SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands, except per share data)

Three Months Ended March 31,

2022

2021

Cash flows from operating activities:

Net income

$
33,123
$
30,076
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of property, plant and equipment
9,002 6,887
Amortization of intangible assets
2,658 2,391
Amortization of debt discount and debt issuance costs
728 724
Amortization of premium and accretion of discount on available-for-sale marketable securities, net
2,550 1,295
Stock-based compensation expenses
34,107 23,153
Deferred income taxes, net
(1,034
)
(2,141
)
Loss (gain) from sale and disposal of assets

(410
)

2,147

Exchange rate fluctuations and other items, net
3,024 13,303
Changes in assets and liabilities:

Inventories, net
(51,323
)
(8,376
)
Prepaid expenses and other assets
(17,163
)
20,218
Trade receivables, net
(224,865
)
(57,380
)
Trade payables, net
(28,045
)
(39,034
)
Employees and payroll accruals
9,246 7,477
Warranty obligations
27,629 13,088
Deferred revenues and customers advances
15,029 3,615
Other liabilities, net
22,755 6,640
Net cash provided by (used in) operating activities

(162,989
)

24,083

Cash flows from investing activities:

Proceed from sales and maturities of available-for-sale marketable securities
53,096 40,450
Purchase of property, plant and equipment
(43,210
)
(24,545
)
Investment in available-for-sale marketable securities
(26,712
)
(186,528
)
Withdrawal from bank deposits, net

0

16,470

Other investing activities
1,692 571
Net cash used in investing activities

$
(15,134
)

$
(153,582
)

	Six Months Ended June 30,
	2022			2021
Cash flows from operating activities:
Net income	$	48,207		$	75,168
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation of property, plant and equipment		18,861			14,008
Amortization of intangible assets		5,277			4,871
Amortization of debt discount and debt issuance costs		1,456			1,450
Amortization of premium and accretion of discount on available-for-sale marketable securities, net		5,376			3,558
Impairment of goodwill and intangible assets		4,008			-
Stock-based compensation expenses		71,181			47,205
Deferred income taxes, net		(1,092	)		(3,931	)
Loss from sale and disposal of assets		296			2,051
Exchange rate fluctuations and other items, net		24,666			12,983
Changes in assets and liabilities:
Inventories, net		(93,348	)		13,229
Prepaid expenses and other assets		(79,215	)		(20,356	)
Trade receivables, net		(235,316	)		(128,564	)
Trade payables, net		(7,339	)		(20,120	)
Employees and payroll accruals		5,202			9,734
Warranty obligations		59,588			27,298
Deferred revenues and customers advances		32,277			4,524
Other liabilities, net		54,341			19,660
Net cash provided by (used in) operating activities		(85,574	)		62,768
Cash flows from investing activities:
Proceed from sales and maturities of available-for-sale marketable securities		126,287			103,763
Purchase of property, plant and equipment		(91,884	)		(65,267	)
Investment in available-for-sale marketable securities		(362,119	)		(422,470	)
Withdrawal from bank deposits, net		-			46,534
Other investing activities		1,783			1,442
Net cash used in investing activities	$	(325,933	)	$	(335,998	)

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

F - 67

SOLAREDGE TECHNOLOGIES INC.

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

(in thousands, except per share data)

	Three Months Ended March 31,						Six Months Ended June 30,
	2022			2021			2022			2021
Cash flows from financing activities:
Proceeds from secondary public offering, net of issuance costs		650,526			0		$	650,526		$	-
Repayment of bank loans								-			(16,385	)
Proceeds from exercise of stock-based awards		1,478			5,008			1,642			5,472
Proceeds (withholdings) from stock-based awards, net		822			(6,724	)
Tax withholding in connection with stock-based awards, net								(2,318	)		(9,668	)
Other financing activities		(491	)		(346	)		(1,444	)		(625	)
Net cash provided by (used in) financing activities		652,335			(2,062	)		648,406			(21,206	)
Increase (decrease) in cash and cash equivalents		474,212			(131,561	)		236,899			(294,436	)
Cash and cash equivalents at the beginning of the period		530,089			827,146			530,089			827,146
Effect of exchange rate differences on cash and cash equivalents		(1,529	)		(10,428	)		(21,454	)		(8,598	)
Cash and cash equivalents at the end of the period	$	1,002,772		$	685,157		$	745,534		$	524,112

Supplemental disclosure of non-cash activities:
Right-of-use asset recognized with corresponding lease liability	$	27,248		$	1,745		$	34,176		$	3,336

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

F - 78

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ~~(Unaudited)~~

(in thousands, except per share ~~data)~~data

)

NOTE 1: GENERAL

SolarEdge Technologies, Inc. (the “Company”) and its subsidiaries design, develop, and sell an intelligent inverter solution designed to maximize power generation at the individual photovoltaic (“PV”) module level while lowering the cost of energy produced by the solar PV system and providing comprehensive and advanced safety features. The Company’s products consist mainly of (i) power optimizers designed to maximize energy throughput from each and every module through constant tracking of Maximum Power Point individually per module, (ii) inverters which invert direct current (DC) from the PV module to alternating current (AC) including the Company’s future ready energy hub inverter which supports, among other things, connection to a DC- coupled battery for backup capabilities, (iii) a remote cloud-based monitoring platform, that collects and processes information from the power optimizers and inverters to enable customers and system owners, to monitor and manage the solar PV system (iv) a residential storage and backup solution which includes a company designed and manufactured lithium-ion DC-coupled battery that is used to increase energy independence and maximize self-consumption for homeowners including a battery, and (v) additional smart energy management solutions.

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

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”).

In June 2022, the Company decided to discontinue its stand-alone Critical Power activities. The Company determined that the discontinuance of the Critical Power business doesn't represent a strategic shift that will have a major effect on the Company's operations and financial results and therefore it did not meet the criteria for discontinued operations classification.

Basis of Presentation:

The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. The Company’s interim period results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year.

The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2021, contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2022, have been applied consistently in these unaudited interim condensed consolidated financial statements. Certain prior year amounts have been reclassified to conform to current year presentation.

Use of estimates:

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

F - 9

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

Concentrations of supply risks:

The Company depends on two contract manufacturers and several limited or single source component ~~suppliers.~~suppliers, including, Samsung SDI, that provides lithium-ion battery cells required for the Company's residential storage solution. Reliance on these vendors makes the Company vulnerable to possible capacity constraints and reduced control over component availability, delivery schedules, manufacturing yields, and costs.

~~F - 8~~

~~SOLAREDGE TECHNOLOGIES INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(in thousands, except per share data)~~

~~NOTE 1: GENERAL (Cont.)~~

As of ~~March 31,~~June 30, 2022, and December 31, 2021, two contract manufacturers collectively accounted for ~~20.9%~~31.9% and 27.9% of the Company’s total trade payables, net, respectively.

~~During 2020,~~In the second quarter of 2022, the Company ~~began commercial shipments from its~~announced the opening of “Sella 2”, a two gigawatt-hour (GWh) Li-Ion battery cell manufacturing facility located in South Korea. Sella 2 is currently in testing phase with ramp-up expected during the second half of 2022. Sella 2, is the Company's second owned manufacturing facility following the opening of the Company's manufacturing facility in the North of Israel, “Sella 1”~~. During the second quarter of 2021, Sella 1 reached full manufacturing capacity.~~ in 2020.

New accounting pronouncements not yet adopted:

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

Recently issued and adopted pronouncements:

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

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

~~Certain prior period amounts have been reclassified to conform to the current period presentation.~~

F - 910

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

NOTE 2:MARKETABLE SECURITIES

The following is a summary of available-for-sale marketable securities as of ~~March 31,~~June 30, 2022:

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Available-for-sale – matures within one year:
Corporate bonds	$	154,930	$	0	$	(882	)	$	154,048	$	149,106	$	-	$	(2,067	)	$	147,039
Governmental bonds		4,528		0		(19	)		4,509		3,279		-		(59	)		3,220
		159,458		0		(901	)		158,557		152,385		-		(2,126	)		150,259
Available-for-sale – matures after one year:
Corporate bonds		453,220		0		(16,507	)		436,713		694,300		136		(21,145	)		673,291
Governmental bonds		13,428		0		(468	)		12,960		36,940		-		(660	)		36,280
		466,648		0		(16,975	)		449,673		731,240		136		(21,805	)		709,571
Total	$	626,106	$	0	$	(17,876	)	$	608,230	$	883,625	$	136	$	(23,931	)	$	859,830

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

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		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	$	160,462	$	23	$	(320	)	$	160,165
Governmental bonds		7,576		0		(13	)		7,563		7,576		-		(13	)		7,563
		168,038		23		(333	)		167,728		168,038		23		(333	)		167,728
Available-for-sale – matures after one year:
Corporate bonds		474,412		9		(5,580	)		468,841		474,412		9		(5,580	)		468,841
Governmental bonds		13,506		0		(119	)		13,387		13,506		-		(119	)		13,387
		487,918		9		(5,699	)		482,228		487,918		9		(5,699	)		482,228
Total	$	655,956	$	32	$	(6,032	)	$	649,956	$	655,956	$	32	$	(6,032	)	$	649,956

As of ~~March 31,~~June 30, 2022, and December 31, 2021, the Company ~~didn’t~~did not record an allowance for credit losses for its available-for-sale marketable ~~debt~~ securities.

F - 1011

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

NOTE 3:INVENTORIES, NET

March 31,
2022

December 31,
2021

Raw materials

$
317,173
$
247,386
Work in process
16,800 13,863
Finished goods
98,531 118,894

$
432,504
$
380,143

	June 30, 2022		December 31, 2021
Raw materials	$	365,709	$	247,386
Work in process		15,643		13,863
Finished goods		88,920		118,894
	$	470,272	$	380,143

NOTE 4:INVESTMENT IN PRIVATELY-HELD COMPANY

On January 31, 2021, the Company completed an investment of $11,643 in the preferred stock of AutoGrid Systems, Inc. ("AutoGrid"), a privately held company 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 ~~March 31,~~June 30, 2022, and 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 three and six months ended ~~March 31,~~June 30, 2022, and 2021.

On July 20, 2022, the Company sold its investment in AutoGrid, see Note 18.

F - 1112

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

NOTE 5:DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

To protect against the increase in value of forecasted foreign currency cash flows resulting from salary denominated in the Israeli currency, the New Israeli Shekels (“NIS”), during the ~~three~~six months ended ~~March 31,~~June 30, 2022, the Company instituted a foreign currency cash flow hedging program. The Company hedges portions of the anticipated payroll denominated in NIS for a period of one to nine months with hedging contracts. Accordingly, when the dollar strengthens against the NIS, the decline in present value of future foreign currency expenses is offset by losses in the fair value of the hedging contracts. Conversely, when the dollar weakens, the increase in the present value of future foreign currency cash flows is offset by gains in the fair value of the hedging contracts. These hedging contracts are designated as cash flow hedges, as defined by ASC 815 and are all effective hedges.

As of ~~March 31,~~June 30, 2022, the Company entered into forward contracts and put and call options to sell and buy U.S. dollars (“USD”) for NIS in the amount of ~~$29~~approximately $75 million and ~~$44~~$34 million, respectively.

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

As of ~~March 31,~~June 30, 2022, the Company entered into forward contracts to sell Australian dollars (“AUD”) for U.S. dollars in the amount of AUD 1910 million.

As of ~~March 31,~~June 30, 2022, the Company entered into forward contracts to sell Euro for U.S. dollars in the amount of ~~€29~~€18 million.

~~As of March 31, 2022, the Company entered into forward contracts to sell U.S. dollars for South Korean Won in the amount of $5,000.~~

The fair value of derivative assets as of ~~March 31,~~June 30, 2022, and December 31, 2021, was ~~$2,042~~$2,348 and $4,009, which was recorded in prepaid expenses and other current assets in the Consolidated Balance Sheets, respectively.

