What changed in this filing

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Item 1. Financial Statements

2023-05-08 compared with 2022-11-08 · 147 added, 303 removed, 420 unchanged (52% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

September 30,

CURRENT ASSETS:

17 unchanged sentences

(in thousands, except per share data)

September 30,

LIABILITIES AND STOCKHOLDERS’ EQUITY

17 unchanged sentences

Common stock of $ 0.0001 par value - Authorized:

125,000,000 shares as of September 30, 2022 and December 31, 2021;

125,000,000 shares as of March 31, 2023 and December 31, 2022;

issued and outstanding:

55,894,106 and 52,815,395 shares as of September 30, 2022 and December 31, 2021, respectively

56,343,164 and 56,133,404 shares as of March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

8 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), net

Other operating income, net

Total operating expenses

Operating income

Financial expense, net

Financial income (expense), net

Income before income taxes

5 unchanged sentences

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(in thousands, except per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Other comprehensive income (loss), net of tax:

Net change related to available-for-sale securities

Net change related to cash flow hedges

Available-for-sale marketable securities

Cash flow hedges

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

Foreign currency translation adjustments, net

Foreign currency translation adjustments

Total other comprehensive loss

Comprehensive income (loss)

Comprehensive income

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

2 unchanged sentences

(in thousands, except per share data)

comprehensive

Additional paid in

other comprehensive

Retained earnings

Balance as of January 1, 2023

1 unchanged sentence

Stock based compensation

Issuance of common stock in a secondary public offering, net of underwriters' discounts and commissions of $ 27,140 and $ 834 of offering costs

Other comprehensive loss adjustments

Balance as of March 31, 2023

Issuance of Common Stock upon exercise of stock-based awards

Issuance of Common stock under employee stock purchase plan

Stock based compensation

Other comprehensive loss adjustments

Balance as of June 30, 2022

Issuance of Common Stock upon exercise of stock-based awards

Stock based compensation

Other comprehensive loss adjustments

Balance as of September 30, 2022

* Represents an amount less than $1.

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

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(in thousands, except per share data)

comprehensive

Additional paid in

other comprehensive

income (loss)

Retained earnings

Balance as of January 1, 2022

Cumulative effect of adopting ASU 2020-06

Issuance of common stock upon exercise of stock-based awards

Stock based compensation

Issuance of common stock in a secondary public offering, net of underwriters' discounts and commissions of $ 27,140 and $ 834 of offering costs

Other comprehensive loss adjustments

Balance as of March 31, 2022

Issuance of Common Stock upon exercise of stock-based awards

Stock based compensation

Other comprehensive income adjustments

Balance as of June 30, 2021

Issuance of Common Stock upon exercise of stock-based awards

Stock based compensation

Other comprehensive loss adjustments

Balance as of September 30, 2021

* Represents an amount less than $1.

3 unchanged sentences

(in thousands, except per share data)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation of property, plant and equipment

Amortization of intangible assets

Amortization of debt discount and debt issuance costs

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

Impairment of goodwill and intangible assets

Depreciation and amortization

Stock-based compensation expenses

Gain from sale of privately held company

Deferred income taxes, net

Loss (gain) from sale and disposal of assets

Exchange rate fluctuations and other items, net

Loss (gain) from exchange rate fluctuations

Changes in assets and liabilities:

6 unchanged sentences

Deferred revenues and customers advances

Other liabilities, net

Accrued expenses and other liabilities, net

Net cash provided by (used in) operating activities

4 unchanged sentences

Investment in a privately-held company

Proceeds from sale of a privately-held company

Withdrawal from bank deposits, net

Payment for asset acquisition, net of cash acquired

Other investing activities

4 unchanged sentences

(in thousands, except per share data)

Nine Months Ended

September 30 ,

Three Months Ended

Cash flows from financing activities:

Proceeds from secondary public offering, net of issuance costs

Repayment of bank loans

Proceeds from exercise of stock-based awards

8 unchanged sentences

Right-of-use asset recognized with a corresponding lease liability

Purchase of property, plant and equipment

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

4 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 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) including the Company’s future ready energy hub inverter which supports, among other things, connection to a DC- coupled battery for backup capabilities, (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 residential storage and backup solution which includes a company designed and manufactured lithium-ion DC-coupled battery that is used to increase energy independence and maximize self-consumption for homeowners including a battery, and (v) additional smart energy management solutions.

