Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
SOLAREDGE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except per share data)
September 30,
2024
December 31,
2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
303,904
$
338,468
Marketable securities
374,869
521,570
Trade receivables, net of allowances of $ 41,501 and $ 16,400 , respectively
239,408
622,425
Inventories, net
798,383
1,443,449
Prepaid expenses and other current assets
401,551
378,394
Total current assets
2,118,115
3,304,306
LONG-TERM ASSETS:
Marketable securities
56,041
407,825
Deferred tax assets, net
-
80,912
Property, plant and equipment, net
423,905
614,579
Operating lease right-of-use assets, net
43,088
64,167
Intangible assets, net
11,169
35,345
Goodwill
51,875
42,996
Other long-term assets
112,201
37,601
Total long-term assets
698,279
1,283,425
Total assets
$
2,816,394
$
4,587,731
F - 1
SOLAREDGE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Cont.)
(in thousands, except per share data)
September 30,
2024
December 31,
2023
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payables, net
$
94,730
$
386,471
Employees and payroll accruals
70,120
76,966
Warranty obligations
163,561
183,047
Deferred revenues and customers advances
27,367
40,836
Accrued expenses and other current liabilities
202,134
205,911
Convertible senior notes, net
345,900
-
Total current liabilities
903,812
893,231
LONG-TERM LIABILITIES:
Convertible senior notes, net
329,614
627,381
Warranty obligations
315,343
335,197
Deferred revenues
226,770
214,607
Finance lease liabilities
39,197
41,892
Operating lease liabilities
31,293
45,070
Other long-term liabilities
13,999
18,444
Total long-term liabilities
956,216
1,282,591
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS’ EQUITY:
Common stock of $ 0.0001 par value - Authorized: 125,000,000 shares; issued: 57,935,436 shares at September 30, 2024 and 57,123,437 shares at December 31, 2023; outstanding: 57,182,072 shares at September 30, 2024 and 57,123,437 shares at December 31, 2023.
6
6
Additional paid-in capital
1,779,212
1,680,622
Treasury stock, at cost; 753,364 shares held
( 50,315
)
-
Accumulated other comprehensive loss
( 57,253
)
( 46,885
)
Retained earnings (Accumulated deficit)
( 715,284
)
778,166
Total stockholders’ equity
956,366
2,411,909
Total liabilities and stockholders’ equity
$
2,816,394
$
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
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Revenues
$
260,903
$
725,305
$
730,707
$
2,660,484
Cost of revenues
963,229
582,488
1,470,189
1,900,236
Gross profit (loss)
( 702,326
)
142,817
( 739,482
)
760,248
Operating expenses:
Research and development
70,372
80,082
214,999
246,481
Sales and marketing
37,427
40,351
116,316
125,539
General and administrative
41,212
39,110
111,085
111,876
Other operating expense (income), net
233,929
-
237,271
( 1,434
)
Total operating expenses
382,940
159,543
679,671
482,462
Operating income (loss)
( 1,085,266
)
( 16,726
)
( 1,419,153
)
277,786
Financial income (expense), net
5,558
( 7,901
)
( 2,371
)
19,157
Other income (loss), net
( 3,928
)
( 484
)
14,623
( 609
)
Income (loss) before income taxes
( 1,083,636
)
( 25,111
)
( 1,406,901
)
296,334
Income taxes
( 121,108
)
( 36,065
)
( 85,109
)
( 99,622
)
Net loss from equity method investments
( 577
)
-
( 1,440
)
-
Net income (loss)
$
( 1,205,321
)
$
( 61,176
)
$
( 1,493,450
)
$
196,712
Net basic earnings (loss) per share of common stock
$
( 21.13
)
$
( 1.08
)
$
( 26.22
)
$
3.49
Net diluted earnings (loss) per share of common stock
$
( 21.13
)
$
( 1.08
)
$
( 26.22
)
$
3.34
Weighted average number of shares used in computing net basic earnings (loss) per share of common stock
57,029,983
56,671,504
56,952,656
56,435,880
Weighted average number of shares used in computing net diluted earnings (loss) per share of common stock
57,029,983
56,671,504
56,952,656
59,297,423
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
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Net income (loss)
$
( 1,205,321
)
$
( 61,176
)
$
( 1,493,450
)
$
196,712
Other comprehensive income (loss), net of tax:
Available-for-sale marketable securities
2,975
2,562
4,470
9,400
Cash flow hedges
563
( 923
)
( 2,970
)
( 938
)
Foreign currency translation adjustments on intra-entity transactions that are of a long-term investment nature
13,555
( 9,989
)
( 7,408
)
( 22,724
)
Foreign currency translation adjustments
3,604
1,833
( 4,460
)
3,422
Total other comprehensive income (loss)
20,697
( 6,517
)
( 10,368
)
( 10,840
)
Comprehensive income (loss)
$
( 1,184,624
)
$
( 67,693
)
$
( 1,503,818
)
$
185,872
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)
Common stock
Additional paid in
Capital
Treasury stock
Accumulated
other comprehensive
loss
Retained earnings (Accumulated deficit)
Total
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
Issuance of common stock upon exercise of stock-based awards
230,050
* -
42
-
-
-
42
Stock based compensation
-
-
37,871
-
-
-
37,871
Capped call transactions related to notes 2029
-
-
( 3,112
)
-
-
-
( 3,112
)
Other comprehensive gain adjustments
-
-
-
-
20,697
-
20,697
Net loss
-
-
-
-
-
( 1,205,321
)
( 1,205,321
)
Balance as of September 30, 2024
57,182,072
$
6
$
1,779,212
$
( 50,315
)
$
( 57,253
)
$
( 715,284
)
$
956,366
F - 5
SOLAREDGE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
(in thousands, except per share data)
Common stock
Additional paid in
Capital
Accumulated
other comprehensive
loss
Retained earnings
Total
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
Issuance of common stock upon exercise of stock-based awards
254,219
* -
18
-
-
18
Stock based compensation
-
-
37,892
-
-
37,892
Other comprehensive loss adjustments
-
-
-
( 6,517
)
-
( 6,517
)
Net income
-
-
-
-
( 61,176
)
( 61,176
)
Balance as of September 30, 2023
56,810,559
$
6
$
1,633,800
$
( 83,949
)
$
940,549
$
2,490,406
* 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)
Nine Months Ended
September 30,
2024
2023