The fair value of derivative liabilities as of ~~March 31,~~June 30, 2022, and December 31, 2021, was ~~$536~~$4,123 and $169, which was recorded in accrued expenses and other current liabilities in the Consolidated Balance Sheets, respectively.

For the three months ended ~~March 31,~~June 30, 2022, and 2021, the Company recorded a gain ~~and~~ in the amount of ~~$934~~$3,009 and ~~$3,536,~~$820, respectively, in ~~"Financial~~financial expense, ~~net",~~net, related to the derivative instruments not designated as ~~hedging instruments.~~cash flow hedges.

For the three months ended ~~March 31,~~June 30, 2022 and 2021, the Company recorded an unrealized loss in the amount of ~~$1,178~~$6,351, net of tax effect and ~~$128,~~an unrealized gain in the amount of $841, net of tax effect, respectively, in ~~“Accumulated~~“accumulated other comprehensive loss” related to the derivative assets designated as hedging instruments.

For the six months ended June 30, 2022, and 2021, the Company recorded a gain in the amount of $3,943 and $4,355, respectively, in financial expense, net, related to the derivative instruments not designated as cash flow hedges.

For the six months ended June 30, 2022 and 2021, the Company recorded an unrealized loss in the amount of $7,529, net of tax effect and an unrealized gain in the amount of $713, net of tax effect, respectively, in “accumulated other comprehensive loss” related to the derivative assets designated as hedging instruments.

F - 1213

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

NOTE 6:FAIR VALUE MEASUREMENTS

In accordance with ASC 820, the Company measures its cash equivalents and marketable securities, at fair value using the market approach valuation technique. Cash equivalents and marketable securities are classified within Level 1 and Level 2, respectively, because these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Foreign currency derivative contracts are classified within the Level 2 value hierarchy, as the valuation inputs are based on quoted prices and market observable data of similar instruments.

The following table sets forth the Company’s assets that were measured at fair value as of ~~March 31,~~June 30, 2022 and December 31, 2021, by level within the fair value hierarchy:

Fair value measurements as of

Description

Fair Value Hierarchy

March 31,
2022

December 31, 2021

Assets:

Cash equivalents:

Money market mutual funds

Level 1

$
603,405
$
21,680
Derivative instruments asset:

Forward contracts designated as hedging instruments

Level 2

$
465
$
992
Options and forward contracts not designated as hedging instruments

Level 2

$
1,577
$
3,017
Short-term marketable securities:

Corporate bonds

Level 2

$
154,048
$
160,165
Governmental bonds

Level 2

$
4,509
$
7,563
Long-term marketable securities:

Corporate bonds

Level 2

$
436,713
$
468,841
Governmental bonds

Level 2

$
12,960
$
13,387
Liabilities

Derivative instruments liability:

Options and forward contracts designated as hedging instruments

Level 2

$
(245
)

$
0

Forward contracts not designated as hedging instruments

Level 2

$
(291
)

$
169

		Fair value measurements as of
Description	Fair Value Hierarchy	June 30, 2022			December 31, 2021
Assets:
Cash equivalents:
Money market mutual funds	Level 1	$	132,750		$	21,680
Derivative instruments asset:
Forward contracts designated as hedging instruments	Level 2	$	-		$	992
Options and forward contracts not designated as hedging instruments	Level 2	$	2,348		$	3,017
Short-term marketable securities:
Corporate bonds	Level 2	$	147,039		$	160,165
Governmental bonds	Level 2	$	3,220		$	7,563
Long-term marketable securities:
Corporate bonds	Level 2	$	673,291		$	468,841
Governmental bonds	Level 2	$	36,280		$	13,387
Liabilities
Derivative instruments liability:
Options and forward contracts designated as hedging instruments	Level 2	$	(4,123	)	$	-
Forward contracts not designated as hedging instruments	Level 2	$	-		$	(169	)

NOTE 7:WARRANTY OBLIGATIONS

Changes in the Company’s product warranty obligations for the three and six months ended ~~March 31,~~June 30, 2022 and 2021, were as follows:

Three Months Ended March 31,

2022

2021

Balance, at the beginning of the period

$
265,160
$
204,994
Additions and adjustments to cost of revenues
47,907 29,971
Usage and current warranty expenses
(20,401
)
(17,012
)
Balance, at end of the period
292,666 217,953
Less current portion
(82,340
)
(63,443
)
Long term portion

$
210,326
$
154,510

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Balance, at the beginning of the period	$	292,666		$	217,953		$	265,160		$	204,994
Additions and adjustments to cost of revenues		59,061			36,343			106,968			66,314
Usage and current warranty expenses		(27,551	)		(22,129	)		(47,952	)		(39,141	)
Balance, at end of the period		324,176			232,167			324,176			232,167
Less current portion		(91,761	)		(64,855	)		(91,761	)		(64,855	)
Long term portion	$	232,415		$	167,312		$	232,415		$	167,312

F - 1314

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

NOTE 8: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:

	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021			2022			2021
Balance, at the beginning of the period	$	169,345		$	140,020		$	184,245		$	143,233		$	169,345		$	140,020
Revenue recognized		(14,529	)		(19,786	)		(10,595	)		(15,807	)		(25,124	)		(35,593	)
Increase in deferred revenues and customer advances		29,429			22,999			27,045			16,827			56,473			39,826
Balance, at the end of the period		184,245			143,233			200,695			144,253			200,695			144,253
Less current portion		(25,511	)		(21,065	)		(30,460	)		(16,144	)		(30,460	)		(16,144	)
Long term portion	$	158,734		$	122,168		$	170,235		$	128,109		$	170,235		$	128,109

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 ~~March 31,~~June 30, 2022:

2022

$
15,468

2023

17,380

2024

8,468

2025

7,506

2026

6,769

Thereafter

128,654

Total deferred revenues

$
184,245

2022	$	15,314
2023		20,693
2024		9,970
2025		9,067
2026		8,372
Thereafter		137,279
Total deferred revenues	$	200,695

NOTE 9:ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

March 31,
2022

December 31, 2021

Accrued expenses

$
65,903

$
51,014

Government authorities

27,707

22,631

Operating lease liabilities

14,570

12,728

Provision for legal claims

11,476

11,622

Other

15,295

11,384

$
134,951

$
109,379

	June 30, 2022		December 31, 2021
Accrued expenses	$	100,425	$	57,158
Government authorities		39,194		22,631
Operating lease liabilities		15,313		12,728
Provision for legal claims		141		11,622
Accrual for sales incentives		5,131		3,048
Other		8,196		2,192
	$	168,400	$	109,379

F - 1415

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

NOTE 10: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 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 to, but excluding the fundamental change repurchase date. If certain fundamental changes referred to as make-whole fundamental changes occur, the conversion rate for the Notes may be increased.

The Convertible Senior Notes consisted of the following as of ~~March 31,~~June 30, 2022 and December 31, 2021:

	March 31, 2022			December 31, 2021			June 30, 2022			December 31, 2021
Liability:
Principal	$	632,500		$	632,500		$	632,500		$	632,500
Unamortized issuance costs		(10,237	)		(10,965	)		(9,509	)		(10,965	)
Net carrying amount	$	622,263		$	621,535		$	622,991		$	621,535

For the three months ended ~~March 31,~~June 30, 2022 and 2021 the Company recorded issuance costs related to the Notes in the amount of $728 and ~~$724,~~$726, respectively.

For the six months ended June 30, 2022 and 2021 the Company recorded issuance costs related to the Notes in the amount of $1,456 and $1,450, respectively.

As of ~~March 31,~~June 30, 2022, the issuance costs of the Notes will be amortized over the remaining term of approximately ~~3.5~~3.2 years.

The annual effective interest rate of the ~~liability component~~Notes is 0.47%.

As of ~~March 31,~~June 30, 2022, the estimated fair value of the Notes, which the Company has classified as Level 2 financial instruments, is ~~$878,985.~~$755,920. 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 ~~March 31,~~June 30, 2022, the if-converted value of the Notes ~~exceeded~~did not exceed the principal ~~amount by $246,485.~~amount.

F - 1516

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

NOTE 11: STOCK CAPITAL

a.Common stock rights:

Common stock confers upon its holders the right to receive notice of, and to participate in, all general meetings of the Company, where each share of common stock shall have one vote for all purposes; to share equally, on a per share basis, in bonuses, profits, or distributions out of fund legally available therefor; and to participate in the distribution of the surplus assets of the Company in the event of liquidation of the Company.

b.Secondary public offering:

On March 17, 2022, the Company offered and sold 2,300,000 shares of the Company’s common stock, at a public offering price of $295.00 per share. The shares of Common Stock were issued and sold in a registered offering pursuant to the underwriting agreement dated March 17, 2022, among the Company, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, and Morgan Stanley & Co. LLC (the “Underwriting Agreement”). All of the offered shares were issued at closing, including 300,000 shares of Common Stock that were issued and sold pursuant to the underwriters’ option to purchase additional shares under the Underwriting Agreement, which was exercised in full on March 18, 2022. The shares of Common Stock were issued and sold pursuant to the Company’s Registration Statement on Form S-3, which became effective upon filing with the Securities and Exchange Commission on February 22, 2022, the related prospectus dated February 22, 2022, and the prospectus supplement dated March 17, 2022.

The net proceeds to the Company were $650,526 after deducting underwriters' discounts of $27,140 and commissions of ~~$27,140 and $834 of offering costs was $650,526.~~$834.

c.Equity Incentive Plans:

The Company’s 2007 Global Incentive Plan (the “2007 Plan”) was adopted by the board of directors on August 30, 2007. The 2007 Plan terminated upon the Company’s IPO on March 31, 2015 and no further awards may be granted thereunder. All outstanding awards will continue to be governed by their existing terms and 379,358 available options for future grant were transferred to the Company’s 2015 Global Incentive Plan (the “2015 Plan”) and are reserved for future issuances under the 2015 plan. The 2015 Plan became effective upon the consummation of the IPO. The 2015 Plan provides for the grant of options, restricted stock units ("RSU"), performance stock units ("PSU"), and other share-based awards to directors, employees, officers, and non-employees of the Company and its subsidiaries. As of ~~March 31,~~June 30, 2022, a total of 18,047,085 shares of common stock were reserved for issuance pursuant to stock awards under the 2015 Plan (the “Share Reserve”).

The Share Reserve will automatically increase on January 1^st of each year during the term of the 2015 Plan, commencing on January 1^st of the year following the year in which the 2015 Plan becomes effective, in an amount equal to 5% of the total number of shares of capital stock outstanding on December 31^st of the preceding calendar year; provided, however, that the Company’s board of directors may determine that there will not be a January 1^st increase in the Share Reserve in a given year or that the increase will be less than 5% of the shares of capital stock outstanding on the preceding December 31^st.

The Company granted under its 2015 Plan, PSU awards to certain employees and officers which vest upon the achievement of certain performance or market conditions subject to their continued employment with the Company.

The market condition for the PSUs is based on the Company’s total shareholder return ("TSR") compared to the TSR of companies listed in the S&P 500 index over a one to three year performance period. The Company uses a Monte-Carlo simulation to determine the grant date fair value for these awards, which takes into consideration the market price of a share of the Company’s common stock on the date of grant less the present value of dividends expected during the requisite service period, as well as the possible outcomes pertaining to the TSR market condition. The Company recognizes such compensation expenses on an accelerated vesting method.

F - 1617

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

~~NOTE 11:~~~~STOCK CAPITAL~~ ~~(Cont.)~~

The aggregate maximum number of shares of common stock that may be issued on the exercise of incentive stock options is 10,000,000. As of ~~March 31,~~June 30, 2022, an aggregate of 8,617,974 options are still available for future grant under the 2015 Plan.

