What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-04 compared with 2020-11-04 · 381 added, 728 removed, 508 unchanged (69% of the section changed)

2 unchanged sentences

AND ITS SUBSIDIARIES.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2020

Condensed Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019

F-2  - F-3

Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2020 and 2019 (unaudited)

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019 (unaudited)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2021

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Income

Condensed Consolidated Statements of Comprehensive Income

Condensed Consolidated Statements of Changes in Stockholders’

Equity for the nine months ended September 30, 2020 and 2019 (unaudited)

F-6  - F-9

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited)

F-10  - F-11

Notes to the Condensed Consolidated Financial Statements (unaudited)

F-12  - F-31

Condensed Consolidated Statements of Cash Flows

Notes to the Condensed Consolidated Financial Statements

SOLAREDGE TECHNOLOGIES, INC.

2 unchanged sentences

dollars in thousands (except share and per share data)

September 30,

CURRENT ASSETS:

4 unchanged sentences

Trade receivables, net of allowances of $ 3,576 and $ 2,886 , respectively

Prepaid expenses and other current assets

Inventories, net

Prepaid expenses and other current assets

Total current assets

2 unchanged sentences

Deferred tax assets, net

Other long-term assets

Property, plant and equipment, net

1 unchanged sentence

Intangible assets, net

Other long-term assets

Total long-term assets

The accompanying notes are an integral part of the condensed consolidated financial statements.

The accompanying notes are an integral part of the consolidated financial statements.

F - 2

1 unchanged sentence

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Cont.)

dollars in thousands (except share and per share data)

September 30,

LIABILITIES AND STOCKHOLDERS'

LIABILITIES AND STOCKHOLDERS’

CURRENT LIABILITIES:

11 unchanged sentences

Deferred tax liabilities, net

Finance lease liabilities

Operating lease liabilities

3 unchanged sentences

STOCKHOLDERS’

Common stock of $ 0.0001 par value –

125,000,000 shares as of September 30, 2020 and December 31, 2019;

51,207,310 and 49,081,457 shares as of September 30, 2020 and December 31, 2019, respectively;

51,207,310 and 48,898,062 shares as of September 30, 2020 and December 31, 2019, respectively.

Common stock of $ 0.0001 par value - Authorized:

125,000,000 shares as of March 31, 2021 and December 31, 2020;

issued and outstanding:

51,966,175 and 51,560,936 shares as of March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Retained earnings

1 unchanged sentence

Total liabilities and stockholders’

The accompanying notes are an integral part of the condensed consolidated financial statements.

The accompanying notes are an integral part of the consolidated financial statements.

F - 3

4 unchanged sentences

Three months ended

September 30,

Nine months ended

September 30,

Cost of revenues

3 unchanged sentences

General and administrative

Other operating expenses (income)

Other operating expenses (income), net

Total operating expenses

Operating income

Financial expenses (income), net

Financial expenses, net

Income before income taxes

Net loss (income) attributable to Non-controlling interests

Net income attributable to SolarEdge Technologies, Inc.

Net basic earnings per share of common stock attributable to SolarEdge Technologies, Inc.

Net diluted earnings per share of common stock attributable to SolarEdge Technologies, Inc.

Weighted average number of shares used in computing net basic earnings per share of common stock

Net income per share:

Net basic earnings per share of common stock

Net diluted earnings per share of common stock

Weighted average number of shares used in computing net basic earnings per share of common stock  

Weighted average number of shares used in computing net diluted earnings per share of common stock

The accompanying notes are an integral part of the condensed consolidated financial statements.

The accompanying notes are an integral part of the consolidated financial statements.

F - 4

4 unchanged sentences

Three months ended

September 30,

Nine months ended

September 30,

Other comprehensive income (loss):

Available-for-sale securities:

Changes in unrealized gains (losses), net of tax

Reclassification adjustments for losses included in net income

Cash flow hedges:

Changes in unrealized gains, net of tax

Reclassification adjustments for gains included in net income

Other comprehensive income (loss), net of tax:

Net change related to available-for-sale securities

Net change related to cash flow hedges

Foreign currency translation adjustments on intra-entity transactions that are of a long-term investment nature

Foreign currency translation adjustments, net

Total other comprehensive income (loss)

Total other comprehensive loss

Comprehensive income

Comprehensive loss attributable to Non-controlling interests

Comprehensive income attributable to SolarEdge Technologies, Inc.

The accompanying notes are an integral part of the condensed consolidated financial statements.

The accompanying notes are an integral part of the consolidated financial statements.

F - 5

4 unchanged sentences

dollars in thousands (except share and per share data)

SolarEdge Technologies, Inc.

Stockholders’

Additional paid in Capital

1 unchanged sentence

Retained earnings

Non-controlling

stockholders’

Balance as of January 1, 2019

Issuance of Common Stock upon exercise of employee and nonemployees stock-based awards

Equity based compensation expenses to employees and nonemployee

Issuance of Common stock upon business combination

Non-controlling interests related to business combination

Change in non-controlling interests

Other comprehensive loss adjustments

Balance as of March 31, 2019

Issuance of Common Stock upon exercise of employee and nonemployees stock-based awards

Equity based compensation expenses to employees and nonemployee

Change in non-controlling interests

Other comprehensive income adjustments

Balance as of June 30, 2019

* Represents an amount less than $1.

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 6

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (Unaudited)

dollars in thousands (except share and per share data)

SolarEdge Technologies, Inc.

Stockholders’

Additional paid in Capital

comprehensive

Retained earnings

Non-controlling

Total stockholders’

Balance as of June 30, 2019

Issuance of Common Stock upon exercise of employee and nonemployees stock-based awards

Equity based compensation expenses to employees and nonemployee

Change in non-controlling interests

Other comprehensive loss  adjustments

Balance as of  September 30, 2019

* Represents an amount less than $1.

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 7

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (Unaudited)

dollars in thousands (except share and per share data)

SolarEdge Technologies, Inc.

Stockholders’

Additional paid in Capital

comprehensive

Retained earnings

Non-controlling

Total stockholders’

Balance as of January 1, 2020

Issuance of Common Stock upon exercise of employee and nonemployees stock-based awards

Equity based compensation expenses to employees and nonemployee

Balance as of January 1, 2020  

Issuance of Common Stock upon exercise of employee and non-employees stock-based awards

Equity based compensation expenses to employees and nonemployees

Other comprehensive loss adjustments

Balance as of March 31, 2020

Issuance of Common Stock upon exercise of employee and nonemployees stock-based awards

Equity based compensation expenses to employees and nonemployee

Other comprehensive income adjustments

Balance as of June 30, 2020

Balance as of March 31, 2020  

* Represents an amount less than $1.

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 6

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (Unaudited)

EQUITY (Unaudited) (Cont.)

dollars in thousands (except share and per share data)

SolarEdge Technologies, Inc.

Stockholders’

Additional paid in Capital

comprehensive

Other comprehensive

Income (loss)

Retained earnings

Non-controlling

Total stockholders’

Balance as of June 30, 2020

Issuance of Common Stock upon exercise of employee and nonemployees stock-based awards

Equity based compensation expenses to employees and nonemployee

Equity component of convertible senior notes, net

Other comprehensive income adjustments

Balance as of  September 30, 2020

Balance as of January 1, 2021  

Cumulative effect of adopting ASU 2020-06

Issuance of Common Stock upon exercise of employee and non-employees stock-based awards

Equity based compensation expenses to employees and nonemployees

Other comprehensive loss adjustments

Balance as of March 31, 2021  

* Represents an amount less than $1.

The accompanying notes are an integral part of the condensed consolidated financial statements.

The accompanying notes are an integral part of the consolidated financial statements.

F - 7

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

dollars in thousands

Nine months ended

September 30,

dollars in thousands (except share and per share data)

Three months ended

Cash flows provided by operating activities:

3 unchanged sentences

Amortization of debt discount and debt issuance costs

Amortization of premium and accretion of discount on available-for-sale marketable securities, net

Stock-based compensation expenses

Deferred income tax benefit, net

Other adjustments, net

Deferred income taxes, net

Loss from disposal of assets

Exchange rate fluctuations and other items, net

Changes in assets and liabilities:

2 unchanged sentences

Trade receivables, net

Operating lease right-of-use assets and liabilities, net and effect of exchange rate differences

Trade payables, net

5 unchanged sentences

Cash flows from investing activities:

Proceeds from sales and maturities of available-for-sale marketable securities

Purchase of property, plant and equipment

Investment in available-for-sale marketable securities

Withdrawal from (investment in) restricted bank deposits

Business combination, net of cash acquired

Withdrawal from (investment in) bank deposits

Proceed from maturities of available-for-sale marketable securities

Purchase of property, plant and equipment

Withdrawal from (investment in) bank deposits, net

Other investing activities

Net cash provided by (used in) in investing activities

The accompanying notes are an integral part of the condensed consolidated financial statements.

Net cash used in investing activities

F - 8

1 unchanged sentence

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

dollars in thousands

Nine months ended

September 30,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Cont.)

dollars in thousands (except share and per share data)

Three months ended

Cash flows from financing activities:

Proceeds from issuance of convertible senior notes, net

Repayment of bank loans

Proceeds from bank loans

Proceeds from issuance of shares under stock purchase plan and upon exercise of stock-based awards

Change in Non-controlling interests

Proceeds from exercise of stock-based awards net of tax withholding

Other financing activities

Net cash provided by (used in) financing activities

Increase in cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

1 unchanged sentence

Cash and cash equivalents at the end of the period

Supplemental disclosure of non-cash activities:

Purchase of property, plant and equipment

Operating lease, right of use asset

The accompanying notes are an integral part of the condensed consolidated financial statements.

The accompanying notes are an integral part of the consolidated financial statements.

F - 9

6 unchanged sentences

(the “Company”) and its subsidiaries design, develop, and sell an intelligent inverter solution designed to maximize power generation at the individual photovoltaic (“PV”) module level while lowering the cost of energy produced by the solar PV system and providing comprehensive and advanced safety features.

The Company’s products consist mainly of (i) power optimizers designed to maximize energy throughput from each and every module of a solar PV system through constant tracking of Maximum Power Point individually per module, (ii) inverters which invert direct current (DC) from the PV module to alternating current (AC), (iii) a related cloud-based monitoring platform, that collects and processes information from the power optimizers and inverters of a solar PV system to enable customers and system owners as applicable, to monitor and manage the applicable solar PV system and (iv) a storage solution that is used to increase energy independence and maximize self-consumption for homeowners by utilizing a battery that is sold separately by third party manufacturers, to store and supply power as needed.

The Company and its subsidiaries sell their intelligent inverter solution products worldwide through large distributors and electrical equipment wholesalers to smaller solar installers as, well as directly to large solar installers and engineering, procurement and construction firms (“EPCs”).

The Company has expanded its activity to other areas of smart energy technology through acquisitions.

The Company now offers energy solutions which include lithium-ion cells, batteries and energy storage systems (“Energy Storage”), electric vehicle, or EV components and charging capabilities (“e-Mobility”), uninterrupted power supply solutions (“UPS”), as well as the manufacture of automated machines for industries (“Automation Machines”).

Recent accounting pronouncements not yet adopted:

In August 2020, the FASB issued ASU No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

Among other changes, ASU 2020-06 removes from U.S.

GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt.

Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument.

Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium.

Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’

equity to liabilities as it relates to the Company’s convertible senior notes.

Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS), which is consistent with the Company’s accounting treatment under the current standard.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a fully retrospective or a modified retrospective basis.

The Company is currently evaluating the timing, method of adoption and overall impact of this standard on its consolidated financial statements.