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) including the Company’s Energy Hub inverter which supports, among other things, connection to a DC-coupled battery for full or partial home backup, and optional connection to the Company's smart EV charger, (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 residential storage and backup solution which includes a company designed and manufactured lithium-ion DC-coupled battery that is used to increase energy independence and maximize self-consumption for homeowners including a battery, 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.

1 unchanged sentence

The Company now offers a 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”), as well as automated machines for industrial use (“Automation Machines”).

In June 2022, the Company decided to discontinue its stand-alone uninterrupted power supply solutions or UPS (“Critical Power”).

The Company determined that the discontinuance of the Critical Power business does not represent a strategic shift that will have a major effect on the Company's operations and financial results and therefore it did not meet the criteria for discontinued operations classification.

Basis of Presentation:

10 unchanged sentences

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

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

Concentrations of supply risks:

The Company depends on two contract manufacturers and several limited or single source component suppliers, including, Samsung SDI, that provides lithium-ion battery cells required for the Company's residential storage solution.

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 September 30, 2022, and December 31, 2021, two contract manufacturers collectively accounted for 30.1 % and 27.9 % of the Company’s total trade payables, net, respectively.

As of March 31, 2023, and December 31, 2022, two contract manufacturers collectively accounted for 31.3 % and 34.3 % of the Company’s total trade payables, net, respectively.

In the second quarter of 2022, the Company announced the opening of “Sella 2”, a two gigawatt-hour (GWh) Li-Ion battery cell manufacturing facility located in South Korea.

Sella 2 is currently in testing phase with ramp-up expected during the fourth quarter of 2022.

Sella 2, is the Company's second owned manufacturing facility following the opening of the Company's manufacturing facility in the North of Israel, “Sella 1” in 2020 that produces power optimizers and inverters for the Company's solar activities.

New accounting pronouncements not yet adopted:

Sella 2 began producing and shipping cells at the end of 2022 and is expected to reach full manufacturing capacity in 2023.

Sella 2 is the Company's second owned manufacturing facility following the establishment of Sella 1 in 2020.

Sella 1 is the Company's manufacturing facility in the North of Israel that produces power optimizers and inverters for the Company's solar activities.

New accounting standards updates:

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies are adopted by the Company as of the specified effective date.

The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

Recently issued and adopted pronouncements:

In October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805).

This ASU requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606.

At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts.

The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years.

Adoption of the ASU should be applied prospectively.

Early adoption is also permitted, including adoption in an interim period.

The Company elected to early adopt ASU 2021-08 on January 1, 2022, and will apply this new guidance to all business combinations consummated subsequent to this date.

Currently, this ASU has no impact on our consolidated financial statements.

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance.

Under ASU 2021-10, the accounting entities with transactions with a government that are accounted for by analogy to a grant or contribution accounting model are required to annually disclose certain information regarding the transaction including:

(i) nature and related accounting policy used;

(ii) line items on the balance sheet and income statement affected by the transactions;

(iii) amounts applicable to each line item;

and (iv) significant terms and conditions.

This guidance is effective for financial statements issued for annual periods beginning after December 15, 2021.

The adoption of this ASU will have a minor impact on the disclosures to the annual consolidated financial statements.

The Company believes that the impact of recently issued or newly effective standards were not applicable to the Company, did not have a material impact on the condensed consolidated financial statements or are not expected to have a material impact on the condensed consolidated financial statements.

SOLAREDGE TECHNOLOGIES INC.

2 unchanged sentences

MARKETABLE SECURITIES

The following is a summary of available-for-sale marketable securities as of September 30, 2022:

The following is a summary of available-for-sale marketable securities as of March 31, 2023:

Gross unrealized

15 unchanged sentences

Governmental bonds

As of September 30, 2022, and December 31, 2021, the Company did not record an allowance for credit losses for its available-for-sale marketable securities.

As of March 31, 2023, and December 31, 2022, the Company did not record an allowance for credit losses for its available-for-sale marketable securities.

