What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-09 · 195 added, 96 removed, 208 unchanged (58% of the section changed)

10 unchanged sentences

In addition, historical, current and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future, including future rule-making.

Also, forward-looking statements represent our management’s beliefs and assump tions only as of the date of this filing.

Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this filing.

Important factors that could cause actual results to differ materially from our expectations include:

50 unchanged sentences

The Solar segment solution consists mainly of the Company’s power optimizers, inverters, batteries and cloud‑based monitoring platform.

The Energy Storage segment includes the design, development, manufacturing, and sales of high-energy, high-power, lithium-ion cells and BESS solutions for C&I and Utility markets.

The Energy Storage segment includes the design, development, manufacturing, and sales of high-energy, high-power, lithium-ion cells and BESS solutions for the C&I and Utility markets.

The Energy Storage segment provides purpose-built components and solutions, hardware and software, as well as pre and post sales engineering support to design, build, and manage battery and system solutions according to the customer’s use cases and mission profiles.

4 unchanged sentences

Sella 2 currently has a 2GWh capacity.

Sella 2 began producing and shipping cells at the end of 2022 and is expected to gradually increase manufacturing capacity during 2024.

In light of the Inflation Reduction Act legislation in the United States, which incentivizes the local manufacturing of renewable energy products by providing benefits to installers for the purchase and installation of product with domestic content, as well as by incentivizing local manufacturing of our products, we have begun manufacturing inverters in Texas and are currently establishing additional manufacturing capabilities in Florida for optimizers and inverters.

With the ramp up of these new sites and due to a decrease in demand for our products, we have reduced capacity in our manufacturing site in China and discontinued manufacturing of our products in Mexico.

As of March 31, 2024 , we shipped approximately 126.2 million power optimizers, 5.6 million inverters and 259.6 thousand residential batteries.

Over 3.8 million installation s, many of which may include multiple inverters, are currently connected to, and monitored through, our cloud-based monitoring platform.

As of March 31, 2024 , we shipped approximately 53.6 GW of our DC optimized inverter systems and approximately 1.8 GWh of our batteries for PV applications .

Our revenues for the three months ended March 31, 2024 and March 31, 2023 were $204.4 million and $943.9 million , respectively.

Gross loss was 12.8% for the three months ended March 31, 2024 , compared to gross margin of 31.8% for the three months ended March 31, 2023 .

Net loss was $157.3 million for the three months ended March 31, 2024 , compared to net income of $138.4 million for the three months ended March 31, 2023 .

With the ramp up of these new sites and due to a decrease in demand for our products, we have reduced capacity in all of our manufacturing sites outside of the U,S and discontinued manufacturing of our products in Mexico.

As of June 30, 2024, we shipped approximately 128.2 million power optimizers, 5.7 million inverters and 276.2 thousand batteries for PV applications.

Over 4 million installations, many of which may include multiple inverters, are currently connected to, and monitored through, our cloud-based monitoring platform.

As of June 30, 2024, we shipped approximately 54.5 GW of our DC optimized inverter systems and approximately 2.0 GWh of our batteries for PV applications.

Our revenues for the three months ended June 30, 2024, and 2023 were $265.4 million and $991.3 million, respectively.

Gross loss was 4.1% for the three months ended June 30, 2024, compared to gross margin of 32.0% for the three months ended June 30, 2023.

Net loss for the three months ended June 30, 2024 was $130.8 million compared to net income in the amount of $119.5 million for the three months ended June 30, 2023.

Our revenues for the six months ended June 30, 2024, and 2023 were $469.8 million and $1,935.2 million, respectively.

Gross loss was 7.9% for the six months ended June 30, 2024, compared to gross margin of 31.9% for the six months ended June 30, 2023.

Net loss for the six months ended June 30, 2024 was $288.1 million compared to net income in the amount of $257.9 million for the six months ended June 30, 2023.

Global Circumstances Influencing our Business and Operations

4 unchanged sentences

We attribute these cancellations and pushouts to high inventory in the channels and slower than expected installation rates both in the United States and Europe.

This trend continued in the following quarters.

Additionally, the Company anticipates a continued lower level of revenues in the second quarter of 2024 when compared to the same quarter last year, as the inventory destocking process continues.

This trend continued in the subsequent quarters.

Additionally, the Company anticipates a continued lower level of revenues in the third quarter of 2024 when compared to the same quarter last year, as the inventory destocking process continues.

Disruptions due to the war in Israel

1 unchanged sentence

About 75% of these employees have returned to work, though recruitments for additional reserve duties may and have reoccurred.

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

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

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

12 unchanged sentences

The IRA also further incentivizes residential and commercial solar customers and developers through the inclusion of a tax credit for qualifying energy projects of up to 30%.

Section 45X of the IRA offers advanced manufacturing production tax credits that incentivize the production of eligible components within the U.S.

