The accompanying notes are an integral part of the condensed consolidated financial statements.
The accompanying notes are an integral part of the condensed consolidated financial statements.
The accompanying notes are an integral part of the condensed consolidated financial statements.
The accompanying notes are an integral part of the condensed consolidated financial statements.
The accompanying notes are an integral part of the condensed consolidated financial statements.
The accompanying notes are an integral part of the condensed consolidated financial statements.
The accompanying notes are an integral part of the condensed consolidated financial statements.
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 of a solar PV system 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 applicable solar PV system and (iv) a storage solution that is used to increase energy independence and maximize self-consumption for homeowners by utilizing a battery that is sold separately by third party manufacturers, to store and supply power as needed.
The Company and its subsidiaries sell their intelligent inverter solution products worldwide through large distributors and electrical equipment wholesalers to smaller solar installers as, well as directly to large solar installers and engineering, procurement and construction firms (“EPCs”).
The Company has expanded its activity to other areas of smart energy technology through acquisitions. The Company now offers energy solutions which include lithium-ion cells, batteries and energy storage systems (“Energy Storage”), electric vehicle, or EV components and charging capabilities (“e-Mobility”), as well as uninterrupted power supply solutions (“UPS”).
b.Recently issued and adopted pronouncements:
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2020. This standard requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings and report credit losses using an expected losses model rather than the incurred losses model that was previously used, and establishes additional disclosures related to credit risks. For available-for-sale (“AFS”) debt securities with unrealized losses, the standard eliminates the concept of other-than-temporary impairments and requires allowances to be recorded instead of reducing the amortized cost of the investment.
This standard limits the amount of credit losses to be recognized for AFS debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases.
The Company adopted Topic 326 effective January 1, 2020, based on the composition of the Company’s trade receivables, investment portfolio and other financial assets, current economic conditions and historical credit loss activity. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
The condensed consolidated financial statements for the six months ended June 30, 2020 are presented under the new standard, while comparative periods presented are not adjusted and continue to be reported in accordance with the Company’s historical accounting policy (see Note 7).
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.)
c.Basis of Presentation:
The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with Article 10 of Regulation S-X, “Interim Financial Statements” and the rules and regulations for Form 10-Q of the Securities and Exchange Commission (the “SEC”). Pursuant to those rules and regulations, the Company has condensed or omitted certain information and disclosures in footnotes that it normally includes in its annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its condensed consolidated financial position, results of operations, and cash flows. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year.
The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2019, contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2020, have been applied consistently in these unaudited interim condensed consolidated financial statements, except for ASC 815 - Derivatives and Hedging (see Note 6) and the adoption of ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (see Note 7).
d.Concentrations of supply risks:
The Company depends on two contract manufacturers and several limited or single source component suppliers. Reliance on these vendors makes the Company vulnerable to possible capacity constraints and reduced control over component availability, delivery schedules, manufacturing yields, and costs. These two contract manufacturers collectively accounted for 54.7% and 42.3% of the Company’s trade payables as of June 30, 2020 and December 31, 2019, respectively.
e.Use of estimates:
The preparation of financial statements in conformity with U.S. 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, 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 AFS debt securities, or an increase in the Company’s insurance liabilities as of the time of a relevant measurement event.
f.Certain prior period amounts have been reclassified to conform to the current period presentation.