Cash flows from operating activities:
Net income (loss)
$
( 1,493,450
)
$
196,712
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization
47,215
42,019
Provision to write down inventories to net realizable value
638,966
20,674
Loss on impairment and disposal of property, plant and equipment
206,620
-
Stock-based compensation expenses
112,818
115,015
Impairment of goodwill and intangible assets
24,725
-
Deferred income taxes, net
79,831
( 18,199
)
Gain from repurchasing of convertible notes
( 15,455
)
-
Loss (gain) from exchange rate fluctuations
8,243
( 8,170
)
Other items
10,299
6,915
Changes in assets and liabilities:
Trade receivables, net
379,214
( 40,011
)
Inventories, net
15,858
( 458,475
)
Prepaid expenses and other assets
( 38,223
)
19,822
Operating lease right-of-use assets, net
12,286
12,323
Trade payables, net
( 284,255
)
( 53,996
)
Warranty obligations
( 39,294
)
130,863
Deferred revenues and customers advances
1,253
18,580
Operating lease liabilities
( 11,881
)
( 11,945
)
Accrued expenses and other liabilities, net
19,574
( 12,330
)
Net cash used in operating activities
( 325,656
)
( 40,203
)
Cash flows from investing activities:
Investment in available-for-sale marketable securities
( 200,919
)
( 214,516
)
Proceeds from maturities of available-for-sale marketable securities
632,866
191,810
Proceeds from sales of available-for-sale marketable securities
70,642
2,807
Purchase of property, plant and equipment
( 95,905
)
( 130,024
)
Business combinations, net of cash acquired
( 10,417
)
( 16,653
)
Purchase of intangible assets
( 10,000
)
( 10,600
)
Disbursements for loans receivables
( 37,500
)
( 13,000
)
Investment in privately-held companies
( 25,742
)
( 8,000
)
Other investing activities
( 4,270
)
9,989
Net cash provided by (used in) investing activities
$
318,755
$
( 188,187
)
F - 7
SOLAREDGE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Cont.)
(in thousands, except per share data )
Nine Months Ended
September 30,
2024
2023
Cash flows from financing activities:
Repurchase of common stock
$
( 50,315
)
$
-
Partial repurchase of Notes 2025
( 267,900
)
-
Proceeds from issuance of Notes 2029, net of issuance costs
329,214
-
Capped call transactions related to Notes 2029
( 28,342
)
-
Tax withholding in connection with stock-based awards, net
( 592
)
( 9,267
)
Other financing activities
( 1,938
)
( 2,038
)
Net cash used in financing activities
( 19,873
)
( 11,305
)
Effect of exchange rate differences on cash and cash equivalents
( 7,790
)
7,705
Decrease in cash and cash equivalents
( 34,564
)
( 231,990
)
Cash and cash equivalents at the beginning of the period
338,468
783,112
Cash and cash equivalents at the end of the period
$
303,904
$
551,122
Supplemental disclosure of non-cash activities:
Purchase of intangible assets and business combinations
$
-
$
11,307
Right-of-use asset recognized with a corresponding lease liability
$
2,138
$
17,658
Purchase of property, plant and equipment
$
4,761
$
19,574
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, government grants, income taxes 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 third quarter of 2024, the Company's share price continued to deteriorate and a major slowdown in operations occurred, leading the Company to perform an impairment test. For detailed information on impairments related to long-lived assets, refer to Notes 7 and 8.
F - 9
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
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 September 30, 2024 none of the Company's contract manufacturers account for more than 10% 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.
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. Since ASU 2023-07 addresses only disclosures, the adoption of ASU 2023-07 is not expected to have a significant impact on its consolidated financial statements.
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. Since ASU 2023-07 addresses only disclosures, the adoption of ASU 2023-07 is not expected to have a significant impact on its consolidated financial statements.
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 fair value of the original investment was determined by multiplying the total fair value of Wevo, as outlined below, by the Company's 34.8 % ownership stake and applying a discount to account for lack of control.
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 24). 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 statements 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 September 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 a readily determinable fair market value.
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. Investments in privately-held companies are included within other long-term assets in the condensed consolidated balance sheets. As of September 30, 2024 and December 31, 2023 the carrying value of investments in privately-held companies was $ 22,574 and $ 7,650 , respectively.
In September 2024, the Company impaired its investment in Stardust in the amount of $ 5,000 . This impairment was recorded under Other income (loss), net in the consolidated statements of income (loss).
There were no impairment charges for the three and nine months ended September 30, 2023 associated with these equity investments.
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 September 30, 2024:
Amortized cost
Gross unrealized gains
Gross unrealized losses
Fair value
Matures within one year:
Corporate bonds
$
350,590
$
164
$
( 1,505
)
$
349,249
U.S. Treasury securities
9,925
-
( 7
)
9,918
U.S. Government agency securities
13,284
25
-
13,309
Non-U.S. Government securities
2,400
-
( 7
)
2,393
376,199
189
( 1,519
)
374,869
Matures after one year:
Corporate bonds
46,103
638
( 50
)
46,691
U.S. Government agency securities
9,280
70
-
9,350
55,383
708
( 50
)
56,041
Total
$
431,582
$
897
$
( 1,569
)
$
430,910
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 September 30, 2024 were $ 18,724 which led to realized gains of $ 777 .