Section 45X of the IRA offers advanced manufacturing production tax credits ("AMPTC") that incentivize the production of eligible components within the U.S.

To that end, we established manufacturing capabilities in the U.S.

11 unchanged sentences

However, revenues may increase in a non-correlated manner to the “megawatt shipped” metric since other products such as power optimizers, are not accounted for in this metric.

Three months ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Inverters shipped

8 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

9 unchanged sentences

Financial income (expense), net

Other loss, net

Other income (loss), net

Income (loss) before income taxes

2 unchanged sentences

Net income (loss)

Three Months Ended

Comparison of three and six months ended June 30, 2024, to the three and six months ended June 30, 2023

Three months ended June 30, 2024 to 2023

Six months ended June 30, 2.024 to 2023

(In thousands)

Revenues decreased by $739.5 million, or 78.3%, in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to (i) a decrease of $614.3 million related to a decrease in the number of inverters and power optimizers sold;

Revenues decreased by $725.9 million, or 73.2%, in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to (i) a decrease of $609.7 million related to a decrease in the number of inverters and power optimizers sold;

(ii) a decrease of $87.0 million related to the lower number of batteries for PV applications sold, primarily in Europe;

and (iii) a decrease of $22.8 million in revenues generated from e-mobility components, related to the discontinuation of the Company’s LCV e-Mobility activity.

(iii) a decrease of $20.9 million in revenues generated in 2023 from e-mobility components, related to the discontinuation of the Company’s LCV e-Mobility activity;

and (iv) a decrease of $15.2 million related to less ancillary solar products sold.

The overall decrease in revenues was due to the decline in demand that began in the third quarter of 2023.

This decline was the result of high inventory in the channels and slower than expected installation rates beginning in the third quarter of 2023, leading to substantial unexpected cancellations and push outs of existing backlog, from our distributors, which continued into the first quarter of 2024.

Revenues from outside of the U.S.

comprised 68.1% of our revenues in the three months ended March 31, 2024, as compared to 72.9% in the three months ended March 31, 2023.

The number of power optimizers recognized as revenues decreased by approximately 5.5 million units, or 83.7%, from approximately 6.5 million units in the three months ended March 31, 2023 to approximately 1.1 million units in the three months ended March 31, 2024.

The number of inverters recognized as revenues decreased by approximately 270 thousand units, or 81.2%, from approximately 332 thousand units in the three months ended March 31, 2023 to approximately 62.3 thousand units in the three months ended March 31, 2024.

The megawatts hour of batteries for PV applications recognized as revenues decreased by approximately 122.7 megawatts hour, or 56.8% from approximately 216.1 in the three months ended March 31, 2023 to approximately 93.4 megawatts hour in the three months ended March 31, 2024 , as a result of lower demand.

Our blended Average Selling Price (“ASP”) per watt for solar products excluding batteries for PV applications is calculated by dividing the solar revenues, excluding revenues from the sale of batteries for PV applications, by the nameplate capacity of inverters shipped.

Our blended ASP per watt for solar products decreased by $0.049, or 22%, in the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

The decrease in blended ASP per watt is mainly attributed to price reduction across our product offerings, a relatively lower number of power optimizers and other solar products shipped compared to the number of inverters shipped, leading to an overall reduction in our ASP per watt as well as due to an increase in the sale of commercial products that are characterized by lower ASP per watt, out of our total solar product mix.

This decrease in blended ASP per watt was partially offset by an increase in the sale of products with enhanced capabilities, such as the SolarEdge energy hub inverter, that are characterized with higher ASP per watt.

Our blended ASP per watt/hour for batteries for PV applications is calculated by dividing batteries for PV applications revenues, by the nameplate capacity of batteries for PV applications shipped.

Our blended ASP per watt/hour for batteries for PV applications decreased by $0.092 , or 19.4% , in the three months ended March 31, 2024 , as compared to the three months ended March 31, 2023 .

comprised 63.4% of our revenues in the three months ended June 30, 2024 as compared to 80.3% in the three months ended June 30, 2023.

The number of power optimizers recognized as revenues decreased by approximately 3.5 million units, or 63.6%, from approximately 5.5 million units in the three months ended June 30, 2023 to approximately 2.0 million units in the three months ended June 30, 2024.

The number of inverters recognized as revenues decreased by approximately 268.5 thousand units, or 80.4%, from approximately 333.8 thousand units in the three months ended June 30, 2023 to approximately 65.4 thousand units in the three months ended June 30, 2024.

The megawatts hour of batteries for PV applications recognized as revenues decreased by approximately 146.0 megawatts hour, or 53.8% from approximately 271.0 in the three months ended June 30, 2023 to approximately 125.0 megawatts hour in the three months ended June 30, 2024, as a result of lower demand.

Our blended ASP per watt for solar products excluding batteries for PV applications is calculated by dividing the sales of solar products, excluding the sales of batteries for PV applications, by the name plate capacity of inverters shipped.

