Company Quick10K Filing
SolarEdge Technologies
Price88.30 EPS2
Shares51 P/E48
MCap4,511 P/FCF26
Net Debt-247 EBIT118
TEV4,263 TEV/EBIT36
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-07
10-K 2019-12-31 Filed 2020-02-27
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-02-28
10-Q 2018-09-30 Filed 2018-11-02
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-02-20
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-03
10-Q 2017-03-31 Filed 2017-05-10
10-Q 2016-09-30 Filed 2016-11-09
10-K 2016-06-30 Filed 2016-08-17
10-Q 2016-03-31 Filed 2016-05-10
10-Q 2015-12-31 Filed 2016-02-08
10-Q 2015-09-30 Filed 2015-11-06
10-K 2015-06-30 Filed 2015-08-20
10-Q 2015-03-31 Filed 2015-05-08
8-K 2020-05-18
8-K 2020-05-06
8-K 2020-02-19
8-K 2020-02-19
8-K 2019-11-06
8-K 2019-08-22
8-K 2019-08-21
8-K 2019-08-16
8-K 2019-08-06
8-K 2019-06-10
8-K 2019-05-06
8-K 2019-04-25
8-K 2019-02-20
8-K 2019-02-12
8-K 2019-01-25
8-K 2019-01-07
8-K 2019-01-02
8-K 2018-11-01
8-K 2018-10-17
8-K 2018-10-11
8-K 2018-09-25
8-K 2018-08-02
8-K 2018-07-02
8-K 2018-06-18
8-K 2018-05-24
8-K 2018-05-09
8-K 2018-02-14

SEDG 10Q Quarterly Report

Part I. Financial Information
Item 1Financial Statements
Note 1: - General
Note 2: - Inventories
Note 3: - Marketable Securities
Note 4: - Warranty Obligations
Note 5: - Fair Value Measurements
Note 6: - Derivative Instruments and Hedging Activities
Note 7: - Credit Losses
Note 8: - Commitments and Contingent Liabilities
Note 9: - Stockholders’ Equity
Note 10: - Earnings per Share
Note 11: - Other Operating Income
Note 12: - Income Taxes
Note 13: - Segment Information
Note 14: - Subsequent Events
Item 2Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3Quantitative and Qualitative Disclosures About Market Risk
Item 4Controls and Procedures
Part II. Other Information
Item 1Legal Proceedings
Item 1Arisk Factors
Item 2Unregistered Sales of Equity Securities and Use of Proceeds
Item 3Defaults Upon Senior Securities
Item 4Mine Safety Disclosures
Item 5Other Information
Item 6Exhibits
EX-31.1 exhibit_31-1.htm
EX-31.2 exhibit_31-2.htm
EX-32.1 exhibit_32-1.htm
EX-32.2 exhibit_32-2.htm

SolarEdge Technologies Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1.41.10.80.60.30.02013201520172020
Assets, Equity
0.50.40.30.20.10.02013201520172020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12013201520172020
Ops, Inv, Fin

SolarEdge Technologies Inc
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from               to               

Commission File No. 001-36894

 

SOLAREDGE TECHNOLOGIES, INC.

 

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

20-5338862

(IRS Employer

Identification No.)

1 HaMada Street

Herziliya Pituach 4673335, Israel

(Address of principal executive offices, zip code)

 

972 (9) 957-6620

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

SEDG

NASDAQ (Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer 

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller Reporting Company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   No ☒

As of May 1, 2020, there were 49,630,559 shares of the registrant’s common stock, par value of $0.0001 per share, outstanding.


SOLAREDGE TECHNOLOGIES, INC.