The Company’s products consist mainly of (i) power optimizers designed to maximize energy throughput from each and every module through constant tracking of Maximum Power Point individually per module, (ii) inverters which invert direct current (DC) from the PV module to alternating current (AC), (iii) a remote cloud-based monitoring platform, that collects and processes information from the power optimizers and inverters to enable customers and system owners, to monitor and manage the solar PV system (iv) a storage and backup solution that is used to increase energy independence and maximize self-consumption for homeowners by utilizing a battery that is sold separately by third party manufacturers, to store and supply power as needed, and (v) additional smart energy management solutions.

The Company and its subsidiaries sell products worldwide through large distributors, electrical equipment wholesalers, as well as directly to large solar installers and engineering, procurement and construction firms.

The Company has expanded its activity to other areas of smart energy technology organically and through acquisitions.

The Company now offers variety of energy solutions, which include lithium-ion cells, batteries and energy storage systems (“Energy Storage”), full powertrain kits for electric vehicles, or EVs (“e-Mobility”), uninterrupted power supply solutions (“UPS”), as well as automated machines for industrial use (“Automation Machines”).

Recently issued and adopted pronouncements:

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method.

ASU 2020-06 will be effective for fiscal years beginning after December 15, 2021, with early adoption permitted.

Effective January 1, 2021, the Company early adopted ASU 2020-06 using the modified retrospective approach.

Adoption of the new standard resulted in an increase of retained earnings in an amount of $ 2,884 , a decrease of an additional paid-in capital in an amount of $ 36,336 , an increase of convertible senior notes, net, in an amount of $ 45,282 and a decrease of deferred tax liabilities, net, in an amount of $ 11,830 .

Interest expense recognized in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost.

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), which clarifies the interaction between the accounting for equity securities in Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815.

The guidance is effective for interim and annual periods beginning after December 15, 2020.

Effective January 1, 2021, the Company adopted this standard on a prospective basis.

The impact of adoption of this standard on the Company’s consolidated financial statements was immaterial.

F - 10

4 unchanged sentences

NOTE 1:- GENERAL (Cont.)

Recently issued and adopted pronouncements:

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2020.

This standard requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings and report credit losses using an expected losses model rather than the incurred losses model that was previously used, and establishes additional disclosures related to credit risks.

For available-for-sale (“AFS”) debt securities with unrealized losses, the standard eliminates the concept of other-than-temporary impairments and requires allowances to be recorded instead of reducing the amortized cost of the investment.

This standard limits the amount of credit losses to be recognized for AFS debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases.

The Company adopted Topic 326 effective January 1, 2020, based on the composition of the Company’s trade receivables, investment portfolio and other financial assets, current economic conditions and historical credit loss activity.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

The condensed consolidated financial statements for the nine months ended September 30, 2020 are presented under the new standard, while comparative periods presented are not adjusted and continue to be reported in accordance with the Company’s historical accounting policy (see Note 7).

Basis of Presentation:

4 unchanged sentences

The Company’s interim period results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year.

The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2019, contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2020, have been applied consistently in these unaudited interim condensed consolidated financial statements, except for ASC 815 - Derivatives and Hedging (see Note 6), the adoption of ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326) (see Note 7) and ASC 470-20 "Debt with Conversion and Other Options"

(see Note 8).

Concentrations of supply risks:

The Company depends on two contract manufacturers and several limited or single source component suppliers.

Reliance on these vendors makes the Company vulnerable to possible capacity constraints and reduced control over component availability, delivery schedules, manufacturing yields, and costs.

These two contract manufacturers collectively accounted for 47.4 % and 42.3 % of the Company’s trade payables as of September 30, 2020 and December 31, 2019, respectively.

F - 13

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

dollars in thousands (except share and per share data)

NOTE 1:- GENERAL (Cont.)

In September 2020 the Company has commenced the production ramp up of its manufacturing facility in the North of Israel, “Sella 1”.

The Company expects ramp up to continue until the second quarter of 2021.

The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2020, contained in the Company’s Annual Report on Form 10-K/A filed with the SEC on February 19, 2021, have been applied consistently in these unaudited interim condensed consolidated financial statements, except for the adoption of ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (Topic 470) (see Note 7).

Use of estimates:

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures in the accompanying notes.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures in the accompanying notes.

The duration, scope and effects of the ongoing COVID-19 pandemic, government and other third party responses to it, and the related macroeconomic effects, including to the Company’s business and the business of the Company’s suppliers and customers are uncertain, rapidly changing and difficult to predict.

1 unchanged sentence

Such changes could result in future impairments of goodwill, intangibles, long-lived assets, inventories, incremental credit losses on receivables and AFS debt securities, or an increase in the Company’s insurance liabilities as of the time of a relevant measurement event.

Concentrations of supply risks:

The Company depends on two contract manufacturers and several limited or single source component suppliers.

Reliance on these vendors makes the Company vulnerable to possible capacity constraints and reduced control over component availability, delivery schedules, manufacturing yields, and costs.

As of March 31, 2021, and December 31, 2020, two contract manufacturers collectively accounted for 37.9 % and 48.5 % of the Company’s total trade payables, net, respectively.

During 2020, the Company started production in its manufacturing facility in the North of Israel, “Sella 1”.

The Company expects manufacturing capacity to continue to increase until the second quarter of 2021 when Sella 1 is expected to reach full manufacturing capacity.

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

NOTE 2:- INVENTORIES

NOTE 2:- INVENTORIES, NET

Raw materials

7 unchanged sentences

NOTE 3:- MARKETABLE SECURITIES

The following table summarizes the AFS marketable debt securities as of September 30, 2020:

Amortized cost

Gross unrealized gains

Gross unrealized losses

The following is a summary of available-for-sale marketable debt securities as of March 31, 2021:

Gross unrealized

Available-for-sale –

matures within one year:

1 unchanged sentence

Governmental bonds

Available for-sale –

matures after one year:

Corporate bonds

The following table summarizes the AFS marketable debt securities as of December 31, 2019:

Governmental bonds

The following is a summary of available-for-sale marketable debt securities as of December 31, 2020:

Gross unrealized

Available-for-sale –

matures within one year:

Corporate bonds

Governmental bonds

Available for-sale –

matures after one year:

1 unchanged sentence

Governmental bonds

As of September 30, 2020, the Company did not record an allowance for credit losses for its AFS marketable debt securities.

As of March 31, 2021, the Company didn’t record an allowance for credit losses for its available-for-sale marketable debt securities.

F - 12

3 unchanged sentences

dollars in thousands (except share and per share data)

NOTE 4:- WARRANTY OBLIGATIONS

Changes in the Company’s product warranty obligations for the nine months ended September 30, 2020 and 2019 were as follows:

Nine months ended

September 30,

Balance, at beginning of period

Additions and adjustments to cost of revenues

Usage and current warranty expenses

Balance, at end of period

Less current portion

Long-term portion

NOTE 4:- INVESTMENT IN PRIVETLY-HELD COMPANIES

On January 31, 2021, the Company completed an investment of $ 11,643 in the preferred stock of AutoGrid Systems, INC ("AutoGrid"), a privately held company without readily determinable fair values.

On February 1, 2021, the Company signed on a preferred stock purchase agreement for an additional investment of $ 5,000 in AutoGrid's preferred stock ("second investment").

As of March 31, 2021, the final closing of the second investment had not yet occurred.

On April 28, the Company completed the second investment.

Under ASU 2016-01 equity investments without readily determinable fair value include ownership rights that either (i) do not meet the definition of in-substance common stock or (ii) do not provide the Company with control or significant influence.

The Company adjusts the carrying value of its non-marketable equity securities to fair value upon observable transactions for identical or similar investments of the same issuer or upon impairment.

All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in financial expenses, net.

The Company accounted for the AutoGrid investment as an equity investment that do not have readily determinable fair values.

As such, the Company’s non-marketable equity securities had a carrying value of $ 11,643 as of March 31, 2021.

The maximum loss the Company can incur for its investments is their carrying value.

Investment in privately-held companies are included within other long-term assets on the consolidated balance sheets.

The Company periodically evaluates the carrying value of the investments in privately-held companies when events and circumstances indicate that the carrying amount of the investment may not be recovered.

These investments include the Company’s holdings in privately-held companies that are not traded and therefore not supported with observable market prices.

The Company may determine the fair value by reviewing equity valuation reports, current financial results, long-term plans of the privately-held companies, the amount of cash that the privately-held companies have on-hand, the ability to obtain additional financing and overall market conditions in which the privately-held companies operate or based on the price observed from the most recent completed financing.

No impairment or other adjustments related to observable price changes in orderly transactions for identical or similar investments were identified for the three months ended March 31, 2021.

F - 13

4 unchanged sentences

NOTE 5:- FAIR VALUE MEASUREMENTS

In accordance with ASC 820, the Company measures its cash equivalents, foreign currency derivative contracts, and marketable securities, at fair value using the market approach valuation technique.

Cash equivalents and marketable securities are classified within Level 1 or Level 2 based on whether these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

In accordance with ASC 820, the Company measures its cash equivalents and marketable securities, at fair value using the market approach valuation technique.

Cash equivalents and marketable securities are classified within Level 1 and Level 2, respectively, because these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

Foreign currency derivative contracts are classified within the Level 2 value hierarchy, as the valuation inputs are based on quoted prices and market observable data of similar instruments.

The following table sets forth the Company’s assets that were measured at fair value as of September 30, 2020 and December 31, 2019, by level within the fair value hierarchy:

Fair value measurements as of

The following table sets forth the Company’s assets that were measured at fair value as of March 31, 2021 and December 31, 2020 by level within the fair value hierarchy:

Fair value measurements

Measured at fair value on a recurring basis:

Cash equivalents:

1 unchanged sentence

Derivative instruments asset:

Options and forward contracts not designated as hedging  instruments

Options and forward contracts not designated as hedging instruments  

Short-term marketable securities:

5 unchanged sentences

Derivative instruments liability:

Options and forward contracts not designated as hedging instruments

Options and forward contracts designated as hedging instruments  

Options and forward contracts not designated as hedging instruments  

F - 14

7 unchanged sentences

The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship.

To protect against the increase in value of forecasted foreign currency cash flows resulting from salary denominated in the Israeli currency, the New Israeli Shekels (“NIS”), during the nine months ended September 30, 2020, the Company instituted a foreign currency cash flow hedging program whereby portions of the anticipated payroll denominated in NIS for a period of one to six months with hedging contracts.

The Company hedges portions of the anticipated payroll denominated in NIS for a period of one to nine months with hedging contracts.

Accordingly, when the dollar strengthens against the NIS, the decline in present value of future foreign currency expenses is offset by losses in the fair value of the hedging contracts.

1 unchanged sentence

These hedging contracts are designated as cash flow hedges, as defined by ASC 815 and are all effective hedges.

As of September 30, 2020, the Company had no derivative instruments that were designated as cash flow hedges.

The Company also entered into derivative instrument arrangements to hedge the Company’s exposure to currencies other than the U.S.

These derivative instruments are not designated as cash flow hedges, as defined by ASC 815, and therefore all gains and losses, resulting from fair value remeasurement, were recorded immediately in the statement of income, as a financial expense (income), net.

As of September 30, 2020, the Company entered into forward contracts to sell Australian dollars (“AUD”) for U.S.

dollars in the amount of AUD 7.5 million.

As of September 30, 2020, the Company entered into put and call options to sell Euro ("EUR") for U.S.

dollars in the amount of EUR 45 million.

As of September 30, 2020, the Company entered into put and call options to sell U.S.

dollars for South Korean Won in the amount of USD 48.6 million.

The fair value of derivative assets as of September 30, 2020, was $ 780 , which was recorded in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.

