SOLAREDGE TECHNOLOGIES, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Statements contained in this Form 10-Q or statements incorporated by reference from documents we have filed with the Securities and Exchange Commission may contain forward-looking statements that are based on our management’s expectations, estimates, projections, beliefs and assumptions in accordance with information currently available to our management. Forward-looking statements should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part 1, Item 1 of this report. This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, technology developments, new products and services, financing and investment plans, competitive position, backlog, industry and regulatory environment, effects of acquisitions, growth opportunities, potential future impairments, and the effects of competition. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “seek,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements inherently involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on forward-looking statements. Forward-looking and other statements regarding our sustainability efforts and aspirations are not an indication that these statements are necessarily material to investors or requiring disclosure in our filing with the Securities and Exchange Commission (“SEC”). In addition, historical, current and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future, including future rule-making. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this filing. Important factors that could cause actual results to differ materially from our expectations include: • future demand for renewable energy including solar energy solutions; • our ability to forecast demand for our products accurately and to match production to such demand as well as our customers' ability to forecast demand based on inventory levels; • changes in tax laws, tax treaties, and regulations or the interpretation of them, including the Inflation Reduction Act; • changes in the U.S. and global trade environments, including the imposition and/or increase of import tariffs or other restrictive trade measures; • ability to successfully operate our global operations with a reduced work force; • macroeconomic conditions in our domestic and international markets, as well as inflation concerns, rising interest rates and recessionary concerns; • changes, elimination or expiration of government subsidies and economic incentives for on-grid solar energy applications; • the retail price of electricity derived from the utility grid or alternative energy sources; • interest rates and supply of capital in the global financial markets in general and in the solar market specifically; • competition, including introductions of power optimizer, inverter and solar photovoltaic (“PV”) system monitoring products by our competitors; • developments in alternative technologies or improvements in distributed solar energy generation; • historic cyclicality of the solar industry and periodic downturns; • product quality or performance problems in our products; • loss of key executives, and our ability to retain key personnel and attract additional qualified personnel • shortages, delays, price changes, or cessation of operations or production affecting our suppliers of key components; • delays, disruptions, and quality control problems in manufacturing; • our dependence upon a small number of outside contract manufacturers and limited or single source suppliers; • changes to net metering policies or the reduction, elimination or expiration of government subsidies and economic incentives for on-grid solar energy applications; • capacity constraints, delivery schedules, manufacturing yields, and costs of our contract manufacturers and availability of components; • performance of distributors and large installers in selling our products; • consolidation in the solar industry among our customers and distributors; • our ability to effectively manage changes in our organization and expansion into new markets; • our ability to recognize expected benefits from restructuring plans; • any unauthorized access to, disclosure, or theft of personal information or unauthorized access to our network or other similar cyber incidents; • our ability to implement our new ERP system; SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 3 • our ability to integrate acquired businesses; • disruption to our business operations due to the evolving state of war in Israel and political conditions related to the Israeli government's plans to significantly reduce the Israeli Supreme Court's judicial oversight; • our dependence on ocean transportation to timely deliver our products in a cost-effective manner; • fluctuations in global currency exchange rates; • the impact of evolving legal and regulatory requirements, including corporate social responsibility and sustainability, requirements; • existing and future responses to and effects of pandemics, epidemics or other health crises; • federal, state, and local regulations governing the electric utility industry with respect to solar energy; • business practices and regulatory compliance of our raw material suppliers; • our ability to maintain our brand and to protect and defend our intellectual property; • volatility of our stock price; • our customers’ financial stability, creditworthiness, and debt leverage ratio; • our ability to effectively design, launch, market, and sell new generations of our products and services; • our ability to retain, and