A summary of the activity in stock options and related information is as follows:

	Number of options			Weighted average exercise price		Weighted average remaining contractual term in years		Aggregate intrinsic Value		Number of options			Weighted average exercise price		Weighted average remaining contractual term in years		Aggregate intrinsic Value
Outstanding as of December 31, 2021		474,280		$	44.68		5.22	$	112,479		474,280		$	44.68		5.22	$	112,479
Exercised		(51,759	)		28.55		-		15,142		(58,211	)		28.21		-		-
Forfeited or expired		(243	)		5.01		-		-		(243	)		5.01		-		-
Outstanding as of March 31, 2022		422,278		$	46.63		5.04	$	114,987
Vested and expected to vest as of March 31, 2022		420,193		$	46.36		5.45	$	115,977
Exercisable as of March 31, 2022		342,083		$	31.86		4.99	$	99,379
Outstanding as of June 30, 2022											415,826		$	47.01		4.85	$	94,991
Vested and expected to vest as of June 30, 2022											415,826		$	47.01		4.85	$	94,991
Exercisable as of June 30, 2022											349,635		$	33.78		4.43	$	84,107

The aggregate intrinsic value in the tables above represents the total intrinsic value (the difference between the fair value of the Company’s common stock as of the last day of each period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last day of each period.

A summary of the activity in the RSUs and related information is as follows:

	Number of RSUs			Weighted average grant date fair value		Number of RSUs			Weighted average grant date fair value
Unvested as of December 31, 2021		1,759,972		$	189.25		1,759,972		$	189.25
Granted		94,839			312.32		203,161			293.31
Vested		(218,992	)		118.04		(424,379	)		124.92
Forfeited		(44,567	)		204.02		(75,161	)		210.94
Unvested as of March 31, 2022		1,591,252		$	185.66
Unvested as of June 30, 2022							1,463,593		$	199.25

A summary of the activity in the PSUs and related information is as follows:

	Number of PSUs		Weighted average grant date fair value		Number of PSUs		Weighted average grant date fair value
Unvested as of December 31, 2021		108,595	$	296.40		108,595	$	296.40
Granted		54,964		209.33		39,263		293.04
Unvested as of March 31, 2022		163,559	$	267.14
Unvested as of June 30, 2022						147,858	$	295.51

d.Employee Stock Purchase Plan:

The Company adopted an ESPP effective upon the consummation of the IPO. As of ~~March 31,~~June 30, 2022, a total of 3,662,737 shares were reserved for issuance under this plan. The number of shares of common stock reserved for issuance under the ESPP will increase automatically on January 1st of each year, for ten years, by the lesser of 1% of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year or 487,643 shares. However, the Company’s board of directors may reduce the amount of the increase in any particular year at their discretion, including a reduction to zero.

F - 1718

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

~~NOTE 11:~~~~STOCK CAPITAL~~ ~~(Cont.)~~

The ESPP is implemented through an offering every six months. According to the ESPP, eligible employees may use up to 15% of their salaries to purchase common stock up to an aggregate limit of $15 per participant for every six months plan. The price of an ordinary share purchased under the ESPP is equal to 85% of the lower of the fair market value of the ordinary share on the subscription date of each offering period or on the purchase date.

As of ~~March 31,~~June 30, 2022, ~~661,827~~696,852 shares of common stock had been purchased under the ESPP.

As of ~~March 31,~~June 30, 2022, ~~3,000,910~~2,965,885 shares of common stock were available for future issuance under the ESPP.

In accordance with ASC No. 718, the ESPP is compensatory and, as such, results in recognition of compensation cost.

e.Stock-based compensation expenses:

The Company recognized stock-based compensation expenses related to all stock-based awards in the consolidated statement of income for the three and six months ended ~~March 31,~~June 30, 2022, and 2021, as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Cost of revenues	$	5,286	$	4,291	$	10,348	$	10,081
Research and development		16,819		9,805		31,804		18,603
Selling and marketing		7,047		5,780		13,748		11,215
General and administrative		7,922		4,176		15,281		7,306
Total stock-based compensation expenses	$	37,074	$	24,052	$	71,181	$	47,205

Three Months Ended March 31,
2022 2021
Cost of revenues

$
5,062
$
5,790
Research and development
14,985 8,798
Selling and marketing
6,701 5,435
General and administrative
7,359 3,130
Total stock-based compensation expenses

$
34,107
$
23,153

An immaterial amount of stock-based compensation was capitalized to prepaid expenses during the three and six months ended June 30, 2022.

The total tax benefit associated with share-based compensation for the three months ended ~~March 31,~~June 30, 2022 and 2021 was ~~$3,478~~$3,058 and ~~$4,397,~~$2,062, respectively. The tax benefit realized from share-based compensation for the three months ended ~~March 31,~~June 30, 2022, and 2021 was ~~$2,927~~$2,885 and ~~$2,749,~~$2,931, respectively.

The total tax benefit associated with share-based compensation for the six months ended June 30, 2022, and 2021 was $6,536 and $6,459, respectively. The tax benefit realized from share-based compensation for the six months ended June 30, 2022, and 2021 was $5,812 and $5,680, respectively.

As of ~~March 31,~~June 30, 2022, there were total unrecognized compensation expenses in the amount of ~~$308,373~~$306,131 related to non-vested equity-based compensation arrangements granted under the Company’s plans and non-plan awards. These expenses are expected to be recognized during the period from ~~April~~July 1, 2022, through ~~October~~May 31, 2026.

F - 1819

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

NOTE 12: COMMITMENTS AND CONTINGENT LIABILITIES

a.Guarantees:

As of ~~March 31,~~June 30, 2022, contingent liabilities exist regarding guarantees in the amounts of ~~$6,284~~$5,892, $2,815, and ~~$1,541~~$1,388 in respect of office rent lease agreements, projects with customers, 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 ~~March 31,~~June 30, 2022, the Company had non-cancelable purchase obligations totaling approximately ~~$1,426,689,~~$1,532,469, out of which the Company recorded a provision for loss in the amount of ~~$4,745.~~$5,408.

As of ~~March 31,~~June 30, 2022, the Company had contractual obligations for capital expenditures totaling approximately ~~$144,201.~~$92,915. 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 ~~$6,102)~~$5,714) 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 May 2019, the ~~Company’s two Chinese subsidiaries and its equipment manufacturer in China were~~Company was served with three lawsuits by Huawei Technologies Co., Ltd., a Chinese entity (“Huawei”)., against its two Chinese subsidiaries and equipment manufacturer in China. In May 2022, the Company announced that it had agreed on a global patent license agreement with Huawei. The ~~lawsuits, filed~~agreement includes a cross license that covers patents relating to both companies' products and resulted in the ~~Guangzhou intellectual property court, alleged infringement~~settlement of ~~three patents and asked for an injunction of manufacture, use, sale and offer for sale, and damage awards. A first-instance judgment was issued on August 7, 2020 ordering~~all pending patent litigation between the three defendants to collectively pay damages in the amount of approximately Chinese Yuan (“CNY”) 10.5 million (approximately $1,658), including court fees. The Company has filed an appeal with the Supreme People’s Court of China. The Company's appeal to the Supreme People's Court was denied in December of 2021, rendering a payment by us to Huawei in an amount of $1,658. The judgement has not been enforced. In addition, in January 2021, Huawei filed a motion to increase its claimed monetary damages to CNY 50.5 million (approximately $7,975) with respect to the second lawsuit. In February 2021, a preliminary injunction was rendered by the Guangzhou intellectual property court with respect to such second lawsuit and applying to seven inverter models. In line with the court’s mandate, the Company took immediate action to make software changes to meet the court order. In addition, in February 22, 2021 a first-instance judgment was issued ordering payment of damages in the amount of CNY 50.5 million (approximately $7,975), including court fees, with respect to the second patent. The Company appealed this judgement with the Supreme People’s Court which case is still pending. The first instance court’s judgement is not effective or enforceable pending the appeal. In October 2021, a first-instance judgment was issued ordering to pay damages in the amount of approximately CNY 10.5 million (approximately $1,658), including court fees, with respect to the third lawsuit. The Company has filed an appeal with the Supreme People’s Court of China which also is still pending. The first instance court’s judgement is not effective or enforceable pending the appeal. The Company believes that it has meritorious defenses to the claims asserted by Huawei.companies.

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 ~~$8,029)~~$7,286) 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 ~~March 31,~~June 30, 2022, accrued amounts for legal claims of ~~$11,476~~$141 were recorded in accrued expenses and other current liabilities.

F - 1920

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

NOTE 13: ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes the changes in accumulated balances of other comprehensive gain (loss), net of taxes:

	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021			2022			2021
Unrealized gains (losses) on available-for-sale marketable securities
Beginning balance	$	(4,709	)	$	240		$	(14,215	)	$	(945	)	$	(4,709	)	$	240
Revaluation		(12,721	)		(1,468	)		(5,919	)		(878	)		(18,640	)		(2,346	)
Tax on revaluation		2,471			283			1,357			187			3,828			470
Other comprehensive loss before reclassifications		(10,250	)		(1,185	)		(4,562	)		(691	)		(14,812	)		(1,876	)
Reclassification		844			0			-			-			844			-
Tax on reclassification		(100	)		0			-			-			(100	)		-
Losses reclassified from accumulated other comprehensive income		744			0			-			-			744			-
Net current period other comprehensive loss		(9,506	)		(1,185	)		(4,562	)		(691	)		(14,068	)		(1,876	)
Ending balance	$	(14,215	)	$	(945	)	$	(18,777	)	$	(1,636	)	$	(18,777	)	$	(1,636	)
Unrealized gains (losses) on cash flow hedges
Beginning balance	$	874		$	0		$	194		$	(128	)	$	874		$	-
Revaluation		(1,337	)		(146	)		(7,188	)		956			(8,525	)		810
Tax on revaluation		159			18			837			(115	)		996			(97	)
Other comprehensive loss before reclassifications		(1,178	)		(128	)		(6,351	)		841			(7,529	)		713
Reclassification		565			0			2,846			(457	)		3,411			(457	)
Tax on reclassification		(67	)		0			(331	)		55			(398	)		55
Losses reclassified from accumulated other comprehensive loss		498			0			2,515			(402	)		3,013			(402	)
Net current period other comprehensive loss		(680	)		(128	)		(3,836	)		439			(4,516	)		311
Ending balance	$	194		$	(128	)	$	(3,642	)	$	311		$	(3,642	)	$	311
Foreign currency translation adjustments on intra-entity transactions that are of a long-term investment in nature
Beginning balance	$	(17,420	)	$	0		$	(24,403	)	$	(3,675	)	$	(17,420	)	$	-
Revaluation		(6,983	)		(3,675	)		(28,347	)		1,779			(35,330	)		(1,896	)
Tax on revaluation		0			0
Other comprehensive loss before reclassifications		(6,983	)		(3,675	)
Net current period other comprehensive loss		(6,983	)		(3,675	)
Ending balance	$	(24,403	)	$	(3,675	)	$	(52,750	)	$	(1,896	)	$	(52,750	)	$	(1,896	)
Unrealized gains (losses) on foreign currency translation
Beginning balance	$	(6,064	)	$	3,617		$	(7,643	)	$	(2,013	)	$	(6,064	)	$	3,617
Revaluation		(1,579	)		(5,630	)		(6,808	)		1,698			(8,387	)		(3,932	)
Tax on revaluation		0			0
Other comprehensive loss before reclassifications		(1,579	)		(5,630	)
Net current period other comprehensive loss		(1,579	)		(5,630	)
Ending balance	$	(7,643	)	$	(2,013	)	$	(14,451	)	$	(315	)	$	(14,451	)	$	(315	)
Total	$	(46,067	)	$	(6,761	)	$	(89,620	)	$	(3,536	)	$	(89,620	)	$	(3,536	)