The fair value of derivative liabilities as of September 30, 2020, was $ 1,119 , which was recorded in accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

As of December 31, 2019 and for the year then ended, the Company had no derivative instruments (see Note 5).

For the three and nine months ended September 30, 2020, the Company recorded a loss in the amount of $ 1,450 and $ 959 , respectively, in “financial income, net”

related to the derivative assets not designated as hedging instruments.

F - 18

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

dollars in thousands (except share and per share data)

NOTE 6:- DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Cont.)

The following table provides details about reclassifications out of accumulated other comprehensive income (loss):

Details about Accumulated Other Comprehensive Income (Loss) Components

Amount Reclassified from Accumulated Other Comprehensive Loss

Affected Line Item in the Statements of Income

Three months ended

Nine months ended

September 30, 2020

Unrealized gains on cash flow hedges, net

Cost of revenues

Research and development

Sales and marketing

General and administrative

Total, before income taxes

Income tax expense

Total, net of income taxes

F - 19

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

dollars in thousands (except share and per share data)

NOTE 7:- CREDIT LOSSES

Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments –

Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, prospectively.

This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables.

The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.

The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance.

As stated above, the Company did not record a noncash cumulative effect adjustment on the opening consolidated balance sheet as of January 1, 2020, due to immateriality.

The Company is exposed to credit losses primarily through sales of products.

The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the status of customers'

trade accounts receivables.

Due to the short-term nature of such receivables, the estimate of amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances, the financial condition of customers and the Company’s historical experience with similar customers.

Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default.

The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers'

financial condition and macroeconomic conditions.

Balances are written off when determined to be uncollectible.

The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted as of September 30, 2020.

Estimates are used to determine the allowance.

The allowance is based on assessment of anticipated payment and other historical, current and future information that is reasonably available.

The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of trade receivables to present the net amount expected to be collected:

Nine months ended

Balance, at beginning of period

Provision for expected credit losses

Amounts written off charged against the allowance and others

Balance, at end of period

As of March 31, 2021, the Company entered into forward contracts to sell U.S.

dollars for NIS in the amount of $ 42,000 .

In addition to the above-mentioned cash flow hedges transactions, the Company also entered into derivative instrument arrangements to hedge the Company’s exposure to currencies other than the U.S.

As of March 31, 2021, the Company entered into forward contracts and put and call options to sell Australian dollars (“AUD”) for U.S.

dollars in the amount of AUD 12 million and AUD 30 million, respectively.

As of March 31, 2021, the Company entered into forward contracts and put and call options to sell Euro (“EUR”) for U.S.

dollars in the amount of EUR 39 million and EUR 57 million, respectively.

As of March 31, 2021, the Company entered into forward contracts to sell U.S.

dollars for South Korean Won in the amount of $ 28,000 .

The fair value of derivative assets as of March 31, 2021 and December 31, 2020, was $ 449 and $ 3,786 , which was recorded in prepaid expenses and other current assets in the consolidated balance sheets, respectively.

The fair value of derivative liabilities as of March 31, 2021 and December 31, 2020, was $ 146 and $ 5,819 , which was recorded in accrued expenses and other current liabilities in the consolidated balance sheets, respectively.

For the three months ended March 31, 2021, the Company recorded a gain in the amount of $ 3,536 in financial expense, net, related to the derivative instruments not designated as cash flow hedges.

The Company had no gains or losses related to derivative instruments during the three months ended March 31, 2020.

For the three months ended March 31, 2021 and 2020, the Company recorded unrealized gain (loss) in the amount of $( 128 ) and $ 538 , net of tax effect, respectively, in “accumulated other comprehensive loss”

related to the derivative assets designated as hedging instruments.

F - 15

18 unchanged sentences

If certain fundamental changes referred to as make-whole fundamental changes occur, the conversion rate for the Notes may be increased.

The Company accounts for its Notes in accordance with ASC 470-20 "Debt with Conversion and Other Options".

The Company separately accounts for the liability and equity components of convertible debt instruments.

The liability component at issuance is recognized at fair value, based on the fair value of a similar instrument that does not have a conversion feature.

The equity component is based on the excess of the principal amount of the debentures over the fair value of the liability component, after adjusting for an allocation of debt issuance costs, and is recorded in additional paid-in capital.

Debt discount is amortized as additional non-cash interest expense over the expected life of the debt using the effective interest rate method.

In accounting for the issuance costs related to the Notes, the issuance costs incurred were allocated between the liability and equity components based on their relative values.

The Company’s Notes are included in the calculation of diluted EPS if the assumed conversion into common shares is dilutive, using the “if-converted”

This involves adding back the periodic interest expense net of tax associated with the Notes to the numerator and by adding the shares that would be issued in an assumed conversion (regardless of whether the conversion option is in or out of the money) to the denominator for the purposes of calculating diluted EPS, unless the Notes are antidilutive (See Note 11).

F - 21

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

dollars in thousands (except share and per share data)

NOTE 8:- CONVERTIBLE SENIOR NOTES (Cont.)

The Convertible Senior Notes consisted of the following as of September 30, 2020:

September 30,

The Convertible Senior Notes consisted of the following as of March 31, 2021 and December 31, 2020:

March 31, 2021

December 31, 2020

Unamortized debt discount

6 unchanged sentences

Equity component, net

As of September 30, 2020, the debt discount and debt issuance costs of the Notes will be amortized over the remaining period of approximately 5 years .

The annual effective interest rate of the liability component is 2.10 % for the Notes which remains unchanged from the Notes issuance date.

The following table presents the total amount of interest expenses recognized related to the Notes for the three and nine months ended September 30, 2020:

September 30, 2020

Amortization of debt discount

Amortization of debt issuance costs

Total interest expenses

Total initial issuance costs of $ 14,632 related to the Notes were allocated between the liability and equity components in the same proportion as the allocation of the total proceeds to the liability and equity components.

Issuance costs attributable to the liability component are being amortized to interest expense over the respective term of the Notes using the effective interest rate method.

The issuance costs attributable to the equity component were netted against the respective equity component in additional paid-in capital.

The Company initially allocated issuance costs of $ 13,502 and $ 1,130 to the liability and equity components, respectively.

As of September 30, 2020, the if-converted value of the Notes did not exceed the principal amount.

F - 16

3 unchanged sentences

dollars in thousands (except share and per share data)

NOTE 7:- CONVERTIBLE SENIOR NOTES (Cont.)

As of March 31, 2021, the debt issuance costs of the Notes will be amortized over the remaining term of approximately 4.5 years.

Prior to January 1, 2021, the Company separated the Notes into liability and equity components.

On issuance, the carrying amount of the equity components was recorded as a debt discount and subsequently amortized to interest expense.

Effective January 1, 2021, the Company early adopted ASU 2020-06 using the modified retrospective approach.

The Notes are accounted for as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives.

The annual effective interest rate of the Notes following the adoption of ASU 2020-06 is 0.47%.

Interest expense related to the amortization of debt issuance costs was $ 724 for the three months ended March 31, 2021.

As of March 31, 2021, the estimated fair value of the Notes, which the Company has classified as Level 2 financial instruments, is $ 812,294 .

The estimated fair value was determined based on the quoted bid price of the Notes in an over-the-counter market on the last trading day of the reporting period.

As of March 31, 2021, the if-converted value of the Notes exceeded the principal amount by $ 179,794 .

NOTE 8:- WARRANTY OBLIGATIONS

Changes in the Company’s product warranty obligations for the three months ended March 31, 2021 and 2020, were as follows:

As of March 31,

Balance, at the beginning of the period

Additions and adjustments to cost of revenues

Usage and current warranty expenses

Balance, at the end of the period

Less current portion

Long term portion

F - 17

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

dollars in thousands (except share and per share data)

NOTE 9:- COMMITMENTS AND CONTINGENT LIABILITIES

As of September 30, 2020, contingent liabilities exist regarding guarantees in the amounts of $ 18,643 , $ 2,176 and $ 240 in respect of bank loans, office rent lease agreements and other transactions, respectively.

As of March 31, 2021, contingent liabilities exist regarding guarantees in the amounts of $ 18,373 , $ 2,712 and $ 476 in respect of bank loans, office rent lease agreements and other transactions, respectively.

Contractual purchase obligations:

The Company has contractual obligations to purchase goods and raw materials.

These contractual purchase obligations relate to inventories held by contract manufacturers and purchase orders initiated by the contract manufacturers and suppliers, which cannot be cancelled without penalty.

These contractual purchase obligations relate to inventories held by contract manufacturers and purchase orders initiated by the contract manufacturers, which cannot be canceled without penalty.

The Company utilizes third parties to manufacture its products.

In addition, it acquires raw materials or other goods and services, including product components, by issuing to suppliers authorizations to purchase based on its projected demand and manufacturing needs.

As of September 30, 2020, the Company had non-cancellable purchase obligations totaling approximately $ 326,661 out of which the Company already recorded a provision for loss in the amount of $ 3,118 .

As of September 30, 2020, the Company had off-balance sheet contractual obligations for capital expenditures totaling approximately $ 114,526 .

These commitments reflect purchases of automated assembly lines and other machinery related to the Company’s manufacturing.

In addition, the Company acquires raw materials or other goods and services, including product components, by issuing authorizations to its suppliers to purchase materials based on its projected demand and manufacturing needs.

As of March 31, 2021, the Company had non-cancelable purchase obligations totaling approximately $ 699,325 out of which the Company recorded a provision for loss in the amount of $ 5,009 .

As of March 31, 2021, the Company had contractual obligations for capital expenditures totaling approximately $ 84,811 .

These commitments reflect purchases of automated assembly lines and other machinery related to the Company’s manufacturing process as well as capital expenditures associated with the construction of Sella 2, the Company’s planned second lithium-ion cell and battery factory in Korea.

Legal claims:

4 unchanged sentences

In September 2018, the Company’s German subsidiary, SolarEdge Technologies GmbH received a complaint filed by competitor SMA Solar Technology AG (“SMA”).

The complaint, filed in the District Court Düsseldorf, Germany, alleges that SolarEdge's 12.5kW - 27.6kW inverters infringe two of the plaintiff’s patents.

In its complaint, SMA requests inter alia an injunction and a determination for a claim for damages for sales in Germany.

Plaintiff also asserted a value in dispute of EUR 5.5 million (approximately $ 6,450 ) for both patents.

The complaint, filed in the District Court Düsseldorf, Germany, alleged that the Company’s 12.5kW - 27.6kW inverters infringe two of the plaintiff’s patents.

In its complaint, SMA asserted a value in dispute of EUR 5.5 million (approximately $ 6,455 ) for both patents.

The Company challenged the validity of both patents.

With respect to one of the claims, in October 2020, the German Patent Court rendered the SMA patent invalid.

With respect to one of the claims, in October 2020, the German Patent Court rendered the SMA patent invalid, this invalidity has been appealed by SMA.

With respect to the other claim, in November 2019, the first instance court stayed the infringement proceedings since it considered it to be highly likely that the second SMA patent would also be rendered invalid.

The Company believes that it has meritorious defenses to the claims asserted and intends to vigorously defend against the remaining lawsuit.

In May 2019, the Company’s two Chinese subsidiaries and its equipment manufacturer in China were served with three lawsuits by Huawei Technologies Co., Ltd., a Chinese entity (“Huawei”).

F - 18

4 unchanged sentences

NOTE 9:- COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)

In May 2019, the Company was served with three lawsuits by Huawei Technologies Co., Ltd., a Chinese entity (“Huawei”), against the Company's two Chinese subsidiaries and its equipment manufacturer in China.

The lawsuits, filed in the Guangzhou intellectual property court, allege infringement of three patents and ask for an injunction of manufacture, use, sale and offer for sale, and damage awards of Chinese yuan (“CNY”) 30 million (approximately $ 4,250 ).