Our blended ASP per watt for solar products shipped excluding batteries for PV applications increased by $0.026, or 13.8%, in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.

The increase in blended ASP per watt is mainly attributed to a significantly higher number of power optimizers and other solar products shipped compared to the number of inverters shipped.

This increase in blended ASP per watt was partially offset by an additional price reduction we initiated in the second quarter and an increase in the sale of commercial products that are characterized by lower ASP per watt, out of our total solar product mix.

Our blended ASP per watt/hour for batteries for PV applications is calculated by dividing batteries for PV applications sales, by the nameplate capacity of batteries for PV applications shipped.

Our blended ASP per watt/hour for batteries for PV applications decreased by $0.108, or 22.7%, in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.

The decrease in blended ASP per watt/hour is mainly attributed to a price reduction of our batteries for PV applications.

This decrease in ASP per watt/hour was partially offset by an increase in the sale of our one-phase battery that is sold at a higher ASP per watt/hour.

Revenues decreased by $1,465.4 million, or 75.7%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to (i) a decrease of $1,224.0 million related to a decrease in the number of inverters and power optimizers sold;

(ii) a decrease of $165.4 million related to the lower number of batteries for PV applications sold, primarily in Europe;

(iii) a decrease of $45.4 million related to less ancillary solar products sold;

and (iv) a decrease of $43.7 million in revenues generated from e-mobility components, related to the discontinuation of the Company’s LCV e-Mobility activity.

The overall decrease in revenues was due to the decline in demand that began in the third quarter of 2023.

Revenues from outside of the U.S.

comprised 65.4% of our revenues in the six months ended June 30, 2024 as compared to 76.7% in the six months ended June 30, 2023.

The number of power optimizers recognized as revenues decreased by approximately 9.0 million units, or 74.5%, from approximately 12.0 million units in the six months ended June 30, 2023 to approximately 3.1 million units in the six months ended June 30, 2024.

The number of inverters recognized as revenues decreased by approximately 538.1 thousand units, or 80.8%, from approximately 665.8 thousand units in the six months ended June 30, 2023 to approximately 127.7 thousand units in the six months ended June 30, 2024.

The megawatts hour of batteries for PV applications recognized as revenues decreased by approximately 268.0 megawatts hour, or 55.0% from approximately 487.0 megawatts hour in the six months ended June 30, 2023 to approximately 220.0 megawatts hour in the six months ended June 30, 2024 as a result of lower demand.

Our blended ASP per watt for solar products shipped excluding batteries for PV applications decreased by $0.011, or 5.2%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

The decrease in blended ASP per watt is mainly attributed to price reduction as well as an increase in the sale of commercial products that are characterized by lower ASP per watt.

This decrease in blended ASP per watt was partially offset by a relatively higher number of power optimizers shipped compared to the number of inverters shipped.

Our blended ASP per watt/hour for batteries for PV applications decreased by $0.101, or 21.1%, in the six months ended June 30, 2024, as compared to the six months ended June 30, 2023.

The decrease in blended ASP per watt/hour is mainly attributed to price reduction of our batteries for PV applications.

1 unchanged sentence

Cost of Revenues and Gross Profit (loss)

Three Months Ended

Three months ended June 30, 2024 to 2023

Six months ended June 30, 2024 to 2023

(In thousands)

1 unchanged sentence

Gross profit (loss)

Cost of revenues decreased by $413.2 million , or 64.2% , in the three months ended March 31, 2024 , as compared to the three months ended March 31, 2023 , primarily due to:

• a decrease in direct cost of revenues sold of $293.6 million associated primarily with a decrease in the volume of products sold;

Cost of revenues decreased by $397.6 million, or 59.0%, in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to:

• a decrease in direct cost of revenues sold of $280.2 million associated mainly with a decrease in the volume of products sold as well as an increase of $15.2 million in AMPTC recognized;

• a decrease in warranty expenses and warranty accruals of $63.2 million associated primarily with a decrease in revenues;

• a decrease in shipment and logistic costs in an aggregate amount of $43.8 million due to a decrease in volumes shipped and a decrease in expedited shipments costs;

Gross profit as a percentage of revenue decreased from 31.8% in the three months ended March 31, 2023 to gross loss of 12.8% in the three months ended March 31, 2024 primarily due to:

• price reduction primarily in our batteries for PV applications, a higher portion of our single phase batteries out of our total product mix as well as an increase in the ratio of commercial products compared to residential products, resulting in lower gross margin of approximately 12%;

• lower absolute fixed and other production related costs, which were divided this quarter by significantly lower revenue, resulting in lower gross margin o f approximately 30% .

• a decrease in in personnel-related costs of $2.9 million resulting from our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics.

