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 September 30, 2022

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 Number: 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)

Securities registered pursuant to Section 12(g) of the Act: None

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 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	☐	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 November 1, 2022, there were 55,894,875 shares of the registrant’s common stock, par value of $0.0001 per share, outstanding.

TABLE OF CONTENTS

ITEM 1.Financial Statements	F-1
Condensed Consolidated Balance Sheets	F-2
Condensed Consolidated Statements of Income	F-4
Condensed Consolidated Statements of Comprehensive Income	F-5
Condensed Consolidated Statements of Changes in Stockholders’ Equity	F-6
Condensed Consolidated Statements of Cash Flows	F-8
Notes to the Condensed Consolidated Financial Statements (unaudited)	F-10
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.	17
ITEM 4. Controls and Procedures	18
PART II. OTHER INFORMATION.
ITEM 1. Legal Proceedings.	19
ITEM 1A. Risk Factors	19
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.	19
ITEM 3. Defaults upon Senior Securities	19
ITEM 4. Mine Safety Disclosures	19
ITEM 5. Other Information.	19
ITEM 6. Exhibits	20
EXHIBIT INDEX.	20

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except per share data)

	September 30, 2022		December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	678,329	$	530,089
Marketable securities		202,598		167,728
Trade receivables, net of allowances of $4,283 and $2,626, respectively		785,325		456,339
Inventories, net		561,352		380,143
Prepaid expenses and other current assets		224,169		176,992
Total current assets		2,451,773		1,711,291
LONG-TERM ASSETS:
Marketable securities		688,753		482,228
Deferred tax assets, net		38,268		27,572
Property, plant and equipment, net		491,433		410,379
Operating lease right-of-use assets, net		62,535		47,137
Intangible assets, net		46,286		58,861
Goodwill		108,860		129,629
Other long-term assets		15,638		33,856
Total long-term assets		1,451,773		1,189,662
Total assets	$	3,903,546	$	2,900,953

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

F -  2

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Cont.)

(in thousands, except per share data)

	September 30, 2022			December 31, 2021
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payables, net	$	311,565		$	252,068
Employees and payroll accruals		71,905			74,465
Warranty obligations		97,222			71,480
Deferred revenues and customers advances		31,896			17,789
Accrued expenses and other current liabilities		181,892			109,379
Total current liabilities		694,480			525,181
LONG-TERM LIABILITIES:
Convertible senior notes, net		623,721			621,535
Warranty obligations		248,917			193,680
Deferred revenues		176,824			151,556
Finance lease liabilities		45,509			40,508
Operating lease liabilities		46,398			38,912
Other long-term liabilities		15,570			19,542
Total long-term liabilities		1,156,939			1,065,733
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS’ EQUITY:
Common stock of $0.0001 par value - Authorized: 125,000,000 shares as of September 30, 2022 and December 31, 2021; issued and outstanding: 55,894,106 and 52,815,395 shares as of September 30, 2022 and December 31, 2021, respectively		6			5
Additional paid-in capital		1,457,379			687,295
Accumulated other comprehensive loss		(128,266	)		(27,319	)
Retained earnings		723,008			650,058
Total stockholders’ equity		2,052,127			1,310,039
Total liabilities and stockholders’ equity	$	3,903,546		$	2,900,953

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

F -  3

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenues	$	836,723		$	526,404		$	2,219,577		$	1,411,950
Cost of revenues		614,722			353,843			1,635,976			943,123
Gross profit		222,001			172,561			583,601			468,827
Operating expenses:
Research and development		69,659			55,666			210,855			155,307
Sales and marketing		42,726			29,383			117,017			85,752
General and administrative		27,933			21,098			82,483			60,317
Other operating expenses (income), net		(2,724	)		-			1,963			1,350
Total operating expenses		137,594			106,147			412,318			302,726
Operating income		84,407			66,414			171,283			166,101
Financial expense, net		(33,025	)		(5,751	)		(52,785	)		(13,591	)
Other income		7,533			-			7,533			-
Income before income taxes		58,915			60,663			126,031			152,510
Income taxes		34,172			7,615			53,081			24,294
Net income	$	24,743		$	53,048		$	72,950		$	128,216
Net basic earnings per share of common stock	$	0.44		$	1.01		$	1.33		$	2.46
Net diluted earnings per share of common stock	$	0.43		$	0.96		$	1.29		$	2.32
Weighted average number of shares used in computing net basic earnings per share of common stock		55,730,328			52,355,867			54,788,734			52,056,233
Weighted average number of shares used in computing net diluted earnings per share of common stock		58,747,538			55,929,000			57,886,041			55,955,441

