Company Quick10K Filing
Quick10K
Solaredge Technologies
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$51.49 48 $2,450
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-K 2016-06-30 Annual: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-K 2015-06-30 Annual: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
8-K 2019-08-06 Earnings, Exhibits
8-K 2019-06-10 Shareholder Vote
8-K 2019-05-06 Earnings, Exhibits
8-K 2019-04-25 M&A
8-K 2019-02-20 Earnings, Exhibits
8-K 2019-02-12 Other Events, Exhibits
8-K 2019-01-25 M&A, Sale of Shares, Regulation FD, Exhibits
8-K 2019-01-25 M&A, Sale of Shares, Regulation FD, Exhibits
8-K 2019-01-07 Enter Agreement, Sale of Shares, Regulation FD, Exhibits
8-K 2019-01-02 Other Events
8-K 2018-11-01 Earnings, Exhibits
8-K 2018-10-17 Enter Agreement, M&A
8-K 2018-10-11 Regulation FD, Exhibits
8-K 2018-09-25 Other Events, Exhibits, Exhibits
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-07-02 Regulation FD, Exhibits
8-K 2018-06-18 Regulation FD, Exhibits
8-K 2018-05-24 Shareholder Vote
8-K 2018-05-09 Earnings, Exhibits
8-K 2018-02-14 Earnings, Exhibits
HSBC Hsbc Holdings 173,140
ALL Allstate Life Insurance 31,440
PGC Peapack Gladstone Financial 550
RWGE Regalwood Global Energy 304
MOTS Motus Gi Holdings 84
JOB GEE Group 14
PKPH Peak Pharmaceuticals 0
GXP Great Plains Energy 0
WGP Western Gas Equity Partners 0
DDBS Dish DBS 0
SEDG 2019-06-30
Part I. Financial Information
Item 1 Financial Statements
Note 1:- General
Note 2:- Business Combination
Note 3:- Intangible Assets and Goodwill
Note 4:- Inventories
Note 5:- Warranty Obligations
Note 6:- Fair Value Measurements
Note 7:- Leases
Note 8:- Commitments and Contingent Liabilities
Note 9:- Stock Capital
Note 10:- Basic and Diluted Net Earnings per Share
Note 11:- Income Taxes
Note 12:- Concentration of Credit Risk and Major Customers
Note 13:- Segment Information
Note 14:- Subsequent Event
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 Quantitative and Qualitative Disclosures About Market Risk
Item 4 Controls and Procedures
Part II. Other Information
Item 1 Legal Proceedings
Item 1A Risk Factors
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
Item 3 Defaults Upon Senior Securities
Item 4 Mine Safety Disclosures
Item 5 Other Information
Item 6 Exhibits
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 2019-06-30

SEDG 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

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 June 30, 2019

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
 
20-5338862
(State or other jurisdiction of incorporation or organization)
 
(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 August 4, 2019, there were 47,971,049 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 JUNE 30, 2019
INDEX

2
2
  F-2 - F-3
  F-4
  F-5
  F-6 - F-7
  F-8 - F-9
  F-10 - F-27
4
17
19
19
19
20
20
20
20
20
21
21
 
2


PART I. FINANCIAL INFORMATION
 
ITEM 1        FINANCIAL STATEMENTS

SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

IN U.S. DOLLARS

UNAUDITED

INDEX

 
Page
   
F-2 - F-3
   
F-4
   
F-5
   
F-6 - F-7
   
F-8 - F-9
   
F-10 - F-27


3



SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED  BALANCE SHEETS (Unaudited)
U.S. dollars in thousands (except share and per share data)

   
June 30,
   
December 31,
 
   
2019
   
2018
 
   
Unaudited
       
ASSETS
           
             
CURRENT ASSETS:
           
Cash and cash equivalents
 
$
176,575
   
$
187,764
 
Short-term bank deposit
   
5,961
     
9,870
 
Restricted bank deposits
   
1,060
     
824
 
Marketable securities
   
109,610
     
118,680
 
Trade receivables, net
   
237,804
     
173,579
 
Prepaid expenses and other assets
   
50,642
     
45,073
 
Inventories, net
   
148,892
     
141,519
 
                 
Total current assets
   
730,544
     
677,309
 
                 
LONG-TERM ASSETS:
               