F - 2021

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

~~NOTE 13:ACCUMULATED OTHER COMPREHENSIVE LOSS (Cont.)~~

The following table summarizes the changes in "Accumulated other comprehensive loss", net of taxes:

Details about Accumulated Other Comprehensive Loss Components	Three Months Ended March 31,					Affected Line Item in the Statement of Income	Three Months Ended June 30,						Six Months Ended June 30,						Affected Line Item in the Statement of Income
	2022			2021			2022			2021			2022			2021
Unrealized losses on available-for-sale marketable securities
	$	(844	)	$	0	Financial expense, net	$	-		$	-		$	(844	)	$	-		Financial expense, net
		100			0	Income taxes		-			-			100			-		Income taxes
	$	(744	)	$	0	Total, net of income taxes	$	-		$	-		$	(744	)	$	-		Total, net of income taxes
Unrealized losses on cash flow hedges, net
		(67	)		0	Cost of revenues		(318	)		54			(385	)		54		Cost of revenues
		(338	)		0	Research and development		(1,694	)		275			(2,032	)		275		Research and development
		(71	)		0	Sales and marketing		(349	)		56			(420	)		56		Sales and marketing
		(89	)		0	General and administrative		(485	)		72			(574	)		72		General and administrative
	$	(565	)	$	0	Total, before income taxes	$	(2,846	)	$	457		$	(3,411	)	$	457		Total, before income taxes
		67			0	Income taxes		331			(55	)		398			(55	)	Income taxes
		(498	)		0			(2,515	)		402			(3,013	)		402		Total, net of income taxes
Total reclassifications for the period	$	(1,242	)	$	0		$	(2,515	)	$	402		$	(3,757	)	$	402

~~F - 21~~

~~SOLAREDGE TECHNOLOGIES INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(in thousands, except per share data)~~

NOTE 14: ~~EARNINGS PER SHARE~~OTHER OPERATING EXPENSES

The following table presents the ~~computation of basic~~expenses recorded in the three and ~~diluted EPS:~~six months ended June 30, 2022, and 2021:

Three Months Ended March 31,

2022

2021

Basic EPS:

Numerator:

Net income

$
33,123
$
30,076
Denominator:

Shares used in computing net earnings per share of common stock, basic
53,134,937 51,726,998
Diluted EPS:

Numerator:

Net income attributable to common stock, basic

$
33,123
$
30,076
Notes due 2025
553 534
Net income attributable to common stock, diluted

$
33,676
$
30,610
Denominator:

Shares used in computing net earnings per share of common stock, basic
53,134,937 51,726,998
Notes due 2025
2,276,818 2,276,818
Effect of stock-based awards
903,438 1,993,320
Shares used in computing net earnings per share of common stock, diluted
56,315,193 55,997,136

	Three Months Ended June 30,					Six Months Ended June 30,
	2022		2021			2022		2021
Impairment of goodwill and intangible assets (1)	$	4,008	$	-		$	4,008	$	-
Write-off of property, plant and equipment		678		-			678		2,209
Kokam purchase escrow (2)		-		(859	)		-		(859	)
Total other operating expenses (income)	$	4,686	$	(859	)	$	4,686	$	1,350

~~No shares were excluded from~~(1) In June 2022, the ~~calculation~~Company decided to discontinue its stand-alone Critical Power activities. The Company wrote-off goodwill and intangible assets related to its Critical Power business in an amount of $4,008, see also Note 1b.

(2) In the three and six months ended June 30, 2021, the Company received a payment of $859 out of the Kokam acquisition escrow (“the escrow”), with regards to a working capital adjustment.

F - 22

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

NOTE 15:INCOME TAXES

The effective tax rate for the three months ended ~~March 31,~~June 30, 2022, and 2021 was 30.5% and 16.2%, respectively, and for the six months ended June 30, 2022, and 2021 the effective tax rate was 28.2% and 18.2%, respectively.

The increase in the effective tax rate in the current year, is primarily due to a different allocation of income among the Company’s US, Israeli, and foreign subsidiaries and the change to Section 174 of the U.S Internal Revenue Code, which went into effect on January 1, 2022. The change eliminates the option to deduct research and development expenditures currently and requires taxpayers to amortize them over five years (if generated from a US entity) and fifteen years (if generated from non-US entities). This change resulted in an increase in the Company’s taxable income and Global Intangible Low Taxed Income (“GILTI”) tax.

As of June 30, 2022, and December 31, 2021, unrecognized tax benefits were $2,403 and $2,192, respectively. If recognized, such benefits would favorably affect the Company’s effective tax rate.

The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. The total amount of penalties and interest were immaterial as of June 30, 2022, and December 31, 2021.

F - 23

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

~~NOTE 15:OTHER OPERATING EXPENSES~~

~~In the three months ended March 31, 2021, the Company recorded a write-off of long-lived assets in the amount of $2,209.~~

NOTE 16: ~~INCOME TAXES~~EARNINGS PER SHARE

~~The effective tax rate for the three months ended March 31, 2022 and 2021 was 27.1% and 20.9%, respectively.~~

The increase in the effective tax rate in the three months ended March 31, 2022, is primarily due to a different allocation of income among the Company’s US, Israeli, and foreign subsidiaries and the change to Section 174 of the U.S Internal Revenue Code, which went into effect on January 1, 2022. The change eliminates the option to deduct research and development expenditures currently and requires taxpayers to amortize them over five years (if generated from a US entity) and fifteen years (if generated from non-US entities). This change resulted in an increase in the Company’s taxable income and Global Intangible Low Taxed Income (“GILTI”) tax.

~~As of March 31, 2022, and December 31, 2021, unrecognized tax benefits were $2,303 and $2,192, respectively. If recognized, such benefits would favorably affect the Company’s effective tax rate.~~

~~F - 22~~

~~SOLAREDGE TECHNOLOGIES INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(in thousands, except per share data)~~

~~NOTE 17: SEGMENT, GEOGRAPHIC AND PRODUCT INFORMATION (Cont.)~~

~~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, 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.~~

The following table presents ~~information on reportable segments profit (loss) for~~ the ~~period presented:~~computation of basic and diluted earnings per share (“EPS”):

Three Months Ended March 31,

2022

2021

Solar

All other

Solar

All other

Revenues

$
607,997
$
46,948
$
376,287
$
29,116
Cost of revenues
424,500 44,341 226,833 30,483
Gross profit (loss)

183,497

2,607

149,454

(1,367
)
Research and development

$
43,131
$
7,930 31,902 6,265
Sales and marketing
25,805 2,574 18,742 2,497
General and administrative
15,849 3,625 13,272 3,501
Segments profit (loss)

$
98,712
$
(11,522
)

$
85,538
$
(13,630
)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Basic EPS:
Numerator:
Net income	$	15,084	$	45,092	$	48,207	$	75,168
Denominator:
Shares used in computing net EPS of common stock, basic		55,470,279		52,076,208		54,309,060		51,903,123
Diluted EPS:
Numerator:
Net income attributable to common stock, basic	$	15,084	$	45,092	$	48,207	$	75,168
Notes due 2025		551		536		1,100		1,071
Net income attributable to common stock, diluted	$	15,635	$	45,628	$	49,307	$	76,239
Denominator:
Shares used in computing net EPS of common stock, basic		55,470,279		52,076,208		54,309,060		51,903,123
Notes due 2025		2,276,818		2,276,818		2,276,818		2,276,818
Effect of stock-based awards		817,637		1,577,536		860,538		1,785,428
Shares used in computing net EPS of common stock, diluted		58,564,734		55,930,562		57,446,416		55,965,369

Shares excluded from the calculation of diluted net EPS due to their anti-dilutive effect		182,715		171,011		203,246		132,551

F - 2324

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

NOTE 17: SEGMENT, GEOGRAPHIC AND PRODUCT INFORMATION

The Company operates in five different operating segments: Solar, Energy Storage, e-Mobility, Critical Power and Automation Machines. In June 2022, the Company decided to discontinue its stand-alone Critical Power activities, see also Note 1b.

Segment profit is comprised of gross profit for the segment less operating expenses that do not include amortization of purchased intangible assets, impairments of goodwill and intangible assets, stock based compensation expenses, and certain other items.

The “All other” category includes the design, development, manufacturing, and sales of energy storage products, e-Mobility products, UPS products, and automated machines.

The following table presents information on reportable segments profit (loss) for the period presented:

	Three Months Ended June 30, 2022					Six Months Ended June 30, 2022
	Solar		All other			Solar		All other
Revenues	$	687,599	$	40,029		$	1,295,596	$	86,977
Cost of revenues		494,400		38,948			918,900		83,289
Gross profit		193,199		1,081			376,696		3,688
Research and development	$	49,141	$	8,587		$	92,272	$	16,517
Sales and marketing		28,419		3,283			54,224		5,857
General and administrative		16,396		3,789			32,245		7,414
Segments profit (loss)	$	99,243	$	(14,578	)	$	197,955	$	(26,100	)

F - 25

SOLAREDGE TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share data)

	Three Months Ended June 30, 2021					Six Months Ended June 30, 2021
	Solar		All other			Solar		All other
Revenues	$	431,449	$	48,509		$	807,736	$	77,625
Cost of revenues		270,249		46,921			497,082		77,404
Gross profit		161,200		1,588			310,654		221
Research and development	$	35,592	$	7,258		$	67,494	$	13,523
Sales and marketing		20,889		2,553			39,631		5,050
General and administrative		11,768		3,419			25,040		6,920
Segments profit (loss)	$	92,951	$	(11,642	)	$	178,489	$	(25,272	)

The following table presents information on reportable segments reconciliation to consolidated revenues for the periods presented:

Three Months Ended March 31,

2022

2021

Solar revenues

$
607,997
$
376,287
All other revenues
46,948 29,116
Revenues from services ASC 606
135 86
Consolidated revenues

$
655,080
$
405,489

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Solar revenues	$	687,599	$	431,449	$	1,295,596	$	807,736
All other revenues		40,029		48,509		86,977		77,625
Revenues from finance component		146		99		281		185
Consolidated revenues	$	727,774	$	480,057	$	1,382,854	$	885,546

The following table presents information on reportable segments reconciliation to consolidated operating income for the periods presented:

Three Months Ended March 31,

2022

2021

Solar segment profit

$
98,712
$
85,538
All other segment loss
(11,522
)
(13,630
)
Segments operating profit
87,190 71,908
Amounts not allocated to segments:

Stock based compensation expenses
(34,107
)
(23,153
)
Other unallocated expenses
(2,219
)
(4,627
)
Consolidated operating income

$
50,864
$
44,128

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Solar segment profit	$	99,243		$	92,951		$	197,955		$	178,489
All other segment loss		(14,578	)		(11,642	)		(26,100	)		(25,272	)
Segments operating profit		84,665			81,309			171,855			153,217
Amounts not allocated to segments:
Stock based compensation expenses		(37,074	)		(24,052	)		(71,181	)		(47,205	)
Impairment of goodwill and intangible assets		(4,008	)		-			(4,008	)		-
Disposal of assets related to Critical Power		(4,314	)		-			(4,314	)		-
Other unallocated expenses, net		(3,257	)		(1,698	)		(5,476	)		(6,325	)
Consolidated operating income	$	36,012		$	55,559		$	86,876		$	99,687

NOTE 18: SUBSEQUENT EVENTS

On July 20, 2022, the Company completed the sale of its investment in AutoGrid and received payment in the amount of $24,175, subject to post-closing adjustments.

On July 28, 2022, the Company received notice that Ampt LLC had filed complaints against SolarEdge Technologies Inc and SolarEdge Technologies Ltd in the U.S. International Trade Commission and the District Court for the District of Delaware alleging patent infringement. The Company anticipates a vigorous defense of these new actions.