FORM 10-Q

FOR THE QUARTER ENDED March 31, 2020

INDEX

PART I. FINANCIAL INFORMATION

3

ITEM 1Financial Statements

3

Condensed Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019

F-2 - F-3

Condensed Consolidated Statements of Income for the three months ended March 31, 2020 and 2019 (unaudited)

F-4

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019 (unaudited)

F-5

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2020 and 2019 (unaudited)

F-6 - F-7

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (unaudited)

F-8 - F-9

Notes to the Condensed Consolidated Financial Statements (unaudited)

F-10 - F-24

ITEM 2Management’s Discussion and Analysis of Financial Condition and Results of Operations

4

ITEM 3Quantitative and Qualitative Disclosures About Market Risk

16

ITEM 4Controls and Procedures

18

PART II. OTHER INFORMATION

18

ITEM 1Legal Proceedings

18

ITEM 1ARisk Factors

18

ITEM 2Unregistered Sales of Equity Securities and Use of Proceeds

19

ITEM 3Defaults upon Senior Securities

19

ITEM 4Mine Safety Disclosures

19

ITEM 5Other Information

19

ITEM 6Exhibits

20

EXHIBIT INDEX

20

2


PART I. FINANCIAL INFORMATION

ITEM 1FINANCIAL STATEMENTS

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2020

IN U.S. DOLLARS

UNAUDITED

INDEX

3


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


U.S. dollars in thousands (except share and per share data)

March 31,

2020

December 31,

2019

ASSETS

 

CURRENT ASSETS:

Cash and cash equivalents

$

324,072

$

223,901

Short-term bank deposits

8,085

5,010

Restricted bank deposits

27,515

27,558

Marketable securities

95,143

91,845

Trade receivables, net of allowances of $4,509 and $2,473, respectively

235,673

298,383

Prepaid expenses and other current assets

66,874

115,268

Inventories, net

198,557

170,798

 

Total current assets

955,919

932,763

 

LONG-TERM ASSETS:

Marketable securities

103,863

119,176

Operating lease right-of-use assets, net

37,896

35,858

Property, plant and equipment, net

195,982

176,963

Deferred tax assets, net

17,095

16,298

Intangible assets, net

69,111

74,008

Goodwill

125,520

129,654

Other long-term assets

8,454

9,904

 

Total long-term assets

557,921

561,861

 

Total assets

$

1,513,840

$

1,494,624

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 2


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


U.S. dollars in thousands (except share and per share data)

March 31,

2020

December 31,

2019

LIABILITIES AND STOCKHOLDERS' EQUITY

 

CURRENT LIABILITIES:

Trade payables, net

$

139,138

$

157,148

Employees and payroll accruals

58,894

47,390

Current maturities of bank loans and accrued interest

15,048

15,673

Warranty obligations

70,158

65,112

Deferred revenues and customers advances

30,706

70,815

Accrued expenses and other current liabilities

75,737

80,576

 

Total current liabilities

389,681

436,714

 

LONG-TERM LIABILITIES:

Bank loans

-

173

Warranty obligations

116,099

107,451

Deferred revenues

98,134

89,982

Operating lease liabilities

30,336

30,213

Deferred tax liabilities, net

2,202

4,461

Other long-term liabilities

10,970

13,960

 

Total long-term liabilities

257,741

246,240

 

COMMITMENTS AND CONTINGENT LIABILITIES

 

STOCKHOLDERS’ EQUITY:

 

Common stock of $0.0001 par value – Authorized: 125,000,000 shares as of March 31, 2020 and December 31, 2019; issued: 49,599,493 and 49,081,457 shares as of March 31, 2020 and December 31, 2019, respectively; outstanding: 49,599,493 and 48,898,062 shares as of March 31, 2020 and December 31, 2019, respectively.

5

5

Additional paid-in capital

491,873

475,792

Accumulated other comprehensive loss

(5,390

)

(1,809

)

Retained earnings

379,930

337,682

 

Total stockholders’ equity

866,418

811,670

 

Total liabilities and stockholders’ equity

$

1,513,840

$

1,494,624

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 3


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


U.S. dollars in thousands (except share and per share data)

 

Three months ended

March 31,

2020

2019

Revenues

$

431,218

$

271,871

Cost of revenues

291,210

185,761

 

Gross profit

140,008

86,110

 

Operating expenses:

 

Research and development

36,695

26,199

Sales and marketing

24,253

20,172

General and administrative

16,185

11,691

Other operating income

(4,900

)

-

 

Total operating expenses

72,233

58,062

 

Operating income

67,775

28,048

 

Financial expenses, net

16,605

6,151

 

Income before income taxes

51,170

21,897

 

Income taxes

8,922

3,922

 

Net income

$

42,248

$

17,975

 

Net loss attributable to Non-controlling interests

-

1,041

 

Net income attributable to SolarEdge Technologies, Inc.