Gross profit as a percentage of revenue decreased from 32.0% in the three months ended June 30, 2023 to gross loss of 4.1% in the three months ended June 30, 2024, primarily due to:

• price reductions and a higher portion of our single phase batteries out of our total product mix resulting in lower gross margin of approximately 18%;

• lower absolute fixed and other production related costs, which were divided this quarter by significantly lower revenue, resulting in lower gross margin of approximately 24%.

These were partially offset by an increase of approximately 6% due to AMPTC recognized.

Cost of revenues decreased by $810.8 million, or 61.5%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to:

• a decrease in direct cost of revenues sold of $574.0 million associated primarily with a decrease in the volume of products sold as well as an increase of $30.1 million AMPTC recognized;

• a decrease in warranty expenses and warranty accruals of $137.9 million associated primarily with a decrease in revenues;

• a decrease in shipment and logistic costs in an aggregate amount of $83.7 million due to a decrease in volumes shipped and a decrease in expedited shipments costs.

Gross profit as a percentage of revenue decreased from 31.9% in the six months ended June 30, 2023 to gross loss of 7.9% in the six months ended June 30, 2024 primarily due to:

• price reduction primarily in our batteries for PV applications and a higher portion of our single phase batteries out of our total product mix resulting in lower gross margin of approximately 18%;

• lower absolute fixed and other production related costs, which were divided this year by significantly lower revenue, resulting in lower gross margin of approximately 27%.

These were partially offset by an increase of approximately 6% due to AMPTC recognized.

Operating Expenses:

Research and Development

Three months ended March 31,

Three months ended June 30, 2024 to 2023

Six months ended June 30, 2024 to 2023

(In thousands)

Research and development

Research and development costs decreased by $4.5 million or 5.7% , in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 , primarily due to:

Research and development costs decreased by $17.3 million or 19.9%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to:

• a decrease in personnel-related costs of $13.3 million resulting from our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics;

• a decrease in expenses related to consultants and sub-contractors in an amount of $3.1 million.

• a decrease in personnel-related costs of $1.5 million primarily attributed to salaries and benefits expenses, hedging, as well as a decrease in headcount in alignment with our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics, which was partially offset by a one-time restructuring costs.

Research and development costs decreased by $21.8 million or 13.1%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to:

• a decrease in personnel-related costs of $14.8 million resulting from our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics;

• a decrease in expenses related to consultants and sub-contractors in an amount of $5.9 million.

Sales and Marketing

Three months ended March 31,

Three months ended June 30, 2024 to 2023

Six months ended June 30, 2024 to 2023

(In thousands)

Sales and marketing

Sales and marketing expenses decreased by $2.1 million , or 5.0% , in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 , primarily due to:

• a decrease of $1.4 million in training-related expenses .

• a decrease in personnel-related costs of $1.1 million primarily attributed to salaries and benefits expenses, a decrease in headcount in alignment with our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics which was partially offset by a one-time restructuring costs.

Sales and marketing expenses decreased by $4.2 million, or 9.6%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to:

• a decrease in personnel-related costs of $2.7 million resulting from our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics;

• a decrease in lead generation incentives of $1.4 million.

Sales and marketing expenses decreased by $6.3 million, or 7.4%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to:

• a decrease in personnel-related costs of $3.8 million resulting from our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics;

• a decrease of $1.4 million in training-related expenses as a result of resuming training activities that had been previously cancelled or postponed due to Covid-19 restrictions;

• a decrease in lead generation incentive of $1.4 million.

General and Administrative

Three months ended March 31,

Three months ended June 30, 2024 to 2023

Six months ended June 30, 2024 to 2023

(In thousands)

General and administrative

General and administrative expenses decreased by $5.7 million , or 15.6% , in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 , primarily due to:

• a decrease in expenses related to consultants and sub-contractors in an amount of $3.6 million ;

• a decrease in personnel-related costs of $3.4 million primarily attributed to salaries and benefits expenses, a decrease in headcount in alignment with our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics which was partially offset by a one-time restructuring costs.

These were partially offset by:

• an increase in expenses related to an accrual for credit losses in an amount of $1.3 million.

General and administrative expenses increased by $2.8 million, or 7.8%, in the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to an increase in expenses related to doubtful debt of $7.4 million.

This was partially offset by:

• a decrease in personnel-related costs of $3.1 million resulting from our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics;

• a decrease in expenses related to consultants and sub-contractors of $1.2 million.

General and administrative expenses decreased by $2.9 million, or 4.0%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to:

• a decrease in personnel-related costs of $6.6 million resulting from our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics;

• a decrease in expenses related to consultants and sub-contractors $4.9 million.

These were partially offset by an increase in expenses related to doubtful debt of $8.8 million

Other operating expense (income), net

Three months ended March 31,

Three months ended June 30, 2024 to 2023

Six months ended June 30, 2024 to 2023

(In thousands)

Other operating expense (income), net

Other operating expense, net was $2.4 million in the three months ended March 31, 2024 compared to other operating income of $1.4 million in the three months ended March 31, 2023 primarily due to:

• a decrease of $1.8 million in income related to the sale of property, plant and equipment and other assets.

Other operating expenses, net, increased by $1.0 million in the three months ended June 30, 2024 , compared to the three months ended June 30, 2023 , primarily due to an increase in losses related to the sale of property, plant and equipment and other assets.

Other operating expense, net was $3.3 million, in the six months ended June 30, 2024 , compared to other operating income, net of $1.4 million in the six months ended June 30, 2023 , primarily due to:

• an increase of $2.1 million in losses related to the sale of property, plant and equipment;

• an increase of $1.7 million in impairment of property, plant and equipment.

Financial income (expense), net

Three months ended March 31,

Three months ended June 30, 2024 to 2023

Six months ended June 30, 2024 to 2023

(In thousands)

Financial income (expense), net

Financial expense , net, was $7.1 million in the three months ended March 31, 2024 , compared to financial income, net, in the amount of $23.7 million in the three months ended March 31, 2023 , primarily due to fluctuations in foreign exchange rates between the Euro and the NIS against the U.S.

Three months ended March 31,

Financial expense, net was $0.9 million in the three months ended June 30, 2024, compared to financial income, net in the amount of $3.4 million in the three months ended June 30, 2023, primarily due to an increase of $9.2 million in expenses due to credit loss related to loans receivables.

This was partially offset by an increase of $4.5 million in income due to fluctuations in foreign exchange rates, primarily between the Euro and the NIS against the U.S.

Financial expenses, net was $7.9 million in the six months ended June 30, 2024, compared to financial income, net in the amount of $27.1 million in the six months ended June 30, 2023, primarily due to:

• an expense of $5.1 million in the six months ended June 30, 2024, compared to income of $21.2 million in the six months ended June 30, 2023, as a result of fluctuations in foreign exchange rates, primarily between the Euro and the NIS against the U.S.

• an increase of $11.4 million expenses due to credit loss related to loans receivables.

These were partially offset by a decrease of $2.6 million in accretion (amortization) of discount (premium) on marketable securities.

Please refer to the section entitled "Foreign Currency Exchange Risk" under Item 3 of this report for additional information.

Other income (loss), net

Three months ended June 30, 2024 to 2023

Six months ended June 30, 2024 to 2023

(In thousands)

Other loss, net

Other loss decreased by $0.1 million , or 100.0% , in the three months ended March 31, 2024 , compared to the three months ended March 31, 2023 , due to a decrease in realized loss on marketable securities.

Income taxes (tax benefits)

Three months ended March 31,

Other income (loss), net

Other income increased by $18.6 million in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to:

• an increase of $15.5 million due to a gain from the repurchase of the 2025 Notes;

• an increase of $2.0 million in realized gain from marketable securities;

• an increase of $1.1 million due to gain from the revaluation of equity investment as a result of business combination.

Other income, net was $18.6 million in the six months ended June 30, 2024, compared to other loss, net of $0.1 million in the six months ended June 30, 2023, primarily due to:

• an increase of $15.5 million due to a gain from the repurchase of the 2025 Notes;

• an increase of $2.1 million in realized gain from marketable securities;

• an increase of $1.1 million due to gain from the revaluation of equity investment as a result of business combination.

Tax benefits (income taxes)

Three months ended June 30, 2024 to 2023

Six months ended June 30, 2024 to 2023

(In thousands)

Tax benefits (income taxes)

Tax benefits was $23.8 million in the three months ended March 31, 2024, compared to income taxes in the amount of $29.3 million in the three months ended March 31, 2023 primarily due to:

Tax benefits were $12.2 million in the three months ended June 30, 2024 compared to income taxes of $34.2 million in the three months ended June 30, 2023, primarily due to:

• a current tax benefit of $3.4 million in the three months ended June 30, 2024, compared to a current tax expenses of $38.0 million in the three months ended June 30, 2023 related to the decrease in profits before tax in certain jurisdictions, partially offset by an increase in our provision for uncertain tax positions;

• an increase of $5.2 million in deferred tax income driven by the net operating loss in the current quarter compared to net profit in the comparable period in 2023, as well as the increase of the Preferred Technological Enterprises Tax rate in Israel, This was offset by lower tax benefits relating to stock-based compensation.

• a decrease of $15.8 million in current tax expenses mainly related to the decrease in profits before tax in certain jurisdictions, partially offset by an increase in our provision for uncertain tax positions .

Tax benefit was $36.0 million in the six months ended June 30, 2024, compared to income taxes of $63.6 million in the six months ended June 30, 2023 primarily due to:

• a decrease of $57.2 million mainly related to the decrease in profits before tax in certain jurisdictions, partially offset by an increase in our provision for uncertain tax positions;

• an increase of $43.2 million in deferred tax income driven by the net operating loss in the six months ended June 30, 2024 compared to net profit in the six months ended June 30, 2023, as well as the increase of the Preferred Technological Enterprises Tax rate in Israel.

This was offset by lower tax benefits relating to stock-based compensation.

Net loss from equity method investments

Three months ended March 31,

Three months ended June 30, 2024 to 2023

Six months ended June 30, 2024 to 2023

(In thousands)

Net loss from equity method investments

Net loss from equity method investments increased by $0.3 million , or 100% in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 .

Net loss from equity method investments increased by $0.6 million, or 100% in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Net loss from equity method investments increased by $0.9 million, or 100% in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Net Income (loss)

Three months ended March 31,

Three months ended June 30, 2024 to 2023

Six months ended June 30, 2024 to 2023

(In thousands)

Net income (loss)

As a result of the factors discussed above, the net loss was $157.3 million in the three months ended March 31, 2024 , compared to net income of $138.4 million in the three months ended March 31, 2023 .

As a result of the factors discussed above, net loss was $130.8 million in the three months ended June 30, 2024, as compared to a net income of $119.5 million in the three months ended June 30, 2023.

As a result of the factors discussed above, net loss was $288.1 million in the six months ended June 30, 2024, as compared to a net income of $257.9 million in the six months ended June 30, 2023.

Segment analysis

Following the discontinuation of the Critical Power segment in June 2022, we operated in four different operating segments:

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

In October 2023, we decided to discontinue our LCV e-Mobility activity and the remaining e-Mobility activity is included under the solar segment starting January 1, 2024.

We have identified two operating segments as reportable – the Solar and the Energy Storage segments.

Following the discontinuation of its e-Mobility LCV activity, the Company operates in three different operating segments:

Solar, Energy Storage and Automation Machines.We have identified two operating segments as reportable – the Solar and the Energy Storage segments.

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

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Segment profit (loss) is comprised of gross profit (loss) for the segment less operating expenses excluding amortization and impairment of purchased intangible assets, stock based compensation expenses, restructuring charges, discontinued activity charges, impairment of property, plant and equipment and certain other items (which are reported under "Not allocated to segments").

Year ended March 31,

Three Months Ended

Six Months Ended

(In thousands)

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Expenses, net not allocated to segments

Solar revenues decreased by $718.4 million, or 79.1%, in the three months ended March 31, 2024, as compared to the three months ended March 31, 2023 primarily due to (i) a decrease of $614.3 million related to a decrease in the number of inverters and power optimizers sold;

(ii) a decrease o f $78.4 million related to the number of batteries for PV applications sold primarily in Europe;

(iii) a decrease of $30.1 million in the amount of ancillary solar products sold.

As discussed above, this decrease in revenues was due to high inventory in the channels and slower than expected installation rates beginning in the third quarter of 2023, leading to substantial unexpected cancellations and push outs of existing backlog from our distributors.

Solar operating loss was $110.4 million, in the three months ended March 31, 2024, as compared to profit of $206.7 million in the three months ended March 31, 2023.

This was due to the decrease in revenue of $718.4 million followed by a lesser decrease of $393.3 million in cost of revenues, mainly attributed to fixed and other production related costs.

Solar revenues decreased by $706.1 million, or 74.5%, in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023 primarily due to (i) a decrease of $609.7 million related to a decrease in the number of inverters and power optimizers sold;

(ii) a decrease of $87.0 million related to the number of batteries for PV applications sold primarily in Europe;

(iii) a decrease of $15.2 million related to less ancillary solar products sold.

Solar operating loss was $105.1 million, in the three months ended June 30, 2024, as compared to profit of $207.0 million in the three months ended June 30, 2023.

This was due to the decrease of $706.1 million in revenue followed by a lesser decrease of $380.8 million in cost of revenues, mainly attributed to fixed and other production related costs as well as a decrease of $15.2 million in AMPTC recognize.

This was partially offset by a decrease of $13.2 million in operating expenses, as a result of our workforce reduction plan designed to reduce operating expenses and align our cost structure with current market dynamics.

Solar revenues decreased by $1,424.5 million, or 76.8%, in the six months ended June 30, 2024, as compared to the six months ended June 30, 2023 primarily due to (i) a decrease of $1,224.0 million related to a decrease in the number of inverters and power optimizers sold;

(ii) a decrease of $165.4 million related to the number of batteries for PV applications sold primarily in Europe;

(iii) a decrease of $45.4 million related to less ancillary solar products sold.

Solar operating loss was $215.4 million, in the six months ended June 30, 2024, as compared to profit of $413.7 million in the six months ended June 30, 2023.

This was primarily due to the decrease of $1,424.5 million in revenue followed by a lesser decrease of $774.1 million in cost of revenues, mainly attributed to fixed and other production related costs as well as a decrease of $30.1 million in AMPTC recognized.

This was partially offset by a decrease of $21.2 million in operating expenses as a result of our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics.

Energy Storage

Energy Storage revenues increased by $1.5 million, or 16.2%, in the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

Energy Storage operating loss decreased by $6.3 million , or 34.3% , in the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

The decrease in operating loss was p rimarily due to an increase in revenues followed by a decrease of $1.8 million in cost of revenues and a decrease of $3.1 million in operating expenses primarily due to a decrease in the doubtful debt expenses.

All other segments revenues decreased by $22.6 million, or 86.8%, in the three months ended March 31, 2024, as compared to the three months ended March 31, 2023 , primarily due to the discontinuation of the Company’s LCV e-Mobility activity.

All other segments operating profit was $0.1 million in the three months ended March 31, 2024 , compared to operating loss of $4.4 million , in the three months ended March 31, 2023 .

Energy Storage revenues increased by $2.3 million, or 12.0%, in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.

Energy Storage operating loss decreased by $5.7 million, or 37.1%, in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.

The decrease in operating loss was primarily due to the increase in revenues, a decrease of $2.4 million in cost of revenues mainly attributed to a decrease in inventory write-down and a decrease of $0.9 million in operating expenses.

Energy Storage revenues increased by $3.8 million, or 13.4%, in the six months ended June 30, 2024, as compared to the six months ended June 30, 2023.

Energy Storage operating loss decreased by $12.0 million, or 35.5%, in the six months ended June 30, 2024, as compared to the six months ended June 30, 2023.

The decrease in operating loss was primarily due to an increase in revenues followed by a decrease of $4.2 million in cost of revenues mainly attributed to inventory write-down and a decrease of $4.0 million in operating expenses primarily due to a decrease in the doubtful debt expenses.

All other segments revenues decreased by $22.1 million, or 89.9%, in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to the discontinuation of the Company’s LCV e-Mobility activity.

All other segments operating profit was $0.3 million in the three months ended June 30, 2024, compared to operating loss of $0.8 million, in the three months ended June 30, 2023.

This improvement was mainly due to the discontinuation of our LCV e-Mobility activity.

All other segments revenues decreased by $44.7 million, or 88.3%, in the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily due to the discontinuation of the Company’s LCV e-Mobility activity.

All other segments operating profit was $0.4 million in the six months ended June 30, 2024, compared to operating loss of $5.2 million, in the six months ended June 30, 2023.

This improvement was mainly due to the discontinuation of our LCV e-Mobility activity.

Not allocated to segments

There were no significant changes in revenues not allocated to segments in the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

Expenses, net, not allocated to segments increased by $11.6 million , or 29.1% , in the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

The increase was mainly due to an increase in costs related to the Restructuring Plan as well as an increase in impairment of property, plant, and equipment, all of which are not assessed by our CODM and therefore not allocated to any of the segments above.

There were no significant changes in revenues not allocated to segments in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.

Expenses, net, not allocated to segments increased by $5.3 million, or 13.0%, in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.

The increase was mainly due to an increase in costs related to the Restructuring Plan, which is not assessed by our CODM and therefore not allocated to any of the segments above.

There were no significant changes in revenues not allocated to segments in the six months ended June 30, 2024, as compared to the six months ended June 30, 2023.

Expenses, net, not allocated to segments increased by $16.8 million, or 21.0%, in the six months ended June 30, 2024, as compared to the six months ended June 30, 2023.

The increase was mainly due to an increase in costs related to the Restructuring Plan as well as an increase in impairment of property, plant, and equipment partially offset by an increase from the revaluation of equity investment as a result of business combination, all of which are not assessed by our CODM and therefore not allocated to any of the segments above.

Liquidity and Capital Resources

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

Net cash provided by (used in) operating activities

(In thousands)

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash used in financing activities

Decrease in cash and cash equivalents

As of March 31, 2024 , our cash and cash equivalents were $214.2 million .

Net cash provided by (used in) financing activities

Increase (decrease) in cash and cash equivalents

As of June 30, 2024, our cash and cash equivalents were $259.5 million.

This amount does not include $550.6 million invested in available-for-sale marketable securities and $3.8 million invested in restricted bank deposits.

Our principal uses of cash are for funding our operations, capital expenditures, other working capital requirements, other investments and any potential future share repurchases.

As of March 31, 2024 , we have open commitments for capital expenditures in an amount of approximately $33.0 million .

Our principal uses of cash are for funding our operations, capital expenditures, other working capital requirements, other investments, any potential future share repurchases and the repayment of our convertible notes due 2025.

As of June 30, 2024, we have open commitments for capital expenditures in an amount of approximately $23.9 million.

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

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Operating cash flows consist primarily of net income (loss), adjusted for certain non-cash items and changes in assets and liabilities.

Cash used in operating activities was $217.0 million in the three months ended March 31, 2024 as compared to $7.9 million cash provided by operating activities in the three months ended March 31, 2023 , ma inly due to net loss adjusted for certain non-cash items generated in the three months ended March 31, 2024 as compared to net income adjusted for certain non-cash items in the three months ended March 31, 2023, which was partially offset by lower operating working capital requirements.

Cash used in operating activities increased by $181.0 million in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, mainly due to net loss adjusted for certain non-cash items generated in the six months ended June 30, 2024 as compared to net income adjusted for certain non-cash items in the six months ended June 30, 2023, which was partially offset by lower operating working capital requirements.

Investing Activities

Investing cash flows consist primarily of capital expenditures, investment in, sales and maturities of available for sale marketable securities, investment and withdrawal of bank deposits and restricted bank deposits, cash used for acquisitions and disbursements and receipts from collections of loans made by the Company.

Cash provided by investing activities was $149 million in the three months ended March 31, 2024 as compared to cash used in investing activities of $67.8 million in the three months ended March 31, 2023 , primarily driven by an increase of $308 million in proceeds provided by sales and maturities of available-for-sale marketable securities and a decrease of $12 million in purchase of property plant and equipment.

This was partially offset by an increase of $90.2 million in investments in available-for-sale marketable securities, a $5.8 million increase in disbursements of loans made by the Company and a $3.3 million increase in cash used in purchase of privately-held companies.

Cash provided by investing activities was $243.2 million in the six months ended June 30, 2024 as compared to cash used in investing activities of $144.5 million in the six months ended June 30, 2023, primarily driven by an increase of $445.8 million in proceeds provided by sales and maturities of available-for-sale marketable securities and a decrease of $35.5 million in purchase of property plant and equipment.

This was partially offset by an increase of $37.5 million in disbursements of loans made by the Company, an increase of $31.2 million in purchases of available-for-sale debt investments and an increase of $18.9 million in cash used in purchase of privately-held companies.

Financing Activities

Financing cash flows consisted primarily of repurchases of our common stock under the share repurchase program, proceeds from the sale of shares of common stock in a public offering and employee equity incentive plans.

Cash used in financing activities in the three months ended March 31, 2024 increased by $45.8 million compared to the three months ended March 31, 2023 , primarily due to a $50.0 million increase in cash used in share repurchases and on account of share repurchases, and a $8 million decrease in proceeds provided by the exercise of stock-based awards.

This was partially offset by a decrease of $12.0 million in withholding taxes remitted to the tax authorities related to the exercise of stock-based awards.

Cash used in financing activities in the six months ended June 30, 2024 increased by $40.5 million compared to the six months ended June 30, 2023, primarily due to a $267.9 million increase in cash used for the repurchase of convertible note, an increase of $50.0 million in cash used in share repurchases, a $25.2 million increase in cash used to purchase the capped call transactions and $11.4 million decrease in proceeds provided by the exercise of stock-based awards.

This was partially offset by a $293.6 million increase in cash provided by the issuance of convertible notes and a decrease of $20.2 million in withholding taxes remitted to the tax authorities related to the exercise of stock-based awards.

Share Repurchases

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The program does not obligate SolarEdge to acquire any amount of common stock, it may be suspended, extended, modified, discontinued or terminated at any time at the Company’s discretion without prior notice, and will expire on December 31, 2024.

During the three months ended March 31, 2024 , the Company repurchased 505,896 shares of common stock from the open market at an average cost of $65.67 per share for a total of $33.2 million.

During the six months ended June 30, 2024, the Company repurchased 753,364 shares of common stock from the open market at an average cost of $66.79 per share for a total of $50.3 million.

Convertible Senior Notes

On June 28, 2024, we sold an aggregate principal amount of $300 million of 2.25% convertible senior notes due 2029 in a transaction exempt from registration pursuant to Rule 144A and Regulation S under the Securities Act.

The net proceeds from the offering of the Notes 2029 were approximately $293.2 million, after deducting fees and estimated expenses.

Separately, we have entered into capped call transactions.

We used approximately $25.2 million of the net proceeds from this offering to pay the cost of the capped call transactions and approximately $267.9 million of the net proceeds from this offering to repurchase $285.0 million principal amount of its outstanding 0.000% convertible notes due 2025.

As a result of the repurchase of Notes 2025, we recognized a gain of $15.5 million which was recorded under other income.

We intend to use the remainder of the net proceeds from the offering for general corporate purposes.

Critical Accounting Policies and Significant Management Estimates

Management believes that there have been no significant changes during the three months ended March 31, 2024 to the items that we disclosed as our critical accounting policies and estimates in MD&A in our Annual Report on Form 10-K for the fiscal year ended December 31 , 2023 , except as mentioned in Note 1, “General” (if any).

Management believes that there have been no significant changes during the six months ended June 30, 2024 to the items that we disclosed as our critical accounting policies and estimates in MD&A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, except as mentioned in Note 1, “General” (if any).

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 2. Management’s Discussion and Analysis