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, 2023

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 August 1, 2023, there were 56,557,816 shares of the registrant’s common stock, par value of $0.0001 per share, outstanding.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1.Financial Statements	F-1
Condensed Consolidated Balance Sheets	F-1
Condensed Consolidated Statements of Income	F-3
Condensed Consolidated Statements of Comprehensive Income	F-4
Condensed Consolidated Statements of Changes in Stockholders’ Equity	F-5
Condensed Consolidated Statements of Cash Flows	F-7
Notes to the Condensed Consolidated Financial Statements (unaudited)	F-9
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)

	June 30, 2023		December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	557,744	$	783,112
Marketable securities		493,176		241,117
Trade receivables, net of allowances of $6,890 and $3,202, respectively		1,149,820		905,146
Inventories, net		984,194		729,201
Prepaid expenses and other current assets		264,188		241,082
Total current assets		3,449,122		2,899,658
LONG-TERM ASSETS:
Marketable securities		435,800		645,491
Deferred tax assets, net		49,993		44,153
Property, plant and equipment, net		580,503		543,969
Operating lease right-of-use assets, net		66,387		62,754
Intangible assets, net		43,656		19,929
Goodwill		42,332		31,189
Other long-term assets		28,772		18,806
Total long-term assets		1,247,443		1,366,291
Total assets	$	4,696,565	$	4,265,949

F - 1

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Cont.)

(in thousands, except per share data)

	June 30, 2023			December 31, 2022
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payables, net	$	434,602		$	459,831
Employees and payroll accruals		74,709			85,158
Warranty obligations		146,150			103,975
Deferred revenues and customers advances		28,135			26,641
Accrued expenses and other current liabilities		214,133			214,112
Total current liabilities		897,729			889,717
LONG-TERM LIABILITIES:
Convertible senior notes, net		625,914			624,451
Warranty obligations		342,437			281,082
Deferred revenues		204,693			186,936
Finance lease liabilities		42,208			45,385
Operating lease liabilities		47,046			46,256
Other long-term liabilities		16,349			15,756
Total long-term liabilities		1,278,647			1,199,866
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS’ EQUITY:
Common stock of $0.0001 par value - Authorized: 125,000,000 shares as of June 30, 2023 and December 31, 2022; issued and outstanding: 56,556,340 and 56,133,404 shares as of June 30, 2023 and December 31, 2022, respectively		6			6
Additional paid-in capital		1,595,890			1,505,632
Accumulated other comprehensive loss		(77,432	)		(73,109	)
Retained earnings		1,001,725			743,837
Total stockholders’ equity		2,520,189			2,176,366
Total liabilities and stockholders’ equity	$	4,696,565		$	4,265,949

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

F - 2

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except per share data)

	Three Months Ended June 30,					Six Months Ended June 30,
	2023		2022			2023			2022
Revenues	$	991,290	$	727,774		$	1,935,179		$	1,382,854
Cost of revenues		673,985		545,132			1,317,748			1,021,254
Gross profit		317,305		182,642			617,431			361,600
Operating expenses:
Research and development		86,526		74,847			166,399			141,196
Sales and marketing		44,222		38,975			85,188			74,291
General and administrative		36,199		28,121			72,766			54,550
Other operating expense (income), net		-		4,687			(1,434	)		4,687
Total operating expenses		166,947		146,630			322,919			274,724
Operating income		150,358		36,012			294,512			86,876
Financial income (expense), net		3,384		(14,311	)		27,058			(18,916	)
Other loss		-		-			(125	)		(844	)
Income before income taxes		153,742		21,701			321,445			67,116
Income taxes		34,232		6,617			63,557			18,909
Net income	$	119,510	$	15,084		$	257,888		$	48,207
Net basic earnings per share of common stock	$	2.12	$	0.27		$	4.58		$	0.89
Net diluted earnings per share of common stock	$	2.03	$	0.26		$	4.38		$	0.86
Weighted average number of shares used in computing net basic earnings per share of common stock		56,415,636		55,470,279			56,316,116			54,309,060
Weighted average number of shares used in computing net diluted earnings per share of common stock		59,183,666		58,564,734			59,189,302			57,446,416

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

F - 3

SOLAREDGE TECHNOLOGIES INC.