events affecting, our major customers; • natural disasters, public health events and other disruptions; • impairment of our goodwill or other long-lived and intangible assets • our liquidity and ability to service our debt; the other factors set forth below in Part II, Item 1.A under “Risk Factors and in Part I, Item 1A under Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business. The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Overview We develop, manufacture and sell products in a solar segment that addresses a broad range of energy market segments through our diversified product offering, including residential, commercial and large scale photovoltaic or PV, home energy management, grid services and virtual power plants. In prior years, we also had product offerings for the e-mobility market, automation machines (“Automation Machines”) and energy storage. In October 2023, we decided to discontinue our light commercial vehicle (“LCV”), e-Mobility activity. In October 2024, the Company completed the sale of Automation Machines. Additionally, in November 2024, the Company announced the closure of its Energy Storage Division, as part of its focus on its core activities. Following the sale of Automation Machines and the discontinuation of the Energy Storage activity in 2024, the Company now operates as one operating segment, the Solar segment, that constitutes consolidated results. In light of the Inflation Reduction Act legislation in the United States, which incentivizes the local manufacturing of renewable energy products by providing benefits to installers for the purchase and installation of product with domestic content, as well as by incentivizing local manufacturing of our products, we manufacture single phase inverters in Texas and optimizers in Florida. We are also currently increasing our manufacturing of three-phase inverters in Florida and batteries in Utah. With the ramp-up of new sites and as part of an effort to centralize and improve operational activity, we have discontinued manufacturing in China, Mexico, and Hungary. We continue to maintain manufacturing capabilities in Vietnam with a third-party manufacturer. As of March 31, 2025, we shipped approximately 134.3 million power optimizers, 5.9 million inverters and 346.9 thousand batteries for PV applications. Over 4.3 million installations, many of which may include multiple inverters, are currently connected to, and monitored through, our cloud-based monitoring platform. As of March 31, 2025, we shipped approximately 57.4 GW of our DC optimized inverter systems and approximately 2.4 GWh of our batteries for PV applications. Our revenues for the three months ended March 31, 2025 and March 31, 2024 were $219.5 million and $204.4 million, respectively. Gross profit as a percentage of revenue was 8.0%, for the three months ended March 31, 2025, compared to gross loss as a percentage of revenue of 12.8%, for the three months ended March 31, 2024. Net loss was $98.5 million and $157.3 million for the three months ended March 31, 2025, and March 31, 2024, respectively. SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 4 Global Circumstances Influencing our Business and Operations Demand for Products We have seen a slowdown in demand for our products from our direct customers since the second part of the third quarter of 2023, throughout 2024 and into 2025. This was a result of slowed market demand beginning in the third quarter of 2023 and persisting throughout 2024 and into 2025, as distributors began to take actions to reduce inventory levels. In particular, beginning in the second part of the third quarter of 2023, we experienced substantial unexpected cancellations and push outs of existing backlog, mostly from our European distributors. We attribute these cancellations and pushouts to high inventory in the channels and slower than expected installation rates both in the United States and to a greater extent in Europe. The slowdown continued in the subsequent quarters of 2023, throughout 2024 and the first quarter of 2025. Trade Tariff Uncertainties The current trade situation is creating uncertainty about what the impacts new or existing tariffs, trade restrictions or retaliatory actions may have on us, the solar industry, our partners, and our customers. In the last two and a half years, we have relocated our contract manufacturing to the United States. However, certain critical subcomponents for our products are still sourced from outside the United States. If not resolved, the escalation in trade tensions or the implementation of broader tariffs, trade restrictions or other retaliatory measures on our products or components originating from countries outside of the United States, or from the United States, could adversely impact our ability to source necessary components, manufacture products at competitive cost, or sell our products at prices customers are willing to pay. Certain of the components used in our products are being imported to the United States from China, which may be subject to significantly increased tariffs. In light of the aforementioned, we are exploring alternative suppliers outside of China, however, there is no assurance that we will be successful in identifying suitable alternatives, or that such alternatives, if identified, will not result in increased costs or reduced operational efficiency. If the price of solar power systems increases, as well as the cost of manufacturing our products in the United States, the use of solar power systems could become less economically