A first-instance judgment was issued on August 7, 2020 ordering the Company to pay damages in the amount of approximately CNY 10.5 million (approximately $ 1,550 ), including court fees, with respect of one of the patents, which was recorded in general and administrative expenses.

The lawsuits, filed in the Guangzhou intellectual property court, alleged infringement of three patents and asked for an injunction of manufacture, use, sale and offer for sale, and damage awards.

A first-instance judgment was issued on August 7, 2020 ordering the three defendants to collectively pay damages in the amount of approximately Chinese Yuan (“CNY”) 10.5 million (approximately $ 1,607 ), including court fees, with respect of one of the patents.

The Company has filed an appeal with the Supreme People’s Court of China.

Following the receipt of the lawsuits, the Company filed three lawsuits in China against Huawei for unauthorized use of patented technology of the Company.

These lawsuits are still in process and judgements have not been rendered.

The Company believes that it has meritorious defenses to the claims asserted by Huawei and the judgement of the first instance court and intends to vigorously defend against these lawsuits.

In August 2019, the Company was served with a lawsuit by certain former shareholders of S.M.R.E S.p.A (“SMRE”), against its Italian subsidiary that purchased the shares of SMRE in the tender offer which followed the SMRE Acquisition.

The shareholders who tendered their shares are asking for the difference between EUR 6 per share, which is the amount they tendered their shares, and EUR 6.77 per share, for a total award of EUR 2.7 million (approximately $ 3,150 ).

The Company believes it has meritorious defenses to the claims asserted and intends to vigorously defend against this lawsuit.

In December 2019, the Company received a lawsuit filed by a former consultant of the Company and its Israeli subsidiary in the amount of NIS 25.5 million (approximately $ 7,400 ) claiming damages caused relating to a terminated consulting agreement and stock options therein.

The first instance court’s judgement is not effective or enforceable pending the appeal.

In addition, in January 2021, Huawei filed a motion to increase its claimed monetary damages to CNY 50.5 million (approximately $ 7,700 ) and for a preliminary injunction with respect to the second lawsuit.

In February 2021, a preliminary injunction was rendered by the Guangzhou intellectual property court with respect to such second lawsuit and applying to seven inverter models.

In line with the court’s mandate, the Company took immediate action to make software changes to meet the court order and also appealed the decision.

In addition, in February 22, 2021 a first-instance judgment was issued ordering the three defendants to collectively pay damages in the amount of CNY 50.5 million (approximately $ 7,700 ), including court fees, with respect to the second patent.

The Company appealed this judgement with the Supreme People’s Court.

The first instance court’s judgement is not effective or enforceable pending the appeal.

The Company believes that it has meritorious defenses to the claims asserted by Huawei.

In December 2019, the Company received a lawsuit filed by a former consultant of the Company and its Israeli subsidiary in the amount of 25.5 million NIS (approximately $ 7,648 ) claiming damages caused relating to a terminated consulting agreement and stock options therein.

The Company believes it has meritorious defenses to the claims asserted and intends to vigorously defend against this lawsuit.

As of September 30, 2020, accrued amounts for legal claims of $ 1,709 , were recorded in accrued expenses and other current liabilities.

NOTE 10:- STOCKHOLDERS’

Common Stock:

Number of shares

Authorized as of

Outstanding as of

Stock of $ 0.0001 par  value:

Stock Incentive plans:

The Company’s 2007 Global Incentive Plan (the “2007 Plan”) was adopted by the board of directors on August 30, 2007.

The 2007 Plan terminated upon the Company’s IPO on March 31, 2015 and no further awards may be granted thereunder.

All outstanding awards will continue to be governed by their existing terms and 379,358 available options for future grant were transferred to the Company’s 2015 Global Incentive Plan (the “2015 Plan”) and are reserved for future issuances under the 2015 plan.

As of March 31, 2021, accrued amounts for legal claims of $ 9,265 , were recorded in accrued expenses and other current liabilities.

F - 19

3 unchanged sentences

dollars in thousands (except share and per share data)

NOTE 10:- STOCKHOLDERS’

EQUITY (Cont.)

NOTE 10:- STOCK CAPITAL

Common stock rights:

Common stock confers upon its holders the right to receive notice of, and to participate in, all general meetings of the Company, where each share of common stock shall have one vote for all purposes;

to share equally, on a per share basis, in bonuses, profits, or distributions out of fund legally available therefor;

and to participate in the distribution of the surplus assets of the Company in the event of liquidation of the Company.

Stock option plans:

The Company’s 2007 Global Incentive Plan (the “2007 Plan”) was adopted by the board of directors on August 30, 2007.

The 2007 Plan terminated upon the Company’s IPO on March 31, 2015 and no further awards may be granted thereunder.

The 2015 Plan became effective upon the consummation of the IPO.

The 2015 Plan provides for the grant of options, RSUs and other share-based awards to directors, employees, officers and nonemployees of the Company and its subsidiaries.

As of September 30, 2020, a total of 12,828,270 shares of common stock were reserved for issuance under the 2015 Plan (the “Share Reserve”).

The Share Reserve will automatically increase on January 1st of each year during the term of the 2015 Plan, commencing on January 1st of the year following the year in which the 2015 Plan becomes effective, in an amount equal to 5 % of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year;

As of March 31, 2021, a total of 15,406,316 shares of common stock were reserved for issuance pursuant to stock awards under the 2015 Plan (the “Share Reserve”).

The Share Reserve will automatically increase on January 1st of each year during the term of the 2015 Plan, commencing on January 1st of the year following the year in which the 2015 Plan became effective, in an amount equal to 5 % of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year;

provided, however, that the Company’s board of directors may determine that there will not be a January 1st increase in the Share Reserve in a given year or that the increase will be less than 5% of the shares of capital stock outstanding on the preceding December 31st.

The aggregate maximum number of shares of common stock that may be issued on the exercise of incentive stock options is 10,000,000 .

As of September 30, 2020, an aggregate of 8,627,031 shares of common stock are still available for future grant under the 2015 Plan.

A summary of the activity in the stock options granted to employees and members of the board of directors for the nine months ended September 30, 2020 and related information are as follows:

Outstanding as of December 31, 2019

Outstanding as of September 30, 2020

Vested and expected to vest as of September 30, 2020

Exercisable as of September 30, 2020

The aggregate intrinsic value represents the total intrinsic value (the difference between the fair value of the Company’s common stock as of the last day of each period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last day of each period.

The total intrinsic value of options exercised during the nine months ended September 30, 2020 was $ 239,397 .

The weighted average grant date fair values of options granted to employees and executive directors during the nine months ended September 30, 2020 was $ 53.65 .

As of March 31, 2021, an aggregate of 8,607,542 options are still available for future grant under the 2015 Plan.

F - 20

3 unchanged sentences

dollars in thousands (except share and per share data)

NOTE 10:- STOCKHOLDERS’

EQUITY (Cont.)

A summary of the activity in the RSUs granted to employees and directors for the nine months ended September 30, 2020 is as follows:

NOTE 10:- STOCK CAPITAL (Cont.)

A summary of the activity in the stock options granted to employees and members of the board of directors for the year ended March 31, 2021 and related information are as follows:

Outstanding as of December 31, 2020

Forfeited or expired

Outstanding as of March 31, 2021

Vested and expected to vest as of March 31, 2021

Exercisable as of March 31, 2021

The aggregate intrinsic value in the tables above represents the total intrinsic value (the difference between the fair value of the Company’s common stock as of the last day of each period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last day of each period.

The total intrinsic value of options exercised during the three months ended March 31, 2021 was $ 41,217 .

The weighted average grant date fair values of options granted to employees and executive directors during the three months ended March 31, 2021 was $ 168.71 .

A summary of the activity in the RSUs granted to employees and directors for the year ended March 31, 2021, is as follows:

Weighted average

Unvested as of December 31, 2019

Unvested as of September 30, 2020

Employee Stock Purchase Plan (“ESPP”):

The Company adopted an ESPP.

As of September 30, 2020, a total of 2,687,451 shares were reserved for issuance under this plan.

The number of shares of common stock reserved for issuance under the ESPP will increase automatically on January 1st of each year, for ten years, by the lesser of 1 % of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year or 487,643 shares.

However, the Company’s board of directors may reduce the amount of the increase in any particular year at their discretion, including a reduction to zero.

The ESPP is implemented through an offering every six months.

According to the ESPP, eligible employees may use up to 10 % of their salaries to purchase common stock shares up to an aggregate limit of $ 10 per participant for every six months’

The price of an ordinary share purchased under the ESPP is equal to 85 % of the lower of the fair market value of the ordinary share on the subscription date of each offering period or on the purchase date.

As of September 30, 2020, 578,778 common stock shares had been purchased under the ESPP.

As of September 30, 2020, 2,108,673 common stock shares were available for future issuance under the ESPP.

In accordance with ASC No.

718, the ESPP is compensatory and as such results in recognition of compensation cost.  

Unvested as of January 1, 2021

Unvested as of March 31, 2021

F - 21

3 unchanged sentences

dollars in thousands (except share and per share data)

NOTE 10:- STOCKHOLDERS’

EQUITY (Cont.)

Stock-based compensation expense for employees and non-employees:

The Company recognized stock-based compensation expenses related to stock options, RSUs and PSUs granted to employees and non-employee consultants and ESPP in the condensed consolidated statement of income for the three and nine months ended September 30, 2020 and 2019, as follows:

Three months ended

September 30,

Nine months ended

September 30,

NOTE 10:- STOCK CAPITAL (Cont.)

Employee Stock Purchase Plan (“ESPP”):

The Company adopted an ESPP effective upon the consummation of the IPO.

As of March 31, 2021, a total of 3,175,094 shares were reserved for issuance under this plan.

However, the Company’s board of directors may reduce the amount of the increase in any particular year at its discretion, including a reduction to zero.

The ESPP is implemented through an offering every six months.

According to the ESPP, eligible employees may use up to 10 % of their salaries to purchase common stock up to an aggregate limit of $ 10 per participant for every six months plan.

As of March 31, 2021, 612,229 shares of common stock had been purchased under the ESPP.

As of March 31, 2021, 2,562,865 shares of common stock were available for future issuance under the ESPP.

In accordance with ASC No.

718, the ESPP is compensatory and, as such, results in recognition of compensation cost.

Stock-based compensation expenses for employees and non-employees:

The Company recognized stock-based compensation expenses related to stock options and RSUs granted to employees and nonemployees and ESPP in the condensed consolidated statement of income for the three months ended March 31, 2021 and 2020, as follows:

Three months ended March 31,

Cost of revenues

2 unchanged sentences

General and administrative

Other operating expenses

Total stock-based compensation expense

As of September 30, 2020, there were total unrecognized compensation expenses in the amount of $ 207,529 related to non‑vested equity‑based compensation arrangements granted under the Company’s Plans.

These expenses are expected to be recognized during the period from October 1, 2020 through October 31, 2024.

NOTE 11:- EARNINGS PER SHARE

Basic net Earnings Per Share (“EPS”) is computed by dividing the net earnings attributable to SolarEdge Technologies, Inc.

by the weighted-average number of shares of common stock outstanding during the period.

Diluted net EPS is computed by giving effect to all potential shares of common stock, to the extent dilutive, including stock options, RSUs, PSUs, shares to be purchased under the Company’s ESPP, and the Notes due 2025, all in accordance with ASC No.

260, "Earnings Per Share."

No shares were excluded from the calculation of diluted net EPS due to their anti-dilutive effect for the three and nine months ended September 30, 2020.

