SOLAREDGE TECHNOLOGIES, INC. 10-Q

ITEM 3. Quantitative 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 34.9% and 62.3% of our revenues for the nine months ended September 30, 2025, and September 30, 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 $12.8 million for the nine months ended September 30, 2025. A hypothetical 10% change in foreign currency exchange rates between NIS and the U.S. dollar would increase or decrease our net income by $4.5 million for the nine months ended September 30, 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 for U.S. dollars. These derivative instruments are not designated as cash flow hedges. Concentrations of Major Customers Our trade accounts receivables potentially expose us to a concentration of credit risk with our major customers. As of September 30, 2025, two major customers accounted for approximately 40.1% of our consolidated trade receivables, net balance. As of September 30, 2024, three major customers jointly accounted for approximately 37.4% of our consolidated trade receivables, net balance. For the three months ended September 30, 2025, one major customer accounted for approximately 23.1% of our total revenues. For the three months ended September 30, 2024, one major customer accounted for approximately 16.7% of our total revenues. For the nine months ended September 30, 2025 two major customers accounted for approximately 32.4% of our total revenues. For the nine months ended September 30, 2024 one major customer accounted for approximately 11.0% of our total revenues. SOLAREDGE TECHNOLOGIES INC. | 2025 Form 10-Q | 18 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.