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

(in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Net income	$	119,510		$	15,084		$	257,888		$	48,207
Other comprehensive income (loss), net of tax:
Available-for-sale marketable securities		661			(4,562	)		6,838			(14,068	)
Cash flow hedges		316			(3,836	)		(15	)		(4,516	)
Foreign currency translation adjustments on intra-entity transactions that are of a long-term investment nature		(1,935	)		(28,347	)		(12,735	)		(35,330	)
Foreign currency translation adjustments		730			(6,808	)		1,589			(8,387	)
Total other comprehensive loss		(228	)		(43,553	)		(4,323	)		(62,301	)
Comprehensive income (loss)	$	119,282		$	(28,469	)	$	253,565		$	(14,094	)

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

F - 4

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(in thousands, except per share data)

	Common stock				Additional paid in Capital		Accumulated other comprehensive loss			Retained earnings		Total
	Number		Amount
Balance as of January 1, 2023		56,133,404	$	6	$	1,505,632	$	(73,109	)	$	743,837	$	2,176,366
Issuance of common stock upon exercise of stock-based awards		209,760		*-		75		-			-		75
Stock based compensation		-		-		40,070		-			-		40,070
Other comprehensive loss adjustments		-		-		-		(4,095	)		-		(4,095	)
Net income		-		-		-		-			138,378		138,378
Balance as of March 31, 2023	$	56,343,164	$	6	$	1,545,777	$	(77,204	)	$	882,215	$	2,350,794
Issuance of common stock upon exercise of stock-based awards		171,682		*-		89		-			-		89
Issuance of common stock under employee stock purchase plan		41,494		*-		10,046		-			-		10,046
Stock based compensation		-		-		39,978		-			-		39,978
Other comprehensive loss adjustments		-		-		-		(228	)		-		(228	)
Net income		-		-		-		-			119,510		119,510
Balance as of June 30, 2023	$	56,556,340	$	6	$	1,595,890	$	(77,432	)	$	1,001,725	$	2,520,189

* Represents an amount less than $1.

F - 5

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(in thousands, except per share data)

	Common stock				Additional paid in Capital		Accumulated other comprehensive income (loss)			Retained earnings		Total
	Number		Amount
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 income 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

* Represents an amount less than $1.

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

F - 6

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands, except per share data)

	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities:
Net income	$	257,888		$	48,207
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		26,725			24,138
Loss (gain) from exchange rate fluctuations		(23,214	)		20,398
Stock-based compensation expenses		78,200			71,181
Impairment of goodwill and intangible assets		-			4,008
Deferred income taxes, net		(7,636	)		(1,092	)
Other items		4,783			11,396
Changes in assets and liabilities:
Inventories, net		(246,193	)		(93,348	)
Prepaid expenses and other assets		(33,285	)		(79,215	)
Trade receivables, net		(235,086	)		(235,316	)
Trade payables, net		(22,304	)		(7,339	)
Employees and payroll accruals		8,283			5,202
Warranty obligations		103,524			59,588
Deferred revenues and customers advances		17,222			32,277
Accrued expenses and other liabilities, net		(9,695	)		54,341
Net cash used in operating activities		(80,788	)		(85,574	)
Cash flows from investing activities:
Investment in available-for-sale marketable securities		(124,138	)		(362,119	)
Proceed from sales and maturities of available-for-sale marketable securities		86,813			126,287
Purchase of property, plant and equipment		(84,075	)		(91,884	)
Business combinations, net of cash acquired		(16,653	)		-
Purchase of intangible assets		(10,000	)		-
Investment in privately-held companies		(6,750	)		-
Proceeds from governmental grant		6,797			-
Other investing activities		3,552			1,783
Net cash used in investing activities	$	(144,454	)	$	(325,933	)

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) (Cont.)