The Company did not sell any available-for-sale marketable securities during the three months ended September 30, 2023.
Proceeds from sales of available-for-sale marketable securities during the nine months ended September 30, 2024 and 2023 were $ 70,642 and $ 2,807 , which led to realized gains of $ 2,747 and losses of $ 125 , respectively.
As of September 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
September 30,
2024
December 31,
2023
Raw materials
$
204,083
$
340,604
Work in process
493
20,885
Finished goods
593,807
1,081,960
Total inventories, net
$
798,383
$
1,443,449
The Company records inventory write-downs for excess or obsolete inventory or when it believes that the net realizable value of inventory is less than its carrying value. As of September 30, 2024, the Company examined its current inventory balances, analyzed inventory in its channels and evaluated future installation rates. The Company concluded that significant write-downs are necessary, primarily due to slowdown in the Company's products demand, excess inventory in the channels, repeated price reductions and the introduction of a new generation of products. The Company records write-downs under Cost of revenues, in the consolidated statements of income (loss).
During the three and nine months ended September 30, 2024, the Company recorded write-downs of $ 627,905 and $ 638,966 , respectively.
During the three and nine months ended September 30, 2023, the Company recorded write-downs of $ 8,728 and $ 20,674 , respectively.
NOTE 6: PREPAID EXPENSES AND OTHER CURRENT ASSETS
September 30,
2024
December 31,
2023
Government authorities
$
255,603
$
167,221
Vendor non-trade receivables 1
56,508
102,991
Loan receivables, net 2
32,297
55,418
Prepayments
38,438
29,578
Other
18,705
23,186
Total prepaid expenses and other current assets
$
401,551
$
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 Loan 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 represents market interest rate. As of September 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 September 30, 2024. As of September 30, 2024 and December 31, 2023 the Company granted loans to a customer in the amounts of $ 80,000 and $ 43,000 , respectively. Considering the loan amounts, the customer's balance would potentially expose the Company to a concentration of credit risk. See Note 10 for more information regarding the long-term portion of the loan.
F - 14
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 7: PROPERTY, PLANT AND EQUIPMENT, NET
September 30,
2024
December 31,
2023
Cost:
Land
$
10,112
$
12,823
Buildings and plants
122,437
153,813
Computers and peripheral equipment
51,978
57,527
Office furniture and equipment
9,149
10,992
Laboratory and testing equipment
63,921
67,248
Machinery and equipment
194,534
362,363
Leasehold improvements
112,019
96,730
Assets under construction and payments on account
46,656
88,077
Gross property, plant and equipment
610,806
849,573
Less - accumulated depreciation
186,901
234,994
Total property, plant and equipment, net
$
423,905
$
614,579
The Company evaluates the recoverability of the carrying amount of its property, plant and equipment when events or circumstances indicate the carrying amount of an asset or asset group may not be recoverable. If the Company determines the carrying amount of an asset or asset group is not recoverable based upon the expected undiscounted future cash flows of the asset or asset group, an impairment loss is recorded equal to the excess of the carrying amounts over the estimated fair values of the property, plant and equipment.
During the third quarter of 2024, the Company identified certain conditions in which, events or changes in circumstances indicated that the carrying value of certain long-lived assets may not be recoverable and as a result conducted impairment assessments.
Upon completion of such assessments, the Company disposed by abandonment and impaired certain property, plants and equipment, including but not limited to, machinery, buildings, plants, and assets under construction in the Solar and Energy Storage asset groups.
During the three and nine months ended September 30, 2024, the Company recorded impairment and abandonment by disposal of property, plant and equipment in the amount of $ 204,888 and $ 206,620 , respectively, under Other operating expense (income), net in the consolidated statements of income (loss) section.
Depreciation expenses for the three months ended September 30, 2024 and 2023, were $ 13,965 and $ 12,627 , respectively.
Depreciation expenses for the nine months ended September 30, 2024, and 2023, were $ 40,464 and $ 36,118 , respectively.
F - 15
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 8: INTANGIBLE ASSETS, NET
In September 2024, an impairment test for the Solar and Energy Storage asset group's long-lived assets was performed. The test included comparing the sum of the estimated undiscounted future cash flow attributable to the identified assets group and its carrying amounts, and recognizing an impairment for the amount to which the carrying amount exceeds the fair value of the assets groups.
The Company impaired and disposed intangible assets in the amount of $ 22,474 , which mainly relates to patents and licenses under the Solar asset group that are no longer relevant for the Company's continued and future operations, and technology related to the Energy Storage asset group.
Acquired intangible assets consisted of the following as of September 30, 2024, and December 31, 2023:
September 30,
2024
December 31,
2023
Intangible assets with finite lives:
Technology
$
11,132
$
26,990
Customer relationships
1,546
3,193
Trade names
1,322
624
Assembled workforce
3,575
3,575
Patents and licenses
2,000
22,000
Gross intangible assets
19,575
56,382
Less - accumulated amortization
( 8,406
)
( 21,037
)
Total intangible assets, net
$
11,169
$
35,345
For the three months ended September 30, 2024 and 2023, the Company recorded amortization expenses related to intangible assets in the amount of $ 2,823 and $ 2,663 , respectively.
For the nine months ended September 30, 2024 and 2023, the Company recorded amortization expenses related to intangible assets in the amount of $ 6,751 and $ 5,901 , respectively.
Expected future amortization expenses of intangible assets as of September 30, 2024 are as follows:
2024
$
1,716
2025
2,576
2026
2,228
2027
2,184
2028
1,023
2029 and thereafter
1,442
$
11,169
F - 16
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 9: GOODWILL
Goodwill is assessed annually for impairment in the fourth quarter of each year and is examined between annual tests if events or circumstances arise that indicate that the carrying amount may be impaired.
