SOLAREDGE TECHNOLOGIES, INC. - Annual Report: 2021 (Form 10-K)
|
☒ |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Commission File Number: 001-36894
Delaware
|
|
20-5338862
|
(State or other jurisdiction of
incorporation or organization)
|
|
(IRS Employer
Identification No.)
|
|
|
|
1 HaMada Street
|
|
|
Herziliya Pituach, Israel
|
|
4673335
|
(Address of Principal Executive Offices)
|
|
(Zip Code)
|
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)
|
☒ Large accelerated filer
|
|
☐ Accelerated filer
|
|
☐ Non-accelerated filer
|
|
☐ Smaller reporting company
|
☐ Emerging growth company
|
1 | ||
17 | ||
35 | ||
35 | ||
36 | ||
37 | ||
38 | ||
39 | ||
40 | ||
56 | ||
58 | ||
58 | ||
59 | ||
59 | ||
60 | ||
60 | ||
60 | ||
60 | ||
60 | ||
61 | ||
62 | ||
63 |
• | Existing and future responses to and effects of Covid-19; |
• | future demand for renewable energy including solar energy solutions; |
• | changes to net metering policies or the reduction, elimination or expiration of government subsidies and economic incentives for on-grid solar energy applications; |
• | changes in the U.S. trade environment, including the recent imposition of import tariffs; |
• | federal, state, and local regulations governing the electric utility industry with respect to solar energy; |
• | the retail price of electricity derived from the utility grid or alternative energy sources; |
• | interest rates and supply of capital in the global financial markets in general and in the solar market specifically; |
• | competition, including introductions of power optimizer, inverter and solar photovoltaic (“PV”) system monitoring products by our competitors; |
• | developments in alternative technologies or improvements in distributed solar energy generation; |
• | historic cyclicality of the solar industry and periodic downturns; |
• | defects or performance problems in our products; |
• | our ability to forecast demand for our products accurately and to match production with demand; |
• | our dependence on ocean transportation to timely deliver our products in a cost-effective manner; |
• | our dependence upon a small number of outside contract manufacturers and limited or single source suppliers; |
• | capacity constraints, delivery schedules, manufacturing yields, and costs of our contract manufacturers and availability of components; |
• | delays, disruptions, and quality control problems in manufacturing; |
• | shortages, delays, price changes, or cessation of operations or production affecting our suppliers of key components; |
• | business practices and regulatory compliance of our raw material suppliers; |
• | performance of distributors and large installers in selling our products; |
• | our customers’ financial stability, creditworthiness, and debt leverage ratio; |
• | our ability to retain key personnel and attract additional qualified personnel; |
• | our ability to effectively design, launch, market, and sell new generations of our products and services; |
• | our ability to maintain our brand and to protect and defend our intellectual property; |
• | our ability to retain, and events affecting, our major customers; |
• | our ability to manage effectively the growth of our organization and expansion into new markets; |
• | our ability to integrate acquired businesses; |
• | fluctuations in global currency exchange rates; |
• | unrest, terrorism, or armed conflict in Israel; |
• | general economic conditions in our domestic and international markets; |
• | consolidation in the solar industry among our customers and distributors; |
• | our ability to service our debt; and |
• | the other factors set forth under “Item 1A. Risk Factors.” |
• | Maximized PV module power output. Our power optimizers provide module-level or MPP, tracking and real-time adjustments of current and voltage to the optimal working point of each individual PV module. This enables each PV module to continuously produce its maximum power potential independent of other modules in the same string, thus minimizing module mismatch and partial shading losses. By performing these adjustments at a very high rate, our power optimizers also solve the dynamic MPP losses associated with traditional inverters. |
• | Optimized architecture with economies of scale. Our system shifts certain functions of the traditional inverter to our power optimizers while keeping the DC to AC function and grid interaction in our inverter. As a result, our inverter is smaller, more efficient, more reliable and less expensive than inverters used in traditional inverter systems. The cost savings that we have achieved on the inverter enable our system to be priced at a cost per watt that is comparable with traditional inverter systems of leading manufacturers. As a PV system grows in size, our inverter benefits from economies of scale, making our technology viable for large commercial and utility-scale applications. |
• | Enhanced system design flexibility. Unlike a traditional inverter system that requires each string to be the same length, use the same type of PV modules and be positioned at the same angle toward the sun, our system allows significant design flexibility by enabling the installer to place PV modules in uneven string lengths and on multiple roof facets. This design flexibility: |
• | Increases the amount of the available roof that can be utilized for power production. Unlike traditional inverter systems, our system does not require each string to be the same length, use the same type of PV modules or be positioned at the same angle toward the sun. As a result, our system is significantly less prone to wasted roof space resulting from rooftop asymmetries and obstructions. |
• | Reduces the number of field change orders. For example, some installers use remote tools to estimate the size and configuration of an installation in connection with the customer acquisition process. This is especially common for high-volume residential arrays, where an exhaustive survey of rooftop obstructions would be uneconomical. In some cases, installers discover that their preliminary design, based on remote tools, cannot be implemented due to unexpected shading or other obstructions. With traditional inverter system designs, an obstructed module may require a significant system redesign and a modification of the customer contract to take into account the changed system design. Our DC optimized inverter solution enables an installer to compensate or adjust for most obstructions without materially changing the original design or requiring a modification to the customer contract. |
• | Reduced balance of system costs. Our DC optimized inverter system allows significantly longer strings to be connected to the same inverter (as compared to a traditional inverter system). This minimizes the cost of cabling, fuse boxes and other ancillary electric components. These factors result in easier installations with shorter design times and a lower initial cost per watt, while enabling larger installations per rooftop. |
• | Continuous monitoring and control to reduce operation and maintenance costs. Our cloud-based monitoring platform provides full data visibility at the module level, string level, inverter level and system level. The data can be accessed remotely by any web-enabled device, allowing comprehensive analysis, immediate fault detection and alerts. These monitoring features reduce O&M costs for the system owner by identifying and locating faults, enabling remote testing and reducing field visits. |
• | Enhanced safety. We have incorporated module-level safety mechanisms in our system to protect installers, electricians and firefighters. Each power optimizer is configured to reduce output to 1volt unless the power optimizer receives a fail-safe signal from a functioning inverter. As a result, if the inverter is shut down (e.g., for system maintenance, due to malfunction, in the event of a fire or otherwise), the DC voltage throughout the system is reduced to a safe level. Our DC optimized inverters comply with the applicable safety requirements of the areas in which they are sold, providing incremental cost savings to installers by eliminating the need for additional hardware such as DC breakers, switches or fire-proof ducts required by traditional inverter systems. In the U.S., the SolarEdge SafeDC feature is compliant with NEC 2014 & NEC 2017 Rapid Shutdown functionality, section 690.12. SolarEdge inverters also have a built-in safety feature designed to mitigate the effects of some arcing faults that may pose a risk of fire, in compliance with the UL1699B arc detection standard. |
• | High reliability. Solar PV systems are typically expected to operate for at least 25 years under harsh outdoor conditions. High reliability is critical and is facilitated by systems and components that have low heat generation, solid and stable materials, and an absence of moving parts. We have designed our system to meet these stringent requirements. Our power optimizers dissipate much less heat than microinverters because no DC-AC inversion occurs at the module level. As a result, less heat is dissipated beneath the PV module, which improves lifetime expectancy and the reliability of our power optimizers. Our power optimizers’ high switching frequency allows the use of ceramic capacitors with a low, fixed rate of aging and a proven life expectancy in excess of 25 years. Further, we use automotive-grade application specific integrated circuits (“ASICs”) that embed many of the required electronics . This reduces the number of components and consequently the potential points of failure. |
• | Energy Storage. Our DC optimized inverter system allows solar energy to be directly stored in batteries without any conversion, thereby eliminating energy losses that are associated with such conversions and improving the RoI of PV associated battery systems. |
• | Energy Management. Strategically located at the intersection between PV modules, home usage, and the grid, inverters are well positioned to act as smart energy managers. Our smart inverters incorporate the management of PV energy, battery storage, smart devices, and grid interaction. By enabling smart energy management in our inverter, system owners can not only store solar energy but also control the timing of their PV energy consumption in order to increase their energy independence, take advantage of lower time-of-use rates, reduce electricity bills, and improve overall system RoI. |
• | Distributed Energy Generation. As the electric grid transitions from centralized power stations to a network of distributed, renewable energy sources, our inverter acts as a local control system that can manage the energy resources underlying such distributed network. Our inverters are a key part of developing a distributed and interactive grid that can help support grid stability. One such example is inverter-enabled charging and discharging of batteries as part of a virtual power plant to help manage the load on the grid and support grid stability. |
In 2021, as Covid-19 related lockdowns continued to make in-person training events impractical in many countries, we continued to offer training programs in a hybrid approach by combining hands-on and digital learning techniques. As a result, we were able to significantly increase our overall training reach, offering more than 400 training events and attracting approximately 50,000 participants.
In 2021 we continued to improve and enhance our “Edge Academy”, an intuitive web-based learning portal that aims to help SolarEdge installers improve their installation skills and minimize installation time. As part of the Edge Academy, installers can complete two levels of certification programs: a Scholar certification program, which is offered in 12 different languages; as well as the SolarEdge Expert Training certification program, which is only available to installers that have completed the Scholar program and provides them with in-depth knowledge of our products, further enhancing their ability to install SolarEdge products.
Furthermore, in 2021, we conducted an organization wide, global and extensive training need analysis as preparation for a new training strategy implementation. The new training is designed to determine the needs of individual installers and offer them training programs tailored to these needs.
In addition, in 2021, we launched the SolarEdge energy bank battery certification path for installers. The certification is required for our installers to be able to install our full storage solution.
In 2021, we published over 120 new product training videos on our YouTube channel in multiple languages, which were viewed over 2 million times. Our mobile learning tools continue to be available to installers, assisting in improving their ability to quickly and efficiently install our products.