SOLAREDGE TECHNOLOGIES INC.

2 unchanged sentences

INVENTORIES, NET

September 30,

Raw materials

1 unchanged sentence

Finished goods

INVESTMENT IN PRIVATELY-HELD COMPANY

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.

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 (the "second investment").

On April 28, 2021, the Company completed the second investment.

The Company accounted for the AutoGrid investment as an equity investment without readily determinable fair values.

The Company’s non-marketable equity securities had a carrying value of $ 16,643 as of December 31, 2021.

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

On July 20, 2022, the Company completed the sale of its investment in AutoGrid for proceeds of $ 24,175 , thus recognizing a gain of $ 7,533 which was recorded in the statement of income under "Other income".

No impairment or other adjustments related to observable price changes in orderly transactions for identical or similar investments were identified up to the date of the sale.

Total inventories, net

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Vendor non-trade receivables (*)

Government authorities

Prepaid expenses and other

Total prepaid expenses and other current assets

(*) Vendor non-trade receivables derived from the sale of components to manufacturing vendors who manufacture products for the Company.

The Company purchases these components directly from other suppliers.

The Company does not reflect the sale of these components to the contract manufacturers in its revenues.

SOLAREDGE TECHNOLOGIES INC.

2 unchanged sentences

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

During the nine months ended September 30, 2022 , the Company instituted a foreign currency cash flow hedging program to protect against a forecasted increase in value of foreign currency cash flows resulting from salary denominated in Israeli currency, the New Israeli Shekels (“NIS”).

During the three months ended March 31, 2023, the Company instituted a foreign currency cash flow hedging program to reduce the risk of a forecasted increase in the value of foreign currency cash flows, resulting from payment of salaries in Israeli currency, the New Israeli Shekels (“NIS”).

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.

Conversely, when the dollar weakens, the increase in the present value of future foreign currency cash flows is offset by gains in the fair value of the hedging contracts.

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

As of September 30, 2022 , the Company entered into forward contracts and put and call options to sell U.S.

As of March 31, 2023, the Company entered into forward contracts and put and call options to sell U.S.

dollars (“USD”) for NIS in the amount of approximately NIS 231 million and NIS 125 million, respectively.

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

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, under " Financial expense, net ".

In addition to the above-mentioned cash flow hedge transactions, the Company occasionally enters into derivative instrument arrangements to hedge the Company’s exposure to currencies other than the USD.

The Company classifies cash flows related to its hedging as operating activities in its condensed consolidated statement of cash flows.

As of September 30, 2022 , the Company entered into forward contracts to sell Australian dollars (“AUD”) for USD in the amount of AUD 4 million .

As of September 30, 2022 , the Company entered into forward contracts to sell Euro for USD in the amount of € 9 million .

The fair values of outstanding derivative instruments were as follows:

Balance sheet location

September 30,

Derivative assets of options and forward contracts:

1 unchanged sentence

Prepaid expenses and other current assets

Non-designated hedges

Prepaid expenses and other current assets

Total derivative assets

Derivative liabilities of options and forward contracts:

1 unchanged sentence

Accrued expenses and other current liabilities

Non-designated hedges

Accrued expenses and other current liabilities

Total derivative liabilities

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

Gains (losses) on derivative instruments recognized in our income statements are summarized below:

Gains (losses) on derivative instruments are summarized below:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Affected line item

1 unchanged sentence

Non Designated Hedging Instruments

Financial expenses, net

See Note 13 for information regarding gains (losses) from designated hedging instruments reclassified from accumulated other comprehensive loss.

Gains (losses) on derivative instruments recognized in the consolidated comprehensive income (loss) statements were as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Foreign exchange contracts:

Condensed Consolidated Statements of Income - Financial income (expense), net

Designated Hedging Instruments

Condensed Consolidated Statements of Comprehensive Income - Cash flow hedges

See Note 13 for information regarding losses from designated hedging instruments reclassified from accumulated other comprehensive loss.

SOLAREDGE TECHNOLOGIES INC.

3 unchanged sentences

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, 2022 and December 31, 2021, by level within the fair value hierarchy:

Cash and cash equivalents are classified within Level 1 because these assets are valued using quoted market prices.