In light of impairment indicators which include, among other factors, a sustained decline in the Company's stock price and, as a result, the Company's market capitalization, the Company decided to conduct an impairment test as of September 30, 2024.
The fair value of the reporting units was estimated using a discounted cash flow analysis. When performing this analysis, the Company also considered multiples of earnings from comparable public companies.
The Company performed a qualitative assessment of its Energy Storage reporting unit in order to determine whether it was necessary to conduct the quantitative goodwill impairment test. Based on the results of this assessment, the Company acknowledged that it was more likely than not, that the fair value of said reporting unit is lower than its carrying value, and as such a quantitative goodwill impairment test was performed. Based on the results of the quantitative test, the Energy Storage reporting unit's goodwill was impaired in its entirety. This goodwill impairment was recorded under Other operating expense (income), net in the consolidated statements of income (loss) section.
The Solar reporting unit was also examined. As a result of such quantitative testing, the Company determined that its fair value exceeds its carrying amount, and therefore no impairment was recorded.
Changes in the carrying amount of goodwill for the period ended September 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
Accumulated impairment losses
-
( 2,251
)
( 2,251
)
Foreign currency adjustments
( 101
)
( 113
)
( 214
)
Goodwill at September 30, 2024
$
51,875
$
-
$
51,875
For the three and nine months ended September 30, 2024, the Company recorded goodwill impairment losses in the amount of $ 2,251 .
The Company did not record any goodwill impairment losses for the three and nine months ended September 30, 2023.
As of September 30, 2024 and December 31, 2023 accumulated goodwill impairment amounted to $ 92,355 and $ 90,104 , respectively.
F - 17
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 10: OTHER LONG TERM ASSETS
September 30,
2024
December 31,
2023
Loan receivables
$
50,000
$
-
Cloud computing arrangements
24,006
13,666
Severance pay fund
9,561
9,241
Investments in privately held companies
22,574
7,650
Prepaid expenses and other
6,060
7,044
Total other long term assets
$
112,201
$
37,601
F - 18
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 11: DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
During the nine months ended September 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 September 30, 2024, the Company entered into forward contracts and put and call options to sell U.S. dollars (“USD”) both, in the amounts of NIS 148 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
September 30,
2024
December 31,
2023
Derivative assets of options and forward contracts:
Designated cash flow hedges
Prepaid expenses and other current assets
$
1,102
$
4,477
Non-designated hedges
Prepaid expenses and other current assets
-
410
Total derivative assets
$
1,102
$
4,887
Gains (losses) on derivative instruments are summarized below:
Three Months Ended
September 30,
Nine Months Ended
September 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
$
-
$
5,841
$
802
$
5,841
Designated Hedging Instruments
Condensed Consolidated Statements of Comprehensive Income (loss) - Cash flow hedges
$
1,131
$
( 2,713
)
$
( 1,426
)
$
( 6,861
)
See Note 19 for information regarding losses from designated hedging instruments reclassified from accumulated other comprehensive loss.
F - 19
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 12: 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 September 30, 2024 and December 31, 2023, by level within the fair value hierarchy:
Fair value measurements as of
Description
Fair Value Hierarchy
September 30,
2024
December 31,
2023
Assets:
Cash and cash equivalents:
Cash
Level 1
$
289,287
$
309,521
Money market mutual funds
Level 1
$
11,180
$
22,311
Deposits
Level 1
$
3,437
$
6,636
Derivative instruments
Level 2
$
1,102
$
4,887
Short-term marketable securities:
Corporate bonds
Level 2
$
349,249
$
481,820
U.S. Treasury securities
Level 2
$
9,918
$
15,261
U.S. Government agency securities
Level 2
$
13,309
$
8,795
Non-U.S. Government securities
Level 2
$
2,393
$
15,694
Long-term marketable securities:
Corporate bonds
Level 2
$
46,691
$
339,681
U.S. Treasury securities
Level 2
$
-
$
2,408
U.S. Government agency securities
Level 2
$
9,350
$
44,086
Non-U.S. Government securities
Level 2
$
-
$
21,650
In addition to assets and liabilities that are recorded at fair value on a recurring basis, impairment indicators may subject goodwill and long-lived assets to nonrecurring fair value measurements. The implied fair values of the Solar and Energy Storage reporting units were estimated using the discounted cash flow approach (see Notes 8 and 9). The inputs to these models are considered Level 3.
NOTE 13: WARRANTY OBLIGATIONS
Changes in the Company’s product warranty obligations for the three and nine months ended September 30, 2024 and 2023, were as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Balance, at the beginning of the period
$
490,832
$
488,587
$
518,244
$
385,057
Accruals for warranty during the period
15,981
65,401
47,320
220,422
Changes in estimates
6,878
300
16,188
10,355
Settlements
( 34,787
)
( 38,476
)
( 102,848
)
( 100,022
)
Balance, at end of the period
478,904
515,812
478,904
515,812
Less current portion
( 163,561
)
( 174,125
)
( 163,561
)
( 174,125
)
Long term portion
$
315,343
$
341,687
$
315,343
$
341,687
F - 20
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 14: 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
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Balance, at the beginning of the period
$
251,014
$
232,828
$
255,443
$
213,577
Revenue recognized
( 17,824
)
( 19,869
)
( 37,442
)
( 25,819
)
Increase in deferred revenues and customer advances
20,947
21,130
36,136
46,331
Balance, at the end of the period
254,137
234,089
254,137
234,089
Less current portion
( 27,367
)
( 22,064
)
( 27,367
)
( 22,064
)
Long term portion
$
226,770
$
212,025
$
226,770
$
212,025
The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2024:
2024
$
16,674
2025
14,248
2026
13,904
2027
11,829
2028
11,339
Thereafter
186,143
Total deferred revenues
$
254,137
NOTE 15: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
September 30,
2024
December 31,
2023
Accrued expenses
$
137,698
$
142,130
Government authorities
35,595
34,309
Operating lease liabilities
12,439
17,704
Accrual for sales incentives
10,350
5,862
Other
6,052
5,906
Total accrued expenses and other current liabilities
$
202,134
$
205,911
F - 21
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 16: 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 $ 1,000 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 $1,000 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 $1,000 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 $ 1,000 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 $1,000 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 in 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 $ 1,000 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 $1,000 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 $1,000 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 $ 1,000 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.