feasible and could further reduce our gross margins or reduce the demand of solar power systems manufactured and sold, which in turn may decrease demand for our products. Additionally, existing or future tariffs may negatively affect key partners, suppliers and manufacturers. Such outcomes could adversely affect the amount or timing of our revenue, results of operations or cash flows, and continuing uncertainty could cause sales volatility, price fluctuations or supply shortages or cause our customers to advance or delay their purchase of our products. Any such developments could materially and adversely affect our business operations, results of operations and cash flows. SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 5 Disruptions Due to the War in Israel Due to the war that began on October 7, 2023, some of our employees in Israel were called to active reserve duty and additional employees may be called in the future, if needed. In the three months ended March 31, 2025 approximately 5% of our employees in Israel have been called to active reserve duty for varying periods. While our offices and facilities are open worldwide, including in Israel, and, to date, we have not had disruptions to our ability to manufacture and deliver products and services to customers. Although the situation is somewhat stabilized due to ceasefires between Israel and Hezbollah, an escalation of the current conflicts in Israel could materially adversely affect our business, financial condition, and results of operations. Due to the ongoing and evolving nature of the conflict in Israel, and the extent of these events, the adverse effect on our business operations is still unknown. The majority of our key employees and officers are residents of Israel. If any of our facilities in Israel were to be damaged, destroyed or otherwise rendered unable to operate, whether due to war, acts of hostility, earthquakes, fire, floods, storms, other natural disasters, employee malfeasance, terrorist acts, power outages or otherwise, or if performance of our research and development is disrupted for any other reason, such an event could delay commercialization of our products, and if we choose to manufacture all or any part of them internally, jeopardize our ability to manufacture our products as promptly as our prospective customers will likely expect, or possibly at all. If we experience delays in achieving our development objectives within a timeframe that meets our prospective customers’ expectations, our business, prospects, financial results and reputation could be harmed. Inflation Reduction Act In August 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “IRA”), which includes several provisions intended to accelerate U.S. manufacturing and adoption of 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, among other things, extends the investment tax credit and production tax credit through 2034 and is therefore expected to increase the demand for solar products. The IRA also further incentivizes residential and commercial solar customers and developers through the inclusion of a tax credit for qualifying energy projects of up to 30%. Section 45X of the IRA offers AMPTCs that incentivize the production of eligible components within the U.S. To that end, we established manufacturing capabilities in the U.S. in 2023. These provisions of the law are new and regulations and guidance concerning their implementation are gradually being published by the U.S. Treasury Department. On October 24, 2024, final regulations concerning the application of IRC §45X were published. The regulations contain detailed rules concerning eligibility, qualifying and accounting for AMPTCs. Of particular relevance to the Company are the tax credits that we generate as a result of rules concerning the qualification and measurement of AMPTCs to Residential Inverters, Commercial Inverters and DC-Optimized Inverter Systems. In 2024 and the first quarter of 2025, we sold a significant part of the AMPTCs that we generated from our U.S. production of eligible components. In January 2025, the new U.S. administration issued executive orders aimed at pausing grants and other government funding that have not already been dispersed to under the IRA, creating uncertainty regarding the ability to secure government awards and grants in the future. This potential loss of financial support could adversely impact our business, and potentially the overall financial performance of the Company. As of March 31, 2025 and December 31, 2024 benefits from AMPTCs of $82,946 and $80,516, respectively, were recorded as a tax prepayment within prepaid expenses and other current assets. SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 6 Key Operating Metrics In managing our business and assessing financial performance, we supplement the information provided in our financial statements with other operating metrics. These operating metrics are utilized by our management to evaluate our business, measure our performance, identify trends affecting our business and formulate projections. We use metrics relating to shipments of inverters, power optimizers and megawatts to evaluate our sales performance and to track market acceptance of our products. We provide the “megawatts shipped” and “megawatt hours shipped” metrics, which are calculated based on inverter or battery nameplate capacity shipped, respectively, to show adoption of our system on a nameplate capacity basis. Nameplate capacity shipped is the maximum rated power output capacity of an