Marketable securities and foreign currency derivative contracts are classified within level 2 due to these assets being valued by alternative pricing sources and models utilizing market observable inputs.

The following table sets forth the Company’s assets that were measured at fair value as of March 31, 2023 and December 31, 2022, by level within the fair value hierarchy:

Fair Value Hierarchy

Fair value measurements as of

September 30,

Cash equivalents:

March 31, 2023

December 31, 2022

Cash and cash equivalents:

Money market mutual funds

8 unchanged sentences

WARRANTY OBLIGATIONS

Changes in the Company’s product warranty obligations for the three and nine months ended September 30, 2022 and 2021, were as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Changes in the Company’s product warranty obligations for the three months ended March 31, 2023 and 2022, were as follows:

Three Months Ended March 31,

Balance, at the beginning of the period

7 unchanged sentences

(in thousands, except per share data)

DEFERRED REVENUES

DEFERRED REVENUES AND CUSTOMERS ADVANCES

Deferred revenues consist of deferred cloud-based monitoring services, communication services, warranty extension services and advance payments received from customers for the Company’s products.

Deferred revenues are classified as short-term and long-term deferred revenues based on the period in which revenues are expected to be recognized.

Significant changes in the balances of deferred revenues during the period are as follows:

Significant changes in the balances of deferred revenues and customer advances during the period are as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Balance, at the beginning of the period

4 unchanged sentences

Long term portion

The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2022:

The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2023 :

Total deferred revenues

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

September 30,

Accrued expenses

1 unchanged sentence

Operating lease liabilities

Provision for legal claims

Accrual for sales incentives

Total accrued expenses and other current liabilities

SOLAREDGE TECHNOLOGIES INC.

16 unchanged sentences

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

The Convertible Senior Notes consisted of the following as of September 30, 2022 and December 31, 2021:

September 30,

The Convertible Senior Notes consisted of the following as of March 31, 2023 and December 31, 2022 :

Unamortized issuance costs

Net carrying amount

For the three months ended September 30, 2022 and 2021 the Company recorded amortized debt issuance costs related to the Notes in the amount of $ 730 and $ 726 , respectively.

For the nine months ended September 30, 2022 and 2021 the Company recorded amortized debt issuance costs related to the Notes in the amount of $ 2,186 and $ 2,175 , respectively.

As of September 30, 2022, the unamortized issuance costs of the Notes will be amortized over the remaining term of approximately 3.0 years.

For the three months ended March 31, 2023 and 2022 the Company recorded amortized debt issuance costs related to the Notes in the amount of $ 731 and $ 728 , respectively.

As of March 31, 2023, the unamortized issuance costs of the Notes will be amortized over the remaining term of approximately 2.5 years.

The annual effective interest rate of the Notes is 0.47 %.

As of September 30, 2022, the estimated fair value of the Notes, which the Company has classified as Level 2 financial instruments, is $ 691,190 .

As of March 31, 2023, the estimated fair value of the Notes, which the Company has classified as Level 2 financial instruments, is $ 823,730 .

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 September 30, 2022, the if-converted value of the Notes did not exceed the principal amount.

As of March 31, 2023, the if-converted value of the Notes exceeded the principal amount by $ 59,537 .

SOLAREDGE TECHNOLOGIES INC.

17 unchanged sentences

The 2015 Plan provides for the grant of options, restricted stock units ("RSU"), performance stock units ("PSU"), and other share-based awards to directors, employees, officers, and non-employees of the Company and its subsidiaries.

As of September 30, 2022, a total of 18,047,085 shares of common stock were reserved for issuance pursuant to stock awards under the 2015 Plan (the “Share Reserve”) , an aggregate of 9,802,734 shares are still available for future grants.

As of March 31, 2023, a total of 20,853,755 shares of common stock were reserved for issuance pursuant to stock awards under the 2015 Plan (the “Share Reserve”) , an aggregate of 12,005,195 shares are still available for future grants.

The Share Reserve will automatically increase on January 1 st of each year during the term of the 2015 Plan, commencing on January 1 st 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 31 st of the preceding calendar year;

1 unchanged sentence

The Company granted under its 2015 Plan, PSU awards to certain employees and officers which vest upon the achievement of certain performance or market conditions subject to their continued employment with the Company.