F - 22
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
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 2029), holders of the Notes 2029 may require the Company to repurchase all or a portion of their Notes 2029, in multiples of $ 1,000 principal amounts, at a repurchase price of 100% of the principal amount of the Notes 2029, plus any accrued and unpaid interest, if any, up 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, up to, but excluding, the redemption date.
The net proceeds from the offering of the Notes 2029 were approximately $ 293,200 , after deducting fees and estimated expenses. Congruently, the Company has entered into capped call transactions (as detailed below). The Company used approximately $ 25,230 of the net proceeds from this offering to pay the cost of the capped call transactions. The Company also used approximately $ 267,900 of the net proceeds from this offering to repurchase $ 285,000 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.
O n July 8, 2024 the Company sold to Goldman Sachs & Co. LLC, as representative of the several initial purchasers (the “Initial Purchasers”), and the Initial Purchasers purchased from the Company, $ 37,000 aggregate principal amount of additional Notes 2029. The additional Notes 2029 were sold pursuant to the Initial Purchasers’ exercise of the option granted by the Company to the Initial Purchasers to purchase additional Notes 2029, solely to cover over-allotments, under the purchase agreement described in the Company's Form 8-K filed on June 28, 2024.
The net proceeds from the exercise of the option granted by the Company to the Initial Purchasers of the Notes 2029 were approximately $ 36,237 , after deducting fees and estimated expenses. Congruently, the Company has entered into additional capped call transactions. The Company used approximately $ 3,111 of the net proceeds from this offering to pay the cost of the additional capped call transactions. The Company intends to use the remainder of the net proceeds from the offering for general corporate purposes.
F - 23
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
The convertible senior notes consisted of the following as of September 30, 2024 and December 31, 2023:
September 30,
2024
December 31,
2023
Notes 2025
Principal
$
347,500
$
632,500
Unamortized issuance costs
( 1,600
)
( 5,119
)
Net carrying amount Notes 2025
345,900
627,381
Notes 2029
Principal
337,000
-
Unamortized issuance costs
( 7,386
)
-
Net carrying amount Notes 2029
329,614
-
Total notes carrying amount
$
675,514
$
627,381
Costs related to the Notes 2025 and the Notes 2029 for the three and nine months ended September 30, 2024 were as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Notes 2025
Debt issuance cost
$
1,138
$
733
$
1,874
$
2,196
Notes 2029
Debt issuance cost
$
393
$
-
$
400
$
-
Contractual interest expense
$
1,913
$
-
$
1,950
$
-
As of September 30, 2024, the unamortized issuance costs of the Notes 2025 and Notes 2029 will be amortized over the remaining term of approximately 1 and 4.8 years, respectively.
The annual effective interest rate of Notes 2025 and Notes 2029 is 0.47 %. and 2.75 %, respectively.
As of September 30, 2024, the estimated fair value of Notes 2025 and Notes 2029, which the Company has classified as Level 2 financial instruments, is $ 324,044 and $ 306,633 , 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 September 30, 2024, the if-converted value of the Notes 2025 and Notes 2029 did not exceed the principal amount.
F - 24
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 17: 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 September 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 12,392,004 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 .
Under its 2015 Plan, the Company granted 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 share price target or 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 September 30, 2024, an aggregate of 8,617,974 options are still available for future grants under the 2015 Plan.
F - 25
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
( 14,757
)
4.60
-
537
Forfeited or expired
( 666
)
3.96
-
-
Outstanding as of September 30, 2024
301,993
$
55.87
3.48
$
899
Vested and expected to vest as of September 30, 2024
301,930
$
55.82
3.45
$
25,782
Exercisable as of September 30, 2024
299,552
$
53.79
3.42
$
25,782
The intrinsic value is the amount by which the closing price of the Company’s common stock on September 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
1,731,577
45.89
Vested
( 539,819
)
187.51
Forfeited
( 306,658
)
158.23
Unvested as of September 30, 2024
2,745,386
$
98.11
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
96,249
86.06
Vested
( 12,277
)
298.92
Forfeited
( 14,196
)
247.53
Unvested as of September 30, 2024
144,191
$
163.78
F - 26
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
c.
Employee Stock Purchase Plan ("ESPP"):
The Company adopted an ESPP effective upon the consummation of the IPO. As of September 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 the lesser of either up to 15 % of their salaries or $ 15,000 per participant, to purchase common stock for every six month 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 September 30, 2024, 1,183,310 shares of common stock have been purchased under the ESPP.
As of September 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.
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 nine months ended September 30, 2024, and 2023, as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Stock-based compensation expenses:
Cost of revenues
$
6,038
$
5,882
$
18,224
$
17,732
Research and development
17,115
16,481
51,893
50,962
Sales and marketing
6,816
7,739
22,876
23,640
General and administrative
6,672
6,713
19,825
22,681
Total stock-based compensation expenses
$
36,641
$
36,815
$
112,818
$
115,015
Stock-based compensation capitalized:
Inventory
$
722
$
655
$
2,387
$
1,666
Other long-term assets
508
422
1,451
1,259
Total stock-based compensation capitalized
$
1,230
$
1,077
$
3,838
$
2,925
The Company did not recognize any tax benefits realized with stock-based compensation for the three and nine months ended September 30, 2024.