   Marketable securities
   
79,616
     
74,256
 
   Operating lease right-of-use assets
   
36,788
     
-
 
   Property, plant and equipment, net
   
140,200
     
119,329
 
   Deferred tax assets, net
   
14,751
     
14,699
 
   Intangible assets, net and goodwill
   
211,340
     
73,378
 
   Other long term assets
   
8,455
     
5,501
 
                 
Total long term assets
   
491,150
     
287,163
 
                 
Total assets
 
$
1,221,694
   
$
964,472
 

The accompanying notes are an integral part of the interim 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)

   
June 30,
   
December 31,
 
   
2019
   
2018
 
   
Unaudited
       
             
LIABILITIES AND STOCKHOLDERS' EQUITY
           
             
CURRENT LIABILITIES:
           
Trade payables, net
 
$
116,795
   
$
107,079
 
Employees and payroll accruals
   
34,555
     
29,053
 
Current maturities of bank loans and accrued interest
   
16,454
     
16,639
 
Warranty obligations
   
38,819
     
28,868
 
Deferred revenues
   
15,708
     
14,351
 
Accrued expenses and other liabilities
   
71,447
     
29,728
 
                 
Total current liabilities
   
293,778
     
225,718
 
                 
LONG-TERM LIABILITIES:
               
Bank loans
   
5,519
     
3,510
 
Warranty obligations
   
111,819
     
92,958
 
Deferred revenues
   
73,796
     
60,670
 
Operating lease liabilities
   
30,009
     
-
 
Deferred tax liabilities, net
   
8,663
     
1,499
 
Other long term liabilities
   
18,062
     
9,391
 
                 
Total long-term liabilities
   
247,868
     
168,028
 
                 
COMMITMENTS AND CONTINGENT LIABILITIES
               
                 
STOCKHOLDERS’ EQUITY:
               
                 
Common stock of $0.0001 par value - Authorized: 125,000,000 shares as of June 30, 2019 (unaudited) and December 31, 2018; issued and outstanding: 47,967,425 and 46,052,802 shares as of June 30, 2019  (unaudited) and December 31, 2018, respectively
   
5
     
5
 
Additional paid-in capital
   
431,684
     
371,794
 
Accumulated other comprehensive loss
   
(895
)
   
(524
)
Retained earnings
   
243,277
     
191,133
 
                 
Total SolarEdge Technologies, Inc. stockholders’ equity
   
674,071
     
562,408
 
                 
Non-controlling interests
   
5,977
     
8,318
 
                 
Total stockholders’ equity
   
680,048
     
570,726
 
                 
Total liabilities and stockholders’ equity
 
$
1,221,694
   
$
964,472
 

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

F - 3

SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF  OPERATIONS (Unaudited)
U.S. dollars in thousands (except share and per share data)

   
Three months ended
June 30,
   
Six months ended
June 30,
 
   
2019
   
2018
   
2019
   
2018
 
   
Unaudited
   
Unaudited
 
                         
Revenues
 
$
325,010
   
$
227,118
   
$
596,881
   
$
436,989
 
Cost of revenues
   
214,340
     
145,172
     
400,101
     
275,446
 
                                 
Gross profit
   
110,670
     
81,946
     
196,780
     
161,543
 
                                 
Operating expenses:
                               
                                 
Research and development
   
29,505
     
19,551
     
55,704
     
37,426
 
Sales and marketing
   
22,127
     
15,954
     
42,299
     
32,159
 
General and administrative
   
13,685
     
5,776
     
25,376
     
10,529
 
                                 
Total operating expenses
   
65,317
     
41,281
     
123,379
     
80,114
 
                                 
Operating income
   
45,353
     
40,665
     
73,401
     
81,429
 
                                 
Financial expenses (income), net
   
(773
)
   
2,480
     
5,378
     
1,896
 
                                 
Income before taxes on income
   
46,126
     
38,185
     
68,023
     
79,533
 
                                 
Taxes on income
   
13,213
     
3,617
     
17,135
     
9,279
 
                                 
Net income
 
$
32,913
   
$
34,568
   
$
50,888
   
$
70,254
 
                                 
Net loss attributable to non-controlling interests
   
215
     
-
     
1,256
     
-
 
                                 
Net income attributable to SolarEdge Technologies, Inc.
 