334,096 and 304,725 shares were excluded from the calculation of diluted net earnings per share due to their anti-dilutive effect for the three and nine months ended September 30, 2019, respectively.

Total stock-based compensation expenses

As of March 31, 2021, there were total unrecognized compensation expenses in the amount of $ 224,436 related to non-vested equity-based compensation arrangements granted under the Company’s Plans.

These expenses are expected to be recognized during the period from April 1, 2021 through November 30, 2025.

F - 22

3 unchanged sentences

dollars in thousands (except share and per share data)

NOTE 11:- EARNINGS PER SHARE (Cont.)

The following table presents the computation of basic and diluted net EPS attributable to SolarEdge Technologies, Inc.

for the periods presented:

Three months ended

September 30,

Nine months ended

September 30,

Net (income) loss attributable to Non-controlling  interests

Net income attributable to SolarEdge Technologies,  Inc.

NOTE 11:- EARNINGS PER SHARE

Basic net EPS is computed by dividing the net earnings by the weighted-average number of shares of common stock outstanding during the period.

260, "Earnings Per Share."

10,757 shares were excluded from the calculation of diluted net earnings per share due to their anti-dilutive effect for the three months ended March 31, 2021.

No shares were excluded from the calculation of diluted net EPS due to their anti-dilutive effect for the three months ended March 31, 2020.

The following table presents the computation of basic and diluted EPS:

Three months ended March 31,

Shares used in computing net earnings per share of common stock, basic

Net income attributable to common stock, basic

Notes due 2025

Net (income) loss attributable to Non-controlling  interests

Undistributed earnings reallocated to non-vested

    stockholders

Net income attributable to SolarEdge Technologies,  Inc.

Net income attributable to common stock, diluted

Shares used in computing net earnings per share of common stock, basic

Weighted average effect of dilutive securities:

Non-vested PSUs

Notes due 2025

1 unchanged sentence

Shares used in computing net earnings per share of common stock, diluted

(1) See Note 8 for additional details.

F - 23

4 unchanged sentences

NOTE 12:- OTHER OPERATING EXPENSES (INCOME)

At the time of the acquisition of Kokam Co., Ltd.

(“Kokam”), Kokam had an outstanding claim against it for damages.

The claim was settled for an amount of $ 4,900 , which was recognized as an expense in other operating expenses in the consolidated statement of income in the year ended December 31, 2019.

In March 2020, the Company was indemnified for the full amount by a major selling shareholder of Kokam.

For the nine months ended September 30, 2020, the Company recognized this as other operating income.

NOTE 13:- INCOME TAXES

Income taxes are comprised as follows:

Three months ended

September 30,

Nine months ended September 30,

Current period taxes

Deferred tax income, net and others

Taxes on income

Uncertain tax positions:

September 30, 2020

December 31, 2019

Balance at January 1,

Increases related to current year tax positions

NOTE 14:- SEGMENT INFORMATION

Following the completion of three acquisitions during 2018 and 2019, the Company has changed its segments measurement, beginning in 2019.

The purpose of the new measurement is to provide the Company’s chief operating decision maker (“CODM”) better information to assess segment performance and to make resource allocation decisions.

The Company now operates in five different operating segments:

Solar, Critical Power (formerly known as UPS), Energy Storage, e-Mobility and Automation Machines.

The Company's Chief Executive Officer is the CODM who makes resource allocation decisions and assesses performance based on the financial information presented on a consolidated basis, accompanied by disaggregated information about revenues and contributed profit by the operating segments.

Segment profit is comprised of gross profit for the segment less operating expenses that do not include amortization, stock based compensation expenses and certain other items.

The Company manages its assets on a group basis, not by segments, as many of its assets are shared or commingled.

The Company’s CODM does not regularly review asset information by segments and, therefore, the Company does not report asset information by segment.

A settlement of pre-acquisition legal claim against Kokam (1)

Write-off of property, plant and equipment

Total other operating expenses (income)

At the time of the acquisition of Kokam, Kokam had an outstanding claim against it for damages.

The claim was settled for an amount of $4,900, which was recognized as an expense in the year ended December 31, 2019.

In March 2020, the Company was indemnified for the full amount by a major selling shareholder of Kokam, which was recognized as an income in the three months ended March 31, 2020.

NOTE 13:- INCOME TAXES

The effective tax rate for the three months ended March 31, 2021 and 2020 were 20.9 %, and 17.4 % respectively.

The increase in the effective tax rate in the current year is primarily due to presence of a full valuation allowance in various jurisdictions and different allocation of income among the Company’s US, Israel, and foreign subsidiaries.

The Company’s effective tax rate was lower than the U.S.

federal statutory rate for the three months ended March 31, 2021, due to earnings taxed at lower rates in foreign jurisdictions and tax benefits relating to stock-based compensation, which were primarily offset by full valuation allowance in various jurisdictions and GILTI tax.

As of March 31, 2021, and December 31, 2020, unrecognized tax benefits were $ 10,630 and $ 10,564 , respectively.

If recognized, such benefits would favorably affect the Company’s effective tax rate.

The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes.

The total amount of penalties and interest were $ 152 and $ 127 as of March 31, 2021 and December 31, 2020, respectively.

It is reasonably possible that the Company’s gross unrecognized tax benefits will decrease by up to $ 8,937 in the next 12 months, primarily due to the lapse of the statute of limitations.

These adjustments, if recognized, would positively impact the Company’s effective tax rate, and would be recognized as additional tax benefits.

F - 24

3 unchanged sentences

dollars in thousands (except share and per share data)

NOTE 14:- SEGMENT INFORMATION (cont.)

NOTE 14:- SEGMENT INFORMATION

Segment Information:

The Company operates in five different operating segments:

Solar, Critical Power, Energy Storage, e-Mobility and Automation Machines.

The Company's Chief Executive Officer, who is the chief operating decision maker (“CODM”) , makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis, accompanied by disaggregated information about revenues and contributed profit by the operating segments.

Segment profit is comprised of gross profit for the segment less operating expenses that do not include amortization, stock based compensation expenses and certain other items.

The Company manages its assets on a group basis, not by segments, as many of its assets are shared or commingled.

The Company’s CODM does not regularly review asset information by segments and, therefore, the Company does not report asset information by segment.

The Company identified one operating segment as reportable –

the Solar segment.

The other operating segments are insignificant individually and in the aggregate and therefore their results are presented together under “All other”.

The Solar segment includes the design, development, manufacture, and sales of an intelligent inverter solution designed to maximize power generation at the individual PV module level.

The other operating segments are insignificant individually and therefore their results are presented together under “All other”.

The Solar segment includes the design, development, manufacturing, and sales of an intelligent inverter solution designed to maximize power generation at the individual PV module level.

The solution consists mainly of the Company’s power optimizers, inverters and cloud-based monitoring platform.

1 unchanged sentence

category includes the design, development, manufacturing and sales of UPS products, energy storage products, e-Mobility products and automated machines.

Intersegment sales are a source of revenue for one of the operating segments included in the “All other”

The Company accounts for intersegment sales as if the sales were to third parties, that is, at current market prices.

The following table presents information on reportable segments profit (loss) for the periods ended September 30, 2020:

Three months ended

September 30, 2020

Nine months ended

September 30, 2020

Cost of revenues

Research and development

Sales and marketing

General and administrative

Segments profit (loss)

The following table presents information on reportable segments profit (loss) for the periods ended September 30, 2019:

Three months ended

September 30, 2019

Nine months ended

September 30, 2019

The Company does not allocate to its operating segments revenue recognized due to advance payments received for performance obligations that extend for a period greater than one year (“financing component”), related to Accounting Standard Codification 606, “Revenue from Contracts with Customers”

The following table presents information on reportable segments profit (loss) for the period presented:

Three months ended March 31,

Cost of revenues

Gross profit (loss)

Research and development

10 unchanged sentences

Three months ended

September 30,

Nine months ended

September 30,

Solar segment revenues

All other segment revenues

Adjustment of intersegment revenues

Revenues from financing component

Consolidated revenues

1 unchanged sentence

Three months ended

September 30,

Nine months ended

September 30,

Solar segment profit

3 unchanged sentences

Stock based compensation expenses

Amortization related to business combinations

Legal settlement (see Note 12)

Cost of products adjustments

Other unallocated expenses

Non recurring expenses

Intersegment profit

Other unallocated expenses, net

Consolidated operating income

27 unchanged sentences

the duration, scope and effects of the ongoing COVID-19 pandemic, government and other third party responses to it and the related macroeconomic effects, including to our business and the business of our suppliers and customers;

future demand for solar energy solutions;

future demand for renewable energy including solar energy solutions;

changes to net metering policies or the reduction, elimination or expiration of government subsidies and economic incentives for on‑grid solar energy applications;

4 unchanged sentences

interest rates and supply of capital in the global financial markets in general and in the solar market specifically;

competition, including introductions of power optimizer, inverter and solar photovoltaic (“PV”) system monitoring products by our competitors;

competition, including introductions of power optimizer, inverter and solar photovoltaic ("PV") system monitoring products by our competitors;

developments in alternative technologies or improvements in distributed solar energy generation;

26 unchanged sentences

Except as required by law, we assume no obligation to update these forward looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward looking statements, even if new information becomes available in the future.

We are a leading provider of an optimized inverter solution that has changed the way power is harvested and managed in a solar photovoltaic system, known as PV system.

We are a leading provider of an optimized inverter solution that has changed the way power is harvested and managed in a solar photovoltaic, known as PV system.

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

1 unchanged sentence

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

SolarEdge’s solutions addresses a broad range of solar market segments, from residential solar installations to commercial and small utility-scale solar installations.

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

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

SolarEdge now offers energy solutions which include not only residential, commercial and small utility scale PV systems but also product offerings in the areas of energy storage systems, or Energy Storage System or ESS and backup, electric vehicle, or EV components and charging capabilities, home energy management, grid services and virtual power plants, lithium-ion batteries and uninterrupted power supply, known as UPS solutions.

SolarEdge now offers energy solutions which include not only residential, commercial and small utility scale PV systems but also product offerings in the areas of energy storage systems or ESS and backup, electric vehicle, or EV components and charging capabilities, home energy management, grid services and virtual power plants, lithium-ion batteries and uninterrupted power supply, known as UPS solutions.

As part of our non-organic growth, we have completed three acquisitions during 2018 and 2019, each of which address our growth in the area of smart energy technology and power optimization.

During 2019, we completed the acquisition of approximately 99.9% of SolarEdge Automation Machines SPA (“Automation Machines Division”) and SolarEdge eMobility SPA (“e-Mobility Division”) (formerly S.M.R.E Spa and I.E.T Spa, respectively).

Our Automation Machines Division manufactures automated machinery for industries and our e-Mobility Division develops end-to-end e-Mobility solutions for electric and hybrid vehicles used in motorcycles and light commercial vehicles.

These solutions include integrated, high-performing powertrains with e-motor, motor drive, gearbox, battery, BMS, chargers, vehicle control units and software for electric vehicles.

In September 2020 we commenced the production ramp up of our manufacturing facility in the North of Israel, “Sella 1”.

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

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

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

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

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

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

In the third quarter of 2020 we began commercial shipments to the U.S from our manufacturing facility in the North of Israel, “Sella 1”.

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

During the second quarter of 2021, Sella 1 is expected to reach its full manufacturing capacity.

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

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

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

We are a leader in the global module-level power electronics (“MLPE”) market.

As of September 30, 2020, we have shipped approximately 61.7 million power optimizers and 2.6 million inverters.

As of March 31, 2021, we have shipped approximately 69.1 million power optimizers and 2.9 million inverters.

Over 2 million installations, many of which may include multiple inverters, are currently connected to, and monitored through, our cloud‑based monitoring platform.