• | product and system performance and features; |
• | total cost of ownership; |
• | reliability and duration of product warranty; |
• | customer service and support; |
• | breadth of product line; |
• | local sales and distribution capabilities; |
• | compliance with applicable certifications and grid codes; |
• | size and financial stability of operations; and |
• | size of installed base. |
• | Powering Clean Energy: Accelerating the uptake of clean energy, delivering new smart energy, innovative solutions and improving the lifecycle impacts of our products. As a business founded upon the acceleration of clean energy, we strive to reduce our climate impact by minimizing GHG (greenhouse gas) emissions and transitioning to renewable electricity usage in our facilities. In 2021, we conducted a first lifecycle analysis for three of our key products, examining the carbon footprint of all product life stages. The analysis has recently been conducted, and we are currently examining its results, as well as considering reduction opportunities. Furthermore, we have set a target of reducing 30% of our Scope 1+2 GHG emissions per revenue, by 2025 (compared with the 2020 basis). We have set another target of achieving near-zero e-waste to landfill by 2025. In 2020, a total of 85% of all waste at our owned and operated sites was recycled. |
• | Powering People: Maintaining leading responsible employment practices, upholding human rights and investing in communities. In 2021, we increased our workforce to support SolarEdge’s business growth, and maintained responsible employment practices, including an enhanced focus on safety. Also, in 2021, we published a new statement on human rights in Xinjiang, China, confirming that we do not maintain any manufacturing facilities in, or source any material directly from, this region, as well as our commitment to taking necessary actions to prevent any connection between SolarEdge and human rights abuses in China, as in any other region. We continued to donate to causes that support technology education and other social causes in areas in which we have a presence. |
• | Powering Business: Maintaining and reinforcing ethical conduct throughout our value chain, advancing climate resilience, improving the efficiency of our resource consumption and ethical sourcing of raw materials and components. In 2021 we published our supplier code of conduct ("SCoC"), which includes provisions regarding, among others, ethics, safety, environmental protection, human rights, and fair employment. As of December 31, 2021, over 100 key suppliers have signed their acknowledgment of the SCoC terms. In 2021, we also conducted on-site audits of three contract manufacturers and one major raw material supplier of ours in connection with their compliance with the SCoC requirements, and are aiming to expand these efforts in 2022. |
• | Our ability to maintain our current level of profitability. |
• | The rapidly evolving and competitive nature of the solar industry. |
• | Demand for solar energy solutions. |
• | The dependence of our e-Mobility business on orders from a leading automotive manufacturer. |
• | The impact of declines in the retail price of electricity derived from the utility grid or from alternative energy sources. |
• | The impact of increases in interest rates or tightening of the supply of capital on the ability of end-users to finance the cost of a solar PV system. |
• | The impact of increased competition as new and existing competitors introduce power optimizers, inverters, solar PV system monitoring and other smart energy products. |
• | Developments in alternative technologies or improvements in distributed solar energy generation. |
• | The cyclicality of the solar industry. |
• | Defects or performance problems in our products. |
• | Our dependence on a small number of outside contract manufacturers. |
• | Any delays, disruptions, or quality control problems in our manufacturing operations. |
• | Our dependence on a limited number of suppliers for key components and raw materials in our products to adequately meet anticipated demand. |
• | Our reliance on distributors and large installers to assist in selling our products. |
• | Mergers in the solar industry among our current or potential customers. |
• | Our planned expansion into new geographic markets or new product lines or services. |
• | Our ability to build our non-solar businesses and manage future growth effectively. |
• | Our ability to raise the funds necessary to settle conversion of our Convertible Senior Notes or Notes in cash or to repurchase the Notes upon a fundamental change. |
• | Any unauthorized access to, disclosure, or theft of personal information we gather, store, or use. |
• | Attempts by third parties, our employees, or our vendors mighty to gain unauthorized access to our network or seek to compromise our products and services. |
• | Our entry into business engagements with military bodies as our customers. |
• | Our ability to successfully execute future acquisitions or be effective in integrating such acquisitions. |
• | Any damage or injury caused by Lithium-Ion used in our battery cells and packs. |
• | Conditions in Israel that may affect our operations. |
• | Difficulties in enforcing a judgment of a U.S. court against our officers and directors, to assert U.S. securities laws claims in Israel, or to serve process on our officers and directors. |
• | The ongoing Covid-19 pandemic. |
• | Our dependence on ocean transportation to deliver our products in a timely and cost efficient manner. |
• | Fluctuations in currency exchange rates. |
• | Issues related to corporate social responsibility |
• | Any reduction, elimination or expiration of government subsidies and economic incentives for on-grid solar electricity. |
• | Changes to net metering policies. |
• | Technical and economic barriers to the purchase and use of solar PV systems resulting from current or future regulations. |
• | Our ability to protect our intellectual property and other proprietary rights. |
• | Any claims by third parties that we are infringing upon their intellectual property rights. |
• | Any claims for remuneration or royalties for assigned service invention rights by our employees. |
• | The impairment of our goodwill or other intangible assets. |
• | Volatility of our stock price. |
• | Provisions in our certificate of incorporation and by-laws that may have the effect of delaying or preventing a change of control or changes in our management. |
• | The forum selection clause contained in our certificate of incorporation. |
• | Our lack of plans to pay any cash dividends on our common stock in the foreseeable future. |
• | cost competitiveness, reliability and performance of solar PV systems compared to conventional and non-solar renewable energy sources and products; |
• | competing new technologies at more competitive prices than those we offer for our products; |
• | availability and amount of government subsidies and incentives to support the development and deployment of solar energy solutions; |
• | the extent of deregulation in the electric power industry and broader energy industries to permit broader adoption of solar electricity generation; |
• | prices of traditional carbon-based energy sources; |
• | levels of investment by end-users of solar energy products, which tend to decrease when economic growth slows; and |
• | the emergence, continuance or success of, or increased government support for, other alternative energy generation technologies and products. |
• | construction of a significant number of new power generation plants, including plants utilizing natural gas, nuclear, coal, renewable energy, or other generation technologies; |
• | relief of transmission constraints that enable local centers to generate energy less expensively; |
• | reductions in the price of natural gas, or alternative energy resources other than solar; |
• | utility rate adjustment and customer class cost reallocation; |
• | energy conservation technologies and public initiatives to reduce electricity consumption; |
• | development of smart-grid technologies that lower the peak energy requirements of a utility generation facility; |
• | development of new or lower-cost energy storage technologies that have the ability to reduce a customer’s average cost of electricity by shifting load to off-peak times; and |
• | development of new energy generation technologies that provide less expensive energy. |
If the value of the credit that customers receive for net metering is reduced, end-users may be unable to recognize the current level of cost savings associated with net metering. The absence of favorable net metering policies or of net metering entirely, or the imposition of new charges that only or disproportionately affect end-users that use net metering would significantly limit demand for our products and could have a material adverse effect on our business, financial condition, results of operations and future growth.
Existing electric utility industry regulations, and changes to regulations, may present technical, regulatory, and economic barriers to the purchase and use of solar PV systems that may significantly reduce demand for our products or harm our ability to compete. In addition, determinations of various regulatory bodies regarding lack of compliance with certifications or other regulatory requirements could harm our ability to sell our products in certain countries.
Federal, state, local and foreign government regulations and policies concerning the electric utility industry, and internal policies and regulations promulgated by electric utilities, heavily influence the market for electricity generation products and services, and could deter purchases of solar PV systems sold by our customers, significantly reducing the potential demand for our products. For example, utilities commonly charge fees to larger, industrial customers for disconnecting from the electric grid or for having the capacity to use power from the electric grid for back-up purposes. These fees could increase the cost to use solar PV systems sold by our customers and make them less desirable, thereby harming our business, prospects, financial condition and results of operations. In addition, depending on the region, electricity generated by solar PV systems competes most effectively with expensive peak-hour electricity from the electric grid, rather than the less expensive average price of electricity. Modifications to the utilities’ peak hour pricing policies or rate design, such as to a flat rate, could require the price of solar PV systems and their component parts to be lower in order to compete with the price of electricity from the electric grid.
Changes in current laws or regulations applicable to us or the imposition of new laws and regulations in the U.S., Europe, or other jurisdictions in which we do business could have a material adverse effect on our business, financial condition and results of operations. Any changes to government or internal utility regulations and policies that favor electric utilities could reduce the competitiveness of solar PV systems sold by our customers, and causing a significant reduction in demand for our products and services. In addition, changes in our products or changes in export and import laws and implementing regulations may delay the introduction of new products in international markets, prevent our customers from deploying our products internationally or, in some cases, prevent the export or import of our products to certain countries altogether, resulting in a material adverse effect on our business, financial condition, and results of operations.
Compliance with various regulatory requirements and standards is a prerequisite for placing our products on the market in most countries in which we do business. We have all such certifications but there are at times, challenges by local administrative telecommunications, consumer board or other authorities that can place sales bans on products. For example, in December 2021, the Swedish Electrical Safety Board announced that certain models of our power optimizers are subject to a sales ban alleging that they do not meet the EMC Directive. While we disagree with this finding and maintain our position that all current SolarEdge products are tested, approved and compliant with the EMC Directive and other EU regulations , any such rulings can have a negative impact on our business and reputation. In this specific incident, we have already begun transitioning into our next generation optimizers and do not expect any impact on our business in Sweden or elsewhere.
• | the addition or loss of significant customers; |
• | changes in laws or regulations applicable to our industry, products or services; |
• | speculation about our business in the press or the investment community; |
• | price and volume fluctuations in the overall stock market; |
• | volatility in the market price and trading volume of companies in our industry or companies that investors consider comparable; |
• | share price and volume fluctuations attributable to inconsistent trading levels of our shares; |
• | our ability to protect our intellectual property and other proprietary rights; |
• | sales of our common stock by us or our significant stockholders, officers and directors; |
• | the expiration of contractual lock-up agreements; |
• | success of competitive products or services; |
• | the public’s response to press releases or other public announcements by us or others, including our filings with the Securities and Exchange Commission (the “SEC”), announcements relating to litigation or significant changes to our key personnel; |
• | the effectiveness of our internal controls over financial reporting; |
• | changes in our capital structure, such as future issuances of debt or equity securities; |
• | our entry into new markets; |
• | tax developments in the U.S., Europe, or other markets; |
• | conversion of all or portion of the Notes; |
• | strategic actions by us or our competitors, such as acquisitions or restructurings; and |
• | changes in accounting principles. |
• | authorizing “blank check” preferred stock that our board of directors could issue to increase the number of outstanding shares to discourage a takeover attempt; |
• | providing for a classified board of directors with staggered, three-year terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors; |
• | not providing for cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; |
• | limiting the ability of stockholders to call a special stockholder meeting; |
• | prohibiting stockholders from acting by written consent; |
• | establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; |
• | the removal of directors only for cause and only upon the affirmative vote of the holders of at least 662/3% in voting power of all the then-outstanding shares of common stock of the Company entitled to vote thereon, voting together as a single class; |
• | providing that our board of directors is expressly authorized to amend, alter, rescind or repeal our by-laws; and |
• | requiring the affirmative vote of holders of at least 662/3% of the voting power of all of the then outstanding shares of common stock, voting as a single class, to amend provisions of our certificate of incorporation relating to the management of our business, our board of directors, stockholder action by written consent, advance notification of stockholder nominations and proposals, calling special meetings of stockholders, forum selection and the liability of our directors, or to amend, alter, rescind, or repeal our by-laws. |