$

42,248

$

19,016

 

Net basic earnings per share of common stock attributable to SolarEdge Technologies, Inc.

$

0.86

$

0.40

 

Net diluted earnings per share of common stock attributable to SolarEdge Technologies, Inc.

$

0.81

$

0.39

 

Weighted average number of shares used in computing net basic earnings per share of common stock

49,193,240

47,020,218

 

Weighted average number of shares used in computing net diluted earnings per share of common stock

52,172,720

49,026,327

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 4


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


U.S. dollars in thousands (except share and per share data)

 

Three months ended

March 31,

2020

2019

 

Net income

$

42,248

$

17,975

 

Other comprehensive income (loss):

 

Available-for-sale securities:

Changes in unrealized gains (losses), net of tax

(1,165

)

485

Reclassification adjustments for losses included in net income

-

120

Net change

(1,165

)

605

 

Cash flow hedges:

Changes in unrealized gains, net of tax

538

-

 

Foreign currency translation adjustments, net

(2,954

)

(1,301

)

 

Total other comprehensive loss

(3,581

)

(696

)

 

Comprehensive income

$

38,667

$

17,279

 

Comprehensive loss attributable to Non-controlling interests

-

849

 

Comprehensive income attributable to SolarEdge Technologies, Inc.

$

38,667

$

18,128

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 5


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)


U.S. dollars in thousands (except share and per share data)

SolarEdge Technologies, Inc. Stockholders’ Equity

Common stock

Additional paid in Capital

Accumulated

Other comprehensive

loss

Retained earnings

Total

Non-controlling

interests

Total

stockholder’ equity

Number

Amount

 

Balance as of January 1, 2019

46,052,802

$

5

$

371,794

$

(524

)

$

191,133

$

562,408

$

8,318

$

570,726

 

Issuance of Common Stock upon exercise of employee and nonemployees stock-based awards

254,515

* -

309

-

-

309

-

309

Equity based compensation expenses to employees and nonemployee

-

-

9,704

-

-

9,704

-

9,704

Issuance of Common stock upon business combination

1,194,046

* -

34,601

-

-

34,601

-

34,601

Non-controlling interests related to business combination

-

-

-

-

-

-

67,734

67,734

Change in non-controlling interests

-

-

977

-

-

977

(2,964

)

(1,987

)

Other comprehensive loss adjustments

-

-

-

(696

)

-

(696

)

(849

)

(1,545

)

Net income

-

-

-

-

19,016

19,016

(1,041

)

17,975

 

Balance as of March 31, 2019

47,501,363

$

5

$

417,385

$

(1,220

)

$

210,149

$

626,319

$

71,198

$

697,517

* Represents an amount less than $1.

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 6


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)


U.S. dollars in thousands (except share and per share data)

SolarEdge Technologies, Inc. Stockholders’ Equity

Common stock

Additional paid in Capital

Accumulated

Other comprehensive

loss

Retained earnings

Total

Non-controlling

interests

Total stockholder’ equity

Number

Amount

 

Balance as of January 1, 2020

48,898,062

$

5

$

475,792

$

(1,809

)

$

337,682

$

811,670

$

-

$

811,670

 

-

Issuance of Common Stock upon exercise of employee and nonemployees stock-based awards

701,431

* -

3,308

-

-

3,308

-

3,308

Equity based compensation expenses to employees and nonemployee

-

12,773

-

-

12,773

-

12,773

Other comprehensive loss adjustments

-

-

-

(3,581

)

-

(3,581

)

-

(3,581

)

Net income

-

-

-

-

42,248

42,248

-

42,248

 

Balance as of March 31, 2020

49,599,493

$

5

$

491,873

$

(5,390

)

$

379,930

$

866,418

$

-

$

866,418

* Represents an amount less than $1.