(in thousands, except per share data)

	Six Months Ended June 30,
	2023			2022
Cash flows from financing activities:
Tax withholding in connection with stock-based awards, net	$	(8,811	)	$	(2,318	)
Payment of finance lease liability		(1,428	)		(1,374	)
Proceeds from secondary public offering, net of issuance costs		-			650,526
Other financing activities		98			1,572
Net cash provided by (used in) financing activities		(10,141	)		648,406
Increase (decrease) in cash and cash equivalents		(235,383	)		236,899
Cash and cash equivalents at the beginning of the period		783,112			530,089
Effect of exchange rate differences on cash and cash equivalents		10,015			(21,454	)
Cash and cash equivalents at the end of the period	$	557,744		$	745,534
Supplemental disclosure of non-cash activities:
Purchase of intangible assets and business combinations	$	11,245		$	-
Right-of-use asset recognized with a corresponding lease liability	$	12,063		$	34,176
Purchase of property, plant and equipment	$	16,300		$	13,451

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

F - 8

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 Energy Hub inverter which supports, among other things, connection to a DC-coupled battery for full or partial home backup, and optional connection to the Company's smart EV charger, (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”).

On April 6, 2023, the Company completed the acquisition of all outstanding shares of Hark Systems Ltd. ("Hark"), a UK-based energy IoT company for the commercial and industrial ("C&I") sector, which operates under the newly established consulting segment (see note 2).

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, 2022, contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2023, 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 - 9

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. 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, 2023, and December 31, 2022, two contract manufacturers collectively accounted for 45.4% and 34.3% 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 began producing and shipping cells at the end of 2022 and is expected to reach full manufacturing capacity in early 2024. Sella 2 is the Company's second owned manufacturing facility following the establishment of Sella 1 in 2020. Sella 1 is the Company's manufacturing facility in the North of Israel that produces power optimizers and inverters for the Company's solar activities.

f. New accounting standards updates:

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 or newly effective standards were not applicable to the Company, did not have a material impact on the condensed consolidated financial statements or are not expected to have a material impact on the condensed consolidated financial statements.

F - 10

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

(in thousands, except per share data)

NOTE 2: BUSINESS COMBINATIONS

On April 6, 2023, the Company completed the acquisition of all outstanding shares of Hark Systems Ltd. ("Hark"), a UK-based energy IoT company for the commercial and industrial ("C&I") sector for approximately $18,346 in cash. Hark's platform is expected to enable the Company to offer its commercial and industrial customers expanded capabilities in energy management and connectivity, including identification of potential energy savings, detection of anomalies in assets’ energy consumption, and optimization of energy usage and carbon emissions through load orchestration and storage control.

Pursuant to ASC 805, the Company accounted for the Hark acquisition as a business combination using the acquisition method of accounting. Identifiable assets and liabilities of Hark, including identifiable intangible assets, were recorded based on their estimated fair values as of the date of the closing of the acquisition. The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill. The Company recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date. Such preliminary valuation required estimates and assumptions including, but not limited to, estimating future cash flows and direct costs in addition to developing the appropriate discount rates and current market profit margins. The Company’s management believes the fair values recognized for the assets acquired and the liabilities assumed were based on reasonable estimates and assumptions.

The following table summarizes the preliminary fair values estimation of assets acquired and liabilities assumed as of the date of the acquisition:

	Amount			Weighted Average Useful Life (In years)
Cash	$	448
Net liabilities assumed		(1,837	)
Identified intangible assets:
Current technology		6,576			5
Customer relationships		283			1
Trade name		610			5
Goodwill		12,266
Total	$	18,346

Acquisition costs were immaterial and are included in general and administrative expenses in the consolidated statements of income.

Goodwill generated from this acquisition was primarily attributable to the assembled workforce and expected post-acquisition synergies from combining Hark platform with the Company's product offering to its commercial and industrial customers. All of the Goodwill was assigned to the new Consulting segment (see Note 21). Goodwill was not deductible for tax purposes. The fair values of technology, customer relationships and trade name were derived by applying the multi-period excess earnings method, with-and-without method, and the relief-from-royalty method, respectively, all of which are under the income approach whose underlying inputs are considered Level 3. The fair values assigned to assets acquired and liabilities assumed were based on management's estimates and assumptions.