![](https://www.sec.gov/Archives/edgar/data/0001419612/000117891322000760/sedg_img01.jpg)
Year ended December 31, | 2020 to 2021 | |||||||||||||||
2021 | 2020 | Change | ||||||||||||||
(In thousands) | ||||||||||||||||
Revenues | 1,963,865 | 1,459,271 | 504,594 | 34.6 | % | |||||||||||
Cost of revenues | 1,334,547 | 997,912 | 336,635 | 33.7 | % | |||||||||||
Gross profit | 629,318 | 461,359 | 167,959 | 36.4 | % | |||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 219,633 | 163,123 | 56,510 | 34.6 | % | |||||||||||
Sales and marketing | 119,000 | 95,985 | 23,015 | 24.0 | % | |||||||||||
General and administrative | 82,196 | 63,119 | 19,077 | 30.2 | % | |||||||||||
Other operating expenses (income), net | 1,350 | (3,429 | ) | 4,779 | (139.4 | )% | ||||||||||
Total operating expenses | 422,179 | 318,798 | 103,381 | 32.4 | % | |||||||||||
Operating income | 207,139 | 142,561 | 64,578 | 45.3 | % | |||||||||||
Financial income (expense), net | (19,915 | ) | 21,105 | (41,020 | ) | (194.4 | )% | |||||||||
Income before income taxes | 187,224 | 163,666 | 23,558 | 14.4 | % | |||||||||||
Income taxes | 18,054 | 23,344 | (5,290 | ) | (22.7 | )% | ||||||||||
Net income | 169,170 | 140,322 | 28,848 | 20.6 | % |
Year ended December 31, | 2020 to 2021 | |||||||||||||||
2021 | 2020 | Change | ||||||||||||||
(In thousands) | ||||||||||||||||
Revenues | 1,963,865 | 1,459,271 | 504,594 | 34.6 | % |
Year ended December 31, | 2020 to 2021 | |||||||||||||||
2021 | 2020 | Change | ||||||||||||||
(In thousands) | ||||||||||||||||
Cost of revenues | 1,334,547 | 997,912 | 336,635 | 33.7 | % | |||||||||||
Gross profit | 629,318 | 461,359 | 167,959 | 36.4 | % |
• | an increase in the volume of products sold and the increase in the cost of components used in the manufacturing of our products. |
• | an increase in warranty expenses and warranty accruals of $48.4 million associated primarily with an increased number of products in our install base. This increase was partially offset by various cost reductions on the different elements of our warranty expenses which include the cost of the products, shipment and other related expenses; |
• | a significant increase in shipment and logistic costs in an aggregate amount of $40.1 million due to (i) an increase in shipment rates; and (ii) an increase in volume shipped; |
• | an increase in personnel-related costs of $16.4 million related to the expansion of our production, operations, and support headcount which grew in parallel to our growing install base worldwide, the construction of our lithium-ion cell and battery factory in Korea, known as "Sella 2" and the increase in costs associated with the production of powertrain units manufactured by our SolarEdge e-Mobility division; and |
• | an increase in other production costs of $9.9 million, which is mainly attributed to charges from our contract manufacturers due to manufacturing disruptions related to Covid-19 lockdowns, increased logistics costs resulting from transportation disruptions and the mobilization of components among our different manufacturing sites. |
• | a decrease in custom duties of $25.5 million attributed to lower tariff charges due to the manufacture of a higher portion of our products for the U.S. outside of China; |
Year ended December 31, | 2020 to 2021 | |||||||||||||||
2021 | 2020 | Change | ||||||||||||||
(In thousands) | ||||||||||||||||
Research and development | 219,633 | 163,123 | 56,510 | 34.6 | % |
• | an increase in personnel-related costs of $48.5 million resulting from an increase in our research and development headcount as well as salary expenses associated with employee equity-based compensation. The increase in headcount reflects our continuing investment in enhancements of existing products as well as research and development expenses associated with bringing new products to the market; |
• | an increase in expenses related to overhead costs in an amount of $3.1 million; |
• | an increase in depreciation expenses of property and equipment in an amount of $3.0 million; and |
• | an increase in expenses related to material consumption in the manufacturing of prototypes during our development process in an amount of $2.9 million. |
• | an increase in reimbursement of costs, in an amount of $1.7 million, related to the research and development activities performed by SolarEdge e-Mobility; and |
• | a decrease in expenses related to consultants and sub-contractors in an amount of $1.0 million. |
Year ended December 31, | 2020 to 2021 | |||||||||||||||
2021 | 2020 | Change | ||||||||||||||
(In thousands) | ||||||||||||||||
Sales and marketing | 119,000 | 95,985 | 23,015 | 24.0 | % |
• | an increase in personnel-related costs of $18.4 million as a result of an increase in headcount supporting our growth in all geographies, as well as salary expenses associated with employee equity-based compensation; |
• | an increase in expenses related to marketing activities by $2.1 million due to the renewal of marketing activities, exhibitions and shows, which were cancelled or postponed in 2020 due to Covid-19 restrictions; and |
• | an increase in expenses related to consultants and sub-contractors in an amount of $1.1 million. |
Year ended December 31, | 2020 to 2021 | |||||||||||||||
2021 | 2020 | Change | ||||||||||||||
(In thousands) | ||||||||||||||||
General and administrative | 82,196 | 63,119 | 19,077 | 30.2 | % |
• | an increase in personnel-related costs of $16.6 million resulting from an increase in our general and administrative headcount, the reinstatement of executive management salaries that management voluntarily reduced in early 2020 to mitigate the potential effects of Covid-19, as well as salary expenses associated with employee equity-based compensation; and |
• | an increase of $2.6 million related to insurance and legal expenses. |
Year ended December 31, | 2020 to 2021 | |||||||||||||||
2021 | 2020 | Change | ||||||||||||||
(In thousands) | ||||||||||||||||
Other operating expenses (income), net | 1,350 | (3,429 | ) | 4,779 | (139.4 | )% |
• | a decrease in income in the amount of $4.9 million related to an acquired legal claim as part of the Kokam acquisition which was settled in arbitration in 2019 and subsequently repaid to the Company in 2020; and |
• | an increase of $2.1 million in expenses related to write-offs of tangible assets in our solar business, which we ceased using during the second quarter of 2021. |
• | an increase of $0.8 million in income related to a payment made to us from an escrow account with regards to a working capital adjustment in connection with the Kokam acquisition; and |
• | a decrease of $1.5 million in expenses related to write-offs of intangible assets of SolarEdge e-Mobility, which we ceased to use during 2020. |
Financial income (expenses), net
Year ended December 31, | 2020 to 2021 | |||||||||||||||
2021 | 2020 | Change | ||||||||||||||
(In thousands) | ||||||||||||||||
Financial income (expense), net | (19,915 | ) | 21,105 | (41,020 | ) | (194.4 | )% |
Year ended December 31, | 2020 to 2021 | |||||||||||||||
2021 | 2020 | Change | ||||||||||||||
(In thousands) | ||||||||||||||||
Income taxes | 18,054 | 23,344 | (5,290 | ) | (22.7 | )% |
• | an increase of $8.2 million in deferred tax income; and |
• | an increase of $6.1 million in prior years taxes income. |
Year ended December 31, | 2020 to 2021 | |||||||||||||||
2021 | 2020 | Change | ||||||||||||||
(In thousands) | ||||||||||||||||
Net income | 169,170 | 140,322 | 28,848 | 20.6 | % |
As a result of the factors discussed above, net income increased by $28.8 million, or 20.6% in 2021 as compared to 2020.
Year ended December 31, | ||||||||
2021 | 2020 | |||||||
(In thousands) | ||||||||
Net cash provided by operating activities | 214,129 | 222,655 | ||||||
Net cash used in investing activities | (484,211 | ) | (236,637 | ) | ||||
Net cash provided by (used in) financing activities | (15,178 | ) | 640,484 | |||||
Increase (decrease) in cash, cash equivalents and restricted cash | (285,260 | ) | 626,502 |
(1) | An initial qualitative assessment may be performed to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. |
(2) | If the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying mount, a quantitative fair value test is performed. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized. |
Consolidated Financial Statements
|
|
F-2 | |
F-5
|
|
F-7
|
|
F-8
|
|
F-9
|
|
F-11
|
|
F-13
|
Description of the Matter
|
As described in Notes 2u and 12 to the consolidated financial statements, as of December 31, 2021, the warranty obligation was $265,160 thousand.
Substantially all of the Company's warranty obligations are related to the solar business. The calculation of such warranty obligations requires significant judgment due to the inherent complexity in estimating the amount and timing of future warranty costs. The Company's products include a warranty of up to 12 years for inverters and up to 25 years for its power optimizers. In order to predict the failure rate of each product, the Company established a reliability model based on the estimated mean time between failures ("MTBF") and an additional model to capture non-systematic failures. Predicted failure rates are updated periodically based on new product versions and analysis of the root cause of actual failures, as are warranty related replacement costs.
Auditing the management’s valuation of warranty obligations was complex and subject to judgment calls due to the significant estimation required in determining its amount. In particular, the warranty obligation is subject to significant assumptions such as product failure rates, the average cost of products
|
How We Addressed the Matter in Our Audit
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the accounting for warranties, including management's assumptions and data underlying the warranty obligation valuation.
Our substantive audit procedures included, among others, look back analyses and testing the accuracy and completeness of the underlying data used in management's warranty obligation valuation assessment. We assessed the accuracy of historical data used in estimating forecasted failure rates, repair replacement ratios and other warranty related costs and compared them to actual warranty claims. In addition, we involved a specialist to assess the assumptions and the precision of the inputs underlying the MTBF model, including, evaluating the appropriateness of the MTBF model and its consistency with data obtained from external sources.
|
December 31,
|
||||||||
2021
|
2020
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
530,089
|
$
|
827,146
|
||||
Marketable securities
|
167,728
|
143,687
|
||||||
Trade receivables, net of allowances of $2,626 and $2,886, respectively
|
456,339
|
218,706
|
||||||
Inventories, net
|
380,143
|
331,696
|
||||||
Prepaid expenses and other current assets
|
176,992
|
198,106
|
||||||
Total current assets
|
1,711,291
|
1,719,341
|
||||||
LONG-TERM ASSETS:
|
||||||||
Marketable securities
|
482,228
|
147,434
|
||||||
Deferred tax assets, net
|
27,572
|
11,676
|
||||||
Property, plant and equipment, net
|
410,379
|
303,408
|
||||||
Operating lease right-of-use assets, net
|
47,137
|
41,600
|
||||||
Intangible assets, net
|
58,861
|
67,818
|
||||||
Goodwill
|
129,629
|
140,479
|
||||||
Other long-term assets
|
24,963
|
5,353
|
||||||
Total long-term assets
|
1,180,769
|
717,768
|
||||||
Total assets
|
$
|
2,892,060
|
$
|
2,437,109
|
December 31,
|
||||||||
2021
|
2020
|
|||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Trade payables, net
|
$
|
252,068
|
$
|
162,051
|
||||
Employees and payroll accruals
|
74,465
|
63,738
|
||||||
Warranty obligations
|
71,480
|
62,614
|
||||||
Deferred revenues and customers advances
|
17,789
|
24,648
|
||||||
Accrued expenses and other current liabilities
|
109,379
|
123,048
|
||||||
Total current liabilities
|
525,181
|
436,099
|
||||||
LONG-TERM LIABILITIES:
|
||||||||
Convertible senior notes, net
|
621,535
|
573,350
|
||||||
Warranty obligations
|
193,680
|
142,380
|
||||||
Deferred revenues
|
151,556
|
115,372
|
||||||
Finance lease liabilities
|
40,508
|
26,173
|
||||||
Operating lease liabilities
|
38,912
|
35,194
|
||||||
Other long-term liabilities
|
10,649
|
22,784
|
||||||
Total long-term liabilities
|
1,056,840
|
915,253
|
||||||
COMMITMENTS AND CONTINGENT LIABILITIES
|
||||||||
STOCKHOLDERS’ EQUITY:
|
||||||||
Common stock of $0.0001 par value - Authorized: 125,000,000 shares as of December 31, 2021 and December 31, 2020; issued and outstanding: 52,815,395 and 51,560,936 shares as of December 31, 2021 and December 31, 2020, respectively
|
5
|
5
|
||||||
Additional paid-in capital
|
687,295
|
603,891
|
||||||
Accumulated other comprehensive income (loss)
|
(27,319
|
)
|
3,857
|
|||||
Retained earnings
|
650,058
|
478,004
|
||||||
Total stockholders’ equity
|
1,310,039
|
1,085,757
|
||||||
Total liabilities and stockholders’ equity
|
$
|
2,892,060
|
$
|
2,437,109
|
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Revenues
|
$
|
1,963,865
|
$
|
1,459,271
|
$
|
1,425,660
|
||||||
Cost of revenues
|
1,334,547
|
997,912
|
946,322
|
|||||||||
Gross profit
|
629,318
|
461,359
|
479,338
|
|||||||||
Operating expenses:
|
||||||||||||
Research and development
|
219,633
|
163,123
|
121,351
|
|||||||||
Sales and marketing
|
119,000
|
95,985
|
87,984
|
|||||||||
General and administrative
|
82,196
|
63,119
|
49,361
|
|||||||||
Other operating expenses (income), net
|
1,350
|
(3,429
|
)
|
30,696
|
||||||||
Total operating expenses
|
422,179
|
318,798
|
289,392
|
|||||||||
Operating income
|
207,139
|
142,561
|
189,946
|
|||||||||
Financial income (expense), net
|
(19,915
|
)
|
21,105
|
(11,343
|
)
|
|||||||
Income before income taxes
|
187,224
|
163,666
|
178,603
|
|||||||||
Income taxes
|
18,054
|
23,344
|
33,646
|
|||||||||
Net income
|
$
|
169,170
|
$
|
140,322
|
$
|
144,957
|
||||||
Net loss attributable to Non-controlling interests
|
-
|
-
|
1,592
|
|||||||||
Net income attributable to SolarEdge Technologies, Inc.
|
$
|
169,170
|
$
|
140,322
|
$
|
146,549
|
||||||
Net basic earnings per share of common stock
|
$
|
3.24
|
$
|
2.79
|
$
|
3.06
|
||||||
Net diluted earnings per share of common stock
|
$
|
3.06
|
$
|
2.66
|
$
|
2.90
|
||||||
Weighted average number of shares used in computing net basic earnings per share of common stock
|
52,202,182
|
50,217,330
|
47,918,938
|
|||||||||
Weighted average number of shares used in computing net diluted earnings per share of common stock
|
55,971,030
|
52,795,475
|
50,195,661
|
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Net income
|
$
|
169,170
|
$
|
140,322
|
$
|
144,957
|
||||||
Other comprehensive income (loss), net of tax:
|
||||||||||||
Net change related to available-for-sale securities
|
(4,949
|
)
|
(24
|
)
|
920
|
|||||||
Net change related to cash flow hedges
|
874
|
-
|
-
|
|||||||||
Foreign currency translation adjustments on intra-entity transactions that are of a long-term investment nature
|
(17,420
|
)
|
-
|
-
|
||||||||
Foreign currency translation adjustments, net
|
(9,681
|
)
|
5,690
|
(2,205
|
)
|
|||||||
Total other comprehensive income (loss)
|
(31,176
|
)
|
5,666
|
(1,285
|
)
|
|||||||
Comprehensive income
|
$
|
137,994
|
$
|
145,988
|
$
|
143,672
|
||||||
Comprehensive loss attributable to Non-controlling interests
|
-
|
-
|
981
|
|||||||||
Comprehensive income attributable to SolarEdge Technologies, Inc.