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 7


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


U.S. dollars in thousands

Three months ended

March 31,

2020

2019

 

Cash flows provided by operating activities:

Net income

$

42,248

$

17,975

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of property, plant and equipment

5,004

3,870

Amortization of intangible assets

2,321

1,971

Amortization of premium and accretion of discount on available-for-sale marketable securities, net

120

(59

)

Stock-based compensation expenses

12,773

9,704

Deferred income tax benefit, net

(2,859

)

(973

)

Other expenses, net

235

186

Changes in assets and liabilities:

Inventories, net

(29,004

)

964

Prepaid expenses and other assets

49,888

10,885

Trade receivables, net

59,420

(7,379

)

Operating lease right-of-use assets and liabilities, net and effect of exchange rate differences

(1,247

)

828

Trade payables, net

(17,589

)

(21,720

)

Employees and payroll accruals

11,821

3,250

Warranty obligations

13,809

14,947

Deferred revenues and customers advances

(31,729

)

1,730

Other liabilities

(7,466

)

20,271

 

Net cash provided by operating activities

107,745

56,450

 

Cash flows from investing activities:

Proceeds from sales and maturities of available-for-sale marketable securities

42,333

44,575

Purchase of property, plant and equipment

(27,053

)

(10,620

)

Investment in available-for-sale marketable securities

(31,924

)

(15,316

)

Withdrawal from (investment in) bank deposits

(3,316

)

3,813

Withdrawal from (investment in) restricted bank deposits

36

(182

)

Business combination, net of cash acquired

-

(39,315

)

 

Net cash used in investing activities

$

(19,924

)

$

(17,045

)

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 8


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Cont.)


U.S. dollars in thousands

Three months ended

March 31,

2020

2019

 

Cash flows from financing activities:

Repayment of bank loans

$

(15,232

)

$

(1,003

)

Proceeds from bank loans

15,295

51

Proceeds from issuance of shares under stock purchase plan and upon exercise of stock-based awards

3,308

309

Change in Non-controlling interests

-

(1,987

)

Other financing activities

(56

)

-

 

Net cash provided by (used in) financing activities

3,315

(2,630

)

 

Increase in cash, cash equivalents and restricted cash

91,136

36,775

Cash, cash equivalents and restricted cash at the beginning of the period

223,901

187,764

Effect of exchange rate differences on cash, cash equivalents and restricted cash

9,035

1,939

 

Cash, cash equivalents and restricted cash at the end of the period

$

324,072

$

226,478

 

Supplemental disclosure of non-cash activities:

 

Operating lease, right of use asset

$

2,158

$

32,531

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 9


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


U.S. dollars in thousands (except share and 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), (iii) a related cloud-based monitoring platform, that collects and processes information from the power optimizers and inverters of a solar PV system to enable customers and system owners as applicable, to monitor and manage the solar PV systems and (iv) a storage solution that is used to increase energy independence and maximize self-consumption for homeowners by utilizing a battery that is sold separately by third party manufacturers, to store and supply power as needed.

The Company and its subsidiaries sell their intelligent inverter solution products worldwide through large distributors and electrical equipment wholesalers to smaller solar installers as, well as directly to large solar installers and engineering, procurement and construction firms (“EPCs”).

The Company has expanded its activity to other areas of smart energy technology through acquisitions. The Company now offers energy solutions which include lithium-ion cells, batteries and energy storage systems (“energy storage”), electric vehicle, or EV components and charging capabilities (“e-Mobility”), as well as uninterrupted power supply solutions (“UPS”).

b.Recently issued and adopted pronouncement:

In June 2016 the FASB issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2020. This standard requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings and report credit losses using an expected losses model rather than the incurred losses model that was previously used, and establishes additional disclosures related to credit risks. For available-for-sale (“AFS”) debt securities with unrealized losses, the standard eliminates the concept of other-than-temporary impairments and requires allowances to be recorded instead of reducing the amortized cost of the investment.

This standard limits the amount of credit losses to be recognized for AFS debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases.