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

F -  4

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net income	$	24,743		$	53,048		$	72,950		$	128,216
Other comprehensive income (loss), net of tax:
Net change related to available-for-sale securities		(9,579	)		29			(23,647	)		(1,847	)
Net change related to cash flow hedges		(140	)		308			(4,656	)		619
Foreign currency translation adjustments on intra-entity transactions that are of a long-term investment nature		(30,799	)		(12,272	)		(66,129	)		(14,168	)
Foreign currency translation adjustments, net		1,872			(3,664	)		(6,515	)		(7,596	)
Total other comprehensive loss		(38,646	)		(15,599	)		(100,947	)		(22,992	)
Comprehensive income (loss)	$	(13,903	)	$	37,449		$	(27,997	)	$	105,224

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

F -  5

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(in thousands, except per share data)

	Common stock				Additional		Accumulated other
	Number		Amount		paid in Capital		comprehensive loss			Retained earnings		Total
Balance as of January 1, 2022		52,815,395	$	5	$	687,295	$	(27,319	)	$	650,058	$	1,310,039
Issuance of common stock upon exercise of stock-based awards		270,751		* -		1,478		-			-		1,478
Stock based compensation		-		-		34,107		-			-		34,107
Issuance of common stock in a secondary public offering, net of underwriters' discounts and commissions of $27,140 and $834 of offering costs		2,300,000		1		650,525		-			-		650,526
Other comprehensive loss adjustments		-		-		-		(18,748	)		-		(18,748	)
Net income		-		-		-		-			33,123		33,123
Balance as of March 31, 2022		55,386,146	$	6	$	1,373,405	$	(46,067	)	$	683,181	$	2,010,525
Issuance of Common Stock upon exercise of stock-based awards		211,839		* -		164		-			-		164
Issuance of Common stock under employee stock purchase plan		35,105		* -		8,141		-			-		8,141
Stock based compensation		-		-		37,171		-			-		37,171
Other comprehensive loss adjustments		-		-		-		(43,553	)		-		(43,553	)
Net income		-		-		-		-			15,084		15,084
Balance as of June 30, 2022		55,633,090	$	6	$	1,418,881	$	(89,620	)	$	698,265	$	2,027,532
Issuance of Common Stock upon exercise of stock-based awards		261,016		*-		1,866		-			-		1,866
Stock based compensation		-		-		36,632		-			-		36,632
Other comprehensive loss adjustments		-		-		-		(38,646	)		-		(38,646	)
Net income		-		-		-		-			24,743		24,743
Balance as of September 30, 2022		55,894,106	$	6	$	1,457,379	$	(128,266	)	$	723,008	$	2,052,127

* Represents an amount less than $1.

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

F -  6

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(in thousands, except per share data)

	Common stock				Additional			Accumulated other
	Number		Amount		paid in Capital			comprehensive income (loss)			Retained earnings		Total
Balance as of January 1, 2021		51,560,936	$	5	$	603,891		$	3,857		$	478,004	$	1,085,757
Cumulative effect of adopting ASU 2020-06		-		-		(36,336	)		-			2,884		(33,452	)
Issuance of Common Stock upon exercise of stock-based awards		405,239		* -		5,008			-			-		5,008
Stock based compensation		-		-		23,153			-			-		23,153
Other comprehensive loss adjustments		-		-		-			(10,618	)		-		(10,618	)
Net income		-		-		-			-			30,076		30,076
Balance as of March 31, 2021		51,966,175	$	5	$	595,716		$	(6,761	)	$	510,964	$	1,099,924
Issuance of Common Stock upon exercise of stock-based awards		297,801		* -		5,500			-			-		5,500
Stock based compensation		-		-		24,052			-			-		24,052
Other comprehensive income adjustments		-		-		-			3,225			-		3,225
Net income		-		-		-			-			45,092		45,092
Balance as of June 30, 2021		52,263,976	$	5	$	625,268		$	(3,536	)	$	556,056	$	1,177,793
Issuance of Common Stock upon exercise of stock-based awards		255,514		*-		656			-			-		656
Stock based compensation		-		-		26,185			-			-		26,185
Other comprehensive loss adjustments		-		-		-			(15,599	)		-		(15,599	)
Net income		-		-		-			-			53,048		53,048
Balance as of September 30, 2021		52,519,490	$	5	$	652,109		$	(19,135	)	$	609,104	$	1,242,083

* Represents an amount less than $1.