|
$
|
137,994
|
$
|
145,988
|
$
|
144,653
|
SolarEdge Technologies, Inc. Stockholders’ Equity
|
||||||||||||||||||||||||||||||||
Common stock
|
Additional paid in
Capital
|
Accumulated
Other comprehensive
Income (loss)
|
Retained earnings
|
Total
|
Non-controlling
interests
|
Total stockholders' equity
|
||||||||||||||||||||||||||
Number
|
Amount
|
|||||||||||||||||||||||||||||||
Balance as of December 31,2018
|
46,052,802
|
$
|
5
|
$
|
371,794
|
$
|
(524
|
)
|
$
|
191,133
|
$
|
562,408
|
$
|
8,318
|
$
|
570,726
|
||||||||||||||||
Issuance of Common Stock upon exercise of employees and non-employees stock-based awards
|
1,691,896
|
* -
|
3,498
|
-
|
-
|
3,498
|
-
|
3,498
|
||||||||||||||||||||||||
Issuance of Common stock under employees stock purchase plan
|
142,713
|
* -
|
5,568
|
-
|
-
|
5,568
|
-
|
5,568
|
||||||||||||||||||||||||
Equity based compensation expenses to employees and non-employees
|
-
|
-
|
60,353
|
-
|
-
|
60,353
|
-
|
60,353
|
||||||||||||||||||||||||
Treasury Stock
|
(183,395
|
)
|
* -
|
(2
|
)
|
-
|
-
|
(2
|
)
|
-
|
(2
|
)
|
||||||||||||||||||||
Issuance of Common stock upon business combination
|
1,194,046
|
* -
|
34,601
|
-
|
-
|
34,601
|
-
|
34,601
|
||||||||||||||||||||||||
Non-controlling interests related to business
combination
|
-
|
-
|
-
|
-
|
-
|
-
|
67,734
|
67,734
|
||||||||||||||||||||||||
Change in non-controlling interests
|
-
|
-
|
(20
|
)
|
-
|
-
|
(20
|
)
|
(73,479
|
)
|
(73,499
|
)
|
||||||||||||||||||||
Other comprehensive loss adjustments
|
-
|
-
|
-
|
(1,285
|
)
|
-
|
(1,285
|
)
|
(981
|
)
|
(2,266
|
)
|
||||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
146,549
|
146,549
|
(1,592
|
)
|
144,957
|
|||||||||||||||||||||||
Balance as of December 31, 2019
|
48,898,062
|
$
|
5
|
$
|
475,792
|
$
|
(1,809
|
)
|
$
|
337,682
|
$
|
811,670
|
$
|
-
|
$
|
811,670
|
||||||||||||||||
Issuance of Common Stock upon exercise of employee and non-employees stock-based awards
|
2,579,004
|
* -
|
16,671
|
-
|
-
|
16,671
|
-
|
16,671
|
||||||||||||||||||||||||
Issuance of Common stock under employee stock purchase plan
|
83,870
|
* -
|
7,783
|
-
|
-
|
7,783
|
-
|
7,783
|
||||||||||||||||||||||||
Equity based compensation expenses to employees and non-employees
|
-
|
-
|
67,309
|
-
|
-
|
67,309
|
-
|
67,309
|
||||||||||||||||||||||||
Equity component of convertible senior notes, net
|
-
|
-
|
36,336
|
-
|
-
|
36,336
|
-
|
36,336
|
||||||||||||||||||||||||
Other comprehensive loss adjustments
|
-
|
-
|
-
|
5,666
|
-
|
5,666
|
-
|
5,666
|
||||||||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
140,322
|
140,322
|
-
|
140,322
|
||||||||||||||||||||||||
Balance as of December 31, 2020
|
51,560,936
|
$
|
5
|
$
|
603,891
|
$
|
3,857
|
$
|
478,004
|
$
|
1,085,757
|
$
|
-
|
$
|
1,085,757
|
F - 9
SolarEdge Technologies, Inc. Stockholders’ Equity
|
||||||||||||||||||||||||||||||||
Common stock
|
Additional paid in
Capital
|
Accumulated
Other comprehensive
Income (loss)
|
Retained earnings
|
Total
|
Non-controlling
interests
|
Total stockholders' equity
|
||||||||||||||||||||||||||
Number
|
Amount
|
|||||||||||||||||||||||||||||||
Balance as of December 31, 2020
|
51,560,936
|
$
|
5
|
$
|
603,891
|
$
|
3,857
|
$
|
478,004
|
$
|
1,085,757
|
$
|
-
|
$
|
1,085,757
|
|||||||||||||||||
Cumulative effect of adopting ASU 2020-06
|
-
|
-
|
(36,336
|
)
|
-
|
2,884
|
(33,452
|
)
|
-
|
(33,452
|
)
|
|||||||||||||||||||||
Issuance of Common Stock upon exercise of employee and non-employees stock-based awards
|
1,204,861
|
* -
|
6,486
|
-
|
-
|
6,486
|
-
|
6,486
|
||||||||||||||||||||||||
Issuance of Common stock under employee stock purchase plan
|
49,598
|
* -
|
10,661
|
-
|
-
|
10,661
|
-
|
10,661
|
||||||||||||||||||||||||
Equity based compensation expenses to employees and non-employees
|
-
|
-
|
102,593
|
-
|
-
|
102,593
|
-
|
102,593
|
||||||||||||||||||||||||
Other comprehensive income adjustments
|
-
|
-
|
-
|
(31,176
|
)
|
-
|
(31,176
|
)
|
-
|
(31,176
|
)
|
|||||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
169,170
|
169,170
|
-
|
169,170
|
||||||||||||||||||||||||
Balance as of December 31, 2021
|
52,815,395
|
$
|
5
|
$
|
687,295
|
$
|
(27,319
|
)
|
$
|
650,058
|
$
|
1,310,039
|
$
|
-
|
$
|
1,310,039
|
F - 10
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Cash flows provided by operating activities:
|
||||||||||||
Net income
|
$
|
169,170
|
$
|
140,322
|
$
|
144,957
|
||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation of property, plant and equipment
|
29,359
|
22,355
|
17,261
|
|||||||||
Amortization of intangible assets
|
10,176
|
9,479
|
9,634
|
|||||||||
Amortization of debt discount and debt issuance costs
|
2,903
|
3,185
|
-
|
|||||||||
Amortization of premium and accretion of discount on available-for-sale marketable securities, net
|
9,462
|
1,168
|
92
|
|||||||||
Stock-based compensation expenses
|
102,593
|
67,309
|
60,353
|
|||||||||
Deferred income taxes, net
|
(12,045
|
)
|
(2,738
|
)
|
(6,037
|
)
|
||||||
Exchange rate fluctuations and other items, net
|
20,697
|
3,860
|
8,174
|
|||||||||
Changes in assets and liabilities:
|
||||||||||||
Inventories, net
|
(43,051
|
)
|
(149,661
|
)
|
(22,544
|
)
|
||||||
Prepaid expenses and other assets
|
(39,444
|
)
|
(3,276
|
)
|
(67,323
|
)
|
||||||
Trade receivables, net
|
(247,723
|
)
|
86,538
|
(124,071
|
)
|
|||||||
Trade payables, net
|
91,709
|
3,333
|
47,837
|
|||||||||
Employees and payroll accruals
|
26,519
|
18,315
|
18,592
|
|||||||||
Warranty obligations
|
60,524
|
32,274
|
50,780
|
|||||||||
Deferred revenues and customers advances
|
29,936
|
(21,438
|
)
|
83,137
|
||||||||
Other liabilities, net
|
3,344
|
11,630
|
38,158
|
|||||||||
Net cash provided by operating activities
|
214,129
|
222,655
|
259,000
|
|||||||||
Cash flows from investing activities:
|
||||||||||||
Investment in available-for-sale marketable securities
|
(579,377
|
)
|
(223,705
|
)
|
(160,054
|
)
|
||||||
Proceed from sales and maturities of available-for-sale marketable securities
|
202,188
|
141,839
|
142,744
|
|||||||||
Investment in privately-held company
|
(16,643
|
)
|
-
|
-
|
||||||||
Purchase of property, plant and equipment
|
(149,251
|
)
|
(126,790
|
)
|
(72,562
|
)
|
||||||
Withdrawal from (investment in) bank deposits, net
|
60,096
|
(54,752
|
)
|
4,860
|
||||||||
Withdrawal from (investment in) restricted bank deposits, net
|
798
|
25,267
|
(26,145
|
)
|
||||||||
Business combinations, net of cash acquired
|
-
|
-
|
(38,435
|
)
|
||||||||
Other investing activities
|
(2,022
|
)
|
1,504
|
(3,261
|
)
|
|||||||
Net cash used in investing activities
|
$
|
(484,211
|
)
|
$
|
(236,637
|
)
|
$
|
(152,853
|
)
|
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Cash flows from financing activities:
|
||||||||||||
Repayment of bank loans
|
$
|
(16,073
|
)
|
$
|
(15,595
|
)
|
$
|
(9,514
|
)
|
|||
Proceeds from exercise of stock-based awards and payment of withholding taxes
|
2,203
|
21,500
|
9,066
|
|||||||||
Proceeds from issuance of convertible senior notes, net
|
-
|
617,869
|
-
|
|||||||||
Proceeds from bank loans
|
-
|
16,944
|
249
|
|||||||||
Change in non-controlling interests
|
-
|
-
|
(71,468
|
)
|
||||||||
Other financing activities
|
(1,308
|
)
|
(234
|
)
|
(1,354
|
)
|
||||||
Net cash provided by (used in) financing activities
|
(15,178
|
)
|
640,484
|
(73,021
|
)
|
|||||||
Increase (decrease) in cash and cash equivalents
|
(285,260
|
)
|
626,502
|
33,126
|
||||||||
Cash and cash equivalents at the beginning of the period
|
827,146
|
223,901
|
187,764
|
|||||||||
Effect of exchange rate differences on cash and cash equivalents
|
(11,797
|
)
|
(23,257
|
)
|
3,011
|
|||||||
Cash and cash equivalents at the end of the period
|
$
|
530,089
|
$
|
827,146
|
$
|
223,901
|
||||||
Supplemental disclosure of non-cash activities:
|
||||||||||||
Right-of-use asset recognized with corresponding lease liability
|
$
|
20,526
|
$
|
29,623
|
$
|
37,298
|
||||||
Issuance of common stock upon business combination
|
$
|
-
|
$
|
-
|
$
|
34,601
|
||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid for income taxes
|
$
|
45,977
|
$
|
38,990
|
$
|
41,076
|
||||||
Cash paid for interest on bank loans
|
$
|
36
|
$
|
321
|
$
|
1,096
|
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 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.
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”), uninterrupted power supply solutions or UPS (“Critical power”), as well as automated machines for industrial use (“Automation Machines”).
F - 13
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
F - 14
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
Under ASU 2016-01, the Company adjusts the carrying value of its investments to fair value upon observable transactions for identical or similar investments of the same issuer.
F - 15
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
Year Ended
December 31, 2021
|
||||
Balance, at beginning of the period
|
$
|
2,886
|
||
Decrease in provision for expected credit losses
|
(142
|
)
|
||
Amounts written off charged against the allowance and others
|
(118
|
)
|
||
Balance, at end of the period
|
$
|
2,626
|
%
|
||
Buildings and plants
|
2.5-5.7 (mainly 5.4)
|
|
Computers and peripheral equipment
|
14.3-33.3 (mainly 33.3)
|
|
Office furniture and equipment
|
7-25 (mainly 7)
|
|
Machinery and equipment
|
10-20 (mainly 10)
|
|
Laboratory and testing equipment
|
7-20 (mainly 10)
|
|
Leasehold improvements
|
over the shorter of the lease term or useful economic life
|
F - 16
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
For the years ended December 31, 2021, 2020 and 2019, no impairment losses have been identified.