F - 10


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


U.S. dollars in thousands (except share and per share data)

NOTE 1:-GENERAL (Cont.)

The Company adopted Topic 326 effective January 1, 2020, based on the composition of the Company’s trade receivables, investment portfolio and other financial assets, current economic conditions and historical credit loss activity. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.

The Condensed Consolidated Financial Statements for the three months ended March 31, 2020 are presented under the new standard, while comparative periods presented are not adjusted and continue to be reported in accordance with the Company’s historical accounting policy (See Note 7).

c.Basis of Presentation:

The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with Article 10 of Regulation S-X, “Interim Financial Statements” and the rules and regulations for Form 10-Q of the Securities and Exchange Commission (the “SEC”). Pursuant to those rules and regulations, the Company has condensed or omitted certain information and disclosures in footnotes that it normally includes in its annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its condensed consolidated financial position, results of operations, and cash flows. The Company’s interim period operating 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, 2019, contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2020, have been applied consistently in these unaudited interim condensed consolidated financial statements, except for ASC 815 - Derivatives and Hedging (see Note 6) and the adoption of ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (see Note 7).

d.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. These two contract manufacturers collectively accounted for 43.4% and 42.3% of the Company’s trade payables as of March 31, 2020 and December 31, 2019, respectively.

F - 11


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


U.S. dollars in thousands (except share and per share data)

NOTE 1:-GENERAL (Cont.)

e.COVID-19 Considerations:

The severity, magnitude and duration, as well as the economic consequences of the COVID-19 pandemic, are uncertain, rapidly changing and difficult to predict. As a result, the Company’s accounting estimates and assumptions may change over time in response to COVID-19. Such changes could result in future impairments of goodwill, intangibles, long-lived assets, inventories, incremental credit losses on receivables and AFS debt securities, or an increase in the Company’s insurance liabilities as of the time of a relevant measurement event (see Note 14).

f.Certain prior period amounts have been reclassified to conform to the current period presentation.

NOTE 2:-INVENTORIES

March 31,

2020

December 31,

2019

 

Raw materials

$

84,948

$

64,714

Work in process

18,790

20,752

Finished goods

94,819

85,332

 

$

198,557

$

170,798

NOTE 3:-MARKETABLE SECURITIES

The following table summarizes the AFS marketable debt securities as of March 31, 2020:

Amortized

cost

Gross unrealized

gains

Gross unrealized

losses

Fair

value

 

 

AFS – matures within one year:

 

Corporate bonds

$

95,321

$

101

$

(279

)

$

95,143

 

AFS – matures after one year:

Corporate bonds

103,376

104

(1,023

)

102,457

Governmental bonds

1,398

8

-

1,406

104,774

112

(1,023

)

103,863

 

Total

$

200,095

$

213

$

(1,302

)

$

199,006

F - 12


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


U.S. dollars in thousands (except share and per share data)

NOTE 3:-MARKETABLE SECURITIES (Cont.)

The following table summarizes the AFS marketable debt securities as of December 31, 2019:

Amortized

cost

Gross unrealized

gains

Gross unrealized

losses

Fair

value

 

 

AFS – matures within one year:

Corporate bonds

$

91,677

$

196

$

(28

)

$

91,845

 

AFS – matures after one year:

Corporate bonds

117,692

336

(250

)

117,778

Governmental bonds

1,398

-

-

1,398

119,090

336

(250

)

119,176

 

Total

$

210,767

$

532

$

(278

)

$

211,021

As of March 31, 2020, the Company didn’t record an allowance for credit losses for its AFS marketable debt securities (See Note 7).