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:-INVENTORIES
|
|
June 30,
2020
|
|
|
December
31,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
101,079
|
|
|
$
|
64,714
|
|
Work in process
|
|
|
20,839
|
|
|
|
20,752
|
|
Finished goods
|
|
|
142,542
|
|
|
|
85,332
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
264,460
|
|
|
$
|
170,798
|
|
NOTE 3:-MARKETABLE SECURITIES
The following table summarizes the AFS marketable debt securities as of June 30, 2020:
|
Amortized
cost
|
|
|
Gross unrealized
gains
|
|
|
Gross unrealized
losses
|
|
|
Fair
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFS – matures within one year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
$
|
111,956
|
|
|
$
|
1,082
|
|
|
$
|
(6
|
)
|
|
$
|
113,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFS – matures after one year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
44,081
|
|
|
|
331
|
|
|
|
(143
|
)
|
|
|
44,269
|
|
Governmental bonds
|
|
1,398
|
|
|
|
17
|
|
|
|
-
|
|
|
|
1,415
|
|
|
|
45,479
|
|
|
|
348
|
|
|
|
(143
|
)
|
|
|
45,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
157,435
|
|
|
$
|
1,430
|
|
|
$
|
(149
|
)
|
|
$
|
158,716
|
|
The following table summarizes the AFS marketable debt securities as of December 31, 2019:
|
Amortized
cost
|
|
|
Gross unrealized
gains
|
|
|
Gross unrealized
losses
|
|
|
Fair
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFS – matures within one year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
$
|
91,677
|
|
|
$
|
196
|
|
|
$
|
(28
|
)
|
|
$
|
91,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFS – matures after one year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
117,692
|
|
|
|
336
|
|
|
|
(250
|
)
|
|
|
117,778
|
|
Governmental bonds
|
|
1,398
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,398
|
|
|
|
119,090
|
|
|
|
336
|
|
|
|
(250
|
)
|
|
|
119,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
210,767
|
|
|
$
|
532
|
|
|
$
|
(278
|
)
|
|
$
|
211,021
|
|
As of June 30, 2020, the Company did not record an allowance for credit losses for its AFS marketable debt securities (See Note 7).
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 4:-WARRANTY OBLIGATIONS
Changes in the Company’s product warranty obligations for the six months ended June 30, 2020 and 2019 were as follows:
|
|
Six months ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, at beginning of period
|
|
$
|
172,563
|
|
|
$
|
121,826
|
|
Additions and adjustments to cost of revenues
|
|
|
47,369
|
|
|
|
46,288
|
|
Usage and current warranty expenses
|
|
|
(27,248
|
)
|
|
|
(17,476
|
)
|
|
|
|
|
|
|
|
|
|
Balance, at end of period
|
|
|
192,684
|
|
|
|
150,638
|
|
Less current portion
|
|
|
(68,674
|
)
|
|
|
(38,819
|
)
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
$
|
124,010
|
|
|
$
|
111,819
|
|
NOTE 5:-FAIR VALUE MEASUREMENTS
In accordance with ASC 820, the Company measures its cash equivalents, foreign currency derivative contracts, and marketable securities, at fair value using the market approach valuation technique. Cash equivalents and marketable securities are classified within Level 1 or Level 2 based on whether 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 June 30, 2020 and December 31, 2019, by level within the fair value hierarchy:
|
|
|
|
Fair value measurements
as of
|
|
|
|
Fair Value
|
|
June 30,
|
|
|
December 31,
|
|
Description
|
|
Hierarchy
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
Level 1
|
|
$
|
72,321
|
|
|
$
|
527
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments asset:
|
|
|
|
|
|
|
|
|
|
|
Forward contracts designated as hedging instruments
|
|
Level 2
|
|
$
|
508
|
|
|
$
|
-
|
|
Options and forward contracts not designated as hedging
instruments
|
|
Level 2
|
|
$
|
478
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term marketable securities:
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
Level 2
|
|
$
|
113,032
|
|
|
$
|
91,845
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term marketable securities:
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
Level 2
|
|
$
|
44,269
|
|
|
$
|
117,778
|
|
Governmental bonds
|
|
Level 2
|
|
$
|
1,415
|
|
|
$
|
1,398
|
|
SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands (except share and per share data)
NOTE 6:-DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company accounts for derivatives and hedging based on ASC 815 (“Derivatives and Hedging”). ASC 815 requires the Company to recognize all derivatives on the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship.
To protect against the increase in value of forecasted foreign currency cash flows resulting from salary denominated in the Israeli currency, the New Israeli Shekels (“NIS”), during the six months ended June 30, 2020, the Company instituted a foreign currency cash flow hedging program. The Company hedges portions of the anticipated payroll denominated in NIS for a period of one to six months with hedging contracts.
Accordingly, when the dollar strengthens against the 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 June 30, 2020, the Company entered into forward contracts to sell U.S. dollars for NIS in the amount of $9,027.