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

F -  7

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands, except per share data)

	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net income	$	72,950		$	128,216
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation of property, plant and equipment		29,571			21,492
Amortization of intangible assets		7,741			7,487
Amortization of debt discount and debt issuance costs		2,186			2,175
Amortization of premium and accretion of discount on available-for-sale marketable securities, net		7,864			6,301
Impairment of goodwill and intangible assets		4,008			-
Stock-based compensation expenses		106,932			73,390
Gain from sale of privately held company		(7,533	)		-
Deferred income taxes, net		(3,822	)		(6,686	)
Loss (gain) from sale and disposal of assets		(485	)		2,013
Exchange rate fluctuations and other items, net		64,662			13,086
Changes in assets and liabilities:
Inventories, net		(188,579	)		30,678
Prepaid expenses and other assets		(55,478	)		(14,977	)
Trade receivables, net		(377,089	)		(206,131	)
Trade payables, net		53,683			(22,959	)
Employees and payroll accruals		12,119			14,321
Warranty obligations		82,025			42,368
Deferred revenues and customers advances		41,440			13,723
Other liabilities, net		67,789			20,055
Net cash provided by (used in) operating activities		(80,016	)		124,552
Cash flows from investing activities:
Proceed from sales and maturities of available-for-sale marketable securities		178,415			174,817
Purchase of property, plant and equipment		(125,085	)		(94,135	)
Investment in available-for-sale marketable securities		(461,491	)		(511,615	)
Investment in a privately-held company		-			(16,643	)
Proceeds from sale of a privately-held company		24,175			-
Withdrawal from bank deposits, net		-			50,020
Payment for asset acquisition, net of cash acquired		-			(2,996	)
Other investing activities		3,472			2,593
Net cash used in investing activities	$	(380,514	)	$	(397,959	)

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

F -  8

SOLAREDGE TECHNOLOGIES INC.

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

(in thousands, except per share data)

	Nine Months Ended September 30,
	2022			2021
Cash flows from financing activities:
Proceeds from secondary public offering, net of issuance costs	$	650,526		$	-
Repayment of bank loans		(104	)		(16,219	)
Proceeds from exercise of stock-based awards		3,508			6,128
Tax withholding in connection with stock-based awards, net		(4,686	)		(8,402	)
Other financing activities		(2,109	)		(939	)
Net cash provided by (used in) financing activities		647,135			(19,432	)
Increase (decrease) in cash and cash equivalents		186,605			(292,839	)
Cash and cash equivalents at the beginning of the period		530,089			827,146
Effect of exchange rate differences on cash and cash equivalents		(38,365	)		(7,719	)
Cash and cash equivalents at the end of the period	$	678,329		$	526,588
Supplemental disclosure of non-cash activities:
Right-of-use asset recognized with a corresponding lease liability	$	43,274		$	2,253

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

F -  9

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except 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) including the Company’s future ready energy hub inverter which supports, among other things, connection to a DC- coupled battery for backup capabilities, (iii) a remote cloud-based monitoring platform, that collects and processes information from the power optimizers and inverters to enable customers and system owners, to monitor and manage the solar PV system (iv) a residential storage and backup solution which includes a company designed and manufactured lithium-ion DC-coupled battery that is used to increase energy independence and maximize self-consumption for homeowners including a battery, and (v) additional smart energy management solutions.

The Company and its subsidiaries sell products worldwide through large distributors, electrical equipment wholesalers, as well as directly to large solar installers and engineering, procurement, and construction firms.

b. The Company has expanded its activity to other areas of smart energy technology organically and through acquisitions. The Company now offers a variety of energy solutions, which include lithium-ion cells, batteries, and energy storage systems (“Energy Storage”), full powertrain kits for electric vehicles, or EVs (“e-Mobility”), as well as automated machines for industrial use (“Automation Machines”).

In June 2022, the Company decided to discontinue its stand-alone uninterrupted power supply solutions or UPS (“Critical Power”). The Company determined that the discontinuance of the Critical Power business does not represent a strategic shift that will have a major effect on the Company's operations and financial results and therefore it did not meet the criteria for discontinued operations classification. 

c. Basis of Presentation:

The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. The Company’s interim period 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, 2021, contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2022, have been applied consistently in these unaudited interim condensed consolidated financial statements. Certain prior year amounts have been reclassified to conform to current year presentation.

d. Use of estimates:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures in the accompanying notes. The duration, scope and effects of the ongoing Covid-19 pandemic and the conflict in Ukraine, government and other third-party responses to it, and the related macroeconomic effects, including to the Company’s business and the business of the Company’s suppliers and customers 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 this evolving situation. Such changes could result in future impairments of goodwill, intangibles, long-lived assets, inventories, incremental credit losses on receivables and available-for-sale marketable debt securities, or an increase in the Company’s insurance liabilities as of the time of a relevant measurement event.