NOTE 4:-WARRANTY OBLIGATIONS

Changes in the Company’s product warranty obligations for the three months ended March 31, 2020 and 2019 were as follows:

Three months ended

March 31,

2020

2019

 

Balance, at beginning of period

$

172,563

$

121,826

Additions and adjustments to cost of revenues

26,373

22,105

Usage and current warranty expenses

(12,679

)

(7,185

)

 

Balance, at end of period

186,257

136,746

Less current portion

(70,158

)

(35,229

)

 

Long-term portion

$

116,099

$

101,517

F - 13


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


U.S. dollars in thousands (except share and per share data)

NOTE 5:-FAIR VALUE MEASUREMENTS

In accordance with ASC 820, the Company measures its cash equivalents, foreign currency derivative contracts, and marketable securities, at fair value using the market approach valuation technique. Cash equivalents and marketable securities are classified within Level 1 or Level 2. This is because these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Foreign currency derivative contracts are classified within the Level 2 value hierarchy, as the valuation inputs are based on quoted prices and market observable data of similar instruments.

The following table sets forth the Company’s assets that were measured at fair value as of March 31, 2020 and December 31, 2019, by level within the fair value hierarchy:

Fair value measurements

as of

Fair Value

March 31,

December 31,

Description

Hierarchy

2020

2019

 

Measured at fair value on a recurring basis:

 

Assets:

Cash equivalents:

Money market mutual funds

Level 1

$

28,412

$

527

 

Derivative instruments asset:

Forward contracts designated as hedging instruments

Level 2

$

613

$

-

 

Short-term marketable securities:

Corporate bonds

Level 2

$

95,143

$

91,845

 

Long-term marketable securities:

Corporate bonds

Level 2

$

102,457

$

117,778

Governmental bonds

Level 2

$

1,406

$

1,398

F - 14


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


U.S. dollars in thousands (except share and per share data)

NOTE 6:-DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company accounts for derivatives and hedging based on ASC 815 (“Derivatives and Hedging”). ASC 815 requires the Company to recognize all derivatives on the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship.

To protect against the increase in value of forecasted foreign currency cash flows resulting from salary denominated in the Israeli currency, the New Israeli Shekels (“NIS”), during the three months ended March 31, 2020, the Company instituted a foreign currency cash flow hedging program. The Company hedges portions of the anticipated payroll denominated in NIS for a period of one to six months with hedging contracts.

Accordingly, when the dollar strengthens against the foreign currencies, the decline in present value of future foreign currency expenses is offset by losses in the fair value of the hedging contracts. Conversely, when the dollar weakens, the increase in the present value of future foreign currency cash flows is offset by gains in the fair value of the hedging contracts. These hedging contracts are designated as cash flow hedges, as defined by ASC 815 and are all effective hedges.

As of March 31, 2020, the Company entered into forward contracts to sell U.S. dollars for NIS in the amount of $17,985 for a period of six months. See Note 5 for information on the fair value of these hedging contracts.

The fair value of derivative assets as of March 31, 2020, was $613, which was recorded in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets. As of December 31, 2019, the Company had no derivative instruments.

For the three months ended March 31, 2020, the Company recorded unrealized gain in the amount of $538, net of tax effect, in “accumulated other comprehensive loss” related to the derivative assets designated as hedging instruments.

The Company had no gains or losses related to derivative instruments during the three months ended March 31, 2019.

F - 15


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


U.S. dollars in thousands (except share and per share data)

NOTE 7:-CREDIT LOSSES

Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, prospectively. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.

The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance. As stated above, the Company didn’t record a noncash cumulative effect adjustment on the opening consolidated balance sheet as of January 1, 2020, due to immateriality.

The Company is exposed to credit losses primarily through sales of products. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables.

Due to the short-term nature of such receivables, the estimate of amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default.

The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. The Company considered the current and expected future economic and market conditions surrounding COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted as of March 31, 2020. Estimates are used to determine the allowance. The allowance is based on assessment of anticipated payment and other historical, current and future information that is reasonably available.

The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected:

Three months ended

March 31,

2020

 

Balance, at beginning of period

$

2,473

Provision for expected credit losses

2,442

Amounts written off charged against the allowance and others

(406

)

 

Balance, at end of period

$

4,509

F - 16


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


U.S. dollars in thousands (except share and per share data)

NOTE 8:-COMMITMENTS AND CONTINGENT LIABILITIES

a.Guarantees:

As of March 31, 2020, contingent liabilities exist regarding guarantees in the amounts of $51,472, $18,643, $2,033 and $56 in respect of projects with customers, bank loans, office rent lease agreements and customs transactions, respectively.

b.Contractual purchase obligations:

The Company has contractual obligations to purchase goods and raw materials.