In 2021, the Company has also committed to issuing additional shares, which carry certain performance conditions (including business performance targets and a continued service relationship with the Company) and are treated as PSUs for accounting purposes.

The market condition for the PSUs is based on the Company’s total shareholder return ("TSR") compared to the TSR of companies listed in the S&P 500 index over a one to three year performance period.

2 unchanged sentences

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, 2022, an aggregate of 8,617,974 options are still available for future grants under the 2015 Plan.

As of March 31, 2023, an aggregate of 8,617,974 options are still available for future grants under the 2015 Plan.

SOLAREDGE TECHNOLOGIES INC.

3 unchanged sentences

Number of options

Weighted average

exercise price

Weighted average

remaining contractual

term in years

Aggregate intrinsic

Weighted average exercise price

Weighted average remaining contractual term in years

Aggregate intrinsic Value

Outstanding as of December 31, 2022

Forfeited or expired

Outstanding as of September 30, 2022

Vested and expected to vest as of September 30, 2022

Exercisable as of September 30, 2022

Outstanding as of March 31, 2023

Vested and expected to vest as of March 31, 2023

Exercisable as of March 31, 2023

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.

1 unchanged sentence

Number of RSUs

Weighted average

grant date fair value

Weighted average grant date fair value

Unvested as of December 31, 2022

Unvested as of September 30, 2022

Unvested as of March 31, 2023

A summary of the activity in the PSUs and related information is as follows:

Number of PSUs

Weighted average

grant date fair value

Weighted average grant date fair value

Unvested as of December 31, 2022

Unvested as of September 30, 2022

Employee Stock Purchase Plan:

Unvested as of March 31, 2023

Employee Stock Purchase Plan ("ESPP"):

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

As of September 30, 2022, a total of 3,662,737 shares were reserved for issuance under this plan.

As of March 31, 2023, a total of 4,150,380 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 1 st 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.

3 unchanged sentences

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 March 31, 2023, 738,876 shares of common stock had been purchased under the ESPP.

As of March 31, 2023, 3,411,504 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.

SOLAREDGE TECHNOLOGIES INC.

1 unchanged sentence

(in thousands, except per share data)

As of September 30, 2022, 696,852 shares of common stock had been purchased under the ESPP.

As of September 30, 2022, 2,965,885 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:

The Company recognized stock-based compensation expenses related to all stock-based awards in the consolidated statement of income for the three and nine months ended September 30, 2022, and 2021, as follows:

The Company recognized stock-based compensation expenses related to all stock-based awards in the condensed consolidated statement of income for the three months ended March 31, 2023, and 2022, as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of revenues

3 unchanged sentences

Total stock-based compensation expenses

The Company capitalized stock-based compensation as part of inventories and prepaid expenses for the three and nine months ended September 30, 2022, in the amount of $ 881 and $ 977 , respectively.

In 2021 the Company did not capitalize any stock- based compensation expenses.

The total tax benefit associated with share-based compensation for the three months ended September 30, 2022 and 2021 was $ 2,646 and $ 3,791 , respectively.

The tax benefit realized from share-based compensation for the three months ended September 30, 2022 , and 2021 was $ 3,060 and $ 4,720 , respectively.

The total tax benefit associated with share-based compensation for the nine months ended September 30, 2022 , and 2021 was $ 9,182 and $ 10,249 , respectively.

The tax benefit realized from share-based compensation for the nine months ended September 30, 2022 , and 2021 was $ 8,871 and $ 10,400 , respectively.

As of September 30, 2022 , there were total unrecognized compensation expenses in the amount of $ 279,982 related to non-vested equity-based compensation arrangements granted under the Company’s plans and non-plan awards.

These expenses are expected to be recognized during the period from October 1, 2022 , through August 31, 2026 .

For the three months ended March 31, 2023, the Company capitalized stock-based compensation expenses in the amount of $ 430 related to ERP implementation, which were included within other long-term assets in the condensed consolidated balance sheets and $ 405 related to inventory.

For the three months ended March 31, 2022, the Company did not capitalize any stock-based compensation expenses.