F - 10

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

(in thousands, except per share data)

e. Concentrations of supply risks:

The Company depends on two contract manufacturers and several limited or single source component suppliers, including, Samsung SDI, that provides lithium-ion battery cells required for the Company's residential storage solution. 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 September 30, 2022, and December 31, 2021, two contract manufacturers collectively accounted for 30.1% and 27.9% of the Company’s total trade payables, net, respectively.

In the second quarter of 2022, the Company announced the opening of “Sella 2”, a two gigawatt-hour (GWh)  Li-Ion battery cell manufacturing facility located in South Korea. Sella 2 is currently in testing phase with ramp-up expected during the fourth quarter of 2022. Sella 2, is the Company's second owned manufacturing facility following the opening of the Company's  manufacturing facility in the North of Israel, “Sella 1” in 2020 that  produces power optimizers and inverters for the Company's solar activities.

f. New accounting pronouncements not yet adopted:

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

g. Recently issued and adopted pronouncements:

In October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805). This ASU requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of the ASU should be applied prospectively. Early adoption is also permitted, including adoption in an interim period. The Company elected to early adopt ASU 2021-08 on January 1, 2022, and will apply this new guidance to all business combinations consummated subsequent to this date. Currently, this ASU has no impact on our consolidated financial statements.

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. Under ASU 2021-10, the accounting entities with transactions with a government that are accounted for by analogy to a grant or contribution accounting model are required to annually disclose certain information regarding the transaction including: (i) nature and related accounting policy used; (ii) line items on the balance sheet and income statement affected by the transactions; (iii) amounts applicable to each line item; and (iv) significant terms and conditions. This guidance is effective for financial statements issued for annual periods beginning after December 15, 2021. The adoption of this ASU will have a minor impact on the disclosures to the annual consolidated financial statements.

F - 11

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

(in thousands, except per share data)

NOTE 2:       MARKETABLE SECURITIES

The following is a summary of available-for-sale marketable securities as of September 30, 2022:

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Available-for-sale – matures within one year:
Corporate bonds	$	203,445	$	-	$	(4,049	)	$	199,396
Governmental bonds		3,254		-		(52	)		3,202
		206,699		-		(4,101	)		202,598
Available-for-sale – matures after one year:
Corporate bonds		683,804		-		(30,753	)		653,051
Governmental bonds		36,901		-		(1,199	)		35,702
		720,705		-		(31,952	)		688,753
Total	$	927,404	$	-	$	(36,053	)	$	891,351

The following is a summary of available-for-sale marketable securities as of December 31, 2021:

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Available-for-sale – matures within one year:
Corporate bonds	$	160,462	$	23	$	(320	)	$	160,165
Governmental bonds		7,576		-		(13	)		7,563
		168,038		23		(333	)		167,728
Available-for-sale – matures after one year:
Corporate bonds		474,412		9		(5,580	)		468,841
Governmental bonds		13,506		-		(119	)		13,387
		487,918		9		(5,699	)		482,228
Total	$	655,956	$	32	$	(6,032	)	$	649,956

As of September 30, 2022, and December 31, 2021, the Company did not record an allowance for credit losses for its available-for-sale marketable securities.

F - 12

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

(in thousands, except per share data)

NOTE 3:       INVENTORIES, NET

	September 30, 2022		December 31, 2021
Raw materials	$	432,766	$	247,386
Work in process		15,529		13,863
Finished goods		113,057		118,894
	$	561,352	$	380,143

NOTE 4:       INVESTMENT IN PRIVATELY-HELD COMPANY

On January 31, 2021, the Company completed an investment of $11,643 in the preferred stock of AutoGrid Systems, Inc. ("AutoGrid"), a privately held company.

On February 1, 2021, the Company signed on a preferred stock purchase agreement for an additional investment of $5,000 in AutoGrid's preferred stock (the "second investment"). On April 28, 2021, the Company completed the second investment.

The Company accounted for the AutoGrid investment as an equity investment without readily determinable fair values. The Company’s non-marketable equity securities had a carrying value of $16,643 as of December 31, 2021.

Investments in privately-held companies are included within other long-term assets on the consolidated balance sheets.