F - 17
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
(1) An initial qualitative assessment may be performed to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. |
|
(2) If the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative fair value test is performed. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized. |
F - 18
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
F - 19
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
F - 20
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
F - 21
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
F - 22
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
F - 23
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
F - 24
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Employee Stock Options
|
||||||||||||
Risk-free interest
|
0.43
|
% |
1.73
|
% |
2.53
|
% | ||||||
Dividend yields
|
0
|
% |
0
|
% |
0
|
% | ||||||
Volatility
|
60.74
|
% |
58.98
|
% |
56.26
|
% | ||||||
Expected option term in years
|
5.48
|
6.00
|
6.03
|
|||||||||
Estimated forfeiture rate
|
0
|
% |
0
|
% |
0
|
% | ||||||
ESPP
|
||||||||||||
Risk-free interest
|
0.03% - 0.10
|
% |
0.09% - 1.63
|
% |
1.63% - 2.35
|
% | ||||||
Dividend yields
|
0
|
% |
0
|
% |
0
|
% | ||||||
Volatility
|
48.39% - 76.05
|
% |
55.95% - 92.57
|
% |
46.68% - 55.95
|
% | ||||||
Expected term
|
6 months
|
6 months
|
6 months
|
F - 25
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
F - 26
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
NOTE 3: MARKETABLE SECURITIES
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
|
Amortized cost
|
Gross unrealized gains
|
Gross unrealized losses
|
Fair value
|
|||||||||||||
Available-for-sale – matures within one year:
|
||||||||||||||||
Corporate bonds
|
$
|
141,824
|
$
|
509
|
$
|
(57
|
)
|
$
|
142,276
|
|||||||
Governmental bonds
|
1,400
|
11
|
-
|
1,411
|
||||||||||||
143,224
|
520
|
(57
|
)
|
143,687
|
||||||||||||
Available for-sale – matures after one year:
|
||||||||||||||||
Corporate bonds
|
142,701
|
65
|
(214
|
)
|
142,552
|
|||||||||||
Governmental bonds
|
4,895
|
-
|
(13
|
)
|
4,882
|
|||||||||||
147,596
|
65
|
(227
|
)
|
147,434
|
||||||||||||
Total
|
$
|
290,820
|
$
|
585
|
$
|
(284
|
)
|
$
|
291,121
|
Proceeds from maturity of available-for-sale marketable securities during the years ended December 31, 2021, 2020 and 2019, were $187,375, $141,839 and $120,834, respectively.
Proceeds from sales of available-for-sale marketable securities during the year ended December 31, 2021 were $14,813, which led to realized losses of $16.
The Company had no proceeds from sales of available-for sale, marketable securities during the year ended December 31, 2020, therefore no realized gains or losses from the sale of available-for-sale marketable securities were recognized.
Proceeds from sales of available-for-sale marketable securities during the year ended December 31, 2019 were $21,910, which led to realized losses of $91.
F - 27
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
NOTE 4: INVENTORIES, NET
|
As of December 31, | |||||||
|
2021 |
2020 |
||||||
Raw materials |
$ | 247,386 | $ | 128,363 | ||||
Work in process |
13,863 | 25,461 | ||||||
Finished goods |
118,894 | 177,872 | ||||||
|
$ | 380,143 | $ | 331,696 |
The Company recorded inventory write-downs of $7,142, $8,864 and $4,528 for the years ended December 31, 2021, 2020 and 2019, respectively.
NOTE 5: PREPAID EXPENSES AND OTHER CURRENT ASSETS
As of December 31, |
||||||||
2021 |
2020 |
|||||||
Vendor non-trade receivables (*) |
$ |
71,041 |
$ |
56,617 |
||||
Government authorities |
63,440 |
50,041 |
||||||
Bank deposits | - | 60,096 | ||||||
Prepaid expenses and other |
42,511 |
31,352 |
||||||
$ |
176,992 |
$ |
198,106 |
(*) 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 (see also Note 18b).
|
|
As of December 31,
|
|
|||||
|
|
2021
|
|
|
2020
|
|
||
Cost:
|
|
|
|
|
|
|
||
Land
|
|
$
|
13,829
|
|
|
$
|
17,935
|
|
Buildings and plants
|
|
|
62,519
|
|
|
|
49,855
|
|
Computers and peripheral equipment
|
|
|
44,960
|
|
|
|
37,354
|
|
Office furniture and equipment
|
|
|
10,772
|
|
|
|
8,639
|
|
Laboratory and testing equipment
|
|
|
41,365
|
|
|
|
29,733
|
|
Machinery and equipment
|
|
|
201,406
|
|
|
|
183,512
|
|
Leasehold improvements
|
|
|
73,991
|
|
|
|
48,610
|
|
Assets under construction and payments on account
|
|
|
112,037
|
|
|
|
48,344
|
|
Gross property, plant and equipment
|
|
|
560,879
|
|
|
|
423,982
|
|
Less - accumulated depreciation
|
|
|
150,500
|
|
|
|
120,574
|
|
Total property, plant and equipment, net
|
|
$
|
410,379
|
|
|
$
|
303,408
|
|
F - 28
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
NOTE 7: LEASES
The following table summarizes the Company’s lease-related assets and liabilities recorded on the consolidated balance sheets:
Description |
Classification on the consolidated Balance Sheet |
2021 |
2020 |
|||||||
Assets: |
||||||||||
Operating lease assets, net of lease incentive obligation |
Operating lease right-of use assets, net |
$ |
47,137 |
$ |
41,600 |
|||||
Finance lease assets |
Property, plant and equipment, net |
41,758 |
28,551 |
|||||||
Total lease assets |
$ |
88,895 |
$ |
70,151 |
||||||
Liabilities: |
||||||||||
Operating leases short term |
Accrued expenses and other current liabilities |
$ |
12,728 |
$ |
10,994 |
|||||
Finance leases short term |
Accrued expenses and other current liabilities |
1,875 |
1,686 |
|||||||
Operating leases long term |
Operating lease liabilities |
38,912 |
35,194 |
|||||||
Finance leases long term |
Finance lease liabilities |
40,508 |
26,173 |
|||||||
Total lease liabilities |
$ |
94,023 |
$ |
74,047 |
The following table presents certain information related to the operating and finance leases:
Year ended December 31, |
||||||||
2021 |
2020 |
|||||||
Finance leases: |
||||||||
Finance lease cost |
$ |
2,065 |
$ |
198 |
||||
Weighted average remaining lease term in years |
16.43 |
16.75 |
||||||
Weighted average annual discount rate |
1.93 |
% |
1.49 |
% |
||||
Operating leases: |
||||||||
Operating lease cost |
$ |
14,890 |
$ |
12,741 |
||||
Weighted average remaining lease term in years |
10.25 |
9.94 |
||||||
Weighted average annual discount rate |
1.68 |
% |
1.68 |
% |
The following table presents supplemental cash flows information related to the lease costs for operating and finance leases:
|
Year ended December 31, |
|||||||
|
2021 |
2020 |
||||||
Cash paid for amounts included in measurement of lease liabilities: |
|
|||||||
Operating cash flows for operating leases |
$ |
14,890 |
$ |
12,741 |
||||
Operating cash flows for finance leases |
$ |
523 |
$ |
72 |
||||
Financing cash flows for finance leases |
$ |
1,293 |
$ |
234 |
F - 29
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
The following table reconciles the undiscounted cash flows for each of the first five years and the total of the remaining years of the operating and finance lease liabilities recorded on the consolidated balance sheets:
Operating Leases |
Finance Leases |
|||||||
2022 |
$ |
13,332 |
$ |
2,749 |
||||
2023 |
11,495 |
2,749 |
||||||
2024 |
6,512 |
2,798 |
||||||
2025 |
3,671 |
2,945 |
||||||
2026 |
2,416 |
2,945 |
||||||
Thereafter |
|
19,968 |
|
36,509 |
||||
Total lease payments |
$ |
57,394 |
$ |
50,695 |
||||
Less amount of lease payments representing interest |
|
(5,754 |
) |
|
(8,312 |
) |
||
Present value of future lease payments |
$ |
51,640 |
$ |
42,383 |
||||
Less current lease liabilities |
|
(12,728 |
) |
|
(1,875 |
) |
||
Long-term lease liabilities |
$ |
38,912 |
$ |
40,508 |
F - 30
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
NOTE 8: INTANGIBLE ASSETS AND GOODWILL, NET
a. |
Intangible assets:
|
|
As of December 31, |
|||||||
|
2021 |
2020 |
||||||
Intangible assets with finite lives: |
|
|
|
|
||||
Current Technology |
$ |
74,976 |
$ |
78,375 |
||||
Customer relationships |
|
3,946 |
|
4,227 |
||||
Trade names |
|
3,929 |
|
4,280 |
||||
Assembled workforce |
|
3,575 |
|
- |
||||
Patents |
|
1,400 |
|
1,400 |
||||
Gross intangible assets |
|
87,826 |
|
88,282 |
||||
Less - accumulated amortization |
|
(28,965 |
)
|
|
(20,464 |
)
|
||
Total intangible assets, net |
$ |
58,861 |
$ |
67,818 |
Amortization expenses for the years ended December 31, 2021, 2020 and 2019, were $10,176, $9,479 and $9,634, respectively.
Expected future amortization expenses of intangible assets as of December 31, 2021 are as follows:
2022 |
|
10,755 |
||
2023 |
|
10,741 |
||
2024 |
|
10,176 |
||
2025 |
|
9,142 |
||
2026 |
|
8,356 |
||
2027 and thereafter |
|
9,691 |
||
|
|
58,861 |
b. |
Goodwill:
|
|
|
Solar |
|
|
All other |
|
|
Total |
|
|||
Goodwill at December 31, 2019 |
|
$ |
31,265 |
|
|
$ |
98,389 |
|
|
$ |
129,654 |
|
Changes during the year: |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency adjustments |
|
|
1,990 |
|
|
|
8,835 |
|
|
|
10,825 |
|
Goodwill at December 31, 2020 |
|
|
33,255 |
|
|
|
107,224 |
|
|
|
140,479 |
|
Changes during the year: |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency adjustments |
|
|
(2,750 |
) |
|
|
(8,100 |
) |
|
|
(10,850 |
) |
Goodwill at December 31, 2021 |
|
$ |
30,505 |
|
|
$ |
99,124 |
|
|
$ |
129,629 |
|
F - 31
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
NOTE 9: 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 without readily determinable fair values.
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 that does not have readily determinable fair values. As such, 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.
No impairment or other adjustments related to observable price changes in orderly transactions for identical or similar investments were identified for the year ended December 31, 2021.
NOTE 10: DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
As of December 31, 2021, the Company entered into forward contracts to sell U.S. dollars for NIS in the amount of $64,997.
As of December 31, 2021, the Company entered into forward contracts to sell Australian dollars (“AUD”) for U.S. dollars in the amount of AUD 18 million.
As of December 31, 2021, the Company entered into forward contracts and put and call options to buy and sell Euro for U.S. dollars in the amount of €24.5 million and €9 million, respectively.
As of December 31, 2021, the Company entered into forward contracts to sell U.S. dollars for South Korean Won in the amount of $40,000.
The fair value of derivative assets as of December 31, 2021, and 2020 was $4,009 and $3,786, which were recorded in prepaid expenses and other current assets in the Consolidated Balance Sheets, respectively.
The fair value of derivative liabilities as of December 31, 2021, and 2020 was $169 and $5,819, which was recorded in accrued expenses and other current liabilities in the Consolidated Balance Sheets, respectively.
For the years ended December 31, 2021 and 2020 Company recorded a gain and a loss in the amount of $9,417 and $4,013, respectively, in financial (expense) income, net, related to the derivative instruments not designated as cash flow hedges (see Note 23).
For the years ended December 31, 2021 and 2020, the Company recorded an unrealized gain in the amount of $3,289 and $966 net of tax effect, respectively, in “accumulated other comprehensive gain (loss)” related to the derivative assets designated as hedging instruments.