In addition to the above-mentioned cash flow hedges transactions, the Company also entered into derivative instrument arrangements to hedge the Company’s exposure to currencies other than the U.S. dollar. 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, as financial income (expenses), net.
As of June 30, 2020, the Company entered into forward contracts to sell Australian dollars (“AUD”) for U.S. dollars in the amount of AUD 15 million.
As of June 30, 2020, the Company entered into put and call options to sell Euro for U.S. dollars in the amount of euros 30 million.
The fair value of derivative assets as of June 30, 2020, was $986, which was recorded in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets. As of December 31, 2019, the Company had no derivative instruments (see Note 5).
For the six months ended June 30, 2020, the Company recorded unrealized gain in the amount of $446, net of tax effect, in “accumulated other comprehensive loss” related to the derivative assets designated as hedging instruments.
For the six months ended June 30, 2020, the Company recorded gain in the amount of $491, in “financial expenses, net” related to the derivative assets not designated as hedging instruments.
The Company had no gains or losses related to derivative instruments during the six months ended June 30, 2019.
SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands (except share and per share data)
NOTE 6:-DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Cont.)
The following table provides details about reclassifications out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2020 and 2019:
Details about Accumulated
Other Comprehensive Loss Components
|
|
Amount Reclassified from Accumulated Other
Comprehensive Loss
|
|
Affected Line Item in the
Statements of Income
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on cash flow hedges, net
|
|
$
|
99
|
|
|
$
|
-
|
|
Cost of revenues
|
|
|
|
270
|
|
|
|
-
|
|
Research and development
|
|
|
|
61
|
|
|
|
-
|
|
Sales and marketing
|
|
|
|
66
|
|
|
|
-
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
496
|
|
|
|
-
|
|
Total, before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
-
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
435
|
|
|
$
|
-
|
|
Total, net of income taxes
|
NOTE 7:-CREDIT LOSSES
Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, prospectively. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.
The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance. As stated above, the Company did not record a noncash cumulative effect adjustment on the opening consolidated balance sheet as of January 1, 2020, due to immateriality.
The Company is exposed to credit losses primarily through sales of products. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables.
Due to the short-term nature of such receivables, the estimate of amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances, the financial condition of customers and the Company’s historical experience with similar customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default.
SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands (except share and per share data)
NOTE 7:-CREDIT LOSSES (Cont.)
The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. The Company considered the current and expected future economic and market conditions surrounding COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted as of June 30, 2020. Estimates are used to determine the allowance. The allowance is based on assessment of anticipated payment and other historical, current and future information that is reasonably available.
The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of trade receivables to present the net amount expected to be collected:
|
|
Six months ended
June 30,
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
Balance, at beginning of period
|
|
$
|
2,473
|
|
Provision for expected credit losses
|
|
|
4,296
|
|
Amounts written off charged against the allowance and others
|
|
|
(496
|
)
|
|
|
|
|
|
Balance, at end of period
|
|
$
|
6,273
|
|
NOTE 8:-COMMITMENTS AND CONTINGENT LIABILITIES
a.Guarantees:
As of June 30, 2020, contingent liabilities exist regarding guarantees in the amounts of $18,643, $2,160 and $75 in respect of bank loans, office rent lease agreements and other transactions, respectively.
b.Contractual purchase obligations:
The Company has contractual obligations to purchase goods and raw materials.
These contractual purchase obligations relate to inventories held by contract manufacturers and purchase orders initiated by the contract manufacturers and suppliers, which cannot be cancelled without penalty. The Company utilizes third parties to manufacture its products. In addition, it acquires raw materials or other goods and services, including product components, by issuing to suppliers authorizations to purchase based on its projected demand and manufacturing needs.
As of June 30, 2020, the Company had non-cancellable purchase obligations totaling approximately $335,321 out of which the Company already recorded a provision for loss in the amount of $3,811.
As of June 30, 2020, the Company had off-balance sheet contractual obligations for capital expenditures totaling approximately $80,251. These commitments reflect purchases of automated assembly lines and other machinery related to the Company’s manufacturing.
c.Legal claims:
From time to time, the Company may be involved in various claims and legal proceedings. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss.
SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands (except share and per share data)
NOTE 8:-COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
These accruals are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter.
In September 2018, the Company’s German subsidiary, SolarEdge Technologies GmbH received a complaint filed by competitor SMA Solar Technology AG (“SMA”). The complaint, filed in the District Court Düsseldorf, Germany, alleges that SolarEdge's 12.5kW - 27.6kW inverters infringe two of the plaintiff’s patents. In its complaint, SMA requests inter alia an injunction and a determination for a claim for damages for sales in Germany. Plaintiff also asserts a value in dispute of 5 million Euros (approximately $5,600) for both patents. In November 2019, the first instance court accepted the claim of infringement for one of the two patents and the Company has filed an appeal to the Appeals Court Dusseldorf and challenged the validity of the allegedly infringed patent in the German Patent Court. In July 2020 the German Patent Court rendered a preliminary opinion, suggesting that the patent should be revoked in its entirety. Also in November 2019 the first instance court stayed the infringement proceedings regarding the other one of the two patents since it considered it to be highly likely that the patent would be invalid. The Company believes that it has meritorious defenses to the claims asserted and intends to vigorously defend against these lawsuits.
In May 2019, the Company was served with three lawsuits by Huawei Technologies Co., Ltd., a Chinese entity (“Huawei”), against the Company's two Chinese subsidiaries and its equipment manufacturer in China. The lawsuits, filed in the Guangzhou intellectual property court, allege infringement of three patents and ask for an injunction of manufacture, use, sale and offer for sale, and damage awards of 30 million RMB (approximately $4,250). Following the receipt of the lawsuits, the Company filed three lawsuits in China against Huawei for unauthorized use of patented technology of the Company. These lawsuits are still in process and judgements have not been rendered. The Company believes that it has meritorious defenses to the claims asserted and intends to vigorously defend against these lawsuits.
In August 2019, the Company was served with a lawsuit by certain former shareholders of S.M.R.E S.p.A (“SMRE”), against its Italian subsidiary that purchased the shares of SMRE in the tender offer which followed the SMRE Acquisition. The shareholders who tendered their shares are asking for the difference between 6 Euro per share, which is the amount they tendered their shares, and 6.77 Euro per share, for a total award of 2.7 million Euros (approximately $3,000). The Company believes it has meritorious defenses to the claims asserted and intends to vigorously defend against this lawsuit.
In December 2019, the Company received a lawsuit filed by a former consultant of the Company and its Israeli subsidiary in the amount of NIS 25.5 million (approximately $7,350) claiming damages caused relating to a terminated consulting agreement and stock options therein. The Company believes it has meritorious defenses to the claims asserted and intends to vigorously defend against this lawsuit.
NOTE 9:-STOCKHOLDERS’ EQUITY
a.Common Stock:
|
|
Number of shares
|
|
|
|
Authorized as of
|
|
|
Issued as of
|
|
|
Outstanding as of
|
|
|
|
June
30, 2020
|
|
|
December
31, 2019
|
|
|
June
30, 2020
|
|
|
December
31, 2019
|
|
|
June
30, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock of $0.0001 par value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
125,000,000
|
|
|
125,000,000
|
|
|
50,075,751
|
|
|
49,081,457
|
|
|
50,075,751
|
|
|
48,898,062
|
|
SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands (except share and per share data)
NOTE 9:-STOCKHOLDERS’ EQUITY (Cont.)
b.Stock Incentive plans:
The Company’s 2007 Global Incentive Plan (the “2007 Plan”) was adopted by the board of directors on August 30, 2007. The 2007 Plan terminated upon the Company’s IPO on March 31, 2015 and no further awards may be granted thereunder. All outstanding awards will continue to be governed by their existing terms and 379,358 available options for future grant were transferred to the Company’s 2015 Global Incentive Plan (the “2015 Plan”) and are reserved for future issuances under the 2015 plan.