The total tax benefit associated with share-based compensation for the three months ended March 31, 2023 and 2022 was $ 4,197 and $ 3,478 , respectively.

The tax benefit realized from share-based compensation for three months ended March 31, 2023 and 2022 was $ 2,842 and $ 2,927 , respectively.

As of March 31, 2023, there were total unrecognized compensation expenses in the amount of $ 335,864 related to non-vested equity-based compensation arrangements granted.

These expenses are expected to be recognized during the period from April 1, 2023 through February 28, 2027.

SOLAREDGE TECHNOLOGIES INC.

2 unchanged sentences

COMMITMENTS AND CONTINGENT LIABILITIES

As of September 30, 2022, contingent liabilities exist regarding guarantees in the amounts of $ 5,924 , $ 2,767 , and $ 1,321 in respect of office rent lease agreements, projects with customers, and other transactions, respectively.

As of March 31, 2023 , contingent liabilities exist regarding guarantees in the amounts of $ 5,876 , and $ 1,899 in respect of office rent lease agreements and customs and other transactions, respectively.

Contractual purchase obligations:

2 unchanged sentences

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 September 30, 2022 , the Company had non-cancelable purchase obligations totaling approximately $ 1,639,157 , out of which the Company recorded a provision for loss in the amount of $ 5,874 .

As of September 30, 2022 , the Company had contractual obligations for capital expenditures totaling approximately $ 69,158 .

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 second lithium-ion cell and battery factory in Korea.

As of March 31, 2023 , the Company had non-cancelable purchase obligations totaling approximately $ 1,617,376 , out of which the Company recorded a provision for loss in the amount of $ 8,052 .

As of March 31, 2023 , the Company had contractual obligations for capital expenditures totaling approximately $ 121,347 .

These commitments reflect purchases of automated assembly lines and other machinery related to the Company’s general manufacturing process and mainly to its plans to establish manufacturing capabilities in the United States.

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.

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

SMA asserted a value in dispute of EUR 5.5 million (approximately $ 5,983 ) 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 and 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 was served with three lawsuits by Huawei Technologies Co., Ltd., a Chinese entity (“Huawei”), against its two Chinese subsidiaries and equipment manufacturer in China.

In May 2022, the Company announced that it had agreed on a global patent license agreement with Huawei.

The agreement includes a cross license that covers patents relating to both companies’ products and resulted in the settlement of all pending patent litigation between the companies.

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 $ 7,197 ) claiming damages caused relating to a terminated consulting agreement and stock options therein.

The claim was recently settled with no payment due by the Company.

On July 28, 2022, the Company was served with complaints filed by Ampt LLC in the International Trade Commission (the “Commission”) pursuant to Section 337 of the Tariff Act of 1930, as amended and the District Court for the District of Delaware alleging patent infringement against the Company and its subsidiary SolarEdge Technologies Ltd.

The Company challenged the validity of both patents and the first patent was invalidated and SMA’s appeal on the matter was denied in January 2023.

In August 2021, the German Patent Court rendered SMA's second patent invalid, and this invalidity has been appealed by SMA and a hearing is pending.

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

On July 28, 2022, the Company was served with complaints filed by Ampt LLC in the International Trade Commission (the “Commission”) pursuant to Section 337 of the Tariff Act of 1930, as amended, in the District Court for the District of Delaware alleging patent infringement against the Company and its subsidiary SolarEdge Technologies Ltd.

On October 24, 2022, the complaint filed in the District Court of Delaware was administratively stayed until the Commission's action is resolved.

The Company believes that it has meritorious defenses to the complaints and intend to vigorously defend against them.

As of September 30, 2022, an immaterial amount for legal claims was recorded in accrued expenses and other current liabilities.

As of March 31, 2023 , an immaterial amount for legal claims was recorded in accrued expenses and other current liabilities.

SOLAREDGE TECHNOLOGIES INC.