As of December 31, 2019 and for the year then ended, the Company had no derivative instruments.
F - 32
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
NOTE 11: 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.
|
Fair Value Hierarchy
|
Fair value measurements as
of December 31,
|
||||||||
Description
|
2021
|
2020
|
||||||||
Assets:
|
||||||||||
Cash equivalents:
|
||||||||||
Money market mutual funds
|
Level 1
|
$
|
21,680
|
$
|
480,673
|
|||||
Derivative instruments asset:
|
||||||||||
Forward contracts designated as hedging instruments
|
Level 2
|
$
|
992
|
$
|
-
|
|||||
Options and forward contracts not designated as hedging instruments
|
Level 2
|
$
|
3,017
|
$
|
3,786
|
|||||
Short-term marketable securities:
|
||||||||||
Corporate bonds
|
Level 2
|
$
|
160,165
|
$
|
142,276
|
|||||
Governmental bonds
|
Level 2
|
$
|
7,563
|
$
|
1,411
|
|||||
Long-term marketable securities:
|
||||||||||
Corporate bonds
|
Level 2
|
$
|
468,841
|
$
|
142,552
|
|||||
Governmental bonds
|
Level 2
|
$
|
13,387
|
$
|
4,882
|
|||||
Liabilities
|
||||||||||
Derivative instruments liability:
|
||||||||||
Options and forward contracts not designated as hedging instruments
|
Level 2
|
$
|
(169
|
)
|
$
|
(5,819
|
)
|
F - 33
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
NOTE 12: WARRANTY OBLIGATIONS
Changes in the Company’s product warranty obligations for the years ended December 31, 2021 and 2020, were as follows:
December 31, |
||||||||
2021 |
2020 |
|||||||
Balance, at the beginning of the period |
$ |
204,994 |
$ |
172,563 |
||||
Additions and adjustments to cost of revenues |
150,684 |
102,832 |
||||||
Usage and current warranty expenses |
(90,518 |
) |
(70,401 |
) |
||||
Balance, at end of the period |
265,160 |
204,994 |
||||||
Less current portion |
(71,480 |
) |
(62,614 |
) |
||||
Long term portion |
$ |
193,680 |
$ |
142,380 |
NOTE 13: DEFERRED REVENUES
Deferred revenues consist of deferred cloud-based monitoring services, communication services, warranty extension services and advance payments received from customers for the Company’s products. Deferred revenues are classified as short-term and long-term deferred revenues based on the period in which revenues are expected to be recognized.
Significant changes in the balances of deferred revenues during the period are as follows:
December 31, |
||||||||
2021 |
2020 |
|||||||
Balance, at the beginning of the period |
$ |
140,020 |
$ |
160,797 |
||||
Revenue recognized |
(26,765 |
) |
(72,870 |
) |
||||
Increase in deferred revenues and customer advances |
56,089 |
52,093 |
||||||
Balance, at the end of the period |
169,344 |
140,020 |
||||||
Less current portion |
(17,788 |
) |
(24,648 |
) |
||||
Long term portion |
$ |
151,556 |
$ |
115,372 |
The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2021:
2022 |
$ |
17,788 |
||
2023 |
12,742 |
|||
2024 |
7,609 |
|||
2025 |
6,355 |
|||
2026 |
5,595 |
|||
Thereafter |
119,255 |
|||
Total deferred revenues |
$ |
169,344 |
F - 34
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
NOTE 14: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
|
As of December 31, | |||||||
|
2021 |
2020 |
||||||
Accrued expenses |
$ | 51,014 | $ | 47,757 | ||||
Government authorities |
22,631 | 26,218 | ||||||
Operating lease liabilities |
12,728 | 10,994 | ||||||
Provision for legal claims |
11,622 | 5,866 | ||||||
Loans and borrowings |
148 | 16,894 | ||||||
Other |
11,236 | 15,319 | ||||||
|
$ | 109,379 | $ | 123,048 |
NOTE 15: CONVERTIBLE SENIOR NOTES
On September 25, 2020, the Company sold $632,500 aggregate principal amount of its 0.00% convertible senior notes due 2025 (the “Notes”). The Notes were sold pursuant to an indenture, dated September 25, 2020 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”). The Notes do not bear regular interest and mature on September 15, 2025, unless earlier repurchased or converted in accordance with their terms. The Notes are general senior unsecured obligations of the Company.
Holders may convert their Notes prior to the close of business on the business day immediately preceding June 15, 2025 in multiples of $1,000 principal amount, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2020 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five-business-day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Notes for each trading day of that five consecutive trading day period was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events as described in the Indenture. In addition, holders may convert their Notes, in multiples of $1,000 principal amount, at their option at any time beginning on or after June 15, 2025, and prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date of the Notes, without regard to the foregoing circumstances. The initial conversion rate for the Notes was 3.5997 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $277.80 per share of common stock, subject to adjustment upon the occurrence of certain specified events as set forth in the Indenture.
Upon conversion, the Company may choose to pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock.
In addition, upon the occurrence of a fundamental change (as defined in the Indenture), holders of the Notes may require the Company to repurchase all or a portion of their Notes, in multiples of $1,000 principal amount, at a repurchase price of 100% of the principal amount of the Notes, plus any accrued and unpaid special interest, if any, to, but excluding, the repurchase date. If certain fundamental changes referred to as make-whole fundamental changes occur, the conversion rate for the Notes may be increased.
F - 35
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
The Convertible Senior Notes consisted of the following as of December 31, 2021 and 2020:
|
As of December 31, |
|||||||
2021 |
2020 |
|||||||
Liability: |
|
|
||||||
Principal |
$ |
632,500 |
$ |
632,500 |
||||
Unamortized debt discount |
- |
(46,353 |
) |
|||||
Unamortized issuance costs |
(10,965 |
)
|
(12,797 |
)
|
||||
Net carrying amount |
$ |
621,535 |
$ |
573,350 |
||||
Equity component: |
|
|
||||||
Amount allocated to conversion option |
$ |
- |
$ |
48,834 |
||||
Deferred taxes liability, net |
- |
(11,368 |
)
|
|||||
Allocated issuance costs |
- |
(1,130 |
)
|
|||||
Equity component, net |
$ |
- |
$ |
36,336 |
Effective January 1, 2021, the Company early adopted ASU 2020-06 using the modified retrospective approach (see Note 2v.)
As of December 31, 2021, the issuance costs of the Notes will be amortized over the remaining term of approximately 3.7 years.
The annual effective interest rate of the liability component following the adoption of ASU 2020-06 is 0.47%.
The following table presents the total amount of interest expenses recognized related to the Notes for the years ended December 31, 2021 and 2020:
|
Year ended December 31, |
|||||||
|
2021 |
|
2020 |
|||||
Amortization of debt discount
|
$ |
- |
|
$ |
2,480 |
|||
Amortization of debt issuance costs |
2,903 |
|
705 |
|||||
Total interest expenses |
$ |
2,903 |
|
$ |
3,185 |
As of December 31, 2021, the estimated fair value of the Notes, which the Company has classified as Level 2 financial instruments, is $811,327. The estimated fair value was determined based on the quoted bid price of the Notes in an over-the-counter market on the last trading day of the reporting period.
As of December 31, 2021, the if-converted value of the Notes exceeded the principal amount by $178,827.
NOTE 16: OTHER LONG TERM LIABILITIES
|
As of December 31, |
|||||||
|
2021 |
|
2020 |
|||||
Tax liabilities |
$ |
5,105 |
|
$ |
5,062 |
|||
Accrued severance pay |
|
1,739 |
|
1,561 |
||||
Deferred tax liability |
|
156 |
|
8,593 |
||||
Other |
|
3,649 |
|
7,568 |
||||
|
$ |
10,649 |
|
$ |
22,784 |
F - 36
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
a. |
Common stock rights:
|
b. |
Equity Incentive Plans:
|
F - 37
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
Number of options
|
Weighted average exercise price
|
Weighted average remaining contractual term in years
|
Aggregate intrinsic Value
|
|||||||||||||
Outstanding as of December 31, 2020
|
691,732
|
$
|
31.86
|
5.07
|
$
|
198,709
|
||||||||||
Granted
|
19,489
|
311.35
|
||||||||||||||
Exercised
|
(231,008
|
)
|
28.02
|
|||||||||||||
Forfeited or expired
|
(10,432
|
)
|
44.24
|
|||||||||||||
Outstanding as of December 31, 2021
|
469,781
|
$
|
45.07
|
5.25
|
$
|
111,236
|
||||||||||
Vested and expected to vest as of December 31, 2021
|
441,238
|
$
|
40.48
|
5.53
|
$
|
106,377
|
||||||||||
Exercisable as of December 31, 2021
|
373,664
|
$
|
29.58
|
5.16
|
$
|
93,897
|
Number of RSUs and PSUs |
Weighted average grant date fair value
|
|||||||
Unvested, at beginning of the period
|
2,216,841
|
$ |
103.79
|
|||||
Granted (1) |
703,039
|
278.03
|
||||||
Vested
|
(955,125
|
)
|
81.76
|
|||||
Forfeited
|
(125,804
|
)
|
136.71
|
|||||
Unvested, at end of the period
|
1,838,951
|
$ |
178.64
|
c. |
Employee Stock Purchase Plan:
|
F - 38
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
In accordance with ASC No. 718, the ESPP is compensatory and, as such, results in recognition of compensation cost.
d. |
Stock-based compensation expenses for employees and non-employees:
|
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Cost of revenues
|
$
|
18,743
|
$
|
11,082
|
$
|
6,964
|
||||||
Research and development
|
45,424
|
27,048
|
16,872
|
|||||||||
Selling and marketing
|
22,834
|
19,413
|
11,062
|
|||||||||
General and administrative
|
15,592
|
9,766
|
6,991
|
|||||||||
Other operating expenses
|
-
|
-
|
18,464
|
|||||||||
Total stock-based compensation expenses
|
$
|
102,593
|
$
|
67,309
|
$
|
60,353
|
F - 39
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
NOTE 18: COMMITMENTS AND CONTINGENT LIABILITIES
a. |
Guarantees:
|
As of December 31, 2021, contingent liabilities exist regarding guarantees in the amounts of $4,938 and $2,250 in respect of 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 and other purchase orders , which cannot be canceled without penalty. In addition, the Company acquires raw materials or other goods and services, including product components, by issuing authorizations to its suppliers to purchase materials based on its projected demand and manufacturing needs.
As of December 31, 2021, the Company had non-cancelable purchase obligations totaling approximately $1,428,766, out of which the Company recorded a provision for loss in the amount of $4,071.
As of December 31, 2021, the Company had contractual obligations for capital expenditures totaling approximately $168,528. These commitments reflect purchases of automated assembly lines and other machinery related to the Company’s manufacturing process as well as capital expenditures associated with the construction of Sella 2, the Company’s planned second lithium-ion cell and battery factory in Korea.
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. 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. SMA asserted a value in dispute of EUR 5.5 million (approximately $6,225) for both patents. The Company challenged the validity of both patents. With respect to one of the claims, in October 2020, the German Patent Court rendered the SMA patent invalid and this invalidity has been appealed by SMA. With respect to the other claim, in November 2019, the first instance court stayed the infringement proceedings since it considered it to be highly likely that the second SMA patent would also be rendered invalid. The Company believes that it has meritorious defenses to the claims asserted and intends to vigorously defend against the remaining 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 $8,199) 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.
As of December 31, 2021, accrued amounts for legal claims of $11,622 were recorded in accrued expenses and other current liabilities.