The 2015 Plan became effective upon the consummation of the IPO. The 2015 Plan provides for the grant of options, RSUs and other share-based awards to directors, employees, officers, and nonemployees of the Company and its Subsidiaries. As of June 30, 2020, a total of 12,828,270 shares of common stock were reserved for issuance under the 2015 Plan (the “Share Reserve”).
The Share Reserve will automatically increase on January 1st of each year during the term of the 2015 Plan, commencing on January 1st of the year following the year in which the 2015 Plan becomes effective, in an amount equal to 5% of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year; provided, however, that the Company’s board of directors may determine that there will not be a January 1st increase in the Share Reserve in a given year or that the increase will be less than 5% of the shares of capital stock outstanding on the preceding December 31st.
The aggregate maximum number of shares of common stock that may be issued on the exercise of incentive stock options is 10,000,000. As of June 30, 2020, an aggregate of 8,627,031 shares of common stock are still available for future grant under the 2015 Plan.
A summary of the activity in the stock options granted to employees and members of the board of directors for the six months ended June 30, 2020 and related information are as follows:
|
|
Number
of
Options
|
|
|
Weighted
average
exercise
price
|
|
|
Weighted
average
remaining
contractual
term
in years
|
|
|
Aggregate
intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2019
|
|
|
2,112,009
|
|
|
|
15.44
|
|
|
|
3.58
|
|
|
|
168,229
|
|
Granted
|
|
|
59,558
|
|
|
|
101.81
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(568,165
|
)
|
|
|
9.84
|
|
|
|
|
|
|
|
|
|
Outstanding as of June 30, 2020
|
|
|
1,603,402
|
|
|
|
20.63
|
|
|
|
3.36
|
|
|
|
189,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest as of June 30, 2020
|
|
|
1,597,973
|
|
|
|
20.43
|
|
|
|
5.88
|
|
|
|
189,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of June 30, 2020
|
|
|
1,314,860
|
|
|
|
15.45
|
|
|
|
2.32
|
|
|
|
162,166
|
|
SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands (except share and per share data)
NOTE 9:-STOCKHOLDERS’ EQUITY (Cont.)
The aggregate intrinsic value represents the total intrinsic value (the difference between the fair value of the Company’s common stock as of the last day of each period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last day of each period.
The total intrinsic value of options exercised during the six months ended June 30, 2020 was $63,632.
The weighted average grant date fair values of options granted to employees and executive directors during the six months ended June 30, 2020 was $53.65.
A summary of the activity in the RSUs granted to employees and directors for the six months ended June 30, 2020 is as follows:
|
|
Number of
RSUs
|
|
|
Weighted average
grant date
fair value
|
|
|
|
|
|
|
|
|
Unvested as of December 31, 2019
|
|
|
2,742,589
|
|
|
|
52.77
|
|
Granted
|
|
|
153,481
|
|
|
|
88.41
|
|
Vested
|
|
|
(547,706
|
)
|
|
|
41.92
|
|
Forfeited
|
|
|
(107,688
|
)
|
|
|
54.76
|
|
Unvested as of June 30, 2020
|
|
|
2,240,676
|
|
|
|
57.77
|
|
c.Employee Stock Purchase Plan (“ESPP”):
The Company adopted an ESPP. As of June 30, 2020, a total of 2,687,451 shares were reserved for issuance under this plan. The number of shares of common stock reserved for issuance under the ESPP will increase automatically on January 1st of each year, for ten years, by the lesser of 1% of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year or 487,643 shares.
However, the Company’s board of directors may reduce the amount of the increase in any particular year at their discretion, including a reduction to zero.
The ESPP is implemented through an offering every six months. According to the ESPP, eligible employees may use up to 10% of their salaries to purchase common stock shares up to an aggregate limit of $10 per participant for every six months’ plan. The price of an ordinary share purchased under the ESPP is equal to 85% of the lower of the fair market value of the ordinary share on the subscription date of each offering period or on the purchase date.
As of June 30, 2020, 578,778 common stock shares had been purchased under the ESPP.
As of June 30, 2020, 2,108,673 common stock shares were available for future issuance under the ESPP.
In accordance with ASC No. 718, the ESPP is compensatory and as such results in recognition of compensation cost.
SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands (except share and per share data)
NOTE 9:-STOCKHOLDERS’ EQUITY (Cont.)
d.Stock-based compensation expense for employees and nonemployees:
The Company recognized stock-based compensation expenses related to stock options, RSUs and PSUs granted to employees and non-employee consultants and ESPP in the condensed consolidated statement of income for the three and six months ended June 30, 2020 and 2019, as follows:
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
$
|
2,359
|
|
|
$
|
1,651
|
|
|
$
|
4,632
|
|
|
$
|
3,005
|
|
Research and development
|
|
|
5,847
|
|
|
|
4,176
|
|
|
|
11,225
|
|
|
|
7,666
|
|
Selling and marketing
|
|
|
3,445
|
|
|
|
2,722
|
|
|
|
6,637
|
|
|
|
5,126
|
|
General and administrative
|
|
|
2,310
|
|
|
|
2,823
|
|
|
|
4,240
|
|
|
|
5,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense
|
|
$
|
13,961
|
|
|
$
|
11,372
|
|
|
$
|
26,734
|
|
|
$
|
21,076
|
|
As of June 30, 2020, there were total unrecognized compensation expenses in the amount of $131,368 related to non‑vested equity‑based compensation arrangements granted under the Company’s Plans. These expenses are expected to be recognized during the period from July 1, 2020 through May 31, 2024.
NOTE 10:-EARNINGS PER SHARE
Basic net Earnings Per Share (“EPS”) is computed by dividing the net earnings attributable to SolarEdge Technologies, Inc. by the weighted-average number of shares of common stock outstanding during the period.
Diluted net EPS is computed by giving effect to all potential shares of common stock, including stock options, to the extent dilutive, all in accordance with ASC No. 260, "Earnings Per Share."
No shares were excluded from the calculation of diluted net EPS due to their anti-dilutive effect for the three and six months ended June 30, 2020.
334,096 and 289,796 shares were excluded from the calculation of diluted net earnings per share due to their anti-dilutive effect for the three and six months ended June 30, 2019, respectively.
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 10:-EARNINGS PER SHARE (Cont.)
The following table presents the computation of basic and diluted net EPS attributable to SolarEdge Technologies, Inc. for the periods presented:
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
36,668
|
|
|
$
|
32,913
|
|
|
$
|
78,916
|
|
|
$
|
50,888
|
|
Net loss attributable to Non-controlling interests
|
|
|
-
|
|
|
|
215
|
|
|
|
-
|
|
|
|
1,256
|
|
Net income attributable to SolarEdge Technologies, Inc.
|
|
$
|
36,668
|
|
|
$
|
33,128
|
|
|
$
|
78,916
|
|
|
$
|
52,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net earnings per share of common stock, basic
|
|
|
49,786,586
|
|
|
|
47,683,799
|
|
|
|
49,493,173
|
|
|
|
47,353,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
36,668
|
|
|
$
|
32,913
|
|
|
$
|
78,916
|
|
|
$
|
50,888
|
|
Net loss attributable to Non-controlling interests
|
|
|
-
|
|
|
|
215
|
|
|
|
-
|
|
|
|
1,256
|
|
Undistributed earnings reallocated to non-vested
stockholders
|
|
|
-
|
|
|
|
(220
|
)
|
|
|
-
|
|
|
|
(304
|
)
|
Net income attributable to SolarEdge Technologies, Inc.
|
|
$
|
36,668
|
|
|
$
|
32,908
|
|
|
$
|
78,916
|
|
|
$
|
51,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net earnings per share of common stock, basic
|
|
|
49,786,586
|
|
|
|
47,683,799
|
|
|
|
49,493,173
|
|
|
|
47,353,401
|
|
Weighted average effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested PSU’S
|
|
|
-
|
|
|
|
(334,096
|
)
|
|
|
-
|
|
|
|
(289,796
|
)
|
Effect of stock-based awards
|
|
|
2,749,851
|
|
|
|
2,590,331
|
|
|
|
2,864,665
|
|
|
|
2,294,675
|
|
Shares used in computing net earnings per share of common stock, diluted
|
|
|
52,536,437
|
|
|
|
49,940,034
|
|
|
|
52,357,838
|
|
|
|
49,358,280
|
|
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 11:-OTHER OPERATING INCOME
At the time of the acquisition of Kokam Co., Ltd. (“Kokam”), Kokam had an outstanding claim against it for damages. The claim was settled for an amount of $4,900, which was recognized as an expense in other operating expenses in the consolidated statement of income in the year ended December 31, 2019. In March 2020, the Company was indemnified for the full amount by a major selling shareholder of Kokam. The Company recognized this as income in other operating income.