As of September 30, 2020, we have shipped approximately 21.0 GW of our DC optimized inverter systems.

Our revenues for the three months ended September 30, 2020 and 2019 were $338.1 million and $410.6 million, respectively.

Gross margin was 32.0% and 33.9% for the three months ended September 30, 2020 and 2019, respectively.

Net income was $43.8 million and $41.6 million for the three months ended September 30, 2020 and 2019, respectively.

Our revenues for the nine months ended September 30, 2020 and 2019 were $1,101.2 million and $1,007.4 million, respectively.

Gross margin was 31.9% and 33.4% for the nine months ended September 30, 2020 and 2019, respectively.

Net income was $122.7 million and $93.8 million for the nine months ended September 30, 2020 and 2019, respectively.

As of March 31, 2021, we have shipped approximately 24.0 GW of our DC optimized inverter systems.

Our revenues for the three months ended March 31, 2021 and 2020 were $405.5 million and $431.2 million, respectively.

Gross margin was 34.5% and 32.5% for the three months ended March 31, 2021 and 2020, respectively.

Net income was $30.1 million and $42.2 million for the three months ended March 31, 2021 and 2020, respectively.

COVID-19 Impact

We are continuously and closely monitoring the evolving impact of COVID-19 on our operations and business.

Our first priority continues to be to protect and support our employees through this period while maintaining company operations and support of our customers with as few disruptions as possible.

Given that we have employees in many countries world-wide, we follow the guidance issued by applicable local authorities and health officials in each region in which we do business including in our headquarters located in Israel and have been able to continue our operations remotely or from our offices.

Continued travel restrictions however have had an impact on our operations, including, by way of example delays in third party testing and certification of new products.

Our manufacturing facilities in Korea and Italy and our contract manufacturers facilities in China, Vietnam and Hungary have remained operational and at almost full capacity, with brief interruptions on a case by case basis in compliance with local laws.

Our customer support centers are working at full capacity, primarily from home.

We continue to monitor the evolving impact of COVID-19 on our operations and business.

Our first priority continues to be protecting and supporting our employees while maintaining company operations and support of our customers with as few disruptions as possible.

We follow the guidance issued by applicable local authorities and health officials in each region in which we do business, including in our headquarters located in Israel, and have been able to continue our operations remotely or from our offices.

We have maintained a flexible attendance policy that has allowed our employees to work remotely, where possible, in order to reduce the number of people who are in our offices while our labs and manufacturing facilities remain fully operational.

Our manufacturing facilities in Korea, Italy and Israel and our contract manufacturers facilities in China, Vietnam and Hungary have remained operational and at almost full capacity, with some interruptions on a case-by-case basis in compliance with local laws and in order to minimize the spread of the COVID-19 virus.

Our customer support centers are working at full capacity, partially from home.

Our operations and operating expenses have not been significantly impacted by these adjustments.

As disclosed last quarter, the actions taken around the world to slow the spread of COVID-19 have impacted the installation rate of PV systems which we are closely tracking through our monitoring portal globally and per country.

While the COVID-19 pandemic did not have a material adverse impact on our financial results for the first quarter of fiscal 2020, we saw and reported on a decline in installations in certain regions such as the United States and Italy beginning with the outbreak of the COVID-19 pandemic in March, 2020 and this had a negative impact on our revenues in the second and third quarters of 2020 when compared to the first quarter of 2020.

In certain cases we accommodated customers in certain regions who requested to cancel or delay the supply of their orders.

As anticipated, our third quarter revenues of $338.1 million, a slight increase from reveues of $331.9 million in the second quarter of 2020, reflect strong installation rates in Europe and rest of world, and slower recovery in the United States.

During the third quarter of 2020, many of our customers installed systems they had accumulated in inventory, resulting in lower quarterly revenues from our U.S.-based customers.

Our management and board are continuously examining our plans for 2020 and reacting to the current economic downturn, high unemployment rates in many countries and negative impact on businesses generally.

As we reported in our Form 10Q for the quarter ended March 31, 2020 and June 30, 2020, we have taken actions in order to mitigate the negative impacts of COVID-19 on our business, operating results and financial condition.

We have reviewed our business plan for 2020 and made certain adjustments in the second quarter of 2020 which remained in effect during the third quarter.

These adjustments include substantial reduction of new hiring that were planned for the third quarter as well as elimination of redundant positions, which reductions were implemented in the past quarters.

The impact of these reductions will be reflected in our 2020 year-end financial results.

In addition, as we reported last quarter, we reviewed and cut back where possible on our spending and management of operations including a review of all of our variable, research and development projects and our executives and board members also voluntarily reduced their base salaries/compensation.

These measures are reviewed by management on a quarterly basis and to date, remain in place.

Continued travel restrictions however continue to have an impact on our operations.

As anticipated, our first quarter revenues of $405.5 million reflect continued recovery from the impacts of the global pandemic, with an increase of 13.2% from the $358.1 million of revenues in the fourth quarter of 2020.

This increase reflects an increase in demand in the United States which has not fully returned to pre-COVID installation rates.

Key Operating Metrics

11 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Inverters shipped

7 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Cost of revenues

6 unchanged sentences

Operating income

Financial expenses (income), net

Financial expenses, net

Income before taxes on income

Taxes on income

Net loss (gain) attributable to non-controlling interests

Net income attributable to SolarEdge Technologies, Inc.

Comparison of the Three Months Ended September 30, 2020 and 2019

Comparison of the Three Months Ended March 31, 2021 and 2020

Three Months Ended

September 30,

Three Months Ended

September 30,

(in thousands)

Revenues decreased by $72.5 million, or 17.6%, for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019, primarily due to decreased sales in the U.S.

which we attribute principally to the adverse effect of the COVID 19 pandemic on the economy in the United States.

This decrease was partially offset by $18.5 million of increased sales in Europe and the rest of world.

Revenues decreased by $25.7 million, or 6.0%, for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, partially due to decreased sales of $84.3 million in the U.S.

which we attribute principally to the high level of safe harbor-related revenues in the amount of $51.4 million generated in the United States in the first quarter of 2020 which did not occur in 2021 due to the expected extension of the Solar Investment Tax Credits, as well as to the negative impact of COVID-19 on the economy in the United States which has not yet returned to pre-COVID installation rates and a change in our customer mix in the United States towards larger customers that enjoy preferable pricing.

The lower revenues from the United States were partially offset by an increase of $46.1 million and $12.5 million of revenues from Europe and the rest of world, respectively where the COVID effect on demand was smaller.

Revenues from outside of the U.S.

comprised 68.4% of our revenues for the three months ended September 30, 2020 compared to 51.8% for the three months ended September 30, 2019.

In our solar business, we expect that in the fourth quarter of 2020, revenues from Europe will decrease due to seasonality which is typically experienced in Europe during the colder months.

This reduction is expected to be offset by higher anticipated revenues in the United States which we expect will result in a slight increase in the overall revenues in the fourth quarter of 2020 as compared to the third quarter of 2020.

It is also expected that the fourth quarter results will include revenues from the sale of full powertrain kits to an automative OEM by our eMobility business which is part of our non-solar business.

The number of power optimizers recognized as revenues decreased by approximately 1.3 million units, or 28.3%, from approximately 4.6 million units in the three months ended September 30, 2019 to approximately 3.3 million units in the three months ended September 30, 2020.

The number of inverters recognized as revenues decreased by approximately 30,800 units, or 16.5%, from approximately 187,000 units in the three months ended September 30, 2019 to approximately 156,200 units in the three months ended September 30, 2020.

Our blended ASP per watt for solar products shipped decreased by $0.049, or 18.5%, in the three months ended September 30, 2020 as compared to the three months ended September 30, 2019.

This reduction is primarily attributed to an increased rate of revenues driven from the sale of commercial products mainly in the U.S that are characterized with lower ASP per watt as well as a change in our customer mix in the United States towards larger customers that enjoy preferable pricing.

This ASP erosion was partially offset by the strengthening of the Euro against the U.S.

comprised 59.7% of our revenues for the three months ended March 31, 2021 compared to 42.6% for the three months ended March 31, 2020.

The number of power optimizers and inverters recognized as revenues:

Three Months Ended

Power optimizers

Our blended ASP per watt for solar products shipped decreased by $0.008, or 3.6%, in the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

This reduction is primarily attributed to a change in our customer mix in the United States toward larger customers that enjoy preferable pricing.

This ASP erosion was partially offset by an increased rate of shipments generated from the sale of residential products, mainly in Europe that are characterized with higher ASP per watt, as well as the strengthening of the Euro and the Australian Dollar against the U.S.

Cost of Revenues and Gross Profit

Three Months Ended

September 30,

Three Months Ended

September 30,

(in thousands)

Cost of revenues

Cost of revenues decreased by $41.2 million, or 15.2%, in the three months ended September 30, 2020, as compared to the three months ended September 30, 2019, primarily due to:

a decrease in the volume of products sold;

decreased shipment and logistics costs of $16.0 million mainly attributed to lower custom tariff charges on Chinese made products imported into the U.S resulting from a decrease in sales in the U.S and a higher portion of our products manufactured outside of China that were imported into the U.S.

In addition, a decrease in air shipment costs resulted from higher inventory levels.

a decrease in warranty expenses and warranty accruals of $6.6 million associated with various cost reductions on the different elements of our warranty expenses which include the cost of the products, shipment and other related expenses;

These decreases were partially offset by an increase of $8.1 million in other production costs, which were mainly attributed to:

$1.3 million related to ramp up costs associated with the commencement of production in the Sella 1 manufacturing facility;

$2.9 million related to ramp up manufacturing expenses in the SolarEdge e-Mobility division.

In our solar business we anticipate that our cost of revenues per unit will decrease in the last quarter of 2020 due to realization of cost reduction activities conducted in the previous quarters.

Gross profit as a percentage of revenue decreased from 33.9% in the three months ended September 30, 2019 to 32.0% in the three months ended September 30, 2020, primarily due to:

Cost of revenues decreased by $25.8 million, or 8.9%, in the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to:

a decrease in the volume of products sold;

increased rate of actual support costs related to our warranty obligations due to an increase in our install base from past sales which effects the calculation of such costs as a percentage of our revenues since our install base grew in 2020 while revenues decreased compared to the same quarter of 2019, resulting in a higher rate of warranty expenses to revenues.

an increase in other production costs and inventory valuation accruals as well as other expenses related to reduced manufacturing volumes due to COVID-19;

lower gross profit from our e-Mobility and Automation Machines divisions, coupled with ramp up manufacturing expenses in our e-Mobility division.

decreased shipment and logistics costs of $24.6 million mainly attributed to lower United States tariff charges due to a higher portion of our products for the United States manufactured outside of China as well as a decrease in revenues from the United States compared to the three months ended March 31, 2020.

In addition, we incurred less air shipment costs resulting from higher inventory levels;

These were partially offset by:

an increase in warranty expenses and warranty accruals of $3.6 million associated with different elements of our warranty expenses which include the cost of the products, shipment and other related expenses;

an increase of $5.2 million in inventory accrual which is mainly attributed to changes in raw material inventory valuations related to manufacturing volumes, anticipated future use of such raw materials and inventory write-offs.

Gross profit as a percentage of revenue increased from 32.5% in the three months ended March 31, 2020 to 34.5% in the three months ended March 31, 2021, primarily due to:

the absence of safe harbor related sales, that were characterized with a lower gross margin in the first quarter of 2020;

decreased shipment and logistics costs mainly attributed to a decrease in the portion of products made in China resulting in reduced custom tariffs, a decrease in revenues in the U.S.

and a decrease in air shipments costs resulting from higher inventory levels;

favorable exchange rates on our sales outside of the Unites States;

continued cost reduction efforts.