3 unchanged sentences

The following table summarizes the changes in accumulated balances of other comprehensive gain (loss), net of taxes:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Unrealized gains (losses) on available-for-sale marketable securities

4 unchanged sentences

Tax on reclassification

Gains (losses) reclassified from accumulated other comprehensive income (loss)

Losses reclassified from accumulated other comprehensive income

Net current period other comprehensive income (loss)

3 unchanged sentences

Tax on revaluation

Other comprehensive income (loss) before reclassifications

Other comprehensive loss before reclassifications

Reclassification

Tax on reclassification

Gains (losses) reclassified from accumulated other comprehensive income (loss)

Net current period other comprehensive income (loss)

Losses reclassified from accumulated other comprehensive loss

Net current period other comprehensive loss

Ending balance

8 unchanged sentences

(in thousands, except per share data)

The following table summarizes the changes in "Accumulated other comprehensive loss", net of taxes:

Details about Accumulated Other

Comprehensive Loss Components

The following table summarizes the reclassifications from "Accumulated other comprehensive loss" into the statement of income:

Details about Accumulated Other Comprehensive

Loss Components

Three Months Ended

September 30,

Nine Months Ended

September 30,

Affected Line Item in the

Statement of Income

Unrealized gains (losses) on available-for-sale marketable securities

Financial expense, net

Affected Line Item in the Statement of Income

Available-for-sale marketable securities

Financial income (expense), net

Total, net of income taxes

Unrealized gains (losses) on cash flow hedges, net

Cash flow hedges

Cost of revenues

5 unchanged sentences

Total reclassifications for the period

OTHER OPERATING EXPENSES

The following table presents the expenses recorded in the three and nine months ended September 30, 2022, and 2021:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Impairment of goodwill and intangible assets (1)

Write-off of property, plant and equipment

Sale of property, plant and equipment

Sale of Critical Power assets

Kokam purchase escrow (2)

Total other operating expenses (income)

(1) In June 2022, the Company decided to discontinue its stand-alone Critical Power activities.

The Company recorded an impairment of goodwill and intangible assets related to its Critical Power business in an amount of $ 4,008 , see also Note 1b.

(2) In the nine months ended September 30, 2021, the Company received a payment of $ 859 out of the Kokam acquisition escrow, with regards to a working capital adjustment.

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

The effective tax rate for the three months ended September 30, 2022, and 2021 was 58.0 % and 12.6 %, respectively, and for the nine months ended September 30, 2022, and 2021 the effective tax rate was 42.1 % and 15.9 %, respectively.

The increase in the effective tax rate in the current year, is primarily due to the change to Section 174 of the U.S Internal Revenue Code, which came into effect on January 1, 2022.

The change requires taxpayers to amortize research and development expenditures over five years (if expensed by a U.S.

entity) or fifteen years (if expensed by non-U.S.

This change resulted in an increase in the Company’s taxable income and Global Intangible Low Taxed Income (“GILTI”) tax.

In addition, the change in the Company's tax rate resulted from a different allocation of income among the Company’s U.S., Israeli, and foreign subsidiaries, and lower tax benefits relating to stock-based compensation.

As of September 30, 2022, and December 31, 2021, unrecognized tax benefits were $ 2,561 and $ 2,192 , respectively.

OTHER OPERATING INCOME

In the three months ended March 31, 2023, the Company recorded a gain from sale of property, plant and equipment and other assets in the amount of $ 1,434 .

The effective tax rate for the three months ended March 31, 2023, and 2022 was 17.5 % and 27.1 %, respectively.

The lower tax rate in the current quarter compared to the first quarter of 2022 is mainly due to the fact that the Company's income before tax, most of which is subject to tax rates lower than the US statutory rate, increased.

Conversely, the IRC Section 174 R&D capitalization, and other expenses not recognized for GILTI purposes, did not increase in the same proportion.

As of March 31, 2023, and December 31, 2022, unrecognized tax benefits were $ 2,883 and $ 2,756 , 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 immaterial as of September 30, 2022, and December 31, 2021.

The total amount of penalties and interest were immaterial as of March 31, 2023, and December 31, 2022.

In August 2022, the U.S.

government signed into law the Inflation Reduction Act of 2022 (the “IRA”), which, among other things, revised U.S.

tax law by, including a new corporate alternative minimum tax (the “CAMT”) of 15 % on certain large corporations, imposing a 1 % excise tax on stock buybacks, and providing incentives to address climate change, including the introduction of advanced manufacturing production tax credits, that may be relevant to the company's products, if they will be manufactured in the US.