F - 2426

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in this Form 10-Q or statements incorporated by reference from documents we have filed with the Securities and Exchange Commission may contain forward-looking statements that are based on our management’s expectations, estimates, projections, beliefs and assumptions in accordance with information currently available to our management. Forward-looking statements should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part 1, Item 1 of this report. This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, technology developments, new products and services, financing and investment plans, competitive position, industry and regulatory environment, effects of acquisitions, growth opportunities and the effects of competition. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “seek,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this filing. Important factors that could cause actual results to differ materially from our expectations include:

•

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;

•

disruption in our global supply chain and rising prices of oil and raw materials as a result of the conflict between Russia and Ukraine may adversely affect our business; 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” in ~~“Part II-OTHER INFORMATION” section of this report,~~ our annual report on Form 10-K for the year ended December 31, 2021 and subsequent reports on Form 10-Q and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business.

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Overview

We are a leading provider of an optimized inverter solution that has changed the way power is harvested and managed in a solar photovoltaic, known as PV systems. Our direct current or DC optimized inverter system maximizes power generation at the individual PV module level while lowering the cost of energy produced by the solar PV system, for improved return on investment, or ROI. Additional benefits of the DC optimized inverter system include comprehensive and advanced safety features, improved design flexibility, and improved operating and maintenance, or O&M with module-level and remote monitoring. Our future ready SolarEdge energy hub inverter which supports, among other things, connection to a DC-coupled battery for full or partial home backup, and optional connection to the SolarEdge smart EV charger. The typical SolarEdge optimized inverter system consists of power optimizers, inverters, a communication device which enables access to a cloud-based monitoring platform and in many cases, additional smart energy management solutions. Our solutions address a broad range of solar market segments, from residential solar installations to commercial and small utility-scale solar installations.

Since introducing the optimized inverter solution in 2010, SolarEdge has expanded its activity to other areas of smart energy technology, both through organic growth and through acquisitions. SolarEdge now offers energy solutions which include not only residential, commercial and small utility scale PV systems but also product offerings in the areas of energy storage systems or ESS and backup including our own SolarEdge home battery, electric vehicle, or EV components and charging capabilities, home energy management, grid services and virtual power plants or VPPs, lithium-ion batteries and uninterrupted power supply, known as UPS solutions. In June 2022, we decided to discontinue our stand-alone UPS related activities and that the developed technologies will be integrated in solar products as uninterrupted power supply becomes required or relevant.

In the third quarter of 2020 we began commercial shipments to the U.S. from our manufacturing facility in the North of Israel, “Sella 1”. The proximity of Sella 1 to our R&D team and labs, enables us to accelerate new product development cycles as well as define equipment and manufacturing processes of newly developed products which can then be adopted by our contract manufacturers world-wide. During the second quarter of 2021, Sella 1 reached full manufacturing capacity. In ~~2020,~~May 2022, we ~~began construction~~announced the opening of “Sella 2”, a 2GWh Li-Ion cell factory in Korea. The new factory is ~~being constructed~~intended to help the Company meet the growing global demand for Li-Ion cells and batteries, specifically in the energy storage system (“ESS”) and e-Mobility markets. Sella 2 is currently in testing phase, with ramp-up expected to initiate ~~test runs for manufacturing in~~during the ~~first~~second half of 2022.

We are a leader in the global module-level power electronics (“MLPE”) market. As of ~~March 31,~~June 30, 2022, we have shipped approximately ~~89.6~~94.9 million power optimizers, ~~3.7~~4.0 million inverters and ~~16.3~~45.8 thousand residential batteries. Over ~~2.6~~2.75 million installations, many of which may include multiple inverters, are currently connected to, and monitored through, our cloud-based monitoring platform. As of ~~March 31,~~June 30, 2022, we have shipped approximately ~~31.6~~34.2 GW of our DC optimized inverter systems and approximately ~~160.4~~411.0 MW of our residential batteries.

Our revenues for the three months ended ~~March 31,~~June 30, 2022, and 2021 were ~~$655.1~~$727.8 million and ~~$405.5~~$480.1 million, respectively. Gross ~~margins~~margin for the three months ended ~~March 31,~~June 30, 2022, and 2021 was ~~27.3%~~25.1% and ~~34.5%~~32.5%, respectively. Net income for the three months ended ~~March 31,~~June 30, 2022 and 2021 was ~~$33.1~~$15.1 million and ~~$30.1~~$45.1 million, respectively.

Our revenues for the six months ended June 30, 2022, and 2021 were $1,382.9 million and $885.5 million, respectively. Gross margin for the six months ended June 30, 2022, and 2021 was 26.1% and 33.5%, respectively. Net income for the six months ended June 30, 2022 and 2021 was $48.2 million and $75.2 million, respectively.

Covid-19 Impact & Response

Covid-19 continued to present challenges on our operations and business in 2021, primarily, operational challenges which we reported on continuously during 2021. Due to the worldwide growing trend in availability and administration of vaccines against Covid-19, many restrictions resulted from the pandemic were gradually lifted by governments across the globe. However, the future impact of the Covid-19 pandemic remains highly uncertain. Resurgences of Covid-19 cases and the emergence of new variants may adversely impact our results of operations. For example, the mandatory government shutdowns resulted from ~~recent~~the increase in Covid-19 cases in Shanghai, ~~lead~~that were recently eased, led to delays in our scheduled shipments from the Shanghai port. Our first priority continues to be to protect and support our employees while maintaining company operations and support of our customers with as few disruptions as possible. We follow the guidance issued by applicable local authorities and health officials in each region in which we do business, including in our headquarters located in Israel.

While we have not experienced any new disruptions resulting directly from Covid-19 in ~~first~~the second quarter of 2022, , the pandemic and general global economic conditions continued to present challenges to our operations and business. In the ~~first~~second quarter of 2022, we experienced and expect to continue to experience in the ~~second~~third quarter of 2022, continued disruptions to our logistics supply chain caused by constraints in the global transportation system including limited availability of local ground transportation coupled with congestion in shipping ports and industry-wide component shortages. These factors have impacted our ability to accurately plan and forecast the delivery of our products to customers and have also increased the total shipping time and cost of ocean freight for components and finished goods. Moreover, industry-wide component shortages require our R&D teams to focus their attention on manufacturing and production design workarounds solutions which can impact our ability to meet our plans to roll out new innovative products and services. Our operation team is working tirelessly to mitigate the impact of the disruptions described above.

Impact of Ukraine’s Conflict on the Energy Landscape

The conflict between Ukraine and Russia, which started in early 2022, and the sanctions and other measures imposed in response to this conflict have increased the level of economic and political uncertainty. While we do not have any meaningful business in Russia or Ukraine and we do not have physical assets in these countries, this conflict has, and is likely to continue to have, a multidimensional impact on the global economy, the energy landscape in general and the global supply chain. On one hand, in the first ~~quarter~~half of 2022, rising global interest in becoming less dependent on gas and oil led to higher demand for our products. On the other hand, the conflict further adversely affected the prices of raw materials arriving from Eastern Asia and resulted in an increase in gas and oil prices, leading to additional increases in shipping rates. Furthermore, various shipment routes were adversely impacted by the conflict resulting in increased shipment lead times and shipping costs for our products. While the impact of this conflict cannot be predicted at this time, the circumstances described above may have an adverse effect on our business and results of operations.

Our revenues for the ~~first~~second quarter 2022 of ~~$655.1~~$727.8 million, ~~reflect an increase~~represent continued growth from revenues of ~~$551.9~~$655.1 million in the ~~fourth~~first quarter of ~~2021.~~2022.

Key Operating Metrics

In managing our business and assessing financial performance, we supplement the information provided by the financial statements with other operating metrics. These operating metrics are utilized by our management to evaluate our business, measure our performance, identify trends affecting our business and formulate projections. We use metrics relating to shipments (inverters, power optimizers, residential batteries and megawatts shipped¹) to evaluate our sales performance and to track market acceptance of our products. We use metrics relating to monitoring (systems monitored) to evaluate market acceptance of our products and usage of our solution.

We provide the “megawatts shipped” metric, which is calculated based on inverter nameplate capacity shipped, to show adoption of our system on a nameplate capacity basis. Nameplate capacity shipped is the maximum rated power output capacity of an inverter and corresponds to our financial results in that higher total nameplate capacities shipped are generally associated with higher total revenues. However, revenues increase with each additional unit, not necessarily each additional MW of capacity sold. Accordingly, we also provide the “inverters shipped”, “power optimizers shipped” and "residential batteries shipped" operating metrics.

	Three months ended March 31,				Three Months Ended June 30, 2022				Six Months Ended June 30, 2022
	2022		2021		2022		2021		2022		2021
Inverters shipped		211,114		181,905		228,389		179,546		439,503		361,451
Power optimizers shipped		5,724,131		3,734,790		5,215,074		5,011,290		10,939,205		8,746,080
Megawatts shipped¹		2,130		1,691		2,516		1,643		4,646		3,334
Residential batteries shipped		9,985		—		29,437		-		39,422		-

¹ Excluding residential batteries, based on the aggregate nameplate capacity of inverters shipped during the applicable period. Nameplate capacity is the maximum rated power output capacity of an inverter as specified by the manufacturer.

Results of Operations

The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report.

The following table sets forth selected consolidated statements of income data for each of the periods indicated.

	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021			2022			2021
	(In thousands)						(In thousands)
Revenues		655,080			405,489		$	727,774		$	480,057		$	1,382,854		$	885,546
Cost of revenues		476,122			265,415			545,132			323,865			1,021,254			589,280
Gross profit		178,958			140,074			182,642			156,192			361,600			296,266
Operating expenses:
Research and development		66,349			46,977			74,847			52,664			141,196			99,641
Sales and marketing		35,316			26,911			38,975			29,458			74,291			56,369
General and administrative		26,429			19,849			28,121			19,370			54,550			39,219
Other operating expenses		—			2,209
Other operating expenses (income), net								4,687			(859	)		4,687			1,350
Total operating expenses		128,094			95,946			146,630			100,633			274,724			196,579
Operating income		50,864			44,128			36,012			55,559			86,876			99,687
Financial expense, net		(5,449	)		(6,097	)		(14,311	)		(1,743	)		(19,760	)		(7,840	)
Income before income taxes		45,415			38,031			21,701			53,816			67,116			91,847
Income taxes		12,292			7,955			6,617			8,724			18,909			16,679
Net income		33,123			30,076			15,084			45,092			48,207			75,168

Comparison of three and six months ended ~~March 31,~~June 30, 2022, to the three and ~~three~~six months ended ~~March 31,~~June 30, 2021

Revenues

Three months ended March 31,

2021 to 2022

2022

2021

Change

(In thousands)

Revenues

655,080

405,489

249,591

61.6
%

	Three months ended June 30, 2022 to 2021								Six months ended June 30, 2022 to 2021
	2022		2021		Change				2022		2021		Change
	(In thousands)
Revenues		727,774		480,057		247,717	51.6	%		1,382,854		885,546		497,308	56.2	%

Revenues increased by ~~$249.6~~$247.7 million, or ~~61.6%~~51.6%, in the three months ended ~~March 31,~~June 30, 2022, as compared to the three months ended ~~March 31,~~June 30, 2021, primarily due to (i) an increase in the number of inverters and power optimizers sold, with significant growth in revenues coming from Europe and the U.S; and (ii) an increase of $103.4 million related to the number of residential batteries sold mainly in Europe and the U.S. Revenues from outside of the U.S. comprised 57.3% of our revenues in the three months ended June 30, 2022 as compared to 63.4% in the three months ended June 30, 2021.