The total tax benefit associated with stock-based compensation for the three months ended September 30, 2023 was $ 3,124 . The tax benefit realized from stock-based compensation for the three months ended September 30, 2023 was $ 1,589 .
The total tax benefit associated with stock-based compensation for the nine months ended September 30, 2023 was $ 11,422 . The tax benefit realized from stock-based compensation for the nine months ended September 30, 2023 was and $ 7,050 .
F - 27
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
As of September 30, 2024, there were total unrecognized compensation expenses in the amount of $ 264,268 related to non-vested equity-based compensation arrangements granted. These expenses are expected to be recognized during the period from October 1, 2024, through August 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 nine months ended September 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 - 28
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 18: COMMITMENTS AND CONTINGENT LIABILITIES
a.
Guarantees:
As of September 30, 2024, contingent liabilities exist regarding guarantees in the amounts of $ 10,871 , and $ 1,502 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 September 30, 2024, the Company had non-cancellable purchase obligations totaling approximately $ 443,830 , out of which the Company recorded a provision for loss in the amount of $ 46,617 .
As of September 30, 2024, the Company had contractual obligations for capital expenditures totaling approximately $ 18,452 . 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.
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 Motion was fully briefed as of September 16, 2024, and the parties are awaiting a decision. 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.
F - 29
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
On 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 above, 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 (the “Consolidated Derivative Actions”) with the Hirani matter designated as the lead case. On September 9, 2024, the parties agreed to stay the Consolidated Derivative Actions pending a decision on the motion to dismiss in the Consolidated Securities Litigation.
On August 7, 2024, Edwin Isaac (“Isaac”) filed a purported derivative complaint in the United States District Court for the District of Delaware against the same Defendants as those named in the Consolidated Securities Litigation. The Isaac complaint makes largely the same allegations as those included in the amended complaint in the Consolidated Securities Litigation and Consolidated Derivative Actions. It also pleads the similar counts to those in the Consolidate Securities Litigation, including (i) breach of fiduciary duty, (ii) contribution, (iii) violation of Section 14(a) of the Exchange Act and SEC Rule 14a-9, (iv) unjust enrichment, (v) waste of corporate assets, and (vi) aiding and abetting breach of fiduciary duty. The parties are conferring on service of process and a possible stay of proceedings pending resolution of the motion to dismiss in the Consolidated Securities Litigation.
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 S.r.l in the tender offer that followed the SolarEdge e-Mobility S.r.l Acquisition by certain former shareholders of SolarEdge e-Mobility S.r.l 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 September 30, 2024, the Company recorded an accrual of $ 391 for legal claims which was recorded under accrued expenses and other current liabilities.
F - 30
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 19: ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table summarizes the changes in accumulated balances of other comprehensive gain (loss), net of taxes:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Unrealized gains (losses) on available-for-sale marketable securities
Beginning balance
$
( 3,465
)
$
( 18,611
)
$
( 4,960
)
$
( 25,449
)
Revaluation
4,571
3,216
8,304
11,579
Tax on revaluation
( 1,017
)
( 654
)
( 1,786
)
( 2,257
)
Other comprehensive income before reclassifications
3,554
2,562
6,518
9,322
Reclassification
( 777
)
-
( 2,747
)
107
Tax on reclassification
198
-
699
( 29
)
Losses (gains) reclassified from accumulated other comprehensive income (loss)
( 579
)
-
( 2,048
)
78
Net current period other comprehensive income
2,975
2,562
4,470
9,400
Ending balance
$
( 490
)
$
( 16,049
)
$
( 490
)
$
( 16,049
)
Unrealized gains (losses) on cash flow hedges
Beginning balance
$
407
$
( 1,776
)
$
3,940
$
( 1,761
)
Revaluation
1,286
( 2,896
)
( 1,620
)
( 7,321
)
Tax on revaluation
( 155
)
183
194
460
Other comprehensive loss before reclassifications
1,131
( 2,713
)
( 1,426
)
( 6,861
)
Reclassification
( 646
)
1,910
( 1,755
)
6,316
Tax on reclassification
78
( 120
)
211
( 393
)
Losses (gains) reclassified from accumulated other comprehensive income (loss)
( 568
)
1,790
( 1,544
)
5,923
Net current period other comprehensive income (loss)
563
( 923
)
( 2,970
)
( 938
)
Ending balance
$
970
$
( 2,699
)
$
970
$
( 2,699
)
Foreign currency translation adjustments on intra-entity transactions that are of a long-term investment in nature
Beginning balance
$
( 64,298
)
$
( 50,695
)
$
( 43,335
)
$
( 37,960
)
Revaluation
13,555
( 9,989
)
( 7,408
)
( 22,724
)
Ending balance
$
( 50,743
)
$
( 60,684
)
$
( 50,743
)
$
( 60,684
)
Unrealized gains (losses) on foreign currency translation
Beginning balance
$
( 10,594
)
$
( 6,350
)
$
( 2,530
)
$
( 7,939
)
Revaluation
3,604
1,833
( 4,460
)
3,422
Ending balance
$
( 6,990
)
$
( 4,517
)
$
( 6,990
)
$
( 4,517
)
Total
$
( 57,253
)
$
( 83,949
)
$
( 57,253
)
$
( 83,949
)
F - 31
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
September 30,
Nine Months Ended
September 30,
Affected Line Item in the
Statement of Income
2024
2023
2024
2023
Unrealized gains (losses) on available-for-sale marketable securities
$
777
$
-
$
2,747
$
( 107
)
Financial income (expense), net
( 198
)
-
( 699
)
29
Income taxes
$
579
$
-
$
2,048
$
( 78
)
Total, net of income taxes
Unrealized gains (losses) on cash flow hedges, net