These contractual purchase obligations relate to inventories held by contract manufacturers and purchase orders initiated by the contract manufacturers and suppliers, which cannot be canceled without penalty. The Company utilizes third parties to manufacture its products. In addition, it acquires raw materials or other goods and services, including product components, by issuing to suppliers authorizations to purchase based on its projected demand and manufacturing needs.

As of March 31, 2020, the Company had non-cancellable purchase obligations totaling approximately $500,414 out of which the Company already recorded a provision for loss in the amount of $2,119.

As of March 31, 2020, the Company had contractual obligations for capital expenditures totaling approximately $70,961. These commitments reflect purchases of automated assembly lines and other machinery related to the Company’s manufacturing.

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.

In September, 2018, the Company’s German subsidiary, SolarEdge Technologies GmbH received a complaint filed by competitor SMA Solar Technology AG (“SMA”). The complaint, filed in the District Court Düsseldorf, Germany, alleges that SolarEdge's 12.5kW - 27.6kW inverters infringe two of the plaintiff’s patents. In its complaint, SMA requests inter alia an injunction and a determination for a claim for damages for sales in Germany. Plaintiff also asserts a value in dispute of 5 million Euros (approximately $5,500) for both patents. In November 2019, the first instance court accepted the claim of infringement for one of the two patents and the Company has filed an appeal to the Appeals Court Dusseldorf and is challenging the validity of the allegedly infringed patent in the German Patent Court. Also, in November 2019 the first instance court stayed the infringement proceedings regarding the other one of the two patents since it considered it to be highly likely that the patent would be invalid. The Company believes that it has meritorious defenses to the claims asserted and intends to vigorously defend against these lawsuits.

F - 17


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


U.S. dollars in thousands (except share and per share data)

NOTE 8:-COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)

In May 2019, the Company was served with three lawsuits by Huawei Technologies Co., Ltd., a Chinese entity (“Huawei”), against the Company's two Chinese subsidiaries and its equipment manufacturer in China. The lawsuits, filed in the Guangzhou intellectual property court, allege infringement of three patents and ask for an injunction of manufacture, use, sale and offer for sale, and damage awards of 30 million RMB (approximately $4,250). Following the receipt of the lawsuits, the Company filed three lawsuits in China against Huawei for unauthorized use of patented technology. The Company believes that it has meritorious defenses to the claims asserted and intends to vigorously defend against these lawsuits.

In August 2019, the Company was served with a lawsuit by certain former shareholders of S.M.R.E S.p.A (“SMRE”), against its Italian subsidiary that purchased the shares of SMRE in the tender offer which followed the SMRE Acquisition. The shareholders who tendered their shares are asking for the difference between 6 Euro per share, which is the amount they tendered their shares, and 6.77 Euro per share, for a total award of 2.7 million Euros (approximately $2,950). The Company believes it has meritorious defenses to the claims asserted and intends to vigorously defend against this lawsuit.

In December 2019, the Company received a lawsuit filed by a former consultant of the Company and its Israeli subsidiary in the amount of 25.5 million NIS (approximately $7,150) claiming damages caused relating to a terminated consulting agreement and stock options therein. The Company believes it has meritorious defenses to the claims asserted and intends to vigorously defend against this lawsuit.

NOTE 9:-STOCKHOLDERS’ EQUITY

a.Common Stock:

Number of shares

Authorized as of

Issued as of

Outstanding as of

March 31,

2020

December 31,

2019

March 31,

2020

December 31,

2019

March 31,

2020

December 31,

2019

Stock of $0.0001 par value:

Common stock

125,000,000

125,000,000

49,599,493

49,081,457

49,599,493

48,898,062

b.Stock 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 grant were transferred to the Company’s 2015 Global Incentive Plan (the “2015 Plan”) and are reserved for future issuances under the 2015 plan.