The number of power optimizers recognized as revenues increased by approximately 0.3 million units, or 5.5%, from approximately 4.9 million units in the three months ended June 30, 2021 to approximately 5.2 million units in the three months ended June 30, 2022. The number of inverters recognized as revenues increased by approximately 57.3 thousand units, or 32.3%, from approximately 177.3 thousand units in the three months ended June 30, 2021 to approximately 234.6 thousand units in the three months ended June 30, 2022. The number of residential batteries recognized as revenues in the three months ended June 30, 2022 was approximately 18.9 thousand units.

Our blended Average Selling Price ("ASP") per watt for solar products excluding residential batteries is calculated by dividing the solar revenues, excluding revenues from the sale of residential batteries, by the name plate capacity of inverters shipped. Our blended ASP per watt for solar products shipped excluding residential batteries decreased by $0.034, or 12.5%, in the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. The decrease in blended ASP per watt is mainly attributed to the increase in all geographies in the sale of commercial products out of our total solar product mix that are characterized with lower ASP per watt as well as the depreciation of the Euro and other currencies against the U.S. Dollar which, coupled with our increased sales in Europe, accelerated this effect.

This decrease in blended ASP per watt was partially offset by price increases that went into effect gradually during the second half of 2021 and the first half of 2022.

Revenues increased by $497.3 million, or 56.2%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to (i) an increase in the number of inverters and power optimizers sold, with significant growth in revenues coming from Europe and the U.S; (ii) an increase of ~~$52.0~~$155.4 million related to the number of residential batteries sold mainly in Europe and the U.S ~~and Europe;~~; and (iii) an increase of ~~$20.7~~$20.1 million related to the number of powertrain kits supplied by SolarEdge e-Mobility. Revenues from outside of the U.S. comprised ~~59.4%~~58.3% of our revenues in the ~~three~~six months ended ~~March 31,~~June 30, 2022 as compared to ~~59.7%~~61.7% in the ~~three~~six months ended ~~March 31,~~June 30, 2021.

The number of power optimizers recognized as revenues increased by approximately ~~1.9~~2.2 million units, or ~~50.6%~~25.1%, from approximately ~~3.8~~8.7 million units in the ~~three~~six months ended ~~March 31,~~June 30, 2021 to approximately ~~5.7~~10.9 million units in the ~~three~~six months ended ~~March 31,~~June 30, 2022. The number of inverters recognized as revenues increased by approximately ~~23.1~~80.4 thousand units, or ~~12.6%~~22.3%, from approximately ~~182.9~~360.2 thousand units in the ~~three~~six months ended ~~March 31,~~June 30, 2021 to approximately ~~206.0~~440.6 thousand units in the ~~three~~six months ended ~~March 31,~~June 30, 2022. The number of residential batteries recognized as revenues in the ~~three~~six months ended ~~March 31,~~June 30, 2022, was approximately ~~9.7 thousand.~~28.6 thousand units.

Our ~~blended Average Selling Price ("ASP")~~ASP per watt for solar products excluding residential batteries is calculated by dividing the solar revenues by the name plate capacity of inverters shipped. Our blended ASP per watt for solar products shipped excluding residential batteries increased by ~~$0.045,~~$0.005, or ~~20.2%~~1.9%, in the ~~three~~six months ended ~~March 31,~~June 30, 2022 as compared to the ~~three~~six months ended ~~March 31,~~June 30, 2021. The increase in blended ASP per watt is mainly attributed to a relatively higher number of ~~power optimizers and~~ other solar products shipped compared to the number of inverters shipped, which increased our total solar revenues but did not impact the watt amount used for calculating the ASP per watt, ~~as well as~~ an increase in the sale of products with enhanced capabilities such as the SolarEdge energy hub inverter that are characterized with higher ASP per watt, and price increases that went into effect gradually during the second half of ~~2021.~~

2021 and the first half of 2022. This increase in blended ASP per watt was partially offset by the increase in the sale of commercial products out of our total solar product mix ~~in the U.S and in ROW~~ that are characterized with lower ASP per watt as well as the depreciation of the Euro and other currencies against the U.S. ~~Dollar.~~Dollar which, coupled with our increased sales in Europe, accelerated this effect.

Cost of Revenues and Gross Profit

	Three months ended March 31,				2021 to 2022				Three months ended June 30, 2022 to 2021								Six months ended June 30, 2022 to 2021
	2022		2021		Change				2022		2021		Change				2022		2021		Change
	(In thousands)								(In thousands)
Cost of revenues		476,122		265,415		210,707	79.4	%		545,132		323,865		221,267	68.3	%		1,021,254		589,280		431,974	73.3	%
Gross profit		178,958		140,074		38,884	27.8	%		182,642		156,192		26,450	16.9	%		361,600		296,266		65,334	22.1	%

Cost of revenues increased by ~~$210.7~~$221.3 million, or ~~79.4%~~68.3%, in the three months ended ~~March 31,~~June 30, 2022, as compared to the three months ended ~~March 31,~~June 30, 2021, primarily due to:

•

an increase in the volume of products sold and the increase in the unit cost of components used in the manufacturing of our products;

•

a significant increase in shipment and logistic costs in an aggregate amount of ~~$29.4~~$38.0 million due to (i) an increase in shipment rates; and (ii) an increase in volumes shipped;

•

an increase in warranty expenses and warranty accruals of ~~$17.9~~$23.3 million associated primarily with an ~~increased~~increase in the number of products in our install base as well as an increase in costs related to the different elements of our warranty expenses which include the cost of the products, shipment and other related expenses;

•

an increase in custom duties of ~~$10.1~~$4.2 million attributed to higher tariff charges due to an increase in volumes sold and the manufacture of a higher portion of our products for the U.S. in China;

•

an increase in other production costs of ~~$14.9~~$22.1 million, which is mainly attributed to charges from our contract manufacturers due to manufacturing disruptions, related to the global supply constraints, increased logistics costs resulting from transportation disruptions and the mobilization of components among our different manufacturing sites and ramp up costs associated with the new contract manufacturing site in Mexico; and

•

an increase of $7.5 million in inventory accrual which is mainly attributed to changes in inventory valuations related to manufacturing volumes, anticipated future use of raw materials, and general inventory write-offs including those related to the discontinuation of our UPS related activities.

•

an increase in personnel-related costs of ~~$4.2~~$6.0 million related to the expansion of our production, operations, and support headcount which grew in parallel to our growing install base worldwide and ~~the~~an increase in the costs associated with the production of powertrain units manufactured by the SolarEdge e-Mobility division.

~~These increases were partially offset by:~~

•

a decrease of $5.9 million in inventory accrual which is mainly attributed to changes in inventory valuations related to manufacturing volumes, anticipated future use of such raw materials and inventory write-offs.

Gross profit as a percentage of revenue decreased from ~~34.5%~~32.5% in the three months ended ~~March 31,~~June 30, 2021 to ~~27.3%~~25.1% in the three months ended ~~March 31,~~June 30, 2022 as a result of the factors summarized above.

Cost of revenues increased by $432.0 million, or 73.3%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to:

•

an increase in the volume of products sold and the increase in the unit cost of components used in the manufacturing of our products;

•

a significant increase in shipment and logistic costs in an aggregate amount of $67.4 million due to (i) an increase in shipment rates; and (ii) an increase in volumes shipped;

•

an increase in warranty expenses and warranty accruals of $41.2 million associated primarily with an increase in the number of products in our install base as well as an increase in costs related to the different elements of our warranty expenses which include the cost of the products, shipment and other related expenses;

~~Operating Expenses:~~10

•

an increase in custom duties of $14.3 million attributed to higher tariff charges due to an increase in volumes sold and the manufacture of a higher portion of our products for the U.S. in China;

•

an increase in other production costs of $37.0 million, which is mainly attributed to charges from our contract manufacturers due to manufacturing disruptions, related to the global supply constraints, increased logistics costs resulting from transportation disruptions and the mobilization of components between our different manufacturing sites as well as ramp up costs associated with our new contract manufacturing site in Mexico; and

•

an increase in personnel-related costs of $10.2 million related to the expansion of our production, operations, and support headcount which grew in parallel to our growing install base worldwide and an increase in the costs associated with the production of powertrain units manufactured by the SolarEdge e-Mobility division.

Gross profit as a percentage of revenue decreased from 33.5% in the six months ended June 30, 2021 to 26.1% in the six months ended June 30, 2022 as a result of the factors summarized above.

Operating Expenses:

Research and Development

Three months ended March 31,

2021 to 2022

2022

2021

Change

(In thousands)

Research and development

66,349

46,977

19,372

41.2
%

	Three months ended June 30, 2022 to 2021								Six months ended June 30, 2022 to 2021
	2022		2021		Change				2022		2021		Change
	(In thousands)
Research and development		74,847		52,664		22,183	42.1	%		141,196		99,641		41,555	41.7	%

Research and development costs increased by ~~$19.4~~$22.2 million or ~~41.2%~~42.1%, in the three months ended ~~March 31,~~June 30, 2022, compared to the three months ended ~~March 31,~~June 30, 2021, primarily due to:

•

an increase in personnel-related costs of ~~$15.6~~$17.6 million resulting from an increase in our research and development headcount as well as salary expenses associated with annual merit increases and employee equity-based compensation. The increase in headcount reflects our ~~continuing~~continued investment in enhancements of existing products as well as research and development expenses associated with bringing new products to the market;

•

a decrease in reimbursement of costs related to the research and development activities performed by SolarEdge e-Mobility in an amount of $1.8 million;

•

an increase in expenses related to other overhead costs in an amount of $1.5 million; and

•

an increase in depreciation expenses of property and equipment in an amount of $1.3 million.

These increases were partially offset by:

•

a decrease in expenses related to consultants and sub-contractors in an amount of $1.0 million.

Research and development costs increased by $41.6 million or 41.7%, in the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to:

•

an increase in personnel-related costs of $33.2 million resulting from an increase in our research and development headcount as well as salary expenses associated with annual merit increase and employee equity-based compensation. The increase in headcount reflects our continued investment in enhancements of existing products as well as research and development expenses associated with bringing new products to the market;

•

a decrease in reimbursement of costs, in an amount of ~~$2.6~~$4.4 million, related to the research and development activities performed by SolarEdge e-Mobility;

•

an increase in depreciation expenses of property and equipment in an amount of $2.5 million;

•

an increase in expenses related to other overhead costs in an amount of $1.8 million; and

•

an increase in expenses related to material consumption in the manufacturing of prototypes during our development process in an amount of ~~$1.5 million; and~~

•

~~an increase in depreciation expenses of property and equipment in an amount of $0.9~~$1.4 million.

These increases were partially offset by:

•

a decrease in expenses related to consultants and sub-contractors in an amount of ~~$2.3~~$3.3 million.

Sales and Marketing

Three months ended March 31,

2021 to 2022

2022

2021

Change

(In thousands)

Sales and marketing

35,316

26,911

8,405

31.2
%

	Three months ended June 30, 2022 to 2021								Six months ended June 30, 2022 to 2021
	2022		2021		Change				2022		2021		Change
	(In thousands)
Sales and marketing		38,975		29,458		9,517	32.3	%		74,291		56,369		17,922	31.8	%

Sales and marketing expenses increased by ~~$8.4~~$9.5 million, or ~~31.2%~~32.3%, in the three months ended ~~March 31,~~June 30, 2022, compared to the three months ended ~~March 31,~~June 30, 2021, primarily due to:

•

an increase in personnel-related costs of $5.7 million as a result of an increase in headcount supporting our growth in all geographies, as well as salary expenses associated with annual merit increase and employee equity-based compensation; ~~and~~

•

an increase in expenses related to marketing activities by ~~$1.2~~$1.6 million due to the renewal of marketing activities, exhibitions and shows, which were cancelled or postponed in 2020 and first half of 2021 due to Covid-19 ~~restrictions.~~restrictions; and

•

an increase in expenses related to travel in an amount of $1.0 million.