These factors were partially offset by:

decreased shipment and logistics costs mainly attributed to lower custom tariff charges on Chinese made products imported into the U.S resulting from a decrease in sales in the U.S and a higher portion of our products manufactured outside of China that were imported into the U.S.

In addition, a decrease in air shipments costs resulted from higher inventory levels;

decreased warranty accruals due to various cost reductions on the different elements of our warranty expenses which include the cost of the products, shipment and other related expenses and a change in the product mix sold in the third quarter of 2020 compared to the same period in the previous year.

We expect that gross margin as a percent of revenues will remain similar in the fourth quarter of 2020 to that of the third quarter of 2020.

In light of the uncertain impact of COVID-19 on the rate of growth of our acquired businesses, accounting estimates and assumptions related to goodwill, intangible and other assets may change over time in response to uncertain circumstances related to this evolving situation.

Such changes could result in future impairments of goodwill, intangible and other assets.

an increase in support costs related to our warranty obligations due to an increase in our install base which affects the calculation of such costs as a percentage of our revenues since our install base grew in 2021 while revenues decreased compared to the same quarter in 2020, resulting in a higher rate of warranty expenses to revenues;

an increase in inventory valuation accruals;

lower gross profit from our Critical Power, Automation Machines and Kokam businesses.

Research and Development

Three Months Ended

September 30,

Three Months Ended

September 30,

(in thousands)

Research and development

Research and development costs increased by $10.1 million, or 32.8%, in the three months ended September 30, 2020, as compared to the three months ended September 30, 2019, primarily due to:

an increase in personnel-related costs of $7.7 million resulting from an increase in our research and development headcount as well as salary expenses associated with employee equity-based compensation.

The increase in headcount reflects our continuing investment in enhancements of existing products as well as research and development expenses associated with bringing new products to the market;

Research and development costs increased by $10.3 million, or 28.0%, in the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to:

an increase in personnel-related costs of $8.8 million resulting from an increase in our research and development headcount which returned to growth after the stabilization of the business environment and the roll back of the hiring freeze imposed at the beginning of the COVID pandemic, as well as salary expenses associated with employee equity-based compensation.

The increase in headcount reflects our continuing investment in the enhancement of existing products as well as research and development expenses associated with bringing new products to the market;

increased expenses related to consultants and sub‑contractors in an amount of $2.4 million.

We expect that our research and development expenses in the fourth quarter will remain relatively stable compared to the third quarter primarily due to cost reduction activities initiated in response to COVID-19 and the continued halt in travel and travel related expenses.

These were partially offset by a payment of $2.5 million, received by SolarEdge e-Mobility from a customer in connection with research and development activities.

Sales and Marketing

Three Months Ended

September 30,

Three Months Ended

September 30,

(in thousands)

Sales and marketing

Sales and marketing expenses decreased by $0.1 million, or 0.5%, in the three months ended September 30, 2020, as compared to the three months ended September 30, 2019.

We expect sales and marketing expenses to slightly increase in the fourth quarter of 2020 primarily due to an increase in our sales and marketing headcount.

This increase is expected to be partially offset by our cost reduction activities initiated in response to COVID-19 and the reduction of expenses related to the continued halt in travel and travel related expenses.

Sales and marketing expenses increased by $2.7 million, or 11.0 %, in the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to increased personnel-related costs of $4.0 million as a result of an increase in salary expenses associated with employee equity-based compensation.

This increase was partially offset by a decrease in expenses related to travel in an amount of $1.0 million.

General and Administrative

Three Months Ended

September 30,

Three Months Ended

September 30,

(in thousands)

General and administrative

General and administrative expenses increased by $2.7 million, or 22.2%, in the three months ended September 30, 2020, as compared to the three months ended September 30, 2019, primarily due to:

increased expenses related to consultants and sub‑contractors in an amount of $2.0 million, which includes a $1.5 million provision resulting from a litigation judgement in China that is under appeal;

increased personnel-related costs of $1.3 million resulting from an increase in headcount supporting our growth in Europe and Asia, as well as salary expenses associated with employee equity-based compensation.

While we did provide payment extensions to certain customers, substantially all of these payments have now been made and we did not experience significant customer defaults on payments or incur substantial losses related to customer bankruptcies.

We continue to be cautious in providing credit to our customers.

In the fourth quarter of 2020, we may still incur customer defaults on payments and other bad debts as a result of the impact of the economic downturn caused by COVID-19 on our customers.

If this occurs, these write-offs would be reflected in our general and administrative expenses in future fiscal quarters.

General and administrative expenses increased by $3.7 million, or 22.6%, in the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to:

increased personnel-related costs of $3.1 million resulting from an increase in headcount due to hiring of senior executives during 2020, the roll back of the hiring freeze that we implemented at the start of COVID-19 and the expansion of certain general and administrative functions in the non-solar businesses, as well as salary expenses associated with employee equity-based compensation;

increased provision of $3.6 million in connection with legal claims.

These were partially offset by a decrease in expenses related to accrual for doubtful debts in an amount of $1.9 million.

Other operating expenses

Three Months Ended

September 30,

Three Months Ended

September 30,

(In thousands)

Other operating expenses

Other operating expenses decreased by $8.3 million, in the three months ended September 30, 2020 compared to the three months ended September 30, 2019, due to expenses in the amount of $8.3 million related to payroll, bonus and employees’

equity-based compensation acceleration related to the untimely death of Mr.

Guy Sella, our Founder, who had served as CEO and Chairman of the Board of Directors until shortly before his passing.

Financial expenses (income), net

Other operating expenses was $2.2 million in the three months ended March 31, 2021, compared to other operating income of $4.9 million in three months ended March 31, 2020, primarily due to:

a decrease in income in the amount of $4.9 million incurred in the first quarter of 2020 related to an acquired legal claim as part of the Kokam acquisition which was settled in arbitration;

an increase of $2.2 million in expenses related to write-offs of tangible assets in our solar business, which we ceased to use during the first quarter of 2021.

Financial expenses, net

Three Months Ended

September 30,

Three Months Ended

September 30,

(in thousands)

Financial expenses (income), net

Financial income was $15.8 million in the three months ended September 30, 2020 compared to financial expenses of $17.0 million in the three months ended September 30, 2019, primarily due to an increase of $18.9 million in financial income resulted from foreign exchange fluctuations, mainly between each of the Euro, the New Israeli Shekel, the Australian Dollar and the South Korean Won against the U.S.

Dollar, compared to financial expenses of $15.8 million in the three months ended September 30, 2019.

Financial expenses, net

Financial expenses were $6.1 million in the three months ended March 31, 2021 compared to $16.6 million in financial expenses in the three months ended March 31, 2020, primarily due to:

a decrease of $7.1 million in foreign exchange fluctuations, mainly between the Euro, the New Israeli Shekel and the South Korean Won against the U.S.

an increase of $3.5 million in finance income related to hedging transactions.

Taxes on Income

Three Months Ended

September 30,

Three Months Ended

September 30,

(in thousands)

Taxes on income

Taxes on income decreased by $4.9 million, or 66.9%, in the three months ended September 30, 2020 as compared to the three months ended September 30, 2019, primarily due to:

a decrease of $7.3 million of current tax expenses mainly attributed to a decrease in taxable income and GILTI taxes, both due to higher deductible expenses in the three months ended September 30, 2020, as compared to the three months ended September 30, 2019;

a decrease in previous years taxes of $1.3 million.

Taxes on income decreased by $1.0 million, or 10.8%, in the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to a decrease of $2.3 million of current tax expenses mainly attributed to a decrease in taxable income and Global Intangible Low-Taxed Income or GILTI taxes, both due to higher deductible expenses in the three months ended March 31, 2021, as compared to the three months ended March 31, 2020.

This decrease was partially offset by a decrease of $1.4 million in deferred tax assets, net.

Given the ongoing impact of the economic downturn caused by COVID-19, we expect our tax expenses related to taxes on income to remain stable.

Three Months Ended

September 30,

Three Months Ended

September 30,

(in thousands)

As a result of the factors discussed above, net income increased by $2.0 million, or 4.9%, in the three months ended September 30, 2020, as compared to the three months ended September 30, 2019.

Comparison of the Nine Months Ended September 30, 2020 and 2019

Nine Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Revenues increased by $93.7 million, or 9.3%, for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, primarily due to (i) an increase in the number of inverters and power optimizers sold, with growth in revenues coming from Europe and from the U.S., mainly during the first quarter of 2020;

and (ii) price increases on products sold in the U.S.

intended to offset the increase in imposed tariffs on China made products in June 2019.

Revenues from outside of the U.S.

comprised 56.4% of our revenues for the nine months ended September 30, 2020 compared to 56.2% for the nine months ended September 30, 2019.

The number of power optimizers recognized as revenues increased by approximately 0.6 million units, or 5.2%, from approximately 11.2 million units in the nine months ended September 30, 2019 to approximately 11.8 million units in the nine months ended September 30, 2020.

The number of inverters recognized as revenues increased by approximately 16,600 units, or 3.5%, from approximately 478,400 units in the nine months ended September 30, 2019 to approximately 495,000 units in the nine months ended September 30, 2020.

Revenues from sale of commercial products that are characterized with lower ASP per watt increased during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.

Overall, and primarily due to the factors detailed above, our ASP per watt for solar products shipped decreased by $0.024, or 9.7%, in the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.

Cost of Revenues and Gross Profit

Nine Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Cost of revenues

Cost of revenues increased by $78.8 million, or 11.7%, in the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019, primarily due to:

an increase in the volume of products sold;

increased customs tariffs, shipment and logistics costs of $16.9 million attributed to the change in tariff rates on Chinese made products imported into the U.S.

from 10% to 25% in June 2019 as well as an increase in shipment costs due to increased product demand mainly in the first quarter of 2020;

an increase in other production costs of $26.4 million, which is mainly attributed to:

an accrual for possible raw material write offs resulting from our reduced manufacturing forecast (triggered by lower demand) which may result in rendering these raw materials obsolete as well as other expenses related to reduced manufacturing volumes due to COVID-19.

In addition this amount includes $1.3 million related to ramp up costs associated with the commencement of production in the Sella 1 manufacturing facility and $2.9 million related to ramp up manufacturing expenses in our e-Mobility division;

an increase in personnel-related costs of $7.5 million related to the expansion of our operations and support headcount which grew in parallel to our growing install base worldwide and in connection with entering into the machinery and integrated powertrain markets.

This increase was partially offset by a decrease in warranty expenses and warranty accruals of $5.4 million associated with various cost reductions on the different elements of our warranty expenses which include the cost of the products, shipment and other related expenses;

Gross profit as a percentage of revenue decreased from 33.4% in the nine months ended September 30, 2019 to 31.9% in the nine months ended September 30, 2020, primarily due to:

an increase in other production costs;

increased shipment and logistics costs resulted from our growth and new customs tariff rules in the U.S.;

the arithmetic effect from the increase in selling prices in the U.S.

intended to offset the increase in tariffs on Chinese made products imported into the U.S.

from 10% to 25% in June 2019;

increased actual support costs related to our warranty obligations;

lower gross profit from our e-Mobility and Automation Machines Divisions, coupled with ramp up manufacturing expenses in our e-Mobility division.

These were partially offset by:

increased profit on units sold due to cost reductions in the manufacturing process of these products;

decreased warranty accruals due to various cost reductions on the different elements of our warranty expenses which include the cost of the products, shipment and other related expenses.

Research and Development

Nine Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Research and development

Research and development increased by $29.2 million, or 33.7%, in the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019, primarily due to:

an increase in personnel-related costs of $21.5 million resulting from an increase in our research and development headcount as well as salary expenses associated with employee equity-based compensation.