inverter or battery, and corresponds to our financial results in that higher total nameplate capacities shipped are generally associated with higher total revenues. However, revenues may increase in a non-correlated manner to the “megawatt shipped” metric since other products, such as power optimizers, are not accounted for in this metric. Three months ended March 31, 2025 2024 Inverters shipped 84,533 68,882 Power optimizers shipped 2,251,596 1,070,987 Megawatts shipped 1 1,208 946 Megawatt hours shipped - batteries for PV applications 177 128 1 Excluding batteries for PV applications, based on the aggregate nameplate capacity of inverters shipped during the applicable period. Nameplate capacity is the maximum rated power output capacity of an inverter as specified by the manufacturer. SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 7 Results of Operations The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report. The following table sets forth selected consolidated statements of loss data for each of the periods indicated. Three Months Ended March 31, 2025 2024 (In thousands) Revenues 219,480 204,399 Cost of revenues 201,944 230,586 Gross profit (loss) 17,536 (26,187 ) Operating expenses: Research and development 61,997 75,351 Sales and marketing 31,657 38,911 General and administrative 30,183 30,865 Other operating expense (income), net (3,575 ) 2,391 Total operating expenses 120,262 147,518 Operating loss (102,726 ) (173,705 ) Financial income (expense), net 10,068 (7,064 ) Other income, net 148 - Loss before income taxes (92,510 ) (180,769 ) Tax benefits (income taxes) (5,726 ) 23,754 Net loss from equity method investments (287 ) (296 ) Net loss (98,523 ) (157,311 ) Comparison of three months ended March 31, 2025, and the three months ended March 31, 2024 Revenues Three Months Ended March 31, 2024 to 2025 2025 2024 Change (In thousands) Revenues 219,480 204,399 15,081 7.4 % Revenues increased by $15.1 million, or 7.4%, in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to an increase of $36.4 million related to an increase in the number of power optimizers sold; and an increase of $3.8 million related to an increase in the number of batteries for PV applications sold; these were partially offset by (i) a decrease of $14.1 million related to less ancillary solar products sold; (ii) a decrease of $3.7 million in revenue from inverters sold, related to a price reduction, mainly in Europe; (iii) a decrease of $3.5 million in revenues due to the discontinuation of our Energy Storage Business; and (iv) a decrease of $3.4 million in revenues from automation machines, which was sold in October 2024. Revenues from outside of the U.S. comprised 39.8% of our revenues in the three months ended March 31, 2025, as compared to 68.1% in the three months ended March 31, 2024. SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 8 The number of power optimizers recognized as revenues increased by approximately 1.0 million units, or 98.2%, from approximately 1.1 million units in the three months ended March 31, 2024 to approximately 2.1 million units in the three months ended March 31, 2025. The number of inverters recognized as revenues increased by approximately 10 thousand units, or 15.5%, from approximately 62.3 thousand units in the three months ended March 31, 2024 to approximately 72.0 thousand units in the three months ended March 31, 2025. The megawatt hours of batteries for PV applications recognized as revenues increased by approximately 67.6 megawatt hours, or 71.9% from approximately 94.0 in the three months ended March 31, 2024 to approximately 162.0 megawatt hours in the three months ended March 31, 2025. Our blended Average Selling Price (“ASP”) per watt for solar products excluding batteries for PV applications is calculated by dividing the solar revenues, excluding revenues from the sale of batteries for PV applications, by the nameplate capacity of inverters shipped. Our blended ASP per watt for solar products increased by $0.001, or 0.4%, in the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. This increase in blended ASP per watt is mainly attributed to a higher number of power optimizers shipped, compared to the number of inverters shipped; as well as higher ASP due to increase in U.S. sales compared to sales in Europe, which is characterized by a higher demand for residential products, which have a higher ASP per watt out of our total solar product mix. This increase in blended ASP per watt was partially offset by price reductions, mainly in Europe. Our blended ASP per watt/hour for batteries for PV applications is calculated by dividing batteries for PV applications revenues, by the nameplate capacity of batteries for PV applications shipped. Our blended ASP per watt/hour for batteries for PV applications decreased by $0.116, or 30.2%, in the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The decrease in blended ASP per watt/hour is mainly attributed to price reduction of our batteries for PV applications as well as an increase in the sale of our three-phase battery that is sold at a lower ASP per watt/hour. Cost of Revenues and Gross Profit (loss) Three Months Ended March 31, 2024 to 2025 2025 2024 Change (In thousands) Cost of revenues 201,944 230,586 (28,642 ) (12.4 )% Gross profit (loss) 17,536 (26,187 ) 43,723 (167.0 )% Cost of revenues decreased by $28.6 million, or 12.4%, in the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to: • a decrease in warranty expenses and warranty accruals of $17.2 million associated primarily with