$
33,128
   
$
34,568
   
$
52,144
   
$
70,254
 
                                 
Net basic earnings per share of common stock attributable to SolarEdge Technologies, Inc.
 
$
0.69
   
$
0.76
   
$
1.10
   
$
1.57
 
                                 
Net diluted earnings per share of common stock attributable to SolarEdge Technologies, Inc.
 
$
0.66
   
$
0.72
   
$
1.05
   
$
1.46
 
                                 
Weighted average number of shares used in computing net basic earnings per share of common stock
   
47,683,799
     
45,216,253
     
47,353,401
     
44,726,382
 
                                 
Weighted average number of shares used in computing net diluted earnings per share of common stock
   
49,940,034
     
48,291,280
     
49,358,280
     
47,984,817
 

The accompanying notes are an integral part of the interim 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
June 30,
   
Six months ended
June 30,
 
   
2019
   
2018
   
2019
   
2018
 
   
Unaudited
   
Unaudited
 
                         
Net income
 
$
32,913
   
$
34,568
   
$
50,888
   
$
70,254
 
                                 
Other comprehensive income (loss):
                               
                                 
  Available-for-sale securities:
                               
     Changes in unrealized gains (losses), net of tax
   
370
     
(6
)
   
855
     
(516
)
     Reclassification adjustments for losses included in net income
   
(29
)
   
-
     
91
     
-
 
 Net change
   
341
     
(6
)
   
946
     
(516
)
                                 
Foreign currency translation adjustments, net
   
(16
)
   
3
     
(1,317
)
   
(11
)
                                 
Total other comprehensive income (loss)
   
325
     
(3
)
   
(371
)
   
(527
)
                                 
Comprehensive income
 
$
33,238
   
$
34,565
   
$
50,517
   
$
69,727
 
                                 
Comprehensive income (loss) attributable to non-controlling interests
   
545
     
-
     
(304
)
   
-
 
                                 
Comprehensive income attributable to SolarEdge Technologies, Inc.
 
$
32,693
   
$
34,565
   
$
50,821
   
$
69,727
 

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

F - 5

SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN 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
Income (loss)
   
Retained earnings
   
 

 
Total
   
Non-controlling interests
   
Total stockholders’
equity
 
   
Number
   
Amount
 
                                                 
Balance as of January 1, 2018
   
43,812,601
   
$
4
   
$
331,902
   
$
(611
)
 
$
66,172
   
$
397,467
   
$
-
   
$
397,467
 
                                                     
-
         
Cumulative effect of adopting ASC 606
   
-
     
-
     
-
     
-
     
(3,872
)
   
(3,872
)
   
-
     
(3,872
)
Issuance of Common Stock upon exercise of employee and non-employees stock-based awards
   
1,084,507
     
* -
     
4,605
     
-
     
-
     
4,605
     
-
     
4,605
 
Equity based compensation expenses to employees and non-employee consultants
   
-
     
-
     
6,849
     
-
     
-
     
6,849
     
-
     
6,849
 
Other comprehensive loss adjustments
   
-
     
-
     
-
     
(524
)
   
-
     
(524
)
   
-
     
(524
)
Net income
   
-
     
-
     
-
     
-
     
35,686
     
35,686
     
-
     
35,686
 
                                                                 
Balance as of March 31, 2018 (unaudited)
   
44,897,108
   
$
4
   
$
343,356
   
$
(1,135
)
 
$
97,986
   
$
440,211
   
$
-
   
$
440,211
 
                                                                 
Issuance of Common Stock upon exercise of employee and non-employees stock-based awards
   
601,306
     
* -
     
2,986
     
-
     
-
     
2.986
     

-
     
2,986
 
Equity based compensation expenses to employees and non-employee consultants
   
-
     
-
     
7,128
     
-
     
-
     
7,128
     

-
     
7,128
 
Other comprehensive loss adjustments
   
-
     
-
     
-
     
(3
)
   
-
     
(3
)
   
-
     
(3
)
Net income
   
-
     
-
     
-
     
-
     
34,568
     
34,568
     
-
     
34,568
 
                                                                 
Balance as of June 30, 2018 (unaudited)
   
45,498,414
   
$
5
   
$
353,470
   
$
(1,138
)
 
$
132,554
   
$
484,891
   
$
-
   
$
484,891
 

* Represents an amount lower than $1.