The provisions of the IRA are generally effective for tax years beginning after 2022.

Given the complexities of the IRA, which is pending technical guidance and regulations from the Internal Revenue Service and U.S.

Treasury Department, the Company is in the process of evaluating provisions included under the IRA and its impact to the Company’s consolidated financial statements.

government enacted the Inflation Reduction Act of 2022 (the “IRA”), which includes several incentives intended to promote clean energy, battery and energy storage, electrical vehicles, and other solar products, and is expected to impact our business and operations.

As part of such incentives the IRA, will among other things, extend the investment tax credit (“ITC”) through 2034 and is therefore expected to increase the demand for solar products.

The IRA is expected to further incentivize residential and commercial solar customers and developers due to the inclusion of a tax credit for qualifying energy projects of up to 30%.

Since these regulations are new and their implementation is still pending administrative guidance from the Internal Revenue Service and U.S.

Treasury Department, the Company will be examining the benefits that may be available to it, such as the availability of tax credits for domestic manufacturers, in the coming months.

The Company also announced its plans to establish manufacturing capabilities in the United States during 2023.

SOLAREDGE TECHNOLOGIES INC.

3 unchanged sentences

The following table presents the computation of basic and diluted earnings per share (“EPS”):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Shares used in computing net EPS of common stock, basic

Three Months Ended March 31,

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

Net income attributable to common stock, basic

1 unchanged sentence

Net income attributable to common stock, diluted

Shares used in computing net EPS of common stock, basic

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

Notes due 2025

Effect of stock-based awards

Shares used in computing net EPS of common stock, diluted

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

Earnings per share:

Shares excluded from the calculation of diluted net EPS due to their anti-dilutive effect

2 unchanged sentences

(in thousands, except per share data)

SEGMENT, GEOGRAPHIC AND PRODUCT INFORMATION

The Company operates in five different operating segments:

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

In June 2022, the Company decided to discontinue its stand-alone Critical Power activities, see also Note 1b.

SEGMENT INFORMATION

Following the discontinuation of Critical Power in June 2022, the Company operates in four different operating segments:

Solar, 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.

8 unchanged sentences

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

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

Three Months Ended

September 30, 2022

Nine Months Ended

September 30, 2022

Cost of revenues

Research and development

Sales and marketing

General and administrative

Segments profit (loss)

SOLAREDGE TECHNOLOGIES INC.

1 unchanged sentence

(in thousands, except per share data)

Three Months Ended

September 30, 2021

Nine Months Ended

September 30, 2021

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

3 unchanged sentences

The following table presents information on reportable segments reconciliation to consolidated revenues for the periods presented:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Solar revenues

All other revenues

Revenues from finance component

All other segment revenues

Revenues from financing component

Consolidated revenues

The following table presents information on reportable segments reconciliation to consolidated operating income for the periods presented:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Solar segment profit

3 unchanged sentences

Stock based compensation expenses

Amortization related to business combinations

Impairment of goodwill and intangible assets

Disposal of assets related to Critical Power

Sale of Critical Power assets

Other unallocated income (expenses), net

Other unallocated expenses

Consolidated operating income

SUBSEQUENT EVENTS

On November 3, 2022, the Company received notice that a class action lawsuit was filed in the U.S District Court of the Southern District of New York against the Company, SolarEdge Technologies Ltd., the Company’s CEO and the Company’s CFO, by a purported stockholder of the Company, alleging violations of the Federal Securities Act in connection with complaints filed against the Company by Ampt LLC, the details for which can be found under “Note 12- Commitments and Contingent Liabilities”.

The Company believes the allegations contained in this new action are without merit and intends to vigorously defend against them.

On April 6, 2023, the Company completed the acquisition of all outstanding shares of Hark Systems Ltd.

("Hark"), a UK-based energy IoT company for the commercial and industrial ("C&I") sector for approximately USD 16.7 million in cash.

Hark's platform is expected to enable the Company to offer its commercial and industrial customers expanded capabilities in energy management and connectivity, including identification of potential energy savings, detection of anomalies in assets’ energy consumption, and optimization of energy usage and carbon emissions through load orchestration and storage control.

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