F - 18


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


U.S. dollars in thousands (except share and per share data)

NOTE 9:-STOCKHOLDERS’ EQUITY (Cont.)

The 2015 Plan became effective upon the consummation of the IPO. The 2015 Plan provides for the grant of options, RSUs and other share-based awards to directors, employees, officers, and nonemployees of the Company and its Subsidiaries. As of March 31, 2020, a total of 12,828,270 shares of common stock were reserved for issuance under the 2015 Plan (the “Share Reserve”).

The Share Reserve will automatically increase on January 1st of each year during the term of the 2015 Plan, commencing on January 1st 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 31st of the preceding calendar year; provided, however, that our board of directors may determine that there will not be a January 1st 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 31st.

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 March 31, 2020, an aggregate of 8,627,031 shares of common stock are still available for future grant under the 2015 Plan.

A summary of the activity in the stock options granted to employees and members of the board of directors for the three months ended March 31, 2020 and related information are as follows:

Number

of

Options

Weighted

average

exercise

price

Weighted

average

remaining

contractual

term

in years

Aggregate

intrinsic

Value

 

Outstanding as of December 31, 2019

2,112,009

15.44

3.58

168,229

Granted

59,558

101.81

Exercised

(428,300

)

7.72

Forfeited or expired

-

-

Outstanding as of March 31, 2020

1,743,267

20.28

3.76

108,568

 

Vested and expected to vest as of March 31, 2020

2,143,613

17.51

5.64

139,067

 

Exercisable as of March 31, 2020

1,406,616

15.04

2.69

94,018

The aggregate intrinsic value represents the total intrinsic value (the difference between the fair value of the Company’s common stock as of the last day of each period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last day of each period.

F - 19


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


U.S. dollars in thousands (except share and per share data)

NOTE 9:-STOCKHOLDERS’ EQUITY (Cont.)

The total intrinsic value of options exercised during the three months ended March 31, 2020 was $47,898.

The weighted average grant date fair values of options granted to employees and executive directors during the three months ended March 31, 2020 was $53.01.

A summary of the activity in the RSUs granted to employees and directors for the three months ended March 31, 2020 is as follows:

Number of

RSUs

Weighted average

grant date

fair value

Unvested as of December 31, 2019

2,742,589

52.77

Granted

61,524

101.87

Vested

(268,648

)

38.96

Forfeited

(58,611

)

54.27

Unvested as of March 31, 2020

2,476,854

55.45

f.Employee Stock Purchase Plan (“ESPP”):

The Company adopted an ESPP effective upon the consummation of the IPO. As of March 31, 2020, a total of 2,687,451 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 1st of each year, for ten years, by the lesser of 1% of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year or 487,643 shares.

However, the Company’s board of directors may reduce the amount of the increase in any particular year at their discretion, including a reduction to zero.

The ESPP is implemented through an offering every six months. According to the ESPP, eligible employees may use up to 10% of their salaries to purchase common stock shares up to an aggregate limit of $10 per participant for every six months’ plan. The price of an ordinary share purchased under the ESPP is equal to 85% of the lower of the fair market value of the ordinary share on the subscription date of each offering period or on the purchase date.

As of March 31, 2020, 528,359 common stock shares had been purchased under the ESPP.

As of March 31, 2020, 2,159,092 common stock shares were available for future issuance under the ESPP.

In accordance with ASC No. 718, the ESPP is compensatory and as such results in recognition of compensation cost.

F - 20


SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


U.S. dollars in thousands (except share and per share data)

NOTE 9:-STOCKHOLDERS’ EQUITY (Cont.)

g.Stock-based compensation expense for employees and nonemployees:

The Company recognized stock-based compensation expenses related to stock options, RSUs and PSUs granted to employees and non-employee consultants and ESPP in the condensed consolidated statement of income for the three months ended March 31, 2020 and 2019, as follows:

Three months ended March 31,

2020

2019

 

Cost of revenues

$

2,273

$

1,354

Research and development

5,378

3,490

Selling and marketing

3,192

2,404

General and administrative

1,930