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

F - 6

SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN 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 stockholders’
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 non-employees stock-based awards
   
254,515
     
* -
     
309
     
-
     
-
     
309
     
-
     
309
 
Equity based compensation expenses to employees and non-employee consultants
   
-
     
-
     
9,704
     
-
     
-
     
9,704
     
-
     
9,704
 
Consideration in common stock related to business combination
   
1,194,046
     
* -
     
34,601
     
-
     
-
     
34,601
     
-
     
34,601
 
Non-controlling interests related to business combination
   
-
     
-
     
-
     
-
     
-
     
-
     

67,734
     
67,734
 
Change to 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 (unaudited)
   
47,501,363
   
$
5
   
$
417,385
   
$
(1,220
)
 
$
210,149
   
$
626,319
   
$
71,198
   
$
697,517
 
                                                                 
Issuance of Common Stock upon exercise of employee and non-employees stock-based awards
   
466,062
     
-
     
3,455
     
-
     
-
     
3,455
     
-
     
3,455
 
Equity based compensation expenses to employees and non-employee consultants
   
-
     
-
     
11,372
     
-
     
-
     
11,372
     
-
     
11,372
 
Change to non-controlling interests
   
-
     
-
     
(528
)
   
-
     
-
     
(528
)
   
(65,551
)
   
(66,079
)
Other comprehensive income adjustments
   
-
     
-
     
-
     
325
     
-
     
325
     
545
     
870
 
Net income
   
-
     
-
     
-
     
-
     
33,128
     
33,128
     
(215
)
   
32,913
 
                                                                 
Balance as of June 30, 2019 (unaudited)
   
47,967,425
   
$
5
   
$
431,684
   
$
(895
)
 
$
243,277
   
$
674,071
   
$
5,977
   
$
680,048
 

* Represents an amount lower than $1

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

F - 7

SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF  CASH FLOWS (Unaudited)
U.S. dollars in thousands

   
Six months ended
June 30,
 
   
2019
   
2018
 
   
Unaudited
 
             
Cash flows provided by operating activities:
           
Net income
 
$
50,888
   
$
70,254
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation of property, plant and equipment
   
8,147
     
4,981
 
Amortization of intangible assets
   
4,895
     
72
 
Amortization of premium and accretion of discount on available-for-sale marketable securities
   
(12
)
   
1,014
 
Stock-based compensation
   
21,076
     
13,977
 
Loss from disposal of assets
   
552
     
64
 
Realized loss from sale of available-for-sale marketable securities
   
91
     
-
 
Changes in assets and liabilities:
               
Inventories, net
   
1,723
     
(18,952
)
Prepaid expenses and other assets
   
(2,574
)
   
(2,135
)
Trade receivables, net
   
(56,562
)
   
(9,203
)
Operating lease right-of-use assets and liabilities, net and effect of exchange rate differences
   
1,466
     
(148
)
Deferred tax assets and liabilities, net
   
(1,960
)
   
(3,018
)
Trade payables, net
   
5,493
     
12,143
 
Employees and payroll accruals
   
5,151
     
1,028
 
Warranty obligations
   
28,860
     
18,479
 
       Deferred revenues
   
11,764
     
13,120
 
       Other liabilities
   
28,236
     
6,194
 
                 
Net cash provided by operating activities
   
107,234
     
107,870
 
                 
Cash flows from investing activities:
               
 Business combination, net of cash acquired
   
(38,435
)
   
-
 
Purchase of property, plant and equipment
   
(22,244
)
   
(21,385
)
Withdrawal from bank deposits
   
3,909
     
(342
)
Investment in restricted bank deposits
   
(203
)
   
(191
)
Investment in available-for-sale marketable securities
   
(63,655
)
   
(89,389
)
Proceeds from sales and maturities of available-for-sale marketable securities
   