NOTE 12:-INCOME TAXES
a.Income taxes (tax benefit) are comprised as follows:
|
|
Three months ended
June 30,
|
|
|
Six months ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current period taxes
|
|
$
|
8,098
|
|
|
$
|
13,753
|
|
|
$
|
20,556
|
|
|
$
|
18,909
|
|
Deferred tax income, net and others
|
|
|
(3,236
|
)
|
|
|
(540
|
)
|
|
|
(6,772
|
)
|
|
|
(1,774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes on income
|
|
$
|
4,862
|
|
|
$
|
13,213
|
|
|
$
|
13,784
|
|
|
$
|
17,135
|
|
b.Uncertain tax positions:
|
|
June 30,2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Balance at January 1,
|
|
$
|
8,962
|
|
|
$
|
8,499
|
|
Increases related to current year tax positions
|
|
|
525
|
|
|
|
463
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,487
|
|
|
$
|
8,962
|
|
NOTE 13:-SEGMENT INFORMATION
Following the completion of three acquisitions during 2018 and 2019, the Company has changed its segments measurement, beginning in 2019. The purpose of the new measurement is to provide the Company’s chief operating decision maker (“CODM”) better information to assess segment performance and to make resource allocation decisions. The Company now operates in five different operating segments: Solar, Critical Power (formerly known as UPS), Energy Storage, e-Mobility and Automation Machines.
The Company's Chief Executive Officer is the CODM who makes resource allocation decisions and assesses performance based on the financial information presented on a consolidated basis, accompanied by disaggregated information about revenues and contributed profit by the operating segments.
Segment profit is comprised of gross profit for the segment less operating expenses that do not include amortization, stock based compensation expenses and certain other items.
The Company manages its assets on a group basis, not by segments, as many of its assets are shared or commingled. The Company’s CODM does not regularly review asset information by segments and, therefore, the Company does not report asset information by segment.
The Company identified one operating segment as reportable – the Solar segment. The other operating segments are insignificant individually and in the aggregate and therefore their results are presented together under “All other”.
The Solar segment includes the design, development, manufacture, and sales of an intelligent inverter solution designed to maximize power generation at the individual PV module level. The solution consists mainly of the Company’s power optimizers, inverters and cloud-based monitoring platform.
The “All other” category includes the design, development, manufacturing and sales of UPS products, energy storage products, e-Mobility products and automated machines for industries. Intersegment sales are a source of revenue for one of the operating segments included in the “All other” category.
The Company accounts for intersegment sales as if the sales were to third parties, that is, at current market prices.
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 13:-SEGMENT INFORMATION (cont.)
