BUSINESS COMBINATION

6 Months Ended

Jun. 30, 2019

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".

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).

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.