68,407
     
46,825
 
                 
Net cash used in investing activities
 
$
(52,221
)
 
$
(64,482
)

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

F - 8

SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Cont.)
U.S. dollars in thousands

   
Six months ended
June 30,
 
   
2019
   
2018
 
   
Unaudited
 
             
Cash flows from financing activities:
           
Repayment of bank loans, net
 
$
(4,675
)
 
$
-
 
Proceeds from issuance of shares under stock purchase plan and upon exercise of stock-based awards
   
3,764
     
7,591
 
Change in non-controlling interests
   
(66,474
)
   
-
 
                 
Net cash provided by (used in) financing activities
 
$
(67,385
)
 
$
7,591
 
                 
Increase in cash and cash equivalents and restricted cash
   
(12,372
)
   
50,979
 
Cash, cash equivalents and restricted cash at the beginning of the period
   
187,764
     
163,163
 
Effect of exchange rate differences on cash, cash equivalents and restricted cash
   
1,183
     
398
 
                 
Cash, cash equivalents and restricted cash at the end of the period
 
$
176,575
   
$
214,540
 
                 
Supplemental disclosure of non-cash activities:
               
                 
Operating lease, right of use assets
 
$
38,374
   
$
-
 

 
The accompanying notes are an integral part of the interim 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 “StorEdge solution”). The StorEdge solution is designed to provide smart energy functions such as maximizing self-consumption, Time-of-Use programming for desired hours of the day, and home energy backup solutions.

The Company and its subsidiaries sell their 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”).

In July and October 2018, the Company completed the acquisitions ("Gamatronic Acquisition") of substantially all of the assets and activities of Gamatronic Electronic Industries Ltd. ("Gamatronic IL") and all of the outstanding shares of its wholly owned subsidiary Gamatronic (UK) Limited (“Gamatronic UK”), respectively. Both companies ("UPS Division") are providers and manufacturers of Uninterruptible Power Supplies ("UPS") devices.

On October 17, 2018, the Company completed the acquisition of 74.5% of the outstanding common shares and voting rights of Kokam Co., Ltd. (“Kokam”), a Korean company whose shares are traded on the Korean OTC market, a provider of Lithium-ion cells, batteries and energy storage solutions. From October 17, 2018 and through June 30, 2019, the Company increased its shareholdings of Kokam to 94.2%.

On January 24, 2019, the Company completed the acquisition of 56.8% of the outstanding common shares and voting rights of S.M.R.E S.p.A (“SMRE”), an Italian company whose shares were traded on the Italian AIM, a provider of innovative integrated powertrain technology and electronics for electric vehicles. Between January 24, 2019 and June 30, 2019, the Company increased its shareholdings of SMRE to 99.4% (see note 2).


b.
New accounting pronouncements not yet effective:

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". ASU 2017-04 was issued to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The amendments in ASU 2017-04 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company is in the process of evaluating the potential impact of this pronouncement.


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.)

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in a more timely recognition of losses. The Company will adopt Topic 326 effective January 1, 2020. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated balance sheets, statements of operations and cash flows.

 

   


c.
Recently issued and adopted pronouncements:

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02 (Topic 842) "Leases". Topic 842 supersedes the lease requirements in Accounting Standards Codification (ASC) Topic 840, "Leases". Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures. ASU No. 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. In July 2018, the FASB issued amendments in ASU 2018-11, which provide a transition election to not restate comparative periods for the effects of applying the new standard. This transition election permits entities to change the date of initial application to the beginning of the earliest comparative period presented, or retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment. The Company has elected to apply the standard retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment. The Company has also elected certain relief options offered in ASU 2016-02 including certain available transitional practical expedients. The Company adopted Topic 842 effective January 1, 2019. The interim consolidated financial statements for the six months ended June 30, 2019 are presented under the new standard, while the comparative periods are not adjusted and continue to be reported in accordance with the Company’s historical accounting policy (See note 7).


d.
Basis of Presentation:

The accompanying unaudited interim 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, 2018, contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2019, have been applied consistently in these unaudited interim consolidated financial statements, except for the adoption of ASU No. 2016-02, “Leases (Topic 842) (see Note 1c).

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.)