The results of Hark have been included in the Company's consolidated statements of income since the acquisition date and are not material. Pro forma financial information has not been presented because the impact of the acquisition was not material to the Company's statement of income.

F - 11

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

(in thousands, except per share data)

NOTE 3:       MARKETABLE SECURITIES

The following is a summary of available-for-sale marketable securities as of June 30, 2023:

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Matures within one year:
Corporate bonds	$	472,687	$	424	$	(10,314	)	$	462,797
U.S. governmental bonds		23,954		-		(248	)		23,706
Non - U.S. governmental bonds		6,840		-		(167	)		6,673
		503,481		424		(10,729	)		493,176
Matures after one year:
Corporate bonds		416,648		583		(13,464	)		403,767
U.S. governmental bonds		27,842		-		(313	)		27,529
Non - U.S. governmental bonds		4,742		-		(238	)		4,504
		449,232		583		(14,015	)		435,800
Total	$	952,713	$	1,007	$	(24,744	)	$	928,976

The following is a summary of available-for-sale marketable securities as of December 31, 2022:

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Matures within one year:
Corporate bonds	$	222,482	$	-	$	(4,657	)	$	217,825
U.S. governmental bonds		15,963		-		(284	)		15,679
Non - U.S. governmental bonds		7,882		-		(269	)		7,613
		246,327		-		(5,210	)		241,117
Matures after one year:
Corporate bonds		657,238		80		(26,460	)		630,858
U.S. governmental bonds		9,939		-		(261	)		9,678
Non - U.S. governmental bonds		5,311		-		(356	)		4,955
		672,488		80		(27,077	)		645,491
Total	$	918,815	$	80	$	(32,287	)	$	886,608

As of June 30, 2023, and December 31, 2022, 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 4:       INVENTORIES, NET

	June 30, 2023		December 31, 2022
Raw materials	$	461,453	$	503,257
Work in process		35,348		23,407
Finished goods		487,393		202,537
Total inventories, net	$	984,194	$	729,201

NOTE 5:       PREPAID EXPENSES AND OTHER CURRENT ASSETS

	June 30, 2023		December 31, 2022
Vendor non-trade receivables (*)	$	141,810	$	147,597
Government authorities		78,963		55,670
Prepaid expenses and other		43,415		37,815
Total prepaid expenses and other current assets	$	264,188	$	241,082

(*) Vendor non-trade receivables derived from the sale of components to manufacturing vendors who manufacture products for the Company. The Company purchases these components directly from other suppliers. The Company does not reflect the sale of these components to the contract manufacturers in its revenues.

F - 13

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

(in thousands, except per share data)

NOTE 6:       INTANGIBLE ASSETS, NET

Acquired intangible assets consisted of the following as of June 30, 2023, and December 31, 2022:

	June 30, 2023			December 31, 2022
Intangible assets with finite lives:
Current Technology	$	34,879		$	29,196
Customer relationships		3,138			2,958
Trade names		3,769			3,287
Assembled workforce		3,575			3,575
Patents and licenses*		21,400			1,400
Gross intangible assets		66,761			40,416
Less - accumulated amortization		(23,105	)		(20,487	)
Total intangible assets, net	$	43,656		$	19,929

* See Note 16

For the three months ended June 30, 2023 and 2022 the Company recorded amortization expenses related to intangible assets in the amount of $1,820 and $2,619, respectively.

For the six months ended June 30, 2023 and 2022 the Company recorded amortization expenses related to intangible assets in the amount of $3,238 and $5,277, respectively.

Expected future amortization expenses of intangible assets as of June 30, 2023 are as follows:

2023	$	4,666
2024		8,627
2025		7,698
2026		7,269
2027		4,002
2028 and thereafter		11,394
	$	43,656

F - 14

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

(in thousands, except per share data)

NOTE 7:       GOODWILL

Changes in the carrying amount of goodwill for the period ended June 30, 2023 were as follows:

	Solar			All other		Total
Goodwill at December 31, 2022	$	28,768		$	2,421	$	31,189
Changes during the year:
Acquisitions		-			12,266		12,266
Foreign currency adjustments		(1,194	)		71		(1,123	)
Goodwill at June 30, 2023	$	27,574		$	14,758	$	42,332

As of June 30, 2023 and December 31, 2022 there were $90,104 accumulated goodwill impairment losses.