78
( 219
)
204
( 734
)
Cost of revenues
369
( 1,138
)
1,031
( 3,789
)
Research and development
85
( 256
)
231
( 791
)
Sales and marketing
114
( 297
)
289
( 1,002
)
General and administrative
$
646
$
( 1,910
)
$
1,755
$
( 6,316
)
Total, before income taxes
( 78
)
120
( 211
)
393
Income taxes
568
( 1,790
)
1,544
( 5,923
)
Total, net of income taxes
Total reclassifications for the period
$
1,147
$
( 1,790
)
$
3,592
$
( 6,001
)
NOTE 20: OTHER OPERATING EXPENSE (INCOME)
The following table presents the expenses (income) recorded in the three and nine months ended September 30, 2024, and 2023:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Impairment of intangible assets and goodwill
$
24,725
$
-
$
24,725
$
-
Impairment and disposal by abandonment of property, plant and equipment
204,888
-
206,620
-
Loss (gain) from sales of assets
( 644
)
-
1,838
( 1,434
)
Other
4,960
-
4,088
-
Total other operating expense (income), net
$
233,929
$
-
$
237,271
$
( 1,434
)
F - 32
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 21: 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 September 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
$
884
$
332
$
-
$
( 2
)
$
( 4
)
$
1,210
Research and development
648
-
-
-
-
648
Sales and marketing
468
-
-
-
-
468
General and administrative
183
-
( 11
)
-
-
172
Total
$
2,183
$
332
$
( 11
)
$
( 2
)
$
( 4
)
$
2,498
Restructuring and other exit charges for the nine months ended September 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
$
1,938
$
9,619
$
( 200
)
$
( 138
)
$
( 859
)
$
10,360
Research and development
3,561
248
-
-
-
3,809
Sales and marketing
1,113
-
( 4
)
-
-
1,109
General and administrative
568
118
( 54
)
-
-
632
Total
$
7,180
$
9,985
$
( 258
)
$
( 138
)
$
( 859
)
$
15,910
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
6,922
( 137
)
9,124
Cash payments
( 9,029
)
-
( 36,853
)
Non-cash utilization and other
( 266
)
( 6,171
)
( 2,664
)
Balance as of September 30, 2024
$
-
$
21,466
$
-
1 Inventory write-down is included under Inventories, net on the balance sheet.
F - 33
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 22: INCOME TAXES
For the three months ended September 30, 2024, the Company reported income taxes at an effective tax rate of ( 11.2 )%, compared to the three months ended September 30, 2023, where the Company reported income taxes at an effective tax rate of ( 143.6 )%.
The change in effective tax rate in the three months ended September 30, 2024 compared to the corresponding period in 2023 is mainly due to the impairments and disposals, which significantly increased the quarterly loss before income tax, offset by higher tax expenses resulting from an increase in the valuation allowance during the quarter.
For the nine months ended September 30, 2024, the Company reported income taxes at an effective tax rate of ( 6.0 )%, compared to the nine months ended September 30, 2023, where the Company reported income taxes at an effective tax rate of 33.6 %.
The change in effective tax rate in the nine months ended September 30, 2024 compared to the corresponding period in 2023 is mainly due to the Company transitioning to a loss position in 2024 which has increased significantly as a result of impairments and disposals, in addition to higher tax expenses due to valuation allowance.
Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent that the Company believes they will not be realized. The Company considers all available evidence, including historical information, long range forecast of future taxable income and evaluation of tax planning strategies. Amounts recorded for valuation allowance can result from a complex series of judgments about future events and can rely on estimates and assumptions. Based primarily on the negative evidence outweighing the positive evidence, including the Company's three year cumulative, consolidated GAAP loss, historical tax losses and the difficulty in forecasting excess tax benefits related to equity-based compensation, the Company believes there is uncertainty as to when it will be possible to utilize certain net operating losses (each a "NOL"), credit carryforwards and other deferred tax assets. Therefore, the Company recorded a valuation allowance against the deferred tax assets for which it is more-likely-than-not they will not be realized.
Should the Company's operating results improve and projections show continued utilization of the tax attributes, the Company would consider that as significant positive evidence and future reassessment may result in the determination that all or a portion of the valuation allowance is no longer required. If this were to occur, any reversal of the valuation allowance would result in a corresponding non-cash income tax benefit, thereby increasing total DTAs.
As of September 30, 2024, and December 31, 2023, the Company recorded valuation allowance in the amount of $ 217,314 and $ 51,245 , respectively.
As of September 30, 2024, and December 31, 2023, unrecognized tax benefits were valued at $ 21,992 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 September 30, 2024 and December 31, 2023 were $ 5,543 and $ 2,927 , respectively.
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 nine months ended September 30, 2024, the Company manufactured and sold products that entitle it to $ 13,963 and $ 44,084 of AMPTCs, respectively, which were recorded as a reduction in of cost of revenues. As of September 30, 2024 and December 31, 2023 benefits from AMPTCs of $ 68,001 and $ 6,020 , respectively, were recorded as a tax prepayment within prepaid expenses and other current assets.
On October 24, 2024, final regulations concerning the application of IRC §45X were published. The regulations contain detailed rules concerning the eligibility, qualifying and accounting for AMPTCs. Of particular relevance to the Company are the rules concerning the qualification and measurement of AMPTCs to Residential Inverters, Commercial Inverters and DC-Optimized Inverter Systems, that are included in the definition of Microinverters.