The Company depends on two contract manufacturers and several limited or single source component suppliers, and is in the process of opening an additional site with one of those contract manufacturers. Reliance on these vendors makes the Company vulnerable to possible capacity constraints and reduced control over component availability, delivery schedules, manufacturing yields, and costs.

As of June 30, 2019 (unaudited) and December 31, 2018, two and three vendors collectively accounted for 57.2% and 58.8% of the Company’s total trade payables, respectively.

The Company has the right to offset its trade payables to one of its contract manufacturers against vendor non-trade receivables. As of June 30, 2019 (unaudited), a total of $944 of these receivables met the criteria for net recognition and were off set against the corresponding trade payable balances for this contract manufacturer in the accompanying condensed consolidated balance sheets.


e.
Accounting for share-based compensation:

Some of the RSUs granted are subject to certain performance criteria’s (“PSUs”): accordingly, compensation expense for PSUs are recognized when it becomes probable that the related performance conditions have been satisfied.


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

NOTE 2:-
BUSINESS COMBINATION

S.M.R.E

On January 24, 2019, the Company completed the acquisition of 56.8% of the outstanding common shares and voting rights of SMRE, a provider of innovative integrated powertrain technology and electronics for electric vehicles for $73,036, net of cash acquired, out of which $42,240 was paid in cash and $34,601 was paid in shares of SolarEdge common stock (the “SMRE Acquisition”).

As part of the SMRE Acquisition, the Company issued 334,096 PSUs that are subject to certain performance goals and a vesting period, in the aggregate amount of $13,444 which will be expensed in the condensed consolidated statements of operation in general and administrative expenses line item (see note 9).

As of January 24, 2019 (unaudited), the fair value of the 43.2% non-controlling interests in SMRE was estimated to be $67,733. The fair value of the non-controlling interests was valued based on and at the transaction price.

The primary reason for the SMRE Acquisition was to acquire technology and customer relationships and to expand and diversify the Company’s business by entering into the electric vehicles market.

The Company determined that the SMRE Acquisition will be accounted for as a business combination in accordance with ASC 805 "Business Combinations".

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 2:-
BUSINESS COMBINATION (Cont.)

During the period from the SMRE Acquisition through June 30, 2019 (unaudited), the Company purchased additional common shares of SMRE in the open market and through a tender offer in a total amount of $65,945. As of June 30, 2019 (unaudited), the Company holds 99.4% of the outstanding common shares and voting rights of SMRE and such company’s shares are delisted from the Italian Alternative Investment Market (“AIM”).

The amounts of revenue and net loss of SMRE included in the Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2019 (unaudited):
   
Three months ended
   
Six months ended
 
   
June 30, 2019
 
   
Unaudited
 
             
Revenue
 
$
5,348
   
$
8,250
 
Net loss
 
$
5,388
   
$
7,267
 


The following table summarizes the preliminary estimated purchase price allocation of the business combination completed during the six months ended June 30, 2019 (unaudited):

Components of Purchase Price:
     
       
Cash
 
$
42,240
 
Less cash acquired
   
(3,805
)
Common stock
   
34,601
 
Total purchase price
 
$
73,036
 
         
Allocation of Purchase Price:
       
         
Total net identifiable assets
 
$
7,947
 
Total identifiable intangible assets, net and Goodwill (1)
   
132,822
 
         
Non-controlling interest
  $
(67,733
)  
         
Total purchase price allocation (2)
 
$
73,036
 


(1)
The intangible assets consist primarily of technology, trade name and customer relationships.

(2)
The Company expects to complete the preliminary estimated purchase price allocation during the measurement period of one year from January 24, 2019. Fair values that are still under review include, among others, values assigned to identifiable intangible assets, goodwill, deferred income taxes and contingent liabilities.


During the three and six months ended June 30, 2019 (unaudited), the Company recognized acquisition-related costs of $151 and $604, respectively.

The purchase price allocations for the business combinations completed during the year ended December 31, 2018 are still preliminary as of June 30, 2019 (unaudited).

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 2:-
BUSINESS COMBINATION (Cont.)
 