F - 40
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
NOTE 19: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of taxes, for the year ended December 31, 2021:
|
Unrealized gains (losses) on available-for-sale marketable securities |
Unrealized gains on cash flow hedges |
Foreign currency translation adjustments on intra-entity transactions that are of a long-term investment in nature |
Unrealized gains (losses) on foreign currency translation |
Total |
|||||||||||||||
Beginning balance |
$ | 240 | $ | - | $ | - | $ | 3,617 | $ | 3,857 | ||||||||||
Revaluation |
(6,283 | ) | 3,735 | (17,420 | ) | (9,681 | ) | (29,649 | ) | |||||||||||
Tax on revaluation |
|
1,346
|
|
(446
|
) |
|
-
|
|
-
|
|
900
|
|||||||||
Other comprehensive income (loss) before reclassifications |
(4,937 | ) | 3,289 | (17,420 | ) | (9,681 | ) | (28,749 | ) | |||||||||||
Reclassification |
(16 | ) | (2,742 | ) | - | - | (2,758 | ) | ||||||||||||
Tax on reclassification |
4 | 327 | - | - | 331 | |||||||||||||||
Losses reclassified from accumulated other comprehensive income |
(12 | ) | (2,415 | ) | - | - | (2,427 | ) | ||||||||||||
Net current period other comprehensive income (loss) |
(4,949 | ) | 874 | (17,420 | ) | (9,681 | ) | (31,176 | ) | |||||||||||
Ending balance |
$ | (4,709 | ) | $ | 874 | $ | (17,420 | ) | $ | (6,064 | ) | $ | (27,319 | ) |
F - 41
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
The following table summarizes the changes in accumulated balances of other comprehensive loss (loss), net of taxes, for the year ended December 31, 2020:
|
Unrealized gains (losses) on available-for-sale marketable securities |
Unrealized gains on cash flow hedges |
Foreign currency translation adjustments on intra-entity transactions that are of a long-term investment in nature |
Unrealized gains (losses) on foreign currency translation |
Total |
|||||||||||||||
Beginning balance |
$ | 264 | $ | - | $ | - | $ | (2,073 | ) | $ | (1,809 | ) | ||||||||
Revaluation |
45 | 1,101 | - | 5,690 | 6,836 | |||||||||||||||
Tax on revaluation |
(69 | ) | (135 | ) | - | (204 | ) | |||||||||||||
Other comprehensive income (loss) before reclassifications |
(24 | ) | 966 | - | 5,690 | 6,632 | ||||||||||||||
Reclassification |
- | (1,101 | ) | - | - | (1,101 | ) | |||||||||||||
Tax on reclassification |
- | 135 | - | - | 135 | |||||||||||||||
Losses reclassified from accumulated other comprehensive income |
- | (966 | ) | - | - | (966 | ) | |||||||||||||
Net current period other comprehensive income (loss) |
(24 | ) | - | - | 5,690 | 5,666 | ||||||||||||||
Ending balance |
$ |
240 |
$ |
- |
$ |
- |
$ |
3,617 |
$ |
3,857 |
F - 42
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of taxes, for the year ended December 31, 2019:
|
Unrealized gains (losses) on available-for-sale marketable securities |
Unrealized gains on cash flow hedges |
Foreign currency translation adjustments on intra-entity transactions that are of a long-term investment in nature |
Unrealized gains (losses) on foreign currency translation |
Total |
|||||||||||||||
Beginning balance |
$ | (656 | ) | $ | - | $ | - | $ | 132 | $ | (524 | ) | ||||||||
Revaluation |
1,034 | - | - | (2,205 | ) | (1,171 | ) | |||||||||||||
Tax on revaluation |
(205 | ) | - | - | - | (205 | ) | |||||||||||||
Other comprehensive income (loss) before reclassifications |
829 | - | - | (2,205 | ) | (1,376 | ) | |||||||||||||
Reclassification |
91 | - | - | - | 91 | |||||||||||||||
Tax on reclassification |
- | - | - | - | - | |||||||||||||||
Losses reclassified from accumulated other comprehensive income |
91 | - | - | - | 91 | |||||||||||||||
Net current period other comprehensive income (loss) |
920 | - | - | (2,205 | ) | (1,285 | ) | |||||||||||||
Ending balance |
$ | 264 | $ | - | $ | - | $ | (2,073 | ) | $ | (1,809 | ) |
F - 43
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
The following table provides details about reclassifications out of accumulated other comprehensive income (loss) for the years ended December 31, 2021, 2020 and 2019:
Details about Accumulated Other Comprehensive Income (Loss) Components |
Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | Affected Line Item in the Statement of Income |
|||||||||||||
|
2021 | 2020 | 2019 | ||||||||||||
Unrealized gains on available-for-sale marketable securities |
|||||||||||||||
|
$ | 16 |
$ |
- | $ | (91 | ) | Financial income (expenses), net | |||||||
|
(4 |
) |
- | - | Income taxes | ||||||||||
|
$ | 12 | - | $ | (91 | ) | Total, net of income taxes | ||||||||
Unrealized gains on cash flow hedges, net |
|||||||||||||||
|
333 | 189 | - | Cost of revenues | |||||||||||
|
1,645 | 623 | - | Research and development | |||||||||||
|
334 | 136 | - | Sales and marketing | |||||||||||
|
430 | 153 | - | General and administrative | |||||||||||
|
$ | 2,742 | $ | 1,101 | $ | - | Total, before income taxes | ||||||||
|
(327 | ) | (135 | ) | - | Income taxes | |||||||||
|
2,415 |
966 |
- | ||||||||||||
Total reclassifications for the period |
$ |
2,427 |
$ |
966 |
$ |
(91 |
) |
F - 44
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
NOTE 20: EARNINGS PER SHARE
The following table presents the computation of basic and diluted EPS attributable to SolarEdge Technologies Inc.:
|
Year ended December 31, |
|||||||||||
2021 |
2020 |
2019 |
||||||||||
Basic EPS: |
|
|
|
|
|
|
||||||
Numerator: |
|
|
|
|
|
|
||||||
Net income |
$ |
169,170 |
|
$ |
140,322 |
|
$ |
144,957 |
||||
Net loss attributable to Non-controlling interests |
|
- |
|
- |
|
1,592 |
||||||
|
|
169,170 |
|
140,322 |
|
146,549 |
||||||
Denominator: |
|
|
|
|
|
|
||||||
Shares used in computing net earnings per share of common stock, basic |
|
52,202,182 |
|
50,217,330 |
|
47,918,938 |
||||||
Diluted EPS: |
|
|
|
|
|
|
||||||
Numerator: |
|
|
|
|
|
|
||||||
Net income attributable to common stock, basic |
$ |
169,170 |
|
$ |
140,322 |
|
$ |
144,957 |
||||
Net loss attributable to Non-controlling interests |
|
- |
|
- |
|
1,592 |
||||||
Undistributed earnings reallocated to non-vested stockholders |
|
- |
|
- |
|
(906 |
) | |||||
Notes due 2025 |
|
2,134 |
|
- |
|
- |
||||||
Net income attributable to common stock, diluted |
$ |
171,304 |
|
$ |
140,322 |
|
$ |
145,643 |
||||
Denominator: |
|
|
|
|
|
|
||||||
Shares used in computing net earnings per share of common stock, basic |
|
52,202,182 |
|
50,217,330 |
|
47,918,938 |
||||||
Non-vested PSUs |
|
- |
|
- |
|
(312,128 |
) | |||||
Notes due 2025 |
|
2,276,818 |
|
- |
|
- |
||||||
Effect of stock-based awards |
|
1,492,030 |
|
2,578,146 |
|
2,588,851 |
||||||
Shares used in computing net earnings per share of common stock, diluted |
|
55,971,030 |
|
52,795,475 |
|
50,195,661 |
No shares were excluded from the calculation for the year ended December 31, 2021.
2,276,818 and 312,128 shares of common stock were excluded from the calculation of diluted net EPS due to their anti-dilutive effect for the years ended December 31, 2020 and 2019, respectively.
F - 45
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
NOTE 21: OTHER OPERATING EXPENSES (INCOME), NET
|
Year ended December 31, | |||||||||||
2021 |
2020 |
2019 |
||||||||||
Kokam purchase escrow (1)(2) |
$ | (859 | ) | $ | (4,900 | ) | $ | 4,900 | ||||
Write-off of long-lived assets |
2,209 | 1,471 | - | |||||||||
Compensation package related to the passing of the former Founder, CEO and Chairman(3) |
- | - | 8,305 | |||||||||
Termination of SolarEdge Automation Machines’s former executive(4) |
- | - | 12,222 | |||||||||
Sale of SolarEdge Automation Machines’s subsidiary(5) |
- | - | 5,269 | |||||||||
Total other operating expenses (income) |
$ | 1,350 | $ | (3,429 | ) | $ | 30,696 |
1. | |
2. | |
3. | |
4. | |
5. |
F - 46
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
F - 47
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
Significant components of the Company’s deferred tax liabilities and assets are as follows:
|
December 31,
|
|||||||||||
|
2021
|
2020
|
2019
|
|||||||||
Deferred tax assets, net:
|
||||||||||||
Research and Development carryforward expenses
|
$ | 2,479 | $ | 1,843 | $ | 4,994 | ||||||
Carryforward tax losses(1)
|
19,635 | 20,468 | 6,318 | |||||||||
Stock based compensation expenses
|
12,140 | 6,400 | 4,898 | |||||||||
Deferred revenue
|
8,078 | 5,609 | 3,621 | |||||||||
Inventory Impairment
|
1,326 | 1,977 | 2,442 | |||||||||
Allowance and other reserves
|
10,911 | 4,372 | 7,305 | |||||||||
Total Gross deferred tax assets, net
|
$ | 54,569 | $ | 40,669 | $ | 29,578 | ||||||
Less, Valuation Allowance
|
(14,648 | ) | (9,634 | ) | (2,317 | ) | ||||||
Total deferred tax assets, net
|
$ | 39,921 | $ | 31,035 | $ | 27,261 | ||||||
Deferred tax liabilities, net:
|
||||||||||||
Intercompany transactions
|
$ | (6,099 | ) | $ | - | $ | - | |||||
Convertible Note
|
- | (11,830 | ) | - | ||||||||
Purchase price allocation
|
(6,406 | ) | (16,122 | ) | (15,424 | ) | ||||||
Total deferred tax liabilities, net
|
$ | (12,505 | ) | $ | (27,952 | ) | $ | (15,424 | ) | |||
Recorded as:
|
||||||||||||
Deferred tax assets, net
|
$ | 27,572 | $ | 11,676 | $ | 16,298 | ||||||
Deferred tax liabilities, net
|
(156 | ) | (8,593 | ) | (4,461 | ) | ||||||
Net deferred tax assets
|
$ | 27,416 | $ | 3,083 | $ | 11,837 |
(1) Related to deferred tax assets that would only be realizable upon the generation of net income in certain foreign jurisdictions.
The Company’s Israeli subsidiary’s tax-exempt profit from Benefited Enterprises (as defined in note 22.i) is permanently reinvested, Therefore, deferred taxes have not been provided for such tax-exempt income.
The Company may incur additional tax liability in the event of intercompany dividend distributions by some of its subsidiaries. Such additional tax liability in respect of these subsidiaries has not been provided for in the Financial Statements as the Company’s management and the Board of Directors has determined that the Company intends to reinvest earnings of its subsidiaries indefinitely.