Sales and marketing expenses increased by $17.9 million, or 31.8%, in the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to:

•

an increase in personnel-related costs of $11.4 million as a result of an increase in headcount supporting our growth in all geographies, as well as salary expenses associated with annual merit increases and employee equity-based compensation;

•

an increase in expenses related to marketing activities by $2.8 million due to the renewal of marketing activities, exhibitions and shows, which were cancelled or postponed in 2020 and first half of 2021 due to Covid-19 restrictions; and

•

an increase in expenses related to travel in an amount of $1.3 million.

General and Administrative

Three months ended March 31,

2021 to 2022

2022

2021

Change

(In thousands)

General and administrative

26,429

19,849

6,580

33.2
%

	Three months ended June 30, 2022 to 2021								Six months ended June 30, 2022 to 2021
	2022		2021		Change				2022		2021		Change
	(In thousands)
General and administrative		28,121		19,370		8,751	45.2	%		54,550		39,219		15,331	39.1	%

General and administrative expenses increased by ~~$6.6~~$8.8 million, or ~~33.2%~~45.2%, in the three months ended ~~March 31,~~June 30, 2022 compared to the three months ended ~~March 31,~~June 30, 2021, primarily due to:

•

an increase in personnel-related costs of ~~$6.8~~$5.7 million resulting from an increase in our general and administrative headcount, as well as salary expenses associated with annual merit increases and employee equity-based compensation; ~~and~~

•

an increase in expenses related to consultants and sub-contractors in an amount of ~~$2.3~~$1.0 million; and

•

an increase in expenses related to doubtful debt in an amount of $1.0 million.

~~These increases were partially offset by:~~General and administrative expenses increased by $15.3 million, or 39.1%, in the six months ended months ended June 30, 2022, compared to the six months ended months ended June 30, 2021, primarily due to:

•

an increase in personnel-related costs of $12.5 million resulting from an increase in our general and administrative headcount, as well as salary expenses associated with annual merit increases and employee equity-based compensation;

•

an increase in expenses related to consultants and sub-contractors in an amount of $3.3 million;

•

an increase in expenses related to doubtful debt in an amount of $1.0 million; and

•

an increase in expenses related to overhead costs in an amount of $1.0 million;

These increases were partially offset by:

•

a decrease of ~~$3.6~~$3.5 million related to a provision for legal claims.

Other operating expenses (income), net

Three months ended March 31,

2021 to 2022

2022

2021

Change

(In thousands)

Other operating expenses

—

2,209

(2,209
)

(100.0
)%

	Three months ended June 30, 2022 to 2021									Six months ended June 30, 2022 to 2021
	2022		2021			Change				2022		2021		Change
	(In thousands)
Other operating expenses (income), net		4,687		(859	)		5,546	(645.6	)%		4,687		1,350		3,337	247.2	%

Other operating expenses, ~~decreased by $2.2~~net, were $4.7 million, in the three months ended ~~March 31,~~June 30, 2022, compared to other operating income of $0.9 million in the three months ended June 30, 2021, primarily due to:

•

an increase of $4.0 million in expenses related to write-offs of goodwill and intangible assets related to the discontinuation of our UPS related activities;

•

an increase of $0.7 million in expenses related to write-offs of property, plant and equipment; and

•

a decrease of $0.9 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.

Other operating expenses (income), net increased by $3.3 million, in the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to:

•

an increase of $4.0 million in expenses related to write-offs of goodwill and intangible assets related to the discontinuation of our UPS related activities; and

•

a decrease of $0.9 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.

These increases were partially offset by:

•

a decrease of $1.6 million in expenses related to write-offs of property, plant and equipment.

Financial expense, net

	Three months ended June 30, 2022 to 2021											Six months ended June 30, 2022 to 2021
	2022			2021			Change					2022			2021			Change
	(In thousands)
Financial expense, net		(14,311	)		(1,743	)		(12,568	)	(721.1	)%		(19,760	)		(7,840	)		(11,920	)	(152.0	)%

Financial expenses, net increased by $12.6 million, or 721.1%, in the three months ended June 30, 2022, compared to the three months ended ~~March 31, 2021 due to a decrease in write-offs of property, plant and equipment.~~

~~Financial expense, net~~

Three months ended March 31,

2021 to 2022

2022

2021

Change

(In thousands)

Financial expense, net

(5,449
)
(6,097
)
648

10.6
%

~~Financial expenses, net decreased by $0.6 million, or 10.6%, in the three months ended March 31, 2022 compared to the three months ended March 31,~~June 30, 2021, primarily due to ~~a decrease~~an increase of ~~$4.0~~$15.1 million in expenses related to foreign exchange fluctuations, mainly ~~between~~due to the strengthening of the U.S. Dollar against the Euro, the New Israeli Shekel and the South Korean Won .

This increase was partially offset by an increase of $2.2 million in financial income related to hedging transactions.

Financial expenses, net increased by $11.9 million, or 152.0%, in the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to an increase of $11.1 million in expenses related to foreign exchange fluctuations, mainly due to the strengthening of the U.S. Dollar against the Euro, the New Israeli Shekel and the South Korean Won against the U.S. dollar.

Please refer to the section entitled "Foreign Currency Exchange Risk" under Item 3 of this report for additional information.

~~This decrease was partially offset by:~~Income taxes

•

~~a decrease of $2.6 million in financial income related to hedging transactions.~~

•

~~an increase of $0.8 million in realized loss on marketable securities.~~

	Three months ended June 30, 2022 to 2021									Six months ended June 30, 2022 to 2021
	2022		2021		Change					2022		2021		Change
	(In thousands)
Income taxes		6,617		8,724		(2,107	)	(24.2	)%		18,909		16,679		2,230	13.4	%

~~Income taxes~~

Three months ended March 31,

2021 to 2022

2022

2021

Change

(In thousands)

Income taxes

12,292

7,955

4,337

54.5
%

Income taxes ~~increased~~decreased by ~~$4.3~~$2.1 million, or ~~54.5%~~24.2%, in the three months ended ~~March 31,~~June 30, 2022, as compared to the three months ended ~~March 31,~~June 30, 2021, primarily due to ~~an increase~~a decrease of ~~$3.4~~$3.1 million in current tax expenses mainly attributed to ~~an increase~~a decrease in taxable ~~income~~income. This decrease was partially offset by a decrease of $1.4 million in our foreign subsidiaries. This increase in taxable income is associated with the provisions of Section 174 of the U.S Internal Revenue Code, which went into effect on January 1, 2022, and required capitalization of our research and development expenses.deferred tax income.

Income taxes increased by $2.2 million, or 13.4%, in the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, primarily due to a decrease of $2.3 million in deferred tax income.

Net Income

Three months ended March 31,

2021 to 2022

2022

2021

Change

(In thousands)

Net income

33,123

30,076

3,047

10.1
%

	Three months ended June 30, 2022 to 2021									Six months ended June 30, 2022 to 2021
	2022		2021		Change					2022		2021		Change
	(In thousands)
Net income		15,084		45,092		(30,008	)	(66.5	)%		48,207		75,168		(26,961	)	(35.9	)%

As a result of the factors discussed above, net income ~~increased~~decreased by ~~$3.0~~$30.0 million, or ~~10.1%~~66.5% in the three months ended ~~March 31,~~June 30, 2022 as compared to the three months ended ~~March 31,~~June 30, 2021.

As a result of the factors discussed above, net income decreased by $27.0 million, or 35.9% in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

Liquidity and Capital Resources

The following table shows our cash flows from operating activities, investing activities, and financing activities for the stated periods:

	Three months ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021			2022			2021
	(In thousands)						(In thousands)
Net cash provided by (used in) operating activities		(162,989	)		24,083			77,415			38,685			(85,574	)		62,768
Net cash used in investing activities		(15,134	)		(153,582	)		(310,799	)		(182,416	)		(325,933	)		(335,998	)
Net cash provided by (used in) financing activities		652,335			(2,062	)		(3,929	)		(19,144	)		648,406			(21,206	)
Increase (decrease) in cash, cash equivalents and restricted cash		474,212			(131,561	)
Increase (decrease) in cash and cash equivalents								(237,313	)		(162,875	)		236,899			(294,436	)

As of ~~March 31,~~June 30, 2022, our cash and cash equivalents were ~~$1,002.8~~$745.5 million. This amount does not include ~~$608.2~~$859.8 million invested in available for sale marketable securities, $1.4 million invested in long-term restricted bank deposits and $0.3 million invested in short-term ~~restricted bank deposits and $1.5 million invested in long-term~~ restricted bank deposits. Our principal uses of cash are for funding our operations, capital expenditures, other working capital requirements and other investments. As of ~~March 31,~~June 30, 2022, we have open commitments for capital expenditures in an amount of approximately ~~$144.2~~$92.9 million. These commitments mainly reflect purchases of automated assembly lines and other machinery related to our manufacturing operations. We also have purchase obligations in the amount of ~~$1,426.7~~$1,532.5 million related to raw materials and commitments for the future manufacturing of our products.

We believe that cash provided by operating activities as well as our cash and cash equivalents, and available for sale marketable securities will be sufficient to meet our anticipated cash needs for at least the next 12 months as well as in the longer term, including the self-funding of our capital expenditure and operational commitments.

Operating Activities

Operating cash flows consists primarily of net income adjusted for certain non-cash items and changes in assets and liabilities. Cash used in operating activities in the ~~three~~six months ended ~~March 31,~~June 30, 2022, was ~~$163.0~~$85.6 million as compared to ~~$24.1~~$62.8 million cash provided by operating cash flows in the ~~three~~six months ended ~~March 31,~~June 30, 2021, mainly due to extended shipping times to customers which extended the period of time between payment to our vendors and delivery to and collection from our customers, and a significant increase in inventory procurement in response to increased demand for our products, including increased purchasing of battery cells for our residential storage solution, and, increased safety stocks intended to mitigate supply chain disruptions, all of which resulted in unfavorable changes in working capital in the ~~three~~six months ended ~~March 31,~~June 30, 2022, compared to the ~~three~~six months ended ~~March 31,~~June 30, 2021, which was partially offset by higher net income adjusted for certain non-cash items. The Company returned to cash generation from operating activities in the second quarter of 2022.

Investing Activities

Investing cash flows consist primarily of capital expenditures, investment in, sales and maturities of available for sale marketable securities, investment and withdrawal of bank deposits and restricted bank deposits, and cash used for acquisitions. Cash used for investing activities decreased by ~~$138.4~~$10.1 million in the ~~three~~six months ended ~~March 31,~~June 30, 2022, as compared to the ~~three~~six months ended ~~March 31,~~June 30, 2021, primarily driven by a ~~$172.5~~$82.9 million decrease in purchases of available-for-sale debt investments, net. This decrease was partially offset by ~~an increase of $17.5 million in capital expenditures, net and~~ a ~~$16.5~~$46.6 million decrease in cash provided by withdrawal from bank deposits and restricted bank ~~deposits.~~deposits as well as an increase of $26.2 million in capital expenditures, net.

Financing Activities

Financing cash flows consisted primarily of the issuance and repayment of short-term and long-term debt and proceeds from the sale of shares of common stock in a public offering and employee equity incentive plans. Cash provided by financing activities in the ~~three~~six months ended ~~March 31,~~June 30, 2022, was ~~$652.3~~$648.4 million compared to ~~$2.1~~$21.2 million cash used in financing activities in the ~~three~~six months ended ~~March 31,~~June 30, 2021, primarily due to a $650.5 million increase in cash provided by the issuance of common stock, net through a secondary public offering, a decrease of $16.3 million in repayment of bank loans and ~~a $4.0~~an increase of $3.5 million ~~increase~~ in cash received from the exercise of stock-based awards net of withholding taxes remitted to the tax authorities.