On July 20, 2022, the Company completed the sale of its investment in AutoGrid for proceeds of $24,175, thus recognizing a gain of $7,533 which was recorded in the statement of income under "Other income".

No impairment or other adjustments related to observable price changes in orderly transactions for identical or similar investments were identified up to the date of the sale.

F - 13

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

(in thousands, except per share data)

NOTE 5:       DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

During the nine months ended September 30, 2022, the Company instituted a foreign currency cash flow hedging program to protect against a forecasted increase in value of foreign currency cash flows resulting from salary denominated in Israeli currency, the New Israeli Shekels (“NIS”). The Company hedges portions of the anticipated payroll denominated in NIS for a period of one to nine months with hedging contracts. Accordingly, when the dollar strengthens against the NIS, 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 September 30, 2022, the Company entered into forward contracts and put and call options to sell U.S. dollars (“USD”) for NIS in the amount of approximately NIS 334 million and NIS 10 million, respectively.

In addition to the above-mentioned cash flow hedge transactions, the Company also entered into derivative instrument arrangements to hedge the Company’s exposure to currencies other than the USD. These derivative instruments are not designated as cash flow hedges, as defined by ASC 815, and therefore all gains and losses, resulting from fair value remeasurement, were recorded immediately in the statement of income, under "Financial expense, net".

The Company classifies cash flows related to its hedging as operating activities in its condensed consolidated statement of cash flows.

As of September 30, 2022, the Company entered into forward contracts to sell Australian dollars (“AUD”) for USD in the amount of AUD 4 million.

As of September 30, 2022, the Company entered into forward contracts to sell Euro for USD in the amount of €9 million.

The fair values of outstanding derivative instruments were as follows:

	Balance sheet location	September 30, 2022			December 31, 2021
Derivative assets of options and forward contracts:
Designated cash flow hedges	Prepaid expenses and other current assets	$	-		$	992
Non-designated hedges	Prepaid expenses and other current assets		1,813			3,017
Total derivative assets		$	1,813		$	4,009
Derivative liabilities of options and forward contracts:
Designated cash flow hedges	Accrued expenses and other current liabilities	$	(4,269	)	$	-
Non-designated hedges	Accrued expenses and other current liabilities		-			(169	)
Total derivative liabilities		$	(4,269	)	$	(169	)

F - 14

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

(in thousands, except per share data)

Gains (losses) on derivative instruments recognized in our income statements are summarized below:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021	Affected line item
Foreign exchange contracts
Non Designated Hedging Instruments	$1,211	$3,350	$5,154	$7,706	Financial expenses, net

See Note 13 for information regarding gains (losses) from designated hedging instruments reclassified from accumulated other comprehensive loss.

Gains (losses) on derivative instruments recognized in the consolidated comprehensive income (loss) statements were as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2022			2021		2022			2021
Foreign exchange contracts:
Designated Hedging Instruments	$	(1,399	)	$	1,006	$	(8,928	)	$	1,719

F - 15

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

(in thousands, except per share data)

NOTE 6:       FAIR VALUE MEASUREMENTS

In accordance with ASC 820, the Company measures its cash equivalents and marketable securities, at fair value using the market approach valuation technique. Cash equivalents and marketable securities are classified within Level 1 and Level 2, respectively, 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 September 30, 2022 and December 31, 2021, by level within the fair value hierarchy:

		Fair value measurements as of
Description	Fair Value Hierarchy	September 30, 2022			December 31, 2021
Assets:
Cash equivalents:
Cash	Level 1	$	552,800		$	508,389
Money market mutual funds	Level 1	$	94,581		$	21,680
Deposits	Level 1	$	30,948		$	20
Derivative instruments	Level 2	$	1,813		$	4,009
Short-term marketable securities:
Corporate bonds	Level 2	$	199,396		$	160,165
Governmental bonds	Level 2	$	3,202		$	7,563
Long-term marketable securities:
Corporate bonds	Level 2	$	653,051		$	468,841
Governmental bonds	Level 2	$	35,702		$	13,387
Liabilities:
Derivative instruments	Level 2	$	(4,269	)	$	(169	)

NOTE 7:       WARRANTY OBLIGATIONS

Changes in the Company’s product warranty obligations for the three and nine months ended September 30, 2022 and 2021, were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Balance, at the beginning of the period	$	324,176		$	232,167		$	265,160		$	204,994
Additions and adjustments to cost of revenues		56,815			43,068			163,783			109,382
Usage and current warranty expenses		(34,852	)		(28,172	)		(82,804	)		(