The increase in headcount reflects our continued investment in enhancements of existing products and research and development expenses associated with bringing new products to the market;

increased expenses related to consultants and sub-contractors in an amount of $3.4 million;

increased expenses related to other overhead costs in an amount of $2.9 million.

Sales and Marketing

Nine Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Sales and marketing

Sales and marketing expenses increased by $2.8 million, or 4.3%, in the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, primarily due to:

increased personnel-related costs of $5.8 million as a result of an increase in headcount supporting our growth, as well as salary expenses associated with employee equity-based compensation;

increased expenses related to other overhead costs and other expenses in an amount of $1.2 million.

These factors were partially offset by:

decreased expenses related to marketing activities in an amount of $2.1 million;

decreased expenses related to travel in an amount of $2.1 million.

General and Administrative

Nine Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

General and administrative

General and administrative expenses increased by $7.5 million, or 19.9%, in the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, primarily due to:

increased expenses related to an accrual for doubtful debts in an amount of $3.9 million;

increased personnel-related costs of $2.6 million.

Other operating (income) expenses

Nine Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

Other operating (income) expenses

Other operating income was $4.9 million, in the nine months ended September 30, 2020 compared to other operating expenses of $8.3 million in the nine months ended September 30, 2019, due to:

a payment of $5 million received by us in connection to a matter settled in arbitration for Kokam Co., Ltd.

(“Kokam”) in the fourth quarter of 2019, for which we had indemnification;

a decrease in expenses in the amount of $8.3 million related to payroll, bonus and employees’

equity-based compensation acceleration related to the untimely death of Mr.

Guy Sella, our Founder, who had served as CEO and Chairman of the Board of Directors until shortly before his passing.

Financial Expenses (Income), net

Nine Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

Financial expenses (income), net

Financial income was $10.7 million in the nine months ended September 30, 2020 compared to financial expenses of $22.4 million in the nine months ended September 30, 2019, primarily due to an increase of $34.7 million in foreign exchange fluctuations, mainly between each of the Euro, the New Israeli Shekel, the Australian Dollar and the South Korean Won against the U.S.

Taxes on Income

Nine Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

Tax on Income

Taxes on income decreased by $8.2 million, or 33.7% in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily due to:

a decrease of $5.5 million of current tax expenses mainly attributed to a decrease of taxable income and GILTI taxes, both due to higher deductible expenses in the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019.

a decrease in previous years taxes of $1.7 million.

an increase of $1.0 million in deferred tax assets, net.

Nine Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

As a result of the factors discussed above, net income increased by $30.1 million, or 32.5% in the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019.

As a result of the factors discussed above, net income decreased by $12.2 million, or 28.8%, in the three months ended March 31, 2021, as compared to the three months ended March 31, 2020.

Liquidity and Capital Resources

The following table shows our cash flow from operating activities, investing activities and financing activities for the stated periods:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended

(in thousands)

Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Increase in cash and cash equivalents

As of September 30, 2020, our cash and cash equivalents were $1,048.1 million.

Increase (decrease) in cash and cash equivalents

As of March 31, 2021, our cash and cash equivalents were $685.2 million.

This amount does not include $433.9 million invested in available for sale marketable securities, $2.5 million invested in restricted bank deposits and $43.6 million invested in short-term bank deposits.

Our principal uses of cash are funding our operations and other working capital requirements.

As of September 30, 2020, we have open commitments for capital expenditures in an amount of approximately $114.5 million.

Our principal uses of cash are for funding our operations and other working capital requirements.

As of March 31, 2021, we have open commitments for capital expenditures in an amount of approximately $84.8 million.

These commitments reflect purchases of automated assembly lines and other machinery related to our manufacturing operations.

1 unchanged sentence

We believe that cash provided by operating activities as well as our cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next 12 months including the self-funding of our capital expenditure commitments.

To the extent that revenues decrease over the coming quarters due to the economic downturn caused by COVID-19, we expect that our cash balances would also decrease.

This will be compounded by our continued investment in research and development activities including the establishment of a lithium-ion factory in Korea which is continuing as planned and the support of our other non-solar businesses as they grow.

We carefully oversee our cash resources and believe that our strong balance sheet positions us well to manage the coming quarters despite any temporary decline in revenues.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law.

Section 2302 of the CARES Act provides that employers may defer the deposit and payment of the employer's portion of Social Security taxes imposed under section 3111(a) of the Internal Revenue Code.

As permitted under the CARES Act, we deferred payment of social security taxes through the end of 2020 (with 50% of the deferred amount due December 31, 2021 and the remaining of 50% amount due December 31, 2022).

This deferral is expected to provide approximately $1.2 million in additional liquidity during 2020.

Operating Activities

For the nine months ended September 30, 2020, cash provided by operating activities was $195.4 million, derived mainly from net income of $122.7 million that included $62.2 million of non-cash expenses, a decrease of $118.0 million in trade receivables and $37.9 million in prepaid expenses and other accounts receivable, an increase of $10.6 million in accrued expenses and other accounts payable, $23.2 million in warranty obligations, and $3.1 million accruals for employees.

This was offset by a decrease of $24.3 million in deferred revenues, $35.5 million in trade payables, an increase of $122.0 million in inventories, and $0.5 million in operating lease liabilities.

For the nine months ended September 30, 2019, cash provided by operating activities was $175.9 million, derived mainly from a net income of $92.6 million that included $54.5 million of non-cash expenses, an increase of $49.6 million in warranty obligations, $39.6 million in accrued expenses and other accounts payable, $21.3 million in trade payables, $19.5 million of deferred revenues, $15.3 million in accruals for employees, $2.1 in operating lease liabilities and $15.8 million decrease in inventories, which were offset by an increase of $114.6 million in trade receivables, net, and $19.8 million in prepaid expenses and other receivables.

As a result of the disruption caused by COVID-19, we continue to anticipate a lower volume of orders in the next quarters relative to pre-COVID-19 orders, and in light of purchase obligations and manufacturing commitments incurred by us prior to the outbreak of COVID-19, our inventory levels may further increase in the next quarters resulting in consumption of cash for operating activities.

During the three months ended March 31, 2021, cash provided by operating activities was $24.1 million, derived mainly from a net income of $30.1 million that included $47.8 million of non-cash expenses, a decrease of $20.2 million in prepaid expenses and other accounts receivable, an increase of $6.6 million in accrued expenses and other accounts payable, $13.1 million in warranty obligations, $7.5 million in accruals for employees and $3.6 million in deferred revenues.

This was offset by an increase of $57.4 million in trade receivables, $8.4 million in inventories and a decrease of $39.0 million in trade payables.

During the three months, ended March 31, 2020, cash provided by operating activities was $107.7 million derived mainly from a net income of $42.2 million that included $16.4 million of non-cash expenses, a decrease of $59.4 million in trade receivables and $49.9 million in prepaid expenses and other accounts receivable, and an increase of $13.8 million in warranty obligations and $11.8 million in accruals for employees.

This was offset by a decrease of $31.7 million in deferred revenues and $17.6 million in trade payables, and an increase of $29.0 million in inventories and $7.5 million in accrued expenses.

Investing Activities

During the nine months ended September 30, 2020 net cash provided by investing activities was $0.7 million, of which $116.4 million from maturities of available-for-sale marketable securities which were not re-invested in order to maintain high cash balances to mitigate risks associated with COVID-19 and $25.5 million from the withdrawal from restricted bank deposits.

This was offset by $36.8 million which was invested in available-for-sale marketable securities, $14.6 million was invested in short term bank deposits, and $89.8 million was related to capital investments in laboratory equipment, end of line testing equipment, automated assembly lines, manufacturing tools and leasehold improvements.

During the nine months ended September 30, 2019, net cash used in investing activities was $58.4 million, of which $103.7 million was invested in available-for-sale marketable securities, $39.7 million related to capital investments in laboratory equipment, end of line testing equipment, automated assembly lines, manufacturing tools and leasehold improvements, net, $38.4 million was utilized for the acquisition of SolarEdge Automation Machines SPA and SolarEdge eMobility SPA (formerly S.M.R.E Spa and I.E.T Spa, respectively), This was offset by $119.6 million from proceeds from sales and the maturities of available-for-sale marketable securities and a decrease of $3.8 million in bank deposits.

During the three months ended March 31, 2021, net cash used in investing activities was $153.6 million, of which $186.5 million which was invested in available-for-sale marketable securities and $24.5 million was related to capital investments in laboratory equipment, end of line testing equipment, automated assembly lines, manufacturing tools and leasehold improvements.

This was offset by $40.4 million from maturities of available-for-sale marketable securities, $16.5 million from the withdrawal from bank deposits and $0.5 million related to other investing activities.

During the three months ended March 31, 2020 net cash used in investing activities was $19.9 million, of which $31.9 million was invested in available-for-sale marketable securities, $27.0 million related to capital investments in laboratory equipment, end of line testing equipment, automated assembly lines, manufacturing tools and leasehold improvements and $3.3 million was invested in bank deposits.

This was offset by $42.3 million from maturities of available-for-sale marketable securities.

Financing Activities

For the nine months ended September 30, 2020, net cash provided by financing activities was $637.3 million, of which, $618.3 million were proceeds from the issuance of the Notes, net of $14.2 million of issuance costs , $15.2 million related to proceeds from new bank loans of Kokam and $19.2 million attributed to cash received from the exercise of employee and non-employee stock-based awards.

This was offset by $15.4 million used for repayment of loans we acquired as part of the Kokam acquisition.

For the nine months ended September 30, 2019, net cash used in financing activities was $68.3 million, of which $67.1 million related to the purchase of non-controlling interests in Kokam and SolarEdge Automation Machines, $4.9 million was used for repayment of loan obligations we acquired as part of the acquisitions of Kokam, SolarEdge Automation Machines SPA and SolarEdge eMobility SPA and $1.2 million was related to the purchase of land and building formerly leased under a financial lease.

This was offset by $4.9 million attributed to cash received from the exercise of employee and non-employee stock options.

During the three months ended March 31, 2021, net cash used in financing activities was $2.1 million, of which $1.7 million attributed to cash received from the exercise of employee and non-employee stock-based awards net of withholding taxes effect and $0.4 million related to other financing activities.

During the three months ended March 31, 2020, net cash provided by financing activities was $3.3 million, of which, $15.2 million was used for repayment of loans we acquired as part of the Kokam Acquisition and $0.1 million used for payments related to finance lease.

This was offset by $15.3 million related to proceeds from new bank loans of Kokam and $3.3 million attributed to cash received from the exercise of employee and non-employee stock-based awards.

Convertible Senior Note

5 unchanged sentences

Debt Obligations

   During the nine months ended September 30, 2020, Kokam redeemed all outstanding loans and entered into new bank loans in an aggregate amount of $15.2 million.

The new bank loans mature in two installments through December 31, 2020, with annual interest rate of 1.64%.

As of September 30, 2020, the aggregate outstanding amount of the new bank loans was $15.6 million.

During 2020, we redeemed all outstanding loans, including the bank loan obligations acquired as part of the acquisition of Kokam and entered into new bank loans in an aggregate amount of $15.2 million.

The new bank loans mature in two installments through June 30, 2021, with a monthly interest rate of 1.54%.

As of March 31, 2021, the aggregate outstanding amount of the new bank loans was $16.1 million.

In addition, during 2020, we entered into a second bank loan in an aggregate amount of $1.4 million.

The second bank loan matures in September 2030, with a monthly interest rate of 2.5%.

As of March 31, 2021, the aggregate outstanding amount of the second bank loan was $1.4 million.

Off-Balance Sheet Arrangements

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements