SOLAREDGE TECHNOLOGIES, INC. 10-Q

ITEM 1 . FINANCIAL STATEMENTS SOLAREDGE TECHNOLOGIES INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except per share data) June 30, 2024 December 31, 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 259,498 $ 338,468 Marketable securities 430,333 521,570 Trade receivables, net of allowances of $ 27,626 and $ 16,400 , respectively 295,590 622,425 Inventories, net 1,505,101 1,443,449 Prepaid expenses and other current assets 402,673 378,394 Total current assets 2,893,195 3,304,306 LONG-TERM ASSETS: Marketable securities 120,260 407,825 Deferred tax assets, net 131,748 80,912 Property, plant and equipment, net 595,623 614,579 Operating lease right-of-use assets, net 53,510 64,167 Intangible assets, net 36,790 35,345 Goodwill 52,042 42,996 Other long-term assets 65,046 37,601 Total long-term assets 1,055,019 1,283,425 Total assets $ 3,948,214 $ 4,587,731 F - 1 SOLAREDGE TECHNOLOGIES INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Cont.) (in thousands, except per share data) June 30, 2024 December 31, 2023 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Trade payables, net $ 134,421 $ 386,471 Employees and payroll accruals 67,810 76,966 Warranty obligations 169,214 183,047 Deferred revenues and customers advances 28,457 40,836 Accrued expenses and other current liabilities 166,922 205,911 Total current liabilities 566,824 893,231 LONG-TERM LIABILITIES: Convertible senior notes, net 638,703 627,381 Warranty obligations 321,618 335,197 Deferred revenues 222,557 214,607 Finance lease liabilities 39,244 41,892 Operating lease liabilities 36,838 45,070 Other long-term liabilities 16,241 18,444 Total long-term liabilities 1,275,201 1,282,591 COMMITMENTS AND CONTINGENT LIABILITIES - - STOCKHOLDERS’ EQUITY: Common stock of $ 0.0001 par value - Authorized: 125,000,000 shares; issued: 57,705,386 shares at June 30, 2024 and 57,123,437 shares at December 31, 2023; outstanding: 56,952,022 shares at June 30, 2024 and 57,123,437 shares at December 31, 2023. 6 6 Additional paid-in capital 1,744,411 1,680,622 Treasury stock, at cost; 753,364 shares held ( 50,315 ) - Accumulated other comprehensive loss ( 77,950 ) ( 46,885 ) Retained earnings 490,037 778,166 Total stockholders’ equity 2,106,189 2,411,909 Total liabilities and stockholders’ equity $ 3,948,214 $ 4,587,731 The accompanying notes are an integral part of the condensed consolidated financial statements. F - 2 SOLAREDGE TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited) (in thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenues $ 265,405 $ 991,290 $ 469,804 $ 1,935,179 Cost of revenues 276,374 673,985 506,960 1,317,748 Gross profit (loss) ( 10,969 ) 317,305 ( 37,156 ) 617,431 Operating expenses: Research and development 69,276 86,526 144,627 166,399 Sales and marketing 39,978 44,222 78,889 85,188 General and administrative 39,008 36,199 69,873 72,766 Other operating expense (income), net 951 - 3,342 ( 1,434 ) Total operating expenses 149,213 166,947 296,731 322,919 Operating income (loss) ( 160,182 ) 150,358 ( 333,887 ) 294,512 Financial income (expense), net ( 865 ) 3,384 ( 7,929 ) 27,058 Other income (loss), net 18,551 - 18,551 ( 125 ) Income (loss) before income taxes ( 142,496 ) 153,742 ( 323,265 ) 321,445 Tax benefits (income taxes) 12,245 ( 34,232 ) 35,999 ( 63,557 ) Net loss from equity method investments ( 567 ) - ( 863 ) - Net income (loss) $ ( 130,818 ) $ 119,510 $ ( 288,129 ) $ 257,888 Net basic earnings (loss) per share of common stock $ ( 2.31 ) $ 2.12 $ ( 5.06 ) $ 4.58 Net diluted earnings (loss) per share of common stock $ ( 2.31 ) $ 2.03 $ ( 5.06 ) $ 4.38 Weighted average number of shares used in computing net basic earnings (loss) per share of common stock 56,687,006 56,415,636 56,913,569 56,316,116 Weighted average number of shares used in computing net diluted earnings (loss) per share of common stock 56,687,006 59,183,666 56,913,569 59,189,302 The accompanying notes are an integral part of the condensed consolidated financial statements. F - 3 SOLAREDGE TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (in thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net income (loss) $ ( 130,818 ) $ 119,510 $ ( 288,129 ) $ 257,888 Other comprehensive income (loss), net of tax: Available-for-sale marketable securities 4 661 1,495 6,838 Cash flow hedges ( 1,168 ) 316 ( 3,533 ) ( 15 ) Foreign currency translation adjustments on intra-entity transactions that are of a long-term investment nature ( 7,581 ) ( 1,935 ) ( 20,963 ) ( 12,735 ) Foreign currency translation adjustments ( 2,594 ) 730 ( 8,064 ) 1,589 Total other comprehensive loss ( 11,339 ) ( 228 ) ( 31,065 ) ( 4,323 ) Comprehensive income (loss) $ ( 142,157 ) $ 119,282 $ ( 319,194 ) $ 253,565 The accompanying notes are an integral part of the condensed consolidated financial statements. F - 4 SOLAREDGE TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (in thousands, except per share data) Additional paid in Capital Treasury stock Accumulated other comprehensive loss Retained earnings Total Common stock Number Amount Balance as of January 1, 2024 57,123,437 $ 6 $ 1,680,622 $ - $ ( 46,885 ) $ 778,166 $ 2,411,909 Issuance of common stock upon exercise of stock-based awards 175,254 * - 13 - - - 13 Stock based compensation - - 38,888 - - - 38,888 Repurchase of common stock ( 505,896 ) * - - ( 33,222 ) - - ( 33,222 ) Other comprehensive loss adjustments - - - - ( 19,726 ) - ( 19,726 ) Net loss - - - - - ( 157,311 ) ( 157,311 ) Balance as of March 31, 2024 56,792,795 $ 6 $ 1,719,523 $ ( 33,222 ) $ ( 66,611 ) $ 620,855 $ 2,240,551 Issuance of common stock upon exercise of stock-based awards 161,549 * - 13 - - - 13 Issuance of common stock under employee stock purchase plan 245,146 * - 10,208 - - - 10,208 Stock based compensation - - 39,897 - - - 39,897 Repurchase of common stock ( 247,468 ) * - - ( 17,093 ) - - ( 17,093 ) Capped call transactions related to notes 2029 - - ( 25,230 ) - - - ( 25,230 ) Other comprehensive loss adjustments - - - - ( 11,339 ) - ( 11,339 ) Net loss - - - - - ( 130,818 ) ( 130,818 ) Balance as of June 30, 2024 56,952,022 $ 6 $ 1,744,411 $ ( 50,315 ) $ ( 77,950 ) $ 490,037 $ 2,106,189 F - 5 SOLAREDGE TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (in thousands, except per share data) Additional paid in Capital Accumulated other comprehensive loss Retained earnings Total Common stock Number Amount Balance as of January 1, 2023 56,133,404 $ 6 $ 1,505,632 $ ( 73,109 ) $ 743,837 $ 2,176,366 Issuance of common stock upon exercise of stock-based awards 209,760 * - 75 - - 75 Stock based compensation - - 40,070 - - 40,070 Other comprehensive loss adjustments - - - ( 4,095 ) - ( 4,095 ) Net income - - - - 138,378 138,378 Balance as of March 31, 2023 56,343,164 $ 6 $ 1,545,777 $ ( 77,204 ) $ 882,215 $ 2,350,794 Issuance of common stock upon exercise of stock-based awards 171,682 * - 89 - - 89 Issuance of common stock under employee stock purchase plan 41,494 * - 10,046 - - 10,046 Stock based compensation - - 39,978 - - 39,978 Other comprehensive loss adjustments - - - ( 228 ) - ( 228 ) Net income - - - - 119,510 119,510 Balance as of June 30, 2023 56,556,340 $ 6 $ 1,595,890 $ ( 77,432 ) $ 1,001,725 $ 2,520,189 * Represents an amount less than $1. The accompanying notes are an integral part of the condensed consolidated financial statements. F - 6 SOLAREDGE TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands, except per share data) Six Months Ended June 30, 2024 2023 Cash flows from operating activities : Net income (loss) $ ( 288,129 ) $ 257,888 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 30,430 26,725 Stock-based compensation expenses 76,177 78,200 Deferred income taxes, net ( 50,843 ) ( 7,636 ) Gain from repurchasing of convertible notes ( 15,455 ) - Loss (gain) from exchange rate fluctuations 10,499 ( 23,214 ) Other items 3,340 4,783 Changes in assets and liabilities: Trade receivables, net 317,574 ( 235,086 ) Inventories, net ( 58,764 ) ( 246,193 ) Prepaid expenses and other assets 2,486 ( 33,285 ) Right-of-use assets 11,392 8,004 Trade payables, net ( 245,612 ) ( 22,304 ) Warranty obligations ( 27,178 ) 103,524 Deferred revenues and customers advances ( 4,028 ) 17,222 Operating lease liabilities ( 11,042 ) ( 7,928 ) Accrued expenses and other liabilities, net ( 12,638 ) ( 1,488 ) Net cash used in operating activities ( 261,791 ) ( 80,788 ) Cash flows from investing activities : Investment in available-for-sale marketable securities ( 155,334 ) ( 124,138 ) Proceeds from maturities of available-for-sale marketable securities 480,727 84,006 Proceeds from sales of available-for-sale marketable securities 51,918 2,807 Purchase of property, plant and equipment ( 48,535 ) ( 84,075 ) Business combinations, net of cash acquired ( 11,662 ) ( 16,653 ) Purchase of intangible assets ( 10,000 ) ( 10,000 ) Disbursements for loans receivables ( 37,500 ) - Investment in privately-held companies ( 25,650 ) ( 6,750 ) Other investing activities ( 740 ) 10,349 Net cash provided by (used in) investing activities $ 243,224 $ ( 144,454 ) F - 7 SOLAREDGE TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands, except per share data ) Six Months Ended June 30, 2024 2023 Cash flows from financing activities : Repurchase of common stock $ ( 50,015 ) $ - Partial repurchase of Notes 2025 ( 267,900 ) - Proceeds from issuance of Notes 2029, net of issuance costs 293,625 - Capped call transactions related to Notes 2029 ( 25,230 ) - Tax withholding in connection with stock-based awards, net 75 ( 8,811 ) Other financing activities ( 1,239 ) ( 1,330 ) Net cash used in financing activities ( 50,684 ) ( 10,141 ) Effect of exchange rate differences on cash and cash equivalents ( 9,719 ) 10,015 Decrease in cash and cash equivalents ( 78,970 ) ( 225,368 ) Cash and cash equivalents at the beginning of the period 338,468 783,112 Cash and cash equivalents at the end of the period $ 259,498 $ 557,744 Supplemental disclosure of non-cash activities : Purchase of intangible assets and business combinations $ - $ 11,245 Right-of-use asset recognized with a corresponding lease liability $ 1,505 $ 12,063 Purchase of property, plant and equipment $ 5,968 $ 16,300 The accompanying notes are an integral part of the condensed consolidated financial statements. F - 8 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 1: GENERAL a. SolarEdge Technologies Inc. (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 full or partial home backup capabilities, 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) batteries for PV applications that are used to increase energy independence and maximize self-consumption for PV system's owners 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. b. The Company has expanded its activity to other areas of smart energy technology organically and through acquisitions. The Company offers a variety of energy solutions, which include lithium-ion cells, batteries, and energy storage systems (“Energy Storage”), automated machines for industrial use (“Automation Machines”), as well as cloud-based energy management solutions. c. Basis of Presentation: The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. The Company’s interim period results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2023 , contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 26, 2024, have been applied consistently in these unaudited interim condensed consolidated financial statements. Certain prior year amounts have been reclassified to conform to current year presentation. d. Use of estimates: The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures in the accompanying notes. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties. e. In accordance with ASC 360-10, the Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that long-lived assets may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. During the second quarter of 2024, and close to the issuance date of the convertible Notes 2029, although the Company's share price deteriorated and albeit the slowdown in the Company's operations, the Company determined that no impairment was recorded. In addition to other events and circumstances, the Company believes that it is reasonably possible to estimate that the undiscounted cash flows may change in the near term and could result in the impairment of those long-lived assets to fair value. The Company's estimate of cash flows may change in the near future because of the losses incurred by the group's assets related to the Solar and Energy Storage segments due to high inventory levels in the channels which leads to slower than expected sales. f. Concentrations of supply risks: The Company depends on two contract manufacturers and several limited or single source component suppliers. Reliance on these vendors makes the Company vulnerable to possible capacity constraints and reduced control over component availability, delivery schedules, manufacturing yields, and costs. As of June 30, 2024 one of our contract manufacturer accounts for 12.9 % of the Company’s total trade payables, net. As of December 31, 2023, two contract manufacturers collectively accounted for 58.5 % of the Company’s total trade payables, net. The Company's own manufacturing facility, Sella 1, located in the North of Israel, is primarily used in the Company's Solar segment operations. Additionally, Sella 2, a Company owned manufacturing facility in South Korea, together with a smaller Company owned facility, are used for the Energy Storage segment. F - 9 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) g. New accounting standards updates: In November 2023, the Financial Accounting Standards Board (" FASB ") issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). Additional segment reporting information required by ASU 2023-07 includes: disclosing the title and position of the individual or the name of the group or committee identified as the CODM, provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually, and additional disclosures regarding significant segment expenses. ASU 2023-07 is effective for fiscal periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of adopting ASU 2023-07 . In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires additional categories of information about federal, state and foreign income taxes to be included in effective tax rate reconciliation disclosure. Additionally, the newly added categories also apply to the income taxes paid disclosure. Implementation of said additions are subject to quantitative thresholds. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of adopting ASU 2023-09. F - 10 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 2: BUSINESS COMBINATIONS In January 2023, the Company completed an investment of $ 5,500 in the common stock of Weev Energy B.F. Ltd., ("Wevo"), an Israel-based software startup, specializing in EV charging optimization and management for sites with large quantities of EV chargers, which represented 34.8 % of Wevo's outstanding shares. Wevo's solution will also be part of the SolarEdge ONE energy optimization system for the Commercial and Industrial ("C&I") segment, designed to offer SolarEdge customers a single energy optimization solution that orchestrates and integrates between on-site solar generation, battery storage and large-scale EV charging. On April 1, 2024, the Company completed the acquisition of all remaining outstanding shares of Wevo for approximately $ 13,331 in cash. Pursuant to ASC 805, "Business Combination", the Company accounted for the Wevo acquisition as a business combination using the acquisition method of accounting. Identifiable assets and liabilities of Wevo, including identifiable intangible assets, were recorded based on their estimated fair values as of the date of the closing of the acquisition. The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill. The Company recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date. Such preliminary valuation required estimates and assumptions including, but not limited to, estimating future cash flows and direct costs in addition to developing the appropriate discount rates and current market profit margins. The Company’s management believes the fair values recognized for the assets acquired and the liabilities assumed were based on reasonable estimates and assumptions. From the initial investment through to the purchase of all remaining shares, the Company's share of net losses were $ 646 . The Company determined that the acquisition date fair value of the original investment on April 1, 2024 was $ 5,979 , resulting in a gain of $ 1,125 . The following table summarizes the preliminary fair values estimation of assets acquired and liabilities assumed as of the date of the acquisition: Amount Weighted Average Useful Life (In years) Cash $ 2,914 Net liabilities assumed ( 903 ) Identified intangible assets: Technology 4,049 7 Customer relationships 1,241 1 Trade name 665 2 Goodwill 11,344 Total $ 19,310 Acquisition costs were immaterial and are included in general and administrative expenses in the consolidated statements of income (loss). Goodwill generated from this acquisition was primarily attributable to expected post-acquisition synergies from combining Wevo's platform with the Company's product offering to its commercial and industrial customers. All of the Goodwill was assigned to the Solar segment (see Note 23 ). Goodwill is not deductible for tax purposes. The fair values of technology, customer relationships and trade name were derived by applying the multi-period excess earnings method, with-and-without method, and the relief-from-royalty method, respectively, all of which are under the income approach whose underlying inputs are considered Level 3. The fair values assigned to assets acquired and liabilities assumed were based on management's estimates and assumptions. The results of Wevo have been included in the Company's consolidated statements of income (loss) since its acquisition date and are not material. Pro forma financial information has not been presented because the impact of the acquisition was not material to the Company's statement of income (loss). F - 11 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 3: INVESTMENTS IN PRIVATELY-HELD COMPANIES In January 2024, the Company completed an investment of $ 6,075 in the preferred stock of Ivy Energy, Inc, ("Ivy"), a privately-held U.S. company. The Company accounted for the Ivy investment as an equity investment that does not have readily determinable fair values. As such, the Company’s non-marketable equity securities had a carrying value of $ 6,075 as of June 30, 2024. As of March 2024, the Company completed an investment of $ 5,000 in the preferred stock of Stardust Solution, Inc, ("Stardust"), a privately-held U.S. company. The Company accounted for the Stardust investment as an equity investment that does not have readily determinable fair values. As such, the Company’s non-marketable equity securities had a carrying value of $ 5,000 as of June 30, 2024. In April 2024, the Company completed an investment of approximately $ 17,000 in the preferred stock of Ampeers Energy GmbH ("Ampeers"), a privately-held German company, which represented 28.23 % of Ampeers' outstanding shares. The Company accounted for its investment in Ampeers using the equity method of accounting. Under this method, the investment, which was initially recorded at cost, is adjusted to recognize the Company’s share of net earnings or losses of the investee as they occur, rather than when dividends or other distributions are received. The Company's share of net losses in the three and six months ended June 30, 2024 were $ 567 . Investments in privately-held companies are included within other long-term assets in the condensed consolidated balance sheets. As of June 30, 2024, the carrying value of investments in privately-held companies was $ 27,405 . There were no impairment charges for the three and six months ended June 30, 2024 and 2023 associated with this equity method investment. F - 12 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 4: MARKETABLE SECURITIES The following is a summary of available-for-sale marketable securities as of June 30, 2024: Amortized cost Gross unrealized gains Gross unrealized losses Fair value Matures within one year: Corporate bonds $ 413,866 $ 111 $ ( 4,007 ) $ 409,970 U.S. Treasury securities 9,289 - ( 38 ) 9,251 U.S. Government agency securities 6,453 2 ( 13 ) 6,442 Non-U.S. Government securities 4,710 - ( 40 ) 4,670 434,318 113 ( 4,098 ) 430,333 Matures after one year: Corporate bonds 78,924 248 ( 674 ) 78,498 U.S. Government agency securities 38,647 6 ( 98 ) 38,555 Non-U.S. Government securities 3,179 28 - 3,207 120,750 282 ( 772 ) 120,260 Total $ 555,068 $ 395 $ ( 4,870 ) $ 550,593 The following is a summary of available-for-sale marketable securities as of December 31, 2023: Amortized cost Gross unrealized gains Gross unrealized losses Fair value Matures within one year: Corporate bonds $ 487,083 $ 679 $ ( 5,942 ) $ 481,820 U.S. Treasury securities 15,324 - ( 63 ) 15,261 U.S. Government agency securities 8,787 11 ( 3 ) 8,795 Non-U.S. Government securities 15,161 673 ( 140 ) 15,694 526,355 1,363 ( 6,148 ) 521,570 Matures after one year: Corporate bonds 342,223 1,902 ( 4,444 ) 339,681 U.S. Treasury securities 2,430 - ( 22 ) 2,408 U.S. Government agency securities 44,100 107 ( 121 ) 44,086 Non-U.S. Government securities 20,488 1,162 - 21,650 409,241 3,171 ( 4,587 ) 407,825 Total $ 935,596 $ 4,534 $ ( 10,735 ) $ 929,395 Proceeds from sales of available-for-sale marketable securities during the three months ended June 30, 2024 were $ 51,918 which led to realized gains of $ 1,970 . Proceeds from sales of available-for-sale marketable securities during the six months ended June 30, 2024 and 2023 were $ 51,918 and $ 2,807 , which led to realized gains of $ 1,970 and losses of $ 125 , respectively. The Company did not sell any available-for-sale marketable securities during the three months ended June 30, 2023. As of June 30, 2024, and December 31, 2023, the Company did not record an allowance for credit losses for its available-for-sale marketable securities. F - 13 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 5: INVENTORIES, NET June 30, 2024 December 31, 2023 Raw materials $ 307,487 $ 340,604 Work in process 19,361 20,885 Finished goods 1,178,253 1,081,960 Total inventories, net $ 1,505,101 $ 1,443,449 NOTE 6: PREPAID EXPENSES AND OTHER CURRENT ASSETS June 30, 2024 December 31, 2023 Government authorities 202,806 167,221 Vendor non-trade receivables 1 65,650 102,991 Loan receivables 2 82,297 55,418 Prepayments 33,807 29,578 Other 18,113 23,186 Total prepaid expenses and other current assets $ 402,673 $ 378,394 1 Vendor non-trade receivables derived from the sale of components to manufacturing vendors who manufacture products, components and other testing equipment 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. 2 L oan receivables are loans to third parties. The loan repayments are expected on a monthly or annual basis as per the contractual terms of each loan agreement. The loan is measured at its amortized cost and is subjected to the Company's credit risk policy. The loans bear interest that represent market interest rate. As of June 30, 2024, the Company's provision for credit loss was $ 11,578 which was recorded under Financial income (expense), net. The amortized cost of the loan receivable approximates its fair value as of June 30, 2024. As of June 30, 2024 and December 31, 2023 the balance includes a loan granted to the Company’s customer at the amount of $ 80,000 and 43,000 , respectively. Considering the loan amount the customer balance would potentially expose the Company to a concentration of credit risk. F - 14 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 7: INTANGIBLE ASSETS, NET Acquired intangible assets consisted of the following as of June 30, 2024, and December 31, 2023: June 30, 2024 December 31, 2023 Intangible assets with finite lives: Technology $ 29,676 $ 26,990 Customer relationships 4,233 3,193 Trade names 1,284 624 Assembled workforce 3,575 3,575 Patents and licenses 22,000 22,000 Gross intangible assets 60,768 56,382 Less - accumulated amortization ( 23,978 ) ( 21,037 ) Total intangible assets, net $ 36,790 $ 35,345 For the three months ended June 30, 2024 and 2023, the Company recorded amortization expenses related to intangible assets in the amount of $ 2,032 and $ 1,820 , respectively. For the six months ended June 30, 2024 and 2023, the Company recorded amortization expenses related to intangible assets in the amount of $ 3,929 and $ 3,238 , respectively. Expected future amortization expenses of intangible assets as of June 30, 2024 are as follows: 2024 $ 4,789 2025 7,539 2026 6,413 2027 4,312 2028 3,443 2029 and thereafter 10,294 $ 36,790 NOTE 8: GOODWILL Changes in the carrying amount of goodwill for the period ended June 30, 2024 were as follows: Solar Energy Storage Total Goodwill at December 31, 2023 $ 40,632 $ 2,364 $ 42,996 Changes during the year: Acquisitions 11,344 - 11,344 Foreign currency adjustments ( 2,127 ) ( 171 ) ( 2,298 ) Goodwill at June 30, 2024 $ 49,849 $ 2,193 $ 52,042 As of June 30, 2024 and December 31, 2023 there were $ 90,104 accumulated goodwill impairment losses. NOTE 9: OTHER LONG TERM ASSETS June 30, 2024 December 31, 2023 Cloud computing arrangements $ 21,213 $ 13,666 Severance pay fund 9,625 9,241 Investments in privately held companies 27,405 7,650 Prepaid expenses and other 6,803 7,044 Total other long term assets $ 65,046 $ 37,601 F - 15 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 10: DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES During the six months ended June 30, 2024, 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. These hedging contracts are designated as cash flow hedges, as defined by ASC 815 and are all effective hedges. As of June 30, 2024, the Company entered into put and call options to sell U.S. dollars (“USD”) for NIS in the amount of NIS 115 million. 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 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 (loss), under "Financial income (expense), net ". The Company classifies cash flows related to its hedging as operating activities in its condensed consolidated statement of cash flows. The fair values of outstanding derivative instruments were as follows: Balance sheet location June 30, 2024 December 31, 2023 Derivative assets of options and forward contracts: Designated cash flow hedges Prepaid expenses and other current assets $ 463 $ 4,477 Non-designated hedges Prepaid expenses and other current assets - 410 Total derivative assets $ 463 $ 4,887 Gains (losses) on derivative instruments are summarized below: Three Months Ended June 30, Six Months Ended June 30, Affected line item 2024 2023 2024 2023 Foreign exchange contracts Non Designated Hedging Instruments Condensed Consolidated Statements of Income (loss) - Financial income (expense), net $ 191 $ - $ 802 $ - Designated Hedging Instruments Condensed Consolidated Statements of Comprehensive Income (loss) - Cash flow hedges $ ( 1,019 ) $ ( 2,091 ) $ ( 2,557 ) $ ( 4,148 ) See Note 18 for information regarding losses from designated hedging instruments reclassified from accumulated other comprehensive loss. F - 16 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 11: FAIR VALUE MEASUREMENTS In accordance with ASC 820, "Fair Value Measurement", the Company measures its cash equivalents and marketable securities, at fair value using the market approach valuation technique. 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 June 30, 2024 and December 31, 2023, by level within the fair value hierarchy: Fair value measurements as of Description Fair Value Hierarchy June 30, 2024 December 31, 2023 Assets: Cash and cash equivalents: Cash Level 1 $ 254,220 $ 309,521 Money market mutual funds Level 1 $ 562 $ 22,311 Deposits Level 1 $ 4,716 $ 6,636 Derivative instruments Level 2 $ 463 $ 4,887 Short-term marketable securities: Corporate bonds Level 2 $ 409,970 $ 481,820 U.S. Treasury securities Level 2 $ 9,251 $ 15,261 U.S. Government agency securities Level 2 6,442 8,795 Non-U.S. Government securities Level 2 $ 4,670 $ 15,694 Long-term marketable securities: Corporate bonds Level 2 $ 78,498 $ 339,681 U.S. Treasury securities Level 2 $ - $ 2,408 U.S. Government agency securities Level 2 38,555 44,086 Non-U.S. Government securities Level 2 $ 3,207 $ 21,650 NOTE 12: WARRANTY OBLIGATIONS Changes in the Company’s product warranty obligations for the three and six months ended June 30, 2024 and 2023, were as follows: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Balance, at the beginning of the period $ 502,499 $ 442,971 $ 518,244 $ 385,057 Accruals for warranty during the period 12,492 72,108 31,339 154,948 Changes in estimates 9,204 6,703 9,310 10,068 Settlements ( 33,363 ) ( 33,195 ) ( 68,061 ) ( 61,486 ) Balance, at end of the period 490,832 488,587 490,832 488,587 Less current portion ( 169,214 ) ( 146,150 ) ( 169,214 ) ( 146,150 ) Long term portion $ 321,618 $ 342,437 $ 321,618 $ 342,437 F - 17 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 13: 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. Changes in the balances of deferred revenues and customer advances during the period are as follows: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Balance, at the beginning of the period $ 254,616 $ 224,424 $ 255,443 $ 213,577 Revenue recognized ( 25,359 ) ( 19,000 ) ( 33,790 ) ( 21,990 ) Increase in deferred revenues and customer advances 21,757 27,404 29,361 41,241 Balance, at the end of the period 251,014 232,828 251,014 232,828 Less current portion ( 28,457 ) ( 28,135 ) ( 28,457 ) ( 28,135 ) Long term portion $ 222,557 $ 204,693 $ 222,557 $ 204,693 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 June 30, 2024: 2024 $ 21,373 2025 14,020 2026 13,653 2027 11,559 2028 10,808 Thereafter 179,601 Total deferred revenues $ 251,014 NOTE 14: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES June 30, 2024 December 31, 2023 Accrued expenses $ 98,758 $ 142,130 Government authorities 37,473 34,309 Operating lease liabilities 14,330 17,704 Accrual for sales incentives 10,567 5,862 Other 5,794 5,906 Total accrued expenses and other current liabilities $ 166,922 $ 205,911 F - 18 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 15: CONVERTIBLE SENIOR NOTES On September 25, 2020, the Company sold an aggregate principal amount of $ 632,500 of its 0.00 % convertible senior notes, due 2025 (the “Notes 2025”). The Notes 2025 were sold pursuant to an indenture, dated September 25, 2020 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee. The Notes 2025 do not bear regular interest and mature on September 15, 2025 , unless earlier repurchased or converted in accordance with their terms. The Notes 2025 are general senior unsecured obligations of the Company. Holders may convert their Notes 2025 prior to the close of business on the business day immediately preceding June 15, 2025 in multiples of $ 1 principal amount, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2020 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five-business-day period after any five consecutive trading day period in which the trading price per $1 principal amount of the Notes 2025 for each trading day of that five consecutive trading day period was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events as described in the Indenture. In addition, holders may convert their Notes 2025, in multiples of $1 principal amount, at their option at any time beginning on or after June 15, 2025, and prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date of the Notes 2025, without regard to the foregoing circumstances. The initial conversion rate for the Notes 2025 was 3.5997 shares of common stock per $ 1 principal amount of Notes 2025, which is equivalent to an initial conversion price of approximately $ 277.80 per share of common stock, subject to adjustment upon the occurrence of certain specified events as set forth in the Indenture. Upon conversion, the Company may choose to pay or deliver, as the case may be, cash, shares of common stock, or a combination of cash and shares of common stock. In addition, upon the occurrence of a fundamental change (as defined in the Indenture), holders of the Notes 2025 may require the Company to repurchase all or a portion of their Notes 2025, in multiples of $ 1 principal amounts, at a repurchase price of 100% of the principal amount of the Notes 2025, plus any accrued and unpaid special interest to, but excluding the fundamental change repurchase date. If certain fundamental changes referred to as make-whole fundamental changes occur, the conversion rate for the Notes 2025 may be increased. On June 28, 2024, the Company sold an aggregate principal amount of $ 300,000 of its 2.25 % convertible senior notes , due 2029 (the “ Notes 2029”). The Notes 2029 were sold pursuant to an indenture, dated June 28, 2024 (the “Indenture 2029”), between the Company and U.S. Bank National Association, as trustee. The Notes 2029 will bear interest at a rate of 2.25% per year, payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2025. The Notes 2029 mature on July 1, 2029 , unless repurchased, redeemed or converted in accordance with their terms prior to such date. The Notes 2029 are general senior unsecured obligations of the Company. Holders may convert their Notes 2029 at any time prior to the close of business on the business day immediately preceding April 1, 2029 in multiples of $ 1 principal amount, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2024 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period in which the trading price per $1 principal amount of the Notes 2029 for each trading day of that five consecutive trading day period was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events or if the Company provides a notice of redemption as described in the Indenture 2029 . In addition, holders may convert their Notes 2029, in multiples of $1 principal amount, at their option at any time beginning on or after April 1, 2029, and prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date of the Notes 2029, without regard to the foregoing circumstances. The initial conversion rate for the Notes 2029 is 29.1375 shares of common stock per $ 1 principal amount of Notes 2029, which is equivalent to an initial conversion price of approximately $ 34.32 per share of common stock, subject to adjustment upon the occurrence of certain specified events as set forth in the Indenture 2029. Upon conversion, the Company may choose to pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock. F - 19 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) In addition, upon the occurrence of a fundamental change (as defined in the Indenture 2029), holders of the Notes 2029 may require the Company to repurchase all or a portion of their Notes 2029, in multiples of $ 1 principal amounts, at a repurchase price of 100% of the principal amount of the Notes 2029, plus any accrued and unpaid interest, if any, to, but not including, the repurchase date. If certain fundamental changes referred to as make-whole fundamental changes occur, the conversion rate for the Notes 2029 may be increased. The Notes 2029 are not redeemable prior to July 6, 2027. On or after July 6, 2027, the Company may redeem the Notes 2029 at its option if the last reported sale price of the common stock has been at least 130% of the conversion price, then in effect, for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on and including the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The net proceeds from the offering of the Notes were approximately $ 293.2 million, after deducting fees and estimated expenses. Separately, the Company has entered into capped call transactions (as detailed below). The Company used approximately $ 25.2 million of the net proceeds from this offering to pay the cost of the capped call transactions. The Company also used approximately $ 267.9 million of the net proceeds from this offering to repurchase $ 285 .0 million principal amount of its Notes 2025. The Company recorded under other income a gain of 15,456 from the repurchase of Notes 2025. The Company accounts for the Notes 2029 at amortized cost, as a single unit of account on the balance sheet. The carrying value of the liability is represented by the face amount of the Notes 2029, less debt issuance costs, adjusted for any amortization of issuance costs. Issuance costs are being amortized as interest expense over the term of the Notes 2029, using the effective interest rate method. The capped call transactions are expected generally to reduce the potential dilution to the common stock upon any conversion of the Notes 2029 and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes 2029, as the case may be, in the event that the market price per share of common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions. The strike price initially corresponds to the conversion price of the Notes and is subject to customary anti-dilution adjustments. If, however, the market price per share of common stock exceeds $48.84, the initial cap price of the capped call transactions, there would nevertheless be unmitigated dilution and/or no offset of any cash payments, in each case, attributable to the amount by which the market price of the common stock exceeds the cap price. The cap price is subject to certain customary adjustments under the terms of the capped call transactions. The capped call transactions are considered a freestanding instrument as they were entered into separately and apart from Notes 2029. In addition, the conversion or redemption of the Notes 2029 would not automatically result in the exercise of the capped call. As the capped call transactions are indexed to the Company's common stock, they were recorded as a reduction of additional paid-in capital in the condensed consolidated balance sheets. The convertible senior notes consisted of the following as of June 30, 2024 and December 31, 2023: June 30, 2024 December 31, 2023 Notes 2025 Principal $ 347,500 $ 632,500 Unamortized issuance costs ( 2,005 ) ( 5,119 ) Net carrying amount Notes 2025 345,495 627,381 Notes 2029 Principal 300,000 - Unamortized issuance costs ( 6,792 ) - Net carrying amount Notes 2029 293,208 - Total notes carrying amount $ 638,703 $ 627,381 F - 20 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) Costs relates to the Notes for the three and six months ended June 30, 2024 were as fol lows: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Notes 2025 Debt issuance cost $ 736 $ 732 $ 1,470 $ 1,463 Notes 2029 Debt issuance cost $ 7 $ - $ 7 $ - Contractual interest expense $ 37 $ - $ 37 $ - As of June 30, 2024, the unamortized issuance costs of the Notes 2025 and Notes 2029 will be amortized over the remaining term of approximately 1.2 and 5 years, respectively. The annual effective interest rate of Notes 2025 and Notes 2029 is 0.47 %. and 2.62 %, respectively. As of June 30, 2024, the estimated fair value of Notes 2025 and Notes 2029, which the Company has classified as Level 2 financial instruments, is $ 316,746 and $ 287,880 , respectively. 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 June 30, 2024, the if-converted value of the Notes 2025 and Notes 2029 did not exceed the principal amount. F - 21 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 16: STOCK CAPITAL a. Common stock rights: Common stock confers upon its holders the right to receive notice of, and to participate in, all general meetings of the Company, where each share of common stock shall have one vote for all purposes, to share equally, on a per share basis, in bonuses, profits, or distributions out of fund legally available therefor, and to participate in the distribution of the surplus assets of the Company in the event of liquidation of the Company. b. Equity Incentive Plans: The Company’s 2007 Global Incentive Plan (the “2007 Plan”) was adopted by the board of directors on August 30, 2007. The 2007 Plan terminated upon the Company’s IPO on March 31, 2015 and no further awards may be granted thereunder. All outstanding awards will continue to be governed by their existing terms and 379,358 available options for future grants were transferred to the Company’s 2015 Global Incentive Plan (the “2015 Plan”) and are reserved for future issuances under the 2015 plan. The 2015 Plan became effective upon the consummation of the IPO. 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 June 30, 2024, a total of 23,709,926 shares of common stock were reserved for issuance pursuant to stock awards under the 2015 Plan (the “Share Reserve”), an aggregate of 12,570,551 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; provided, however, that the Company’s board of directors may determine that there will not be a January 1 st increase in the Share Reserve in a given year or that the increase will be less than 5% of the shares of capital stock outstanding on the preceding December 31 st . 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. 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. The Company uses a Monte-Carlo simulation to determine the grant date fair value for these awards, which takes into consideration the market price of a share of the Company’s common stock on the date of grant less the present value of dividends expected during the requisite service period, as well as the possible outcomes pertaining to the TSR market condition. The Company recognizes such compensation expenses on an accelerated vesting method. 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 June 30, 2024, an aggregate of 8,617,974 options are still available for future grants under the 2015 Plan. F - 22 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) A summary of the activity in stock options and related information is as follows: Number of options Weighted average exercise price Weighted average remaining contractual term in years Aggregate intrinsic Value Outstanding as of December 31, 2023 317,416 $ 53.38 4.05 $ 17,366 Exercised ( 5,920 ) 4.38 - 360 Outstanding as of June 30, 2024 311,496 $ 54.31 3.62 $ 1,314 Vested and expected to vest as of June 30, 2024 311,402 $ 54.23 3.62 $ 1,314 Exercisable as of June 30, 2024 307,839 $ 51.26 3.59 $ 1,314 The intrinsic value is the amount by which the closing price of the Company’s common stock on June 30, 2024 or the price on the day of exercise exceeds the exercise price of the stock options multiplied by the number of in-the-money options. A summary of the activity in the RSUs and related information is as follows: Number of RSUs Weighted average grant date fair value Unvested as of December 31, 2023 1,860,286 $ 182.52 Granted 1,401,181 51.09 Vested ( 323,024 ) 209.53 Forfeited ( 145,169 ) 201.70 Unvested as of June 30, 2024 2,793,274 $ 112.47 A summary of the activity in the PSUs and related information is as follows: Number of PSUs Weighted average grant date fair value Unvested as of December 31, 2023 74,415 $ 302.58 Granted 81,249 99.13 Vested ( 7,859 ) 298.93 Forfeited ( 8,836 ) 288.77 Unvested as of June 30, 2024 138,969 $ 184.72 c. Employee Stock Purchase Plan ("ESPP"): The Company adopted an ESPP effective upon the consummation of the IPO. As of June 30, 2024, a total of 4,638,023 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. However, the Company’s board of directors may reduce the amount of the increase in any particular year at their discretion, including a reduction to zero. The ESPP is implemented through an offering every six months. According to the ESPP, eligible employees may use up to 15 % of their salaries to purchase common stock up to an aggregate limit of $ 15 per participant for every six months plan. 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 June 30, 2024, 1,183,310 shares of common stock have been purchased under the ESPP. As of June 30, 2024, 3,454,713 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. F - 23 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) d. Stock-based compensation expenses: The Company recognized stock-based compensation expenses related to all stock-based awards in the consolidated statement of income (loss) for the three and six months ended June 30, 2024, and 2023, as follows: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Stock-based compensation expenses: Cost of revenues $ 6,218 $ 5,923 $ 12,186 $ 11,850 Research and development 17,639 17,272 34,778 34,481 Selling and marketing 8,149 7,822 16,060 15,901 General and administrative 6,565 7,948 13,153 15,968 Total stock-based compensation expenses $ 38,571 $ 38,965 $ 76,177 $ 78,200 Stock-based compensation capitalized: Inventory $ 861 $ 606 $ 1,665 $ 1,011 Other long-term assets 465 407 943 837 Total stock-based compensation capitalized $ 1,326 $ 1,013 $ 2,608 $ 1,848 The total tax benefit associated with stock-based compensation for the three months ended June 30, 2024 and 2023 was $ 4,744 and $ 4,102 , respectively. The tax benefit realized from stock-based compensation for the three months ended June 30, 2024, and 2023 was $ 1,283 and $ 2,619 , respectively. The total tax benefit associated with stock-based compensation for the six months ended June 30, 2024, and 2023 was $ 10,110 and $ 8,298 , respectively. The tax benefit realized from stock-based compensation for the six months ended June 30, 2024, and 2023 was $ 2,624 and $ 5,461 , respectively. As of June 30, 2024, there were total unrecognized compensation expenses in the amount of $ 314,604 related to non-vested equity-based compensation arrangements granted. These expenses are expected to be recognized during the period from July 1, 2024, through May 31, 2028. e. Repurchase of Common Stock: On November 1, 2023, the Company announced the approval by the Board of Directors of a share repurchase program which authorizes the repurchase of up to $ 300,000 of the Company’s common stock. Under the share repurchase program, repurchases can be made using a variety of methods, which may include open market purchases, block trades, privately negotiated transactions, accelerated share repurchase programs and/or a non-discretionary trading plan or other means, including through 10b5-1 trading plans, all in compliance with the rules of the SEC and other applicable legal requirements. The timing, manner, price and amount of any common share repurchases under the share repurchase program are determined by the Company in its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions. The program does not obligate the Company 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 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 $ 50,315 . F - 24 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 17: COMMITMENTS AND CONTINGENT LIABILITIES a. Guarantees: As of June 30, 2024, contingent liabilities exist regarding guarantees in the amounts of $ 10,526 , and $ 1,954 in respect of office rent lease agreements and other transactions, respectively. b. Contractual purchase obligations: The Company has contractual obligations to purchase goods and raw materials. These contractual purchase obligations relate to inventories and other purchase orders, which cannot be canceled without penalty. 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 June 30, 2024, the Company had non-cancellable purchase obligations totaling approximately $ 404,149 , out of which the Company recorded a provision for loss in the amount of $ 23,358 . As of June 30, 2024, the Company had contractual obligations for capital expenditures totaling approximately $ 23,875 . These commitments reflect purchases of automated assembly lines and other machinery related to the Company’s general manufacturing process and are primarily for its new manufacturing sites in the U.S. c. Legal claims: From time to time, the Company may be involved in various claims and legal proceedings. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss. These accruals are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter. O n March 15, 2024, Abdul Hirani (“Hirani”) filed a purported derivative complaint in the United States District Court for the Southern District of New York against certain current and former Company executive officers and board members, including Zvi Lando, Ronen Faier, Nadav Zafrir, Betsy Atkins, Marcel Gani, Dana Gross, Dirk Hoke, Avery More, and Tal Payne (collectively, “Defendants”). The Hirani complaint makes largely the same allegations as those in the Consolidated Securities Litigation described below, namely, that the Company failed to disclose information about its inventory in Europe and cancellation rates from European distributors, which allegedly resulted in material misstatements about the Company’s business and prospects in its quarterly filings. On June 10, 2024, Jonathan Blaufarb (“Blaufarb”) filed a second purported derivative complaint in the United States District Court for the Southern District of New York against the same Defendants as those named in the Hirani Complaint. The Blaufarb complaints makes largely the same allegations as well. It also pleads the same counts as those in the Hirani complaint, as well as additional counts for abuse of control and gross mismanagement. Defendants accepted service of the Hirani and Blaufarb complaints via stipulation that was so-ordered on July 12, 2024, and the two cases were consolidated with the Hirani matter designated as the lead case. The parties have until September 10, 2024 to file a proposed case schedule. On November 3, 2023, Daphne Shen, a purported stockholder of the Company, filed a proposed class action complaint for violation of federal securities laws, individually and punitively on behalf of all others similarly situated, in the U.S. District Court of the Southern District of New York against the Company, the Company’s CEO and the Company’s CFO. The complaint alleges violations of Section 10(b) and Rule 10b-5 of the Exchange Act, as well as violations of Section 20(a) of the Exchange Act against the individual defendants. The complaint seeks class certification, damages, interest, attorneys’ fees, and other relief. On December 13, 2023, Javier Cascallar filed a similar proposed class action. On February 7, 2024, the Court consolidated the two actions (the "Consolidated Securities Litigation"), and appointed co-lead plaintiffs (the "Plaintiffs") and lead counsel. On April 22, 2024, the co-lead Plaintiffs filed an amended complaint adding two additional officers. The amended complaint makes substantially similar allegations and claims. Defendants moved to dismiss the amended complaint on July 15, 2024 (the “Motion”). The Plaintiffs have until August 26, 2024 to file their opposition to the Motion, and defendants will have three weeks thereafter to file a reply brief in support of their Motion. Due to the early stage of this proceeding, the Company cannot reasonably estimate the potential range of loss, if any, or the likelihood of a potential adverse outcome. The Company disputes the allegations of wrongdoing and intends to vigorously defend against them. In August 2019, the Company was served with a lawsuit filed in the civil courts of Milan, Italy against the Italian subsidiary of SolarEdge e-Mobility S.r.l (previously SMRE S.p.A) that purchased the shares of SolarEdge e-Mobility in the tender offer that followed the SolarEdge e-Mobility Acquisition by certain former shareholders of SolarEdge e-Mobility who tendered their shares. The lawsuit asked for damages of approximately $ 3,000 , representing the difference between the amount for which they tendered their shares ( 6 Euro per share) and 6.7 Euros per share. In December 2023, the court of Milan, rendered a decision ordering SolarEdge to pay, in favor of each plaintiff, the difference between the price paid ( 6 Euro per share) and 6.44 Euro per share, (i.e. 0.44 euros per share) for a total payment of approximately $ 1,700 , which consists, in addition to the shareholders' compensation, legal expenses, court fees, VAT, and CPA expenses per local law. The Company filed an appeal to this decision on May 30, 2024 in the Court of Appeals of Milan, First Civil Chamber. As of June 30, 2024, the Company recorded an accrual of $ 2,154 for legal claims which was recorded under accrued expenses and other current liabilities. F - 25 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 18: ACCUMULATED OTHER COMPREHENSIVE LOSS The following table summarizes the changes in accumulated balances of other comprehensive gain (loss), net of taxes: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Unrealized gains (losses) on available-for-sale marketable securities Beginning balance $ ( 3,469 ) $ ( 19,272 ) $ ( 4,960 ) $ ( 25,449 ) Revaluation 1,873 793 3,733 8,363 Tax on revaluation ( 400 ) ( 132 ) ( 769 ) ( 1,603 ) Other comprehensive income before reclassifications 1,473 661 2,964 6,760 Reclassification ( 1,970 ) - ( 1,970 ) 107 Tax on reclassification 501 - 501 ( 29 ) Losses (gains) reclassified from accumulated other comprehensive income (loss) ( 1,469 ) - ( 1,469 ) 78 Net current period other comprehensive income 4 661 1,495 6,838 Ending balance $ ( 3,465 ) $ ( 18,611 ) $ ( 3,465 ) $ ( 18,611 ) Unrealized gains (losses) on cash flow hedges Beginning balance $ 1,575 $ ( 2,092 ) $ 3,940 $ ( 1,761 ) Revaluation ( 1,158 ) ( 2,229 ) ( 2,906 ) ( 4,425 ) Tax on revaluation 139 138 349 277 Other comprehensive loss before reclassifications ( 1,019 ) ( 2,091 ) ( 2,557 ) ( 4,148 ) Reclassification ( 170 ) 2,566 ( 1,109 ) 4,406 Tax on reclassification 21 ( 159 ) 133 ( 273 ) Losses (gains) reclassified from accumulated other comprehensive income (loss) ( 149 ) 2,407 ( 976 ) 4,133 Net current period other comprehensive income (loss) ( 1,168 ) 316 ( 3,533 ) ( 15 ) Ending balance $ 407 $ ( 1,776 ) $ 407 $ ( 1,776 ) Foreign currency translation adjustments on intra-entity transactions that are of a long-term investment in nature Beginning balance $ ( 56,717 ) $ ( 48,760 ) $ ( 43,335 ) $ ( 37,960 ) Revaluation ( 7,581 ) ( 1,935 ) ( 20,963 ) ( 12,735 ) Ending balance $ ( 64,298 ) $ ( 50,695 ) $ ( 64,298 ) $ ( 50,695 ) Unrealized gains (losses) on foreign currency translation Beginning balance $ ( 8,000 ) $ ( 7,080 ) $ ( 2,530 ) $ ( 7,939 ) Revaluation ( 2,594 ) 730 ( 8,064 ) 1,589 Ending balance $ ( 10,594 ) $ ( 6,350 ) $ ( 10,594 ) $ ( 6,350 ) Total $ ( 77,950 ) $ ( 77,432 ) $ ( 77,950 ) $ ( 77,432 ) F - 26 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) The following table summarizes the reclassification out of "Accumulated other comprehensive loss ", net of taxes: Details about Accumulated Other Comprehensive Loss Components Three Months Ended June 30, Six Months Ended June 30, Affected Line Item in the Statement of Income 2024 2023 2024 2023 Unrealized gains (losses) on available-for-sale marketable securities $ 1,970 $ - $ 1,970 $ ( 107 ) Financial income (expense), net ( 501 ) - ( 501 ) 29 Tax benefits (income taxes) $ 1,469 $ - $ 1,469 $ ( 78 ) Total, net of income taxes Unrealized gains (losses) on cash flow hedges, net 20 ( 303 ) 126 ( 515 ) Cost of revenues 98 ( 1,521 ) 662 ( 2,650 ) Research and development 23 ( 310 ) 145 ( 535 ) Sales and marketing 29 ( 432 ) 176 ( 706 ) General and administrative $ 170 $ ( 2,566 ) $ 1,109 $ ( 4,406 ) Total, before income taxes ( 21 ) 159 ( 133 ) 273 Tax benefits (income taxes) 149 ( 2,407 ) 976 ( 4,133 ) Total, net of income taxes Total reclassifications for the period $ 1,618 $ ( 2,407 ) $ 2,445 $ ( 4,211 ) NOTE 19: OTHER OPERATING EXPENSE (INCOME) The following table presents the expenses (income) recorded in the three and six months ended June 30, 2024, and 2023: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Impairment of property, plant and equipment $ - $ - $ 1,732 $ - Loss (gain) from sales and disposal of assets 1,424 - 2,482 ( 1,434 ) Legal settlements and contingencies - - ( 399 ) - Other ( 473 ) - ( 473 ) - Total other operating expense (income), net $ 951 $ - $ 3,342 $ ( 1,434 ) F - 27 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 20: RESTRUCTURING AND OTHER EXIT ACTIVITIES On January 21, 2024, the Company announced the adoption of a restructuring plan in response to challenging industry conditions (the “Restructuring Plan”). Under the Restructuring Plan, the Company reduced its headcount by approximately 16% over the first half of 2024 in an involuntary workforce reduction. The adoption of the Restructuring Plan follows the Company’s previous measures taken to align with current market conditions, including termination of manufacturing in Mexico, reduction of manufacturing capacity in China, and discontinuation of the Company’s light commercial vehicle e-mobility activity. Restructuring and other exit charges for the three months ended June 30, 2024 , by segment and type of cost were as follows: Solar e-Mobility Employee termination costs Contract termination and other Inventory write- down Contract termination and other Total Cost of revenues $ 247 $ 4,272 $ 98 $ ( 855 ) $ 3,762 Research and development - 248 - - 248 Sales and marketing - - - - - General and administrative - 118 - - 118 Total $ 247 $ 4,638 $ 98 $ ( 855 ) $ 4,128 Restructuring and other exit charges for the six months ended June 30, 2024 , by segment and type of cost were as follows: Solar e-Mobility Employee termination costs Contract termination and other Employee termination costs Inventory write-down Contract termination and other Total Cost of revenues $ 1,054 $ 9,287 $ ( 200 ) $ ( 136 ) $ ( 855 ) $ 9,150 Research and development 2,913 248 - - - 3,161 Sales and marketing 645 - ( 4 ) - - 641 General and administrative 385 118 ( 43 ) - - 460 Total $ 4,997 $ 9,653 $ ( 247 ) $ ( 136 ) $ ( 855 ) $ 13,412 The Company’s liability balance for the restructuring and other exit charges is as follows: Employee termination costs Inventory write-down 1 Contract termination and other Balance as of December 31, 2023 $ 2,373 $ 27,774 $ 30,393 Charges 4,750 ( 136 ) 8,798 Cash payments ( 6,857 ) - ( 12,091 ) Non-cash utilization and other ( 266 ) ( 6,732 ) ( 2,340 ) Balance as of June 30, 2024 $ - $ 20,906 $ 24,760 1 Inventory write-down is included under Inventories, net on the balance sheet. F - 28 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 21: INCOME TAXES For the three months ended June 30, 2024 , the Company reported tax benefits and an effective tax rate of 8.6 % , compared to the three months ended June 30, 2023 , where the Company reported income taxes and an effective tax rate of 22.3 % . For the six months ended June 30, 2024 , the Company reported tax benefits and an effective tax rate of 11.1 % , compared to the six months ended June 30, 2023 , where the Company reported income taxes and an effective tax rate of 19.8 % . The change in effective tax rate in the three and six months ended June 30, 2024 compared to the corresponding period in 2023 is primarily attributable to the fact that the pre-tax loss for the quarter was in jurisdictions where the Company is either subject to a lower tax rate or where we do not anticipate a future tax benefit. As of June 30, 2024 , and December 31, 2023 , unrecognized tax benefits were valued at $ 20,152 and $ 15,908 , 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 as of June 30, 2024 and December 31, 2023 were $ 5,345 and $ 2,927 , respectively. As of June 30, 2024 the deferred tax asset related to stock based compensation was $ 33,934 . Given the decrease in the Company's stock price, it is possible that the actual value of the stock based awards will be less than the grant date fair value awards, resulting in a possible write-off of the deferred tax asset. In August 2022, the U.S. 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 significant tax credits for qualifying energy projects, and Advanced Manufacturing Production Tax Credits ("AMPTC") for U.S. manufacturing of eligible components (under IRC §45X), including PV inverters and DC-optimized systems. The Company has been manufacturing eligible products in the U.S. since the fourth quarter of 2023. In the three and six months ended June 30, 2024, the Company manufactured and sold products that entitle it to $ 15,161 and $ 30,121 of AMPTCs, respectively, which were recorded as a reduction in of cost of revenues. As of June 30, 2024 and December 31, 2023 benefits from AMPTCs of $ 36,141 and $ 6,020 , respectively, were recorded as a tax prepayment within prepayment and other current assets. The implementation of the new incentive rules is complex and further guidance by the U.S. Treasury on these rules is still pending. F - 29 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 22: EARNINGS (LOSS) PER SHARE The following table presents the computation of basic and diluted earnings (loss) per share (“EPS”): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Basic EPS : Numerator: Net income (loss) $ ( 130,818 ) $ 119,510 $ ( 288,129 ) $ 257,888 Denominator: Shares used in computing net earnings (loss) per share of common stock, basic 56,687,006 56,415,636 56,913,569 56,316,116 Diluted EPS Numerator: Net income (loss) attributable to common stock, basic $ ( 130,818 ) $ 119,510 $ ( 288,129 ) $ 257,888 Notes due 2025 - 536 - 1,072 Net income (loss) attributable to common stock, diluted $ ( 130,818 ) $ 120,046 $ ( 288,129 ) $ 258,960 Denominator: Shares used in computing net earnings (loss) per share of common stock, basic 56,687,006 56,415,636 56,913,569 56,316,116 Notes due 2025 - 2,276,818 - 2,276,818 Effect of stock-based awards - 491,212 - 596,368 Shares used in computing net earnings (loss) per share of common stock, diluted 56,687,006 59,183,666 56,913,569 59,189,302 Earnings (loss) per share: Basic $ ( 2.31 ) $ 2.12 $ ( 5.06 ) $ 4.58 Diluted $ ( 2.31 ) $ 2.03 $ ( 5.06 ) $ 4.38 The following outstanding shares of common stock equivalents were excluded from the calculation due to their antidilutive nature: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Stock-based awards 1,786,999 211,635 1,807,014 201,987 Notes 2025 2,254,270 - 2,265,544 - Notes 2029 1 192,116 - 96,058 - Total shares excluded 4,233,385 211,635 4,168,616 201,987 1 In conjunction with the issuance of the Notes 2029 in June 2024, the Company used approximately $ 25.2 million of the net proceeds from this offering to pay the cost of the capped call transactions. In accordance with FASB ASC 260, antidilutive contracts, such as purchased put options and purchased call options are excluded from the computation of diluted net income (loss) per share. Accordingly, any potential impact resulting from capped call transaction is excluded from our computation of diluted net income (loss) per share. F - 30 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) NOTE 23: SEGMENT INFORMATION Following the discontinuation of its e-Mobility LCV activity, the Company operates in three different operating segments: Solar, Energy Storage 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. The Company does not allocate to its operating segments revenue recognized due to advance payments received for performance obligations that extend for a period greater than one year (“financing component”), related to Accounting Standard Codification 606, “Revenue from Contracts with Customers” (ASC 606). Segment profit (loss) is comprised of gross profit (loss) for the segment less operating expenses that do not include amortization and impairment of purchased intangible assets, stock based compensation expenses, restructuring charges, discontinued activity charges and certain other items. The Company manages its assets on a group basis, not by segments, as many of its assets are shared or co-mingled. The Company’s CODM does not regularly review asset information by segments and, therefore, the Company does not report asset information by segment. The Company identified two operating segments as reportable, the Solar segment and the Energy Storage segment. The other operating segments are insignificant individually and therefore their results are presented together under “All other”. The Solar segment includes the design, development, manufacturing, and sales of an intelligent inverter solution designed to maximize power generation at the individual PV module level and batteries for PV applications. The Solar segment solution consists mainly of the Company’s power optimizers, inverters, batteries, energy management solutions, 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 racks and containerized battery systems for commercial and industrial ("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. The “All other” category includes automated machines and e-Mobility (in prior periods). F - 31 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) The following tables present information on reportable segments profit (loss) for the period presented: Solar Energy Storage All other Three Months Ended June 30, 2024 Revenues $ 241,243 $ 21,444 $ 2,472 Cost of revenues 238,134 24,956 1,599 Gross profit (loss) 3,109 ( 3,512 ) 873 Research and development 46,828 4,119 171 Sales and marketing 30,100 1,025 237 General and administrative 31,241 940 142 Segments profit (loss) $ ( 105,060 ) $ ( 9,596 ) $ 323 Three Months Ended June 30, 2023 Revenues $ 947,360 $ 19,144 $ 24,584 Cost of revenues 618,943 27,403 20,528 Gross profit (loss) 328,417 ( 8,259 ) 4,056 Research and development 62,102 4,005 2,858 Sales and marketing 34,136 1,123 906 General and administrative 25,145 1,871 1,117 Segments profit (loss) $ 207,034 $ ( 15,258 ) $ ( 825 ) Six Months Ended June 30, 2024 Revenues $ 431,345 $ 32,060 $ 5,919 Cost of revenues 434,916 42,784 4,471 Gross profit (loss) ( 3,571 ) ( 10,724 ) 1,448 Research and development 98,114 7,678 356 Sales and marketing 59,295 1,842 459 General and administrative 54,463 1,529 255 Segments profit (loss) $ ( 215,443 ) $ ( 21,773 ) $ 378 Six Months Ended June 30, 2023 Revenues $ 1,855,865 $ 28,277 $ 50,648 Cost of revenues 1,209,048 46,981 47,166 Gross profit (loss) 646,817 ( 18,704 ) 3,482 Research and development 117,925 8,214 5,177 Sales and marketing 65,281 2,038 1,552 General and administrative 49,888 4,823 1,943 Segments profit (loss) $ 413,723 $ ( 33,779 ) $ ( 5,190 ) F - 32 SOLAREDGE TECHNOLOGIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per share data) The following table presents information on reportable segments reconciliation to consolidated revenues for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Solar segment revenues $ 241,243 $ 947,360 $ 431,345 $ 1,855,865 Energy Storage segment revenues 21,444 19,144 32,060 28,277 All other segment revenues 2,472 24,584 5,919 50,648 Revenues from finance component 246 202 480 389 Consolidated revenues $ 265,405 $ 991,290 $ 469,804 $ 1,935,179 The following table presents information on reportable segments reconciliation to consolidated operating income for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Solar segment profit (loss) $ ( 105,060 ) $ 207,034 $ ( 215,443 ) $ 413,723 Energy Storage segment loss ( 9,596 ) ( 15,258 ) ( 21,773 ) ( 33,779 ) All other segment profit (loss) 323 ( 825 ) 378 ( 5,190 ) Segments operating profit (loss) ( 114,333 ) 190,951 ( 236,838 ) 374,754 Amounts not allocated to segments: Stock based compensation expenses ( 38,571 ) ( 38,965 ) ( 76,177 ) ( 78,200 ) Restructuring and other exit activities ( 4,885 ) - ( 14,650 ) - Impairment of long-lived assets - - ( 1,732 ) - Amortization and depreciation of acquired assets ( 2,083 ) ( 1,379 ) ( 4,030 ) ( 3,414 ) Other unallocated expenses ( 310 ) ( 249 ) ( 460 ) 1,372 Consolidated operating income (loss) ( 160,182 ) 150,358 ( 333,887 ) 294,512 Financial income (expense), net ( 865 ) 3,384 ( 7,929 ) 27,058 Other income (loss), net 18,551 - 18,551 ( 125 ) Income (loss) before income taxes $ ( 142,496 ) $ 153,742 $ ( 323,265 ) $ 321,445 NOTE 24: SUBSEQUENT EVENTS 1. On July 8, 2024, the Company sold an aggregate principal amount of $ 37 million of the Company’s Notes 2029. The Notes were sold pursuant to the Initial Purchasers’ exercise of the option granted by the Company to the Initial Purchasers to purchase additional Notes. 2. On July 15, 2024, the Company announced its adoption of additional measures in response to challenging industry conditions, including reducing its headcount by approximately 400 employees. These decisions were made in order to better align the Company with current market conditions. F - 33