The following table represents the pro-forma (unaudited) condensed consolidated statements of operations as if all acquisitions completed during the year ended December 31, 2018 and the six months ended June 30, 2019 (unaudited), had been included in the condensed consolidated statements of operations of the Company for the three and six months ended June 30, 2019 (unaudited) and 2018 (unaudited):
 
   
Three months ended
June 30,
   
Six months ended
June 30,
 
   
2019
   
2018
   
2019
   
2018
 
   
Unaudited
   
Unaudited
 
                         
Revenue
 
$
325,010
   
$
248,541
   
$
597,953
   
$
480,325
 
Net income
 
$
32,913
   
$
27,009
   
$
49,523
   
$
55,663
 

The pro-forma results have been calculated after applying the Company’s accounting policies and adjusting the results of all acquisitions to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied since the acquisitions date, together with the consequential tax effects.

The pro-forma results are based on estimates and assumptions, which the Company believes are reasonable. The pro-forma results are not the results that would have been realized had the acquisitions actually occurred on January 1, 2018 and 2019, and are not necessarily indicative of the Company’s condensed consolidated statements of operations in future periods.

NOTE 3:-
INTANGIBLE ASSETS AND GOODWILL

Acquired intangible assets and goodwill consisted of the following:
   
As of June 30,
2019
   
As of December 31, 2018
 
   
(unaudited)
       
             
Intangible assets with finite lived:
           
             
Current technology
 
$
29,734
   
$
30,821
 
Customer relationships
   
3,742
     
3,857
 
Trade names
   
3,580
     
3,721
 
Patents
   
1,400
     
1,400
 
                 
Gross intangible assets
   
38,456
     
39,799
 
                 
Less - accumulated amortization
   
(3,532
)
   
(1,295
)
                 
Total intangible assets, net
   
34,924
     
38,504
 
                 
Goodwill:
               
                 
Goodwill from business combinations
   
34,874
     
34,445
 
Foreign currency translation
   
(1,213
)
   
429
 
                 
Goodwill
   
33,661
     
34,874
 
                 
Intangible assets with finite lived, net and goodwill resulted from SMRE Acquisition
   
142,755
     
-
 
                 
Total Intangible assets with finite lived, net and goodwill
 
$
211,340
   
$
73,378
 



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 3:-
INTANGIBLE ASSETS AND GOODWILL (Cont.)

Amortization expenses for the three months ended June 30, 2019 (unaudited) and 2018 (unaudited) were $2,924 and $36, respectively.

Amortization expenses for the six months ended June 30, 2019 (unaudited) and 2018 (unaudited) were $4,895 and $72, respectively.

The reported amount of net acquisition-related intangible assets and goodwill can fluctuate due to the impact of changes in foreign currency exchange rates on intangible assets and goodwill not denominated in U.S. dollars.

Acquired finite-lived intangible assets are amortized on a straight-line basis or accelerated method over the estimated useful lives of the assets. The Company will amortize its finite-lived intangible assets over a period of 2-13 years.

NOTE 4:-
INVENTORIES

   
June 30,
2019
   
December 31,
2018
 
   
(unaudited)
       
             
Raw materials
 
$
63,013
   
$
39,380
 
Work in process
   
23,001
     
18,115
 
Finished goods
   
62,878
     
84,024
 
                 
   
$
148,892
   
$
141,519
 

NOTE 5:-
WARRANTY OBLIGATIONS

Changes in the Company’s product warranty obligations for the six months ended June 30, 2019 (unaudited) and 2018 (unaudited) were as follows:

   
Six months ended June 30,
 
   
2019
   
2018
 
   
(unaudited)
 
             
Balance, at beginning of period
 
$
121,826
   
$
78,811
 
Additions and adjustments to cost of revenues
   
46,288
     
27,546
 
Usage and current warranty expenses
   
(17,476
)
   
(9,066
)
                 
Balance at end of period
   
150,638
     
97,291
 
Less current portion
   
(38,819
)
   
(18,964
)
                 
Long term portion
 
$
111,819
   
$
78,327
 

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 6:-
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. Earn-out provision is classified within the Level 3 value hierarchy, as the valuation is based on unobservable inputs which are supported by little or no market activity.