a lower cost of materials; • a decrease in inventory costs of $8.7 million related to lower write-downs; and • a decrease in the direct cost of revenues sold of $5.9 million, associated primarily with the AMPTC recognized, which was partially offset by an increase in costs due to the manufacturing in the U.S., and a lower cost of products sold. Gross profit as a percentage of revenue in the three months ended March 31, 2025 was 8.0%, as compared to gross loss as a percentage of revenue of 12.8%, in the three months ended March 31, 2024, primarily due to: • a decrease in warranty expenses and warranty accruals of approximately 8% associated primarily with a lower cost of materials; • a decrease of approximately 7% in restructuring plan and ramp up costs; and • a decrease of approximately 4% in indirect cost associated primarily with lower inventory write-downs. SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 9 Operating Expenses: Research and Development Three Months Ended March 31, 2024 to 2025 2025 2024 Change (In thousands) Research and development 61,997 75,351 (13,354 ) (17.7 )% Research and development costs decreased by $13.4 million or 17.7%, in the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to: • a decrease in personnel-related costs of $7.2 million resulting from our Restructuring Plan designed to reduce operating expenses and align our cost structure to current market dynamics; • a decrease in material consumption of $2.2 million; and • a decrease in depreciation and amortization of $1.5 million. Sales and Marketing Three Months Ended March 31, 2024 to 2025 2025 2024 Change (In thousands) Sales and marketing 31,657 38,911 (7,254 ) (18.6 )% Sales and marketing expenses decreased by $7.3 million, or 18.6%, in the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to a decrease in personnel-related costs of $6.4 million resulting from our Restructuring Plan designed to reduce operating expenses and align our cost structure to current market dynamics; General and Administrative Three Months Ended March 31, 2024 to 2025 2025 2024 Change (In thousands) General and administrative 30,183 30,865 (682 ) (2.2 )% General and administrative expenses have decreased by $0.7 million, or 2.2%, in the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to a net reversal of doubtful debt in the amount of $8.1 million in the three months ended March 31, 2025, as compared to an expense of $3.0 million, in the three months ended March 31, 2024, mainly related to collection of doubtful debt. This decrease was partially offset by: • an increase of $8.1 million primarily due to a penalty for postponing the commencement of our campus lease agreement; • an increase in personnel-related costs, of $1.9 million primarily due to one-time restructuring costs and changes in management, which were partially offset by our Restructuring Plan designed to reduce operating expenses and align our cost structure to current market dynamics. SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 10 Other operating expense (income), net Three Months Ended March 31, 2024 to 2025 2025 2024 Change (In thousands) Other operating expense (income), net (3,575 ) 2,391 (5,966 ) (249.5 )% Other operating income, net, was $3.6 million in the three months ended March 31, 2025 compared to other operating expense, net, of $2.4 million in the three months ended March 31, 2024 primarily due to: • an increase of $3.1 million in income related to lower than expected discontinuation charges; • a decrease of $1.7 million in losses related to impairment of property, plant and equipment; and • a decrease of $0.9 million in losses from sale of property, plant and equipment. Financial income (expense), net Three Months Ended March 31, 2024 to 2025 2025 2024 Change (In thousands) Financial income (expense), net 10,068 (7,064 ) 17,132 (242.5 )% Financial income, net, was $10.1 million in the three months ended March 31, 2025, compared to financial expense, net, in the amount of $7.1 million in the three months ended March 31, 2024, primarily due to: • gain of $8.7 million in the three months ended March 31, 2025 as compared to loss of $9.5 million due to fluctuations in foreign exchange rates between the Euro and the NIS, against the U.S. dollar; and • gain of $1.2 million in the three months ended March 31, 2025 as compared to loss of $2.3 million due to credit loss related to loans receivable. These were partially offset by: • a decrease of $3.2 million in interest income related to our marketable securities investments; and • an increase of $1.9 million in interest expenses related to our Notes 2029. SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 11 Other income, net Three months ended March 31, 2024 to 2025 2025 2024 Change (In thousands) Other income, net 148 - 148 100.0 % Other income, net increased by $0.1 million, or 100.0%, in the three months ended March 31, 2025, compared to the three months ended March 31, 2024, due to gain from the repurchase of convertible notes, in the three months ended March 31, 2025. Income taxes (tax benefits) Three months ended March 31, 2024 to 2025 2025 2024 Change (In thousands) Tax benefits (income taxes) (5,726 ) 23,754 (29,480 ) (124.1 )% Income taxes were $5.7 million in the three months ended March 31, 2025, compared to tax benefits in the amount of $23.8 million in the three months ended March 31, 2024 primarily due to a valuation allowance of the deferred tax assets on our current losses, withholding taxes paid on certain intra-group interest payments and