The following table presents information on reportable segments profit (loss) for the periods ended June 30, 2020:
|
|
Three months ended
June 30, 2020
|
|
|
Six months ended
June 30, 2020
|
|
|
|
Solar
|
|
|
All other
|
|
|
Solar
|
|
|
All other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
310,048
|
|
|
$
|
22,290
|
|
|
$
|
717,695
|
|
|
$
|
45,861
|
|
Cost of revenues
|
|
|
205,346
|
|
|
|
19,238
|
|
|
|
470,161
|
|
|
|
40,691
|
|
Gross profit
|
|
|
104,702
|
|
|
|
3,052
|
|
|
|
247,534
|
|
|
|
5,170
|
|
Research and development
|
|
|
26,374
|
|
|
|
5,852
|
|
|
|
53,457
|
|
|
|
10,060
|
|
Sales and marketing
|
|
|
15,020
|
|
|
|
2,179
|
|
|
|
33,643
|
|
|
|
4,322
|
|
General and administrative
|
|
|
8,718
|
|
|
|
2,927
|
|
|
|
17,874
|
|
|
|
8,018
|
|
Segments profit (loss)
|
|
$
|
54,590
|
|
|
$
|
(7,906
|
)
|
|
$
|
142,560
|
|
|
$
|
(17,230
|
)
|
The following table presents information on reportable segments profit (loss) for the periods ended June 30, 2019:
|
|
Three months ended
June 30, 2019
|
|
|
Six months ended
June 30, 2019
|
|
|
|
Solar
|
|
|
All other
|
|
|
Solar
|
|
|
All other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
306,746
|
|
|
$
|
18,264
|
|
|
$
|
559,814
|
|
|
$
|
37,067
|
|
Cost of revenues
|
|
|
193,528
|
|
|
|
15,536
|
|
|
|
359,842
|
|
|
|
31,869
|
|
Gross profit
|
|
|
113,218
|
|
|
|
2,728
|
|
|
|
199,972
|
|
|
|
5,198
|
|
Research and development
|
|
|
22,280
|
|
|
|
3,039
|
|
|
|
42,512
|
|
|
|
5,481
|
|
Sales and marketing
|
|
|
17,149
|
|
|
|
2,307
|
|
|
|
32,349
|
|
|
|
4,017
|
|
General and administrative
|
|
|
7,577
|
|
|
|
2,556
|
|
|
|
14,069
|
|
|
|
4,501
|
|
Segments profit (loss)
|
|
$
|
66,212
|
|
|
$
|
(5,174
|
)
|
|
$
|
111,042
|
|
|
$
|
(8,801
|
)
|
The following table presents information on reportable segments reconciliation to consolidated revenues for the periods presented:
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solar segment revenues
|
|
$
|
310,048
|
|
|
$
|
306,746
|
|
|
$
|
717,695
|
|
|
$
|
559,814
|
|
All other segment revenues
|
|
|
22,290
|
|
|
|
18,264
|
|
|
|
45,861
|
|
|
|
37,067
|
|
Intersegment revenues
|
|
|
(487
|
)
|
|
|
-
|
|
|
|
(487
|
)
|
|
|
-
|
|
Consolidated revenues
|
|
$
|
331,851
|
|
|
$
|
325,010
|
|
|
$
|
763,069
|
|
|
$
|
596,881
|
|
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 13:-SEGMENT INFORMATION (cont.)
The following table presents information on reportable segments reconciliation to consolidated operating income for the periods presented:
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solar segment profit
|
|
$
|
54,590
|
|
|
$
|
66,212
|
|
|
$
|
142,560
|
|
|
$
|
111,042
|
|
All other segment loss
|
|
|
(7,906
|
)
|
|
|
(5,174
|
)
|
|
|
(17,230
|
)
|
|
|
(8,801
|
)
|
Segments operating profit
|
|
|
46,684
|
|
|
|
61,038
|
|
|
|
125,330
|
|
|
|
102,241
|
|
Amounts not allocated to segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation expenses
|
|
|
(13,961
|
)
|
|
|
(11,372
|
)
|
|
|
(26,734
|
)
|
|
|
(21,076
|
)
|
Amortization
|
|
|
(2,651
|
)
|
|
|
(3,291
|
)
|
|
|
(5,336
|
)
|
|
|
(5,262
|
)
|
Legal settlement (see Note 11)
|
|
|
-
|
|
|
|
-
|
|
|
|
4,900
|
|
|
|
-
|
|
Cost of products adjustments
|
|
|
-
|
|
|
|
(319
|
)
|
|
|
(313
|
)
|
|
|
(1,001
|
)
|
Other unallocated expenses
|
|
|
-
|
|
|
|
(703
|
)
|
|
|
-
|
|
|
|
(1,501
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment profit
|
|
|
(107
|
)
|
|
|
-
|
|
|
|
(107
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating income
|
|
$
|
29,965
|
|
|
$
|
45,353
|
|
|
$
|
97,740
|
|
|
$
|
73,401
|
|