The following table sets forth the Company’s assets that were measured at fair value as of June 30, 2019 (unaudited) and December 31, 2018, by level within the fair value hierarchy:

         
Fair value measurements as of
 
         
June 30,
   
December 31,
 
Description
 
Fair Value Hierarchy
   
2019
   
2018
 
           
(unaudited)
       
Measured at fair value on a recurring basis:
                 
                   
Assets:
                 
Cash equivalents:
                 
Money market mutual funds
 
Level 1
   
$
739
   
$
1,767
 
                       
Short-term marketable securities:
                     
Corporate bonds
 
Level 2
     
105,266
     
110,385
 
Governmental bonds
 
Level 2
     
4,344
     
8,295
 
                       
Long-term marketable securities:
                     
Corporate bonds
 
Level 2
     
79,616
     
74,256
 
                       
Liabilities
                     
Long-term Earn-out provision
 
Level 3
   
$
(885
)
 
$
(332
)

NOTE 7:-
LEASES

The Company leases offices, plants and vehicles under operating and finance leases. For leases with terms greater than 12 months, the Company records the related asset and liability at the present value of lease payments according to their term. Several of the Company’s leases include renewal options and some have termination options that are factored into the Company’s determination of the lease payments when appropriate. The Company estimates the incremental borrowing rate in order to discount the lease payments based on the information available at the lease commencement date.

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 7:-
LEASES (cont.)

The following table summarizes the Company’s lease-related assets and liabilities recorded on the condensed consolidated balance sheet:


 
Classification on the condensed consolidated Balance Sheet
 
As of June 30, 2019
 
         (unaudited)
 
Assets
         
           
Operating lease assets, net of lease incentive obligation
 
Operating lease right-of-use assets
 
$
36,788
 
Finance lease assets
 
Property, plant and equipment, net
   
2,922
 
Total lease assets
     
$
39,710
 
             
Liabilities
           
             
Operating and finance leases short term
 
Accrued expenses and other current liabilities
 
$
10,134
 
Operating leases long term
 
Operating lease liabilities
   
30,009
 
Finance leases long term
 
Other non-current liabilities
   
2,014
 
Total lease liabilities
     
$
42,157
 
             
Weighted average remaining lease term in years
           
  Operating leases
       
4.90
 
Finance leases
       
8.42
 
             
Weighted average annual discount rate
           
Operating leases
       
1.45
%
Finance leases
       
2.87
%

The following table presents certain information related to the lease costs for operating and finance leases:

   
Three months ended
   
Six months ended
 
   
June 30, 2019
 
   
(unaudited)
 
Finance lease cost
           
Amortization of leased assets
 
$
26
   
$
53
 
Interest on lease liabilities
   
15
     
31
 
                 
Operating lease cost
   
2,384
     
4,615
 
                 
Total lease cost
 
$
2,425
   
$
4,699
 

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 7:-
LEASES (cont.)

The following table presents supplemental cash flow information related to the lease costs for operating and finance leases:

   
Three months ended
   
Six months ended
 
    June 30, 2019  
   
(unaudited)
 
             
Cash paid for amounts included in  measurement of lease liabilities
           
Operating cash flows for operating leases
 
$
2,384
   
$
4,615
 

The following table reconciles the undiscounted cash flows for each of the first five years and total of the remaining years of the operating and finance lease liabilities recorded on the condensed consolidated balance sheets (unaudited):

   
Operating Lease
   
Finance Leases
 
             
2019
 
$
5,548
   
$
106
 
2020
   
9,289
     
211
 
2021
   
8,024
     
211
 
2022
   
7,278
     
196
 
2023
   
6,365
     
196
 
Thereafter
   
5,197
     
1,654
 
Total lease payments
   
41,701
     
2,574
 
                 
Less: amount of lease payments representing interest
   
(1,694
)
   
(424
)
                 
Present value of future lease payments
   
40,007
     
2,150
 
                 
Less: current obligations under leases
   
(9,998
)
   
(136
)
                 
Long-term lease obligations
 
$
30,009
   
$
2,014
 

NOTE 8:-
COMMITMENTS AND CONTINGENT LIABILITIES


a.
Guarantees:

As of June 30, 2019 (unaudited), contingent liabilities exist regarding guarantees in the amount of $1,963, $