additional tax payable as a result of a settlement with the Israeli Tax Authority for tax years 2016-2018. Net loss from equity method investments Three months ended March 31, 2024 to 2025 2025 2024 Change (In thousands) Net loss from equity method investments (287 ) (296 ) 9 (3.0 )% Net loss from equity method investments slightly decreased in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. Net loss Three months ended March 31, 2024 to 2025 2025 2024 Change (In thousands) Net loss (98,523 ) (157,311 ) 58,788 (37.4 )% As a result of the factors discussed above, net loss decreased by $58.8 million or 37.4% in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 12 Liquidity and Capital Resources The following table shows our cash flows from operating activities, investing activities, and financing activities for the stated periods: Three Months Ended March 31, 2025 2024 (In thousands) Net cash provided by (used in) operating activities $ 33,823 $ (217,019 ) Net cash provided by investing activities 67,597 149,008 Net cash used in financing activities (6,237 ) (50,987 ) Increase (decrease) in cash and cash equivalents $ 95,183 $ (118,998 ) As of March 31, 2025, our cash and cash equivalents were $401.4 million. This amount does not include $284.3 million invested in available-for-sale marketable securities, $104.5 million in restricted cash, and $3.4 million invested in deposits and restricted deposits. Our principal uses of cash are for funding our operations, capital expenditures, other working capital requirements, other investments, and the repayment of our Notes 2025. As of March 31, 2025, we have open commitments for capital expenditures in an amount of approximately $32.4 million. These commitments mainly reflect purchases of automated assembly lines and other machinery related to our manufacturing and operations. We also have purchase obligations in the amount of $234.0 million, related to raw materials and commitments for the future manufacturing of our products. Beginning in the fourth quarter of 2024, we started to sell AMPTCs. We plan to pursue additional tax credit transfer agreements in the future. We believe our cash and cash equivalents, and available-for-sale marketable securities will be sufficient to meet our anticipated cash needs for at least the next 12 months as well as in the longer term, including the self-funding of our capital expenditure, operational commitments and the redemption of our debt. Operating Activities Operating cash flows consist primarily of net loss, adjusted for certain non-cash items and changes in assets and liabilities. Cash provided by operating activities was $33.8 million in the three months ended March 31, 2025 as compared to cash used in operating activities of $217.0 million in the three months ended March 31, 2024,attributed to a decrease in net loss adjusted for certain non-cash items generated in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, as well as by lower operating working capital requirements. Investing Activities Investing cash flows consist primarily of capital expenditures, investment in, sales and maturities of available for sale marketable securities, investment and withdrawal of bank deposits and restricted bank deposits, cash used for acquisitions, and disbursements and receipts from collections of loans made by the Company. Cash provided by investing activities decreased by $81.4 million in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily driven by a decrease of $176.7 million in proceeds provided by sales and maturities of available-for-sale marketable securities, and an increase of $6.6 million in payment related to governmental grant, these were partially offset by a decrease of $56.8 million in purchases of available-for-sale debt investments, a decrease of $16.2 million in purchase of property plant and equipment, an increase of $12.0 million in proceeds from loans receivables, a decrease of $8.8 million in the purchase of privately-held companies and a decrease of $7.5 million in disbursements of loans made by the Company. Financing Activities Financing cash flows consisted primarily of repurchases of our common stock under the share repurchase program, which expired on December 31, 2024, the issuance and partial repurchase of convertible senior notes, and our employee equity incentive plans. Cash used in financing activities in the three months ended March 31, 2025 decreased by $44.8 million compared to the three months ended March 31, 2024, primarily due to a decrease of $50.0 million in cash used in share repurchases, which was partially offset by an increase of $5.1 million in cash used for the repurchase of our convertible senior notes, due in 2025 ("Notes 2025"). SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 13 Share Repurchases On November 1, 2023, we announced the approval by the Board of Directors of a share repurchase program which authorizes the repurchase of up to $300 million 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 SolarEdge to acquire any amount of common stock, it may be suspended, extended, modified, discontinued or terminated at any time at the Company’s discretion without prior notice, and expired on December 31, 2024. During the three months ended March 31, 2024, the Company repurchased 505,896 shares of common stock from the open market at an average cost of $65.67 per share for a total of $33.2 million. Convertible Senior Notes On June 28, 2024, we sold an aggregate principal amount of $300 million of 2.25% convertible senior notes due in 