F - 34
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 23: EARNINGS (LOSS) PER SHARE
The following table presents the computation of basic and diluted earnings (loss) per share (“EPS”):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Basic EPS:
Numerator:
Net income (loss)
$
( 1,205,321
)
$
( 61,176
)
$
( 1,493,450
)
$
196,712
Denominator:
Shares used in computing net earnings (loss) per share of common stock, basic
57,029,983
56,671,504
56,952,656
56,435,880
Diluted EPS
Numerator:
Net income (loss) attributable to common stock, basic
$
( 1,205,321
)
$
( 61,176
)
$
( 1,493,450
)
$
196,712
Notes 2025
-
-
-
1,608
Net income (loss) attributable to common stock, diluted
$
( 1,205,321
)
$
( 61,176
)
$
( 1,493,450
)
$
198,320
Denominator:
Shares used in computing net earnings (loss) per share of common stock, basic
57,029,983
56,671,504
56,952,656
56,435,880
Notes 2025
-
-
-
2,276,818
Effect of stock-based awards
-
-
-
584,725
Shares used in computing net earnings (loss) per share of common stock, diluted
57,029,983
56,671,504
56,952,656
59,297,423
Earnings (loss) per share:
Basic
$
( 21.13
)
$
( 1.08
)
$
( 26.22
)
$
3.49
Diluted
$
( 21.13
)
$
( 1.08
)
$
( 26.22
)
$
3.34
The following outstanding shares of common stock equivalents were excluded from the calculation due to their antidilutive nature:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Stock-based awards
2,552,867
1,072,938
2,055,632
-
Notes 2025
-
2,276,818
1,510,363
-
Notes 2029 1
984,342
-
392,152
-
Total shares excluded
3,537,209
3,349,756
3,958,147
-
1 In conjunction with the issuance of the Notes 2029 in June 2024, the Company used approximately $ 25,230 of the net proceeds from this offering to pay the cost of the capped call transactions. I n July 2024, following an additional issuance of the Notes 2029, $ 3,111 of net proceeds were used to pay the cost of capped call transactions. In accordance with FASB ASC 260, antidilutive contracts, such as 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 - 35
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except per share data)
NOTE 24: 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 Interim 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, disposal by abandonment and impairment of long-lived assets, 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 - 36
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 September 30, 2024
Revenues
$
247,516
$
10,900
$
2,237
Cost of revenues
855,832
95,323
1,307
Gross profit (loss)
( 608,316
)
( 84,423
)
930
Research and development
47,569
4,590
179
Sales and marketing
28,369
997
212
General and administrative
33,037
1,278
51
Segments profit (loss)
$
( 717,291
)
$
( 91,288
)
$
488
Three Months Ended September 30, 2023
Revenues
$
676,929
$
24,215
$
23,946
Cost of revenues
514,390
35,931
23,748
Gross profit (loss)
162,539
( 11,716
)
198
Research and development
56,886
4,134
2,252
Sales and marketing
30,810
1,009
472
General and administrative
29,711
1,827
855
Segments profit (loss)
$
45,132
$
( 18,686
)
$
( 3,381
)
Nine Months Ended September 30, 2024
Revenues
$
678,861
$
42,960
$
8,156
Cost of revenues
1,290,748
138,107
5,778
Gross profit (loss)
( 611,887
)
( 95,147
)
2,378
Research and development
145,683
12,268
535
Sales and marketing
87,664
2,839
671
General and administrative
87,500
2,807
306
Segments profit (loss)
$
( 932,734
)
$
( 113,061
)
$
866
Nine Months Ended September 30, 2023
Revenues
$
2,532,794
$
52,492
$
74,594
Cost of revenues
1,723,438
82,912
70,914
Gross profit (loss)
809,356
( 30,420
)
3,680
Research and development
174,811
12,348
7,429
Sales and marketing
96,091
3,047
2,024
General and administrative
79,599
6,650
2,798
Segments profit (loss)
$
458,855
$
( 52,465
)
$
( 8,571
)
F - 37
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
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Solar segment revenues
$
247,516
$
676,929
$
678,861
$
2,532,794
Energy Storage segment revenues
10,900
24,215
42,960
52,492
All other segment revenues
2,237
23,946
8,156
74,594
Revenues from finance component
250
215
730
604
Consolidated revenues
$
260,903
$
725,305
$
730,707
$
2,660,484
The following table presents information on reportable segments reconciliation to consolidated operating income for the periods presented:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Solar segment profit (loss)
$
( 717,291
)
$
45,132
$
( 932,734
)
$
458,855
Energy Storage segment loss
( 91,288
)
( 18,686
)
( 113,061
)
( 52,465
)
All other segment profit (loss)
488
( 3,381
)
866
( 8,571
)
Segments operating profit (loss)
( 808,091
)
23,065
( 1,044,929
)
397,819
Amounts not allocated to segments:
Stock based compensation expenses
( 36,641
)
( 36,815
)
( 112,818
)
( 115,015
)
Restructuring and other exit activities
( 2,498
)
-
( 15,910
)
-
Impairment and disposal by abandonment of long-lived assets
( 232,102
)
-
( 233,834
)
-
Amortization and depreciation of acquired assets
( 2,872
)
( 2,750
)
( 6,902
)
( 6,164
)
Other unallocated income (expenses)
( 3,062
)
( 226
)
( 4,760
)
1,146
Consolidated operating income (loss)
( 1,085,266
)
( 16,726
)
( 1,419,153
)
277,786
Financial income (expense), net
5,558
( 7,901
)
( 2,371
)
19,157
Other income (loss), net
( 3,928
)
( 484
)
14,623
( 609
)
Income (loss) before income taxes
$
( 1,083,636
)
$
( 25,111
)
$
( 1,406,901
)
$
296,334
NOTE 25: SUBSEQUENT EVENTS
On November 4, 2024, the Company announced that it closed its first transaction for the sale of §45X Advanced Manufacturing Production Tax Credits in consideration for a cash payment of $ 40,000 , net of discounts and fees to Genworth Financial Inc. (the "Tax Credits"). The credits were generated from the sales of inverters, produced during the first half of 2024, at the Company's facility in Austin, Texas.
F - 38
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.