Secondary public offering

On March 17, 2022, we offered and sold 2,300,000 shares of the Company’s common stock at a public offering price of $295.00 per share. The net proceeds to the Company after underwriters' discounts and commissions and offering costs were $650,526. We intend to use the proceeds from the public offering for general corporate purposes, which may include acquisitions. See Note 11b to our condensed consolidated financial statements for more information.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates, customer concentrations, and interest rates. We do not hold or issue financial instruments for trading purposes.

Foreign Currency Exchange Risk

Approximately ~~56.9%~~55.6% and ~~54.9%~~56.4% of our revenues for the ~~three~~six months ended ~~March 31,~~June 30, 2022, and 2021, respectively, were earned in non U.S. dollar denominated currencies, principally the Euro. Our expenses are generally denominated in the currencies in which our operations are located, primarily the U.S. dollar, New Israeli Shekel ("NIS"), Euro, and to a lesser extent, the South Korean Won ("KRW"). Our NIS denominated expenses consist primarily of personnel and overhead costs. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. A hypothetical 10% change in foreign currency exchange rates between the Euro and the U.S. dollar would increase or decrease our net income by ~~$23.4~~$52.4 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022. A hypothetical 10% change in foreign currency exchange rates between the NIS and the U.S. dollar would increase or decrease our net income by ~~$14.5~~$15.4 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022.

For purposes of our consolidated financial statements, local currency assets and liabilities are translated at the rate of exchange to the U.S. dollar on the balance sheet date and local currency revenues and expenses are translated at the exchange rate as of the date of the transaction or at the average exchange rate to the U.S. dollar during the reporting period.

To date, we have used derivative financial instruments, specifically foreign currency forward contracts and put and call options, to manage exposure to foreign currency risks by hedging portions of the anticipated payroll payments denominated in NIS. These derivative instruments are designated as cash flow hedges.

In addition, we also entered into derivative financial ~~instrument~~instruments to hedge the Company’s exposure to currencies other than the U.S. dollar, mainly forward contracts and put and call options to buy and sell Euro for U.S. dollars, forward contracts to sell AUD for U.S. dollars and forward contracts to sell U.S. dollars for KRW. These derivative instruments are not designated as cash flow hedges.

Concentrations of Major Customers

Our trade accounts receivables potentially expose us to a concentration of credit risk with our major customers. As of ~~March 31,~~June 30, 2022, ~~two~~one major ~~customers~~customer accounted for approximately ~~34.3%~~25.1% of our consolidated trade receivables balance. As of ~~March 31,~~June 30, 2021, ~~one~~two major ~~customer~~customers accounted for approximately ~~16.0%~~30.5% of our consolidated trade receivables balance. For the three months ended ~~March 31,~~June 30, 2022, ~~and 2021,~~ one major customer accounted for approximately ~~23.5%~~23.9% of our total revenues. For the three months ended June 30, 2021 two customers accounted for approximately 27.6% of our total revenues. For the six months ended June 30, 2022 and ~~21.2%~~2021 one customer accounted for approximately 23.7% and 18.9% of our total revenues, respectively. We currently do not foresee a credit risk associated with these receivables.

Commodity Price Risk

We are subject to risk from fluctuating market prices of certain commodity raw materials, including copper, which are used in our products. Prices of these raw materials may be affected by supply restrictions or other market factors from time to time, and we do not enter into hedging arrangements to mitigate commodity risk. Significant price changes for these raw materials could reduce our operating margins if we are unable to recover such increases from our customers, and could harm our business, financial condition, and results of operations.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of ~~March 31,~~June 30, 2022. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective and operating to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the ~~first~~second fiscal quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION.

ITEM 1. Legal Proceedings

In our Annual Report on Form 10-K for the year ended December 31, 2021 we disclosed that in May 2019, we were served with three lawsuits by Huawei Technologies Co., Ltd., a Chinese entity (“Huawei”), against our two Chinese subsidiaries and our equipment manufacturer in China. In May 2022, we announced that we have agreed on a global patent license agreement with Huawei. The agreement includes a cross license that covers patents relating to both companies' products, and will result in the settlement of all pending patent-litigation between the companies.

In the normal course of business, we may from time to time be named as a party to various legal claims, actions and complaints (including as a result of initiating such legal claims, action or complaints on behalf of the Company), including the matters described in Item 3 – “Legal Proceedings” of our Annual Report on Form 10-K for the period ended December 31, 2021. It is impossible to predict with certainty whether any resulting liability from any such legal claims, actions or complaints would have a material adverse effect on our financial position, results of operations or cash flows.

ITEM 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider ~~the risk set forth below and~~ the risk factors as described in Part I, Item 1A, ”Risk Factors”, in our Annual Report on Form 10-K for the year ended December 31, 2021.

~~Disruption in our global supply chain and rising prices of oil and raw materials as a result of the conflict between Russia and Ukraine may adversely affect our businesses and results of operations.~~

The conflict that began between Russia and Ukraine in late February 2022, and the recent recognition by Russia of the independence of the self-proclaimed republics of Donetsk and Luhansk, in the Donbas region of Ukraine, may significantly amplify already existing disruptions to our supply-chain and logistics. Specifically, the conflict may disrupt the transit of goods by train from China to Europe, result in an increase in prices of certain raw materials sourced in Russia (such as nickel and aluminum) that we use in the manufacture of our products as well as increase oil prices that will in turn cause overall shipping costs to rise. In addition, the governments of the United States, the European Union, Japan and other jurisdictions have announced sanctions on certain industry sectors and parties in Russia and the regions of Donetsk and Luhansk, as well as enhanced export controls on certain products and industries. These and any additional sanctions, as well as any counter responses by the governments of Russia or other jurisdictions, could adversely affect the global financial markets generally and levels of economic activity as well as increase financial markets volatility. Our compliance with these measures, and any additional measures or sanctions, as well as the resulting rise in prices of oil and certain raw materials sourced in Russia may disrupt our business and results of operations and/or adversely affect the pricing of our products.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

ITEM 3. Defaults upon Senior Securities.

None

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None

1518

ITEM 6. Exhibits

Index to Exhibits

Exhibit No.	Description	Incorporation by Reference
31.1	Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and15d-14(a) of the Securities Exchange Act of 1934, as amended	Filed with this report.
31.2	Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and15d-14(a) of the Securities Exchange Act of 1934, as amended	Filed with this report.
32.1	Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed with this report.
32.2	Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed with this report.
101	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements	Filed with this report.
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 formatted in Inline XBRL	Included in Exhibit 101

1619

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~May~~August 4, 2022

/s/ ~~Zvi Lando~~

Zvi Lando

Chief Executive Officer

(Principal Executive Officer)

Date: ~~May~~August 4, 2022

/s/ Ronen Faier

Ronen Faier

Chief Financial Officer

(Principal Financial Officer)

1720

Delaware		20-5338862
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1 HaMada Street
Herziliya Pituach, 4673335, Israel
(Address of Principal Executive Offices, zip code)

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	☐

PART I. FINANCIAL INFORMATION	F-1
ITEM 1.Financial Statements	F-1
Condensed Consolidated Balance Sheets	F-1
Condensed Consolidated Statements of Income	F-3
Condensed Consolidated Statements of Comprehensive Income	F-4
Condensed Consolidated Statements of Changes in Stockholders’ Equity	F-5
Condensed Consolidated Statements of Cash Flows	~~F-6~~F-7
Notes to the Condensed Consolidated Financial Statements (unaudited)	~~F-8~~F-9
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.	1316
ITEM 4. Controls and Procedures	1417

PART II. OTHER INFORMATION.	1418
ITEM 1. Legal Proceedings.	1418
ITEM 1A. Risk Factors	1418
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.	1518
ITEM 3. Defaults upon Senior Securities	1518
ITEM 4. Mine Safety Disclosures	1518
ITEM 5. Other Information.	1518
ITEM 6. Exhibits	1619
EXHIBIT INDEX.	1619

	March 31, 2022		December 31, 2021		June 30, 2022		December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,002,772	$	530,089	$	745,534	$	530,089
Marketable securities		158,557		167,728		150,259		167,728
Trade receivables, net of allowances of $3,226 and $2,626, respectively		676,820		456,339
Trade receivables, net of allowances of $3,805 and $2,626, respectively						669,100		456,339
Inventories, net		432,504		380,143		470,272		380,143
Prepaid expenses and other current assets		191,664		176,992		248,643		176,992
Total current assets		2,462,317		1,711,291		2,283,808		1,711,291
LONG-TERM ASSETS:
Marketable securities		449,673		482,228		709,571		482,228
Deferred tax assets, net		31,205		27,572		33,400		27,572
Property, plant and equipment, net		473,511		410,379		489,109		410,379
Operating lease right-of-use assets, net		59,783		47,137		58,375		47,137
Intangible assets, net		55,734		58,861		50,372		58,861
Goodwill		127,109		129,629		116,173		129,629
Other long-term assets		23,583		24,963		31,970		33,856
Total long-term assets		1,220,598		1,180,769		1,488,970		1,189,662
Total assets	$	3,682,915	$	2,892,060	$	3,772,778	$	2,900,953

							Accumulated
	Common stock				Additional paid in		other comprehensive								Common stock				Additional		Accumulated other
	Number		Amount		Capital		loss			Retained earnings		Total			Number		Amount		paid in Capital		comprehensive loss			Retained earnings		Total
Balance as of January 1, 2022		52,815,395	$	5	$	687,295	$	(27,319	)	$	650,058	$	1,310,039			52,815,395	$	5	$	687,295	$	(27,319	)	$	650,058	$	1,310,039
Issuance of Common Stock upon exercise of stock-based awards		270,751		* 0		1,478		0			0		1,478
Issuance of common stock upon exercise of stock-based awards																270,751		* -		1,478		-			-		1,478
Stock based compensation expenses		-		0		34,107		0			0		34,107			-		-		34,107		-			-		34,107
Issuance of common stock in a secondary public offering, net of underwriters' discounts and commissions of $27,140 and $834 of offering costs		2,300,000		1		650,525		0			0		650,526			2,300,000		1		650,525		-			-		650,526
Other comprehensive loss adjustments		0		0		0		(18,748	)		0		(18,748	)		-		-		-		(18,748	)		-		(18,748	)
Net income		0		0		0		0			33,123		33,123			-		-		-		-			33,123		33,123
Balance as of March 31, 2022		55,386,146	$	6	$	1,373,405	$	(46,067	)	$	683,181	$	2,010,525			55,386,146	$	6	$	1,373,405	$	(46,067	)	$	683,181	$	2,010,525
Issuance of Common Stock upon exercise of stock-based awards																211,839		* -		164		-			-		164
Issuance of Common stock under employee stock purchase plan																35,105		* -		8,141		-			-		8,141
Stock based compensation expenses																-		-		37,171		-			-		37,171
Other comprehensive loss adjustments																-		-		-		(43,553	)		-		(43,553	)
Net income																-		-		-		-			15,084		15,084
Balance as of June 30, 2022																55,633,090	$	6	$	1,418,881	$	(89,620	)	$	698,265	$	2,027,532

2022	$	15,468
2023		17,380
2024		8,468
2025		7,506
2026		6,769
Thereafter		128,654
Total deferred revenues	$	184,245

	March 31, 2022		December 31, 2021
Accrued expenses	$	65,903	$	51,014
Government authorities		27,707		22,631
Operating lease liabilities		14,570		12,728
Provision for legal claims		11,476		11,622
Other		15,295		11,384
	$	134,951	$	109,379

	Three Months Ended March 31,
		2022		2021
Cost of revenues	$	5,062	$	5,790
Research and development		14,985		8,798
Selling and marketing		6,701		5,435
General and administrative		7,359		3,130
Total stock-based compensation expenses	$	34,107	$	23,153