.
We believe that our existing cash and cash equivalents and cash flows from our operating activities will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, we may need to raise additional capital or debt financing to execute on our current or future business strategies, including to:
• provide additional cash reserves to support our operations;
• invest in our research and development efforts;
• expand our operations into new product markets and new geographies;
• acquire complementary businesses, products, services or technologies; or
• otherwise pursue our strategic plans and respond to competitive pressures, including adjustments to our business to mitigate the effects of any tariffs that might apply to us or our industry.
We do not know what forms of financing, if any, will be available to us. If financing is not available on acceptable terms, if and when needed, our ability to fund our operations, enhance our research and development and sales and marketing functions, develop and enhance our products, respond to unanticipated events and opportunities, or otherwise respond to competitive pressures would be significantly limited. In any such event, our business, financial condition and results of operations could be materially harmed, and we may be unable to continue our operations. Moreover, if we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.
We currently do not intend to pay dividends on our common stock and, consequently, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.
We have never declared or paid any dividends on our common stock. We do not anticipate paying cash dividends in the foreseeable future. Consequently, an investor’s only opportunity to achieve a return on its investment in our company will be if the market price of our common stock appreciates and the investor sells its shares at a profit.
General Risk Factors
Natural disasters, public health events, significant disruptions of information technology systems, data security breaches, or other catastrophic events could adversely affect our operations.
Our worldwide operations could be subject to natural disasters (including as a result of climate change), public health events, significant disruptions of information technology systems, data security breaches and other catastrophic business disruptions, which could harm our future revenue and financial condition and increase our costs and expenses. For example, our corporate headquarters in Fremont, California is located near major earthquake fault lines and our Petaluma, California facility is near fault lines and the sites of recent catastrophic wildfires. We rely on third-party manufacturing facilities, including for all product assembly and final testing of our products, which are performed at third-party manufacturing facilities, in China and India. There may be conflict or
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uncertainty in the countries in which we operate, including public health issues (for example, an outbreak of contagious diseases or health epidemics, such as COVID-19), safety issues, natural disasters, fire, disruptions of service from utilities, nuclear power plant accidents, regional wars, or general economic or political factors. Such risks could result in an increase in the cost of components, production delays, general business interruptions, delays from difficulties in obtaining export licenses for certain technology, tariffs and other barriers and restrictions, longer payment cycles, increased taxes, restrictions on the repatriation of funds and the burdens of complying with a variety of foreign laws, any of which could ultimately have a material adverse effect on our business.
In the event that natural disasters (including as a result of climate change), public health epidemics or technical catastrophes were to damage or destroy any part of our facilities or those of our contract manufacturer, destroy or disrupt vital infrastructure systems or interrupt our operations or services for any extended period of time, our business, financial condition and results of operations would be materially and adversely affected.
If we fail to maintain an effective system of internal controls or are unable to remediate any deficiencies in our internal controls, we might not be able to report our financial results accurately or prevent fraud; in that case, our stockholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our stock.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. In addition, Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), requires us to establish and maintain internal control over financial reporting and disclosure controls procedures. The process of implementing our internal controls and complying with Section 404 of the Sarbanes-Oxley Act has required, and will continue to require, significant attention of management. If we or our independent registered public accounting firm discover a material weakness in our internal controls over financial reporting, the disclosure of that fact, even if quickly remedied, could reduce the market’s confidence in our financial statements and harm our stock price. To the extent any material weaknesses in our internal control over financial reporting are identified, we could be required to expend significant management time and financial resources to correct such material weaknesses or to respond to any resulting regulatory investigations or proceedings.
Our business is subject to tax liabilities.
We are subject to income tax, indirect tax or other tax claims by tax agencies in jurisdictions in which we conduct business. Significant judgment is required in determining our worldwide provision for income taxes. Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. The IRA included significant changes to the U.S. federal income tax laws, the consequences of which could increase our future U.S. income tax expense. As additional guidance is issued by the applicable taxing authorities and as new accounting treatment is clarified, we may report additional adjustments in the period if new information becomes available. We have deferred tax assets related to net operating losses or tax credits that could be subject to limitations under IRS Code Sections 382 or 383, and State separate return limitation year rules. The limitations could reduce our ability to utilize our net operating losses or tax credits before the expiration of the tax attributes. Tax law changes or the limitations could be material and could materially affect our tax obligations and effective tax rate.
In the ordinary course of our business, there are many transactions and calculations where the ultimate income tax, indirect tax, or other tax determination is uncertain. Although we believe our tax estimates are reasonable, we cannot be certain that the final determination of our tax audits and litigation will not be materially different from that which is reflected in historical tax provisions and accruals. Should additional taxes be assessed as a result of an audit, assessment or litigation, there could be a material adverse effect on our cash, tax provisions and net income in the period or periods for which that determination is made.
Our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.
Our certificate of incorporation and our bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions, including effecting changes in our management. These provisions include:
• 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;
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• authorizing our board of directors to issue, without stockholder approval, preferred stock rights senior to those of common stock, which could be used to significantly dilute the ownership of a hostile acquiror;
• prohibiting stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
• requiring the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then outstanding shares of voting 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, forum selection and the liability of our directors, or to amend our bylaws, which may inhibit the ability of stockholders or an acquiror to effect such amendments to facilitate changes in management or an unsolicited takeover attempt;
• requiring special meetings of stockholders may only be called by our chairman of the board, if any, our chief executive officer, our president or a majority of our board of directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and
• requiring advance notification of stockholder nominations and proposals, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
In addition, the provisions of Section 203 of the Delaware General Corporate Law may prohibit large stockholders, in particular those owning 15% or more of our outstanding common stock, from engaging in certain business combinations, without approval of substantially all of our stockholders, for a certain period of time.
These provisions in our certificate of incorporation, our bylaws and under Delaware law could discourage potential takeover attempts, reduce the price that investors might be willing to pay for shares of our common stock in the future and result in the market price being lower than it would be without these provisions.