F - 15

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

(in thousands, except per share data)

NOTE 8: OTHER LONG TERM ASSETS

	June 30, 2023		December 31, 2022
Severance pay fund	$	7,479	$	8,799
Cloud computing arrangements		8,236		3,457
Investments in privately held companies		8,536		1,863
Prepayments		3,285		2,961
Other		1,236		1,726
Total other long term assets	$	28,772	$	18,806

F - 16

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

(in thousands, except per share data)

NOTE 9: DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

During the six months ended June 30, 2023, the Company instituted a foreign currency cash flow hedging program to reduce the risk of a forecasted increase in the value of foreign currency cash flows, resulting from payment of salaries 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. These hedging contracts are designated as cash flow hedges, as defined by ASC 815 and are all effective hedges.

As of June 30, 2023, 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 106.25 million and NIS 216 million, respectively.

In addition to the above-mentioned cash flow hedge transactions, the Company occasionally enters 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 income (expense), net".

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

The fair values of outstanding derivative instruments were as follows:

	Balance sheet location	June 30, 2023			December 31, 2022
Derivative liabilities of options and forward contracts:
Designated cash flow hedges	Accrued expenses and other current liabilities	$	(1,893	)	$	(1,874	)

Gains (losses) on derivative instruments are summarized below:

		Three Months Ended June 30,						Six Months Ended June 30,
	Affected line item	2023			2022			2023			2022
Foreign exchange contracts
Non Designated Hedging Instruments	Condensed Consolidated Statements of Income - Financial income (expense), net	$	-		$	3,009		$	-		$	3,943
Designated Hedging Instruments	Condensed Consolidated Statements of Comprehensive Income - Cash flow hedges	$	(2,091	)	$	(6,351	)	$	(4,148	)	$	(7,529	)

See Note 17 for information regarding losses from designated hedging instruments reclassified from accumulated other comprehensive loss.

F - 17

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

(in thousands, except per share data)

NOTE 10: 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 and cash equivalents are classified within Level 1 because these assets are valued using quoted market prices. Marketable securities and foreign currency derivative contracts are classified within level 2 due to these assets being valued by alternative pricing sources and models utilizing market observable inputs.

The following table sets forth the Company’s assets that were measured at fair value as of June 30, 2023 and December 31, 2022, by level within the fair value hierarchy:

		Fair value measurements as of
Description	Fair Value Hierarchy	June 30, 2023			December 31, 2022
Assets:
Cash and cash equivalents:
Cash	Level 1	$	525,804		$	695,004
Money market mutual funds	Level 1	$	5,772		$	25,149
Deposits	Level 1	$	26,168		$	62,959
Short-term marketable securities:
Corporate bonds	Level 2	$	462,797		$	217,825
U.S. governmental bonds	Level 2	$	23,706		$	15,679
Non - U.S. governmental bonds	Level 2	$	6,673		$	7,613
Long-term marketable securities:
Corporate bonds	Level 2	$	403,767		$	630,858
U.S. governmental bonds	Level 2	$	27,529		$	9,678
Non - U.S. governmental bonds	Level 2	$	4,504		$	4,955
Liabilities:
Derivative instruments	Level 2	$	(1,893	)	$	(1,874	)

NOTE 11:       WARRANTY OBLIGATIONS

Changes in the Company’s product warranty obligations for the three and six months ended June 30, 2023 and 2022, were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Balance, at the beginning of the period	$	442,971		$	292,666		$	385,057		$	265,160
Additions and adjustments to cost of revenues		89,631			59,061			181,201			106,968
Usage and current warranty expenses		(44,015	)		(27,551	)		(77,671	)		(47,952	)
Balance, at end of the period		488,587			324,176			488,587			324,176
Less current portion		(146,150	)		(91,761