2029 in a transaction exempt from registration pursuant to Rule 144A and Regulation S under the Securities Act. The net proceeds from the offering of the Notes 2029 were approximately $293.2 million, after deducting fees and estimated expenses. Separately, we have entered into capped call transactions. We used approximately $25.2 million of the net proceeds from this offering to pay the cost of the capped call transactions and approximately $267.9 million of the net proceeds from this offering to repurchase $285.0 million principal amount of its outstanding 0.000% convertible notes due 2025. As a result of the repurchase of Notes 2025, we recognized a gain of $15.5 million which was recorded under other income. We intend to use the remainder of the net proceeds from the offering for general corporate purposes. On July 8, 2024, we sold an aggregate principal amount of $37 million of the Notes 2029. The 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, as described above in Note 11, “Convertible Senior Notes.” In March 2025 the Company repurchased $5,250 principal amount of its Notes 2025. The Company recorded a net gain of $146 thousands under other income, from this repurchase. Critical Accounting Policies and Significant Management Estimates Management believes that there have been no significant changes during the three months ended March 31, 2025 to the items that we disclosed as our critical accounting policies and estimates in MD&A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, except as mentioned in Note 1, “General” (if any). ITEM 3. Q uantitative and Qualitative Disclosures About Market Risk We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates, customer concentrations, interest rates and commodity prices. We do not hold or issue financial instruments for trading purposes. Foreign Currency Exchange Risk Approximately 32.7% and 54.4% of our revenues for the three months ended March 31, 2025, and 2024, respectively, were earned in non-U.S. dollar denominated currencies other than the U.S. dollar, principally the Euro. Our expenses are generally denominated in the currencies in which our operations are located, primarily the U.S. dollar, NIS, and Euro. Our NIS denominated expenses consist primarily of personnel and overhead costs. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. A hypothetical 10% change in foreign currency exchange rates between the Euro and the U.S. dollar would increase or decrease our net income by $4.0 million for the three months ended March 31, 2025. A hypothetical 10% change in foreign currency exchange rates between the NIS and the U.S. dollar would increase or decrease our net income by $12.8 million for the three months ended March 31, 2025. For purposes of our consolidated financial statements, local currency assets and liabilities are translated at the rate of exchange to the U.S. dollar on the balance sheet date, and local currency revenues and expenses are translated at the exchange rate as of the date of the transaction or at the average exchange rate to the U.S. dollar during the reporting period. To date, we have used derivative financial instruments, specifically foreign currency forward contracts and put and call options, to manage exposure to foreign currency risks by hedging portions of the anticipated payroll payments denominated in NIS. These derivative instruments are designated as cash flow hedges. In addition, from time to time we enter into derivative financial instruments to hedge the Company’s exposure to currencies other than the U.S. dollar, mainly forward contracts to sell Euro and AUD for U.S. dollars. These derivative instruments are not designated as cash flow hedges. SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 14 Concentrations of Major Customers Our trade accounts receivables potentially expose us to a concentration of credit risk with our major customers. As of March 31, 2025, three major customers jointly accounted for approximately 35.9% of our consolidated trade receivables, net balance. As of March 31, 2024, three major customers jointly accounted for approximately 36.9% of our consolidated trade receivables, net balance. For the three months ended March 31, 2025, two major customers accounted for approximately 41.4% of our total revenues. For the three months ended March 31, 2024, no single major customer contributed more than 10% of our total revenues. Commodity Price Risk We are subject to risk from fluctuating market prices of certain commodity raw materials which are used in our products, including Copper, Lithium, Nickel and Cobalt. Prices of these raw materials may be affected by supply restrictions or other market factors from time to time, and we do not enter into hedging arrangements to mitigate commodity risk. Significant price changes for these raw materials could reduce our operating margins if we are unable to recover such increases from our customers, and could harm our business, financial condition, and results of operations. Item 4. Contro ls and Procedures. Disclosure Controls and Procedures Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of March 31, 2025. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Based on that evaluation, our chief executive officer and chief financial officer concluded, as of March 31, 2025, that our disclosure controls and procedures were effective and operating to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the first fiscal quarter of 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 15 PART II. OTHER INFORMATION.