F - 48
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Balance, at the beginning of the period
|
$
|
10,564
|
$
|
9,532
|
$
|
8,499
|
||||||
Increases related to current year tax positions
|
635
|
757
|
651
|
|||||||||
Increase for tax positions related to prior years
|
-
|
275
|
382
|
|||||||||
Decreases related to prior year tax positions
|
(9,007
|
) |
-
|
-
|
||||||||
Balance, at end of the period
|
$
|
2,192
|
$
|
10,564
|
$
|
9,532
|
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Domestic
|
$
|
13,659
|
$
|
33,909
|
$
|
6,029
|
||||||
Foreign
|
173,565
|
129,757
|
172,574
|
|||||||||
Income before income taxes
|
$
|
187,224
|
$
|
163,666
|
$
|
178,603
|
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Current taxes:
|
||||||||||||
U.S. Federal and State
|
$
|
(7,872)
|
$
|
1,842
|
$
|
10,093
|
||||||
Foreign
|
37,564
|
24,936
|
29,590
|
|||||||||
Total current taxes
|
29,692
|
26,778
|
39,683
|
|||||||||
Deferred taxes:
|
||||||||||||
U.S. Federal and State
|
(3,682
|
)
|
2,794
|
|
(3,414
|
)
|
||||||
Foreign
|
(7,956
|
)
|
(6,228
|
)
|
(2,623
|
)
|
||||||
Total deferred taxes
|
(11,638
|
)
|
(3,434
|
)
|
(6,037
|
)
|
||||||
Income taxes, net
|
$
|
18,054
|
$
|
23,344
|
$
|
33,646
|
F - 49
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
|
||||||||||||
Statutory tax rate
|
21
|
%
|
21
|
%
|
21
|
%
|
||||||
Effect of:
|
||||||||||||
Income tax at rate other than the U.S. statutory tax rate
|
(7.4
|
)%
|
(6.9
|
)%
|
(5.0
|
)%
|
||||||
Losses and timing differences for which valuation allowance was provided
|
-
|
|
4.4
|
%
|
1.3
|
% | ||||||
Prior year tax Income/(Expenses)
|
(4.4 | )% | (0.4 | )% | 0.1 | % | ||||||
Tax Cuts and Jobs Act of 2017
|
0.1
|
% |
-
|
%
|
(0.7
|
)%
|
||||||
Disallowable and allowable deductions
|
2.0
|
%
|
(2.6
|
)%
|
2.3
|
%
|
||||||
Other individually immaterial income tax items, net
|
(1.7
|
)%
|
(1.3
|
)%
|
(0.2
|
)%
|
||||||
Effective tax rate
|
9.6
|
%
|
14.2
|
%
|
18.8
|
%
|
F - 50
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
F - 51
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
NOTE 23: FINANCIAL INCOME (EXPENSE), NET
|
Year ended December 31, | |||||||||||
|
2021 |
2020 |
2019 |
|||||||||
Exchange rate (loss) gain, net |
$ | (22,493 | ) | $ | 33,065 | $ | (10,342 | ) | ||||
Marketable securities |
2,973 | 3,750 | 4,712 | |||||||||
Convertible note |
(2,903 | ) | (3,185 | ) | - | |||||||
Hedging |
9,417 | (4,013 | ) | - | ||||||||
Interest expenses |
(6,376 | ) | (5,330 | ) | (4,805 | ) | ||||||
Bank charges |
(1,991 | ) | (2,048 | ) | (1,021 | ) | ||||||
Other financial income (expenses), net |
1,458 | (1,134 | ) | 113 | ||||||||
|
$ | (19,915 | ) | $ | 21,105 | $ | (11,343 | ) |
NOTE 24: SEGMENT, GEOGRAPHIC AND PRODUCT INFORMATION
a. Segment Information:
The Company operates in five different operating segments: Solar, Energy Storage, e-Mobility, Critical Power and Automation Machines.
The Company's Chief Executive Officer, who is the chief operating decision maker (“CODM”), makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis, accompanied by disaggregated information about revenues and contributed profit by the operating segments.
The Company does not allocate to its operating segments revenue recognized due to advance payments received for performance obligations that extend for a period greater than one year (“financing component”), related to Accounting Standard Codification 606, “Revenue from Contracts with Customers” (ASC 606).
Segment profit is comprised of gross profit for the segment less operating expenses that do not include amortization of purchased intangible assets, 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 co-mingled. 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 therefore their results are presented together under “All other”.
The Solar segment includes the design, development, manufacturing, and sales of an intelligent inverter solution designed to maximize power generation at the individual PV module level and a residential storage solution, compatible with the Company’s energy hub inverter, intended to store and supply power for back-up and to maximize self-consumption. The Solar segment solution consists mainly of the Company’s power optimizers, inverters, batteries and cloud‑based monitoring platform.
The “All other” category includes the design, development, manufacturing and sales of energy storage products, e-Mobility products, UPS products and automated machines.
F - 52
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
The following table presents information on reportable segments profit (loss) for the period presented:
Year ended December 31,
|
||||||||||||||||||||||||
|
2021 | 2020 |
2019
|
|||||||||||||||||||||
|
Solar
|
All other
|
Solar
|
All other
|
Solar
|
All other
|
||||||||||||||||||
Revenues
|
$ | 1,787,280 | $ | 176,167 | $ | 1,357,261 | $ | 102,804 | $ | 1,336,618 | $ | 89,042 | ||||||||||||
Cost of revenues
|
1,136,896 | 169,582 | 882,420 | 95,280 | 852,330 | 75,702 | ||||||||||||||||||
Gross profit
|
650,384 | 6,585 | 474,841 | 7,524 | 484,288 | 13,340 | ||||||||||||||||||
Research and development
|
143,173 | 30,506 | 110,567 | 25,417 | 91,868 | 12,520 | ||||||||||||||||||
Sales and marketing
|
85,309 | 9,930 | 66,823 | 8,562 | 67,275 | 8,433 | ||||||||||||||||||
General and administrative
|
53,156 | 13,536 | 41,723 | 10,389 | 31,201 | 9,561 | ||||||||||||||||||
Segments profit (loss)
|
$ | 368,746 | $ | (47,387 | ) | $ | 255,728 | $ | (36,844 | ) | $ | 293,944 | $ | (17,174 | ) |
The following table presents information on reportable segments reconciliation to consolidated revenues for the periods presented:
|
Year ended December 31, | |||||||||||
|
2021 |
2020 |
2019 |
|||||||||
Solar segment revenues |
$ | 1,787,280 | $ | 1,357,261 | $ | 1,336,618 | ||||||
All other segment revenues |
176,167 | 102,804 | 89,042 | |||||||||
Revenues from financing component |
418 | - | - | |||||||||
Inter-segment revenues |
- | (794 | ) | - | ||||||||
Consolidated revenues |
$ | 1,963,865 | $ | 1,459,271 | $ | 1,425,660 |
The following table presents information on reportable segments reconciliation to consolidated operating income for the periods presented:
|
Year ended December 31, | |||||||||||
|
2021 |
2020 |
2019 |
|||||||||
Solar segment profit |
$ | 368,746 | $ | 255,728 | $ | 293,944 | ||||||
All other segment loss |
(47,387 | ) | (36,844 | ) | (17,174 | ) | ||||||
Segments operating profit |
321,359 | 218,884 | 276,770 | |||||||||
Amounts not allocated to segments: |
||||||||||||
Stock based compensation expenses |
(102,593 | ) | (67,309 | ) | (60,353 | ) | ||||||
Amortization related to business combinations |
(10,812 | ) | (9,336 | ) | (9,470 | ) | ||||||
Sale of SolarEdge Automation Machines’ subsidiary |
- | - | (5,269 | ) | ||||||||
Legal settlement |
763 | 4,900 | (4,900 | ) | ||||||||
Other unallocated expenses |
(1,578 | ) | (4,450 | ) | (6,832 | ) | ||||||
Adjustments: |
||||||||||||
Inter-segment profit |
- | (128 | ) | - | ||||||||
Consolidated operating income |
$ | 207,139 | $ | 142,561 | $ | 189,946 |
F - 53
SOLAREDGE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(in thousands, except per share data)
b. Revenues by geographic, based on Customers’ location:
|
Year ended December 31, | |||||||||||
|
2021 |
2020 |
2019 |
|||||||||
United States |
$ | 786,019 | $ | 613,090 | $ | 678,565 | ||||||
Europe(*) |
670,394 | 426,531 | 345,685 | |||||||||
Netherlands |
222,103 | 199,498 | 199,526 | |||||||||
Rest of the world |
285,349 | 220,152 | 201,884 | |||||||||
Total revenues |
$ | 1,963,865 | $ | 1,459,271 | $ | 1,425,660 |
(*) Except for Netherlands
c. Revenues by product:
|
Year ended December 31, | |||||||||||
|
2021 |
2020 |
2019 |
|||||||||
Inverters |
$ | 828,101 | $ | 641,799 | $ | 626,445 | ||||||
Optimizers |
828,542 | 625,465 | 634,007 | |||||||||
Others |
307,222 | 192,007 | 165,208 | |||||||||
Total revenues |
$ | 1,963,865 | $ | 1,459,271 | $ | 1,425,660 |
d. Long-lived assets by geographic location:
|
As of December 31, | |||||||
|
2021 |
2020 |
||||||
Israel |
$ | 271,700 | $ | 216,095 | ||||
Korea |
118,209 | 62,570 | ||||||
China |
30,412 | 32,655 | ||||||
Europe |
21,547 | 24,233 | ||||||
Other |
15,649 | 9,455 | ||||||
Total long-lived assets (*) |
$ | 457,517 | $ | 345,008 |
(*) Long-lived assets are comprised of property and equipment, net and Operating lease right-of-use assets, net.
F - 54
Our independent registered public accounting firm, Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, independently assessed the effectiveness of the company’s internal control over financial reporting, as stated in Part II, Item 8 of this Form 10-K.
Exhibit No. | Description | Incorporation by Reference | ||
Incorporated by reference to Exhibit 4.1 to Form S-8 (Registration No. 333-203193) filed with the SEC on April 2, 2015 | ||||
Incorporated by reference to Exhibit 4.2 to Form S-8 (Registration No. 333-203193) filed with the SEC on April 2, 2015 | ||||
Incorporated by reference to Exhibit 3.3 to Form 10-K/A filed with the SEC on February 19, 2021 | ||||
Incorporated by reference to Exhibit 4.1 of Amendment No. 1 to Form S-1 (Registration No. 333-202159) filed with the SEC on March 11, 2015 | ||||
Incorporated by reference to Exhibit 4.1 to Form 8-K filed with the SEC on September 25, 2020 | ||||
Incorporated by reference to Exhibit 4.2 to Form 8-K filed with the SEC on September 25, 2020 | ||||
Incorporated by reference to Exhibit 10.1 to Form 8-K filed with the SEC on August 21, 2019 | ||||
Incorporated by reference to Exhibit 10.3 of Amendment No. 1 to Form S-1 (Registration No. 333-202159) filed with the SEC on March 11, 2015 | ||||
Incorporated by reference to Exhibit 10.3 of Amendment No. 1 to Form S-1 (Registration No. 333-202159) filed with the SEC on March 11, 2015 | ||||
Incorporated by reference to Exhibit 99.3 to Form S-8 (Registration No. 333-203193) filed with the SEC on April 2, 2015 | ||||
Incorporated by reference to Exhibit 99.1 to Form S-8 (Registration No. 333-203193) filed with the SEC on April 2, 2015 | ||||
Incorporated by reference to Exhibit 99.2 to Form S-8 (Registration No. 333-203193) filed with the SEC on April 2, 2015 | ||||
Incorporated by reference to Exhibit 10.11 to Form 10-K filed with the SEC on August 20, 2015 | ||||
Incorporated by reference to Exhibit 10.12 to Form 10-K filed with the SEC on August 20, 2015 |
Incorporated by reference to Exhibit 10.13 to Form 10-K filed with the SEC on August 20, 2015 | ||||
Incorporated by reference to Exhibit 10.14 to Form 10-K filed with the SEC on August 20, 2015 | ||||
Filed with this report. | ||||
Filed with this report. | ||||
Filed with this report. | ||||
Filed with this report. | ||||
Filed with this report. | ||||
Filed with this report. | ||||
Filed with this report. | ||||
101.INS | XBRL Instance Document - - embedded within the Inline XBRL document | Filed with this report. | ||
101.SCH | XBRL Taxonomy Extension Schema Document | Filed with this report. | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed with this report. | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Filed with this report. | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed with this report. | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Filed with this report. | ||
104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. | Filed with this report. |
By: | /s/ Zvi Lando | |
Name: | Zvi Lando | |
Title: | Chief Executive Officer | |
Date: | February 22, 2022 |
Signature | Title | Date |
/s/ Zvi Lando | Chief Executive Officer and Director (Principal Executive Officer) | February 22, 2022 |
/s/Ronen Faier | Chief Financial Officer (Principal Financial and Accounting Officer) | February 22, 2022 |
/s/Nadav Zafrir | Chairman of the Board | February 22, 2022 |
/s/Yoni Cheifetz | Director | February 22, 2022 |
/s/Marcel Gani | Director | February 22, 2022 |
/s/Doron Inbar | Director | February 22, 2022 |
/s/Avery More | Director | February 22, 2022 |
/s/Tal Payne | Director | February 22, 2022 |
/s/ Betsy Atkins | Director | February 22, 2022 |