SOLAREDGE TECHNOLOGIES, INC. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this Form 10-Q or statements incorporated by reference from documents we have filed with theSecurities 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
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;
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• 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
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 our annual report
on Form 10-K for the year ended
Form 10-Q and in other documents we file from time to time with the
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 readySolarEdge energy hub inverter which supports, among other things, connection to a DC-coupled battery for full or partial home backup, and optional connection to theSolarEdge smart EV charger. The typicalSolarEdge 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. 4 -------------------------------------------------------------------------------- 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 ownSolarEdge 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 asUPS solutions. InJune 2022 , we decided to discontinue our stand-aloneUPS 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 theU.S. from our manufacturing facility in the North ofIsrael , "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. InMay 2022 , we announced the opening of "Sella 2", a 2GWh Li-Ion cell factory inKorea . The new factory is 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 during the second half of 2022. We are a leader in the global module-level power electronics ("MLPE") market. As ofJune 30, 2022 , we have shipped approximately 94.9 million power optimizers, 4.0 million inverters and 45.8 thousand residential batteries. Over 2.75 million installations, many of which may include multiple inverters, are currently connected to, and monitored through, our cloud-based monitoring platform. As ofJune 30, 2022 , we have shipped approximately 34.2 GW of our DC optimized inverter systems and approximately 411.0 MW of our residential batteries.
Our revenues for the three months ended
Our revenues for the six months endedJune 30, 2022 , and 2021 were$1,382.9 million and$885.5 million , respectively. Gross margin for the six months endedJune 30, 2022 , and 2021 was 26.1% and 33.5%, respectively. Net income for the six months endedJune 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 the increase in Covid-19 cases inShanghai , that were recently eased, led to delays in our scheduled shipments from theShanghai 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 inIsrael . While we have not experienced any new disruptions resulting directly from Covid-19 in the second quarter of 2022, the pandemic and general global economic conditions continued to present challenges to our operations and business. In the second quarter of 2022, we experienced and expect to continue to experience in the 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. 5
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Impact of
The conflict betweenUkraine andRussia , 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 inRussia orUkraine 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 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 fromEastern 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 second quarter 2022 of
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--------------------------------------------------------------------------------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 Six Months Ended
June 30, 2022 June 30, 2022
2022 2021 2022 2021
Inverters shipped 228,389 179,546 439,503 361,451
Power optimizers shipped 5,215,074 5,011,290 10,939,205 8,746,080
Megawatts shipped1 2,516 1,643 4,646 3,334
Residential batteries shipped 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.
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--------------------------------------------------------------------------------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 Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(In thousands)
Revenues $ 727,774 $ 480,057 $ 1,382,854 $ 885,546
Cost of revenues 545,132 323,865 1,021,254 589,280
Gross profit 182,642 156,192 361,600 296,266
Operating expenses:
Research and development 74,847 52,664 141,196 99,641
Sales and marketing 38,975 29,458 74,291 56,369
General and administrative 28,121 19,370 54,550 39,219
Other operating expenses (income), net 4,687 (859 ) 4,687 1,350
Total operating expenses 146,630 100,633 274,724 196,579
Operating income 36,012 55,559 86,876 99,687
Financial expense, net (14,311 ) (1,743 ) (19,760 ) (7,840 )
Income before income taxes 21,701 53,816 67,116 91,847
Income taxes 6,617 8,724 18,909 16,679
Net income 15,084 45,092 48,207 75,168
Comparison of three and six months ended
Revenues
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 $247.7 million , or 51.6%, in the three months ended
June 30, 2022 , as compared to the three 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 ; 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.
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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 $155.4
million related to the number of residential batteries sold mainly in Europe and
the U.S ; and (iii) an increase of $20.1 million related to the number of
powertrain kits supplied by SolarEdge e-Mobility. Revenues from outside of the
U.S. comprised 58.3% of our revenues in the six months ended June 30, 2022 as
compared to 61.7% in the six months ended June 30, 2021 .
The number of power optimizers recognized as revenues increased by approximately
2.2 million units, or 25.1%, from approximately 8.7 million units in the six
months ended June 30, 2021 to approximately 10.9 million units in the six months
ended June 30, 2022 . The number of inverters recognized as revenues increased by
approximately 80.4 thousand units, or 22.3%, from approximately 360.2 thousand
units in the six months ended June 30, 2021 to approximately 440.6 thousand
units in the six months ended June 30, 2022 . The number of residential batteries
recognized as revenues in the six months ended June 30, 2022 , was approximately
28.6 thousand units.
Our 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 $0.005 , or 1.9%, in the six months ended
June 30, 2022 as compared to the six months ended June 30, 2021 . The increase in
blended ASP per watt is mainly attributed to a relatively higher number of 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, 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 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 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.
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--------------------------------------------------------------------------------Cost of Revenues and Gross Profit
Three months ended June 30, 2022 to 2021 Six months ended June 30, 2022 to 2021
2022 2021 Change 2022 2021 Change
(In thousands)
Cost of revenues 545,132 323,865 221,267 68.3 % 1,021,254 589,280 431,974 73.3 %
Gross profit 182,642 156,192 26,450 16.9 % 361,600 296,266 65,334 22.1 %
Cost of revenues increased by
• 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 $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
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;
• an increase in custom duties of
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
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
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 $6.0 million related to theexpansion 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 32.5% in the three months
ended June 30, 2021 to 25.1% in the three months ended 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
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;
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• an increase in custom duties of
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
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
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 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 $22.2 million or 42.1%, in the
three months ended June 30, 2022 , compared to the three months ended June 30,
2021 , primarily due to:
• an increase in personnel-related costs of
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 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
• an increase in expenses related to other overhead costs in an amount of
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
• an increase in personnel-related costs of
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;
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• a decrease in reimbursement of costs, in an amount of
the research and development activities performed by
• 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
million; and
• an increase in expenses related to material consumption in the manufacturing
of prototypes during our development process in an amount of
These increases were partially offset by:
• a decrease in expenses related to consultants and sub-contractors in an amount
of $3.3 million .
Sales and Marketing
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 $9.5 million , or 32.3%, in the three
months ended June 30, 2022 , compared to the three months ended 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;
• an increase in expenses related to marketing activities by
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
Sales and marketing expenses increased by
• an increase in personnel-related costs of
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
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
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--------------------------------------------------------------------------------General and Administrative
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 $8.8 million , or 45.2%, in the
three months ended June 30, 2022 compared to the three months ended June 30,
2021 , primarily due to:
• an increase in personnel-related costs of
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 $1.0 million ; and
• an increase in expenses related to doubtful debt in an amount of
General and administrative expenses increased by$15.3 million , or 39.1%, in the six months ended months endedJune 30, 2022 , compared to the six months ended months endedJune 30, 2021 , primarily due to:
• an increase in personnel-related costs of
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
and
• an increase in expenses related to overhead costs in an amount of
million;
These increases were partially offset by:
• a decrease of $3.5 million related to a provision for legal claims.
Other operating expenses (income), 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)
Other operating
expenses
(income), net 4,687 (859 ) 5,546 (645.6 )% 4,687 1,350 3,337 247.2 %
Other operating expenses, net, were $4.7 million , in the three months ended
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
intangible assets related to the discontinuation of our UPS related
activities;
• an increase of
plant and equipment; and
• a decrease of
escrow account with regards to a working capital adjustment in connection with
the Kokam acquisition.
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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
intangible assets related to the discontinuation of our UPS related
activities; and
• a decrease of
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 June 30, 2021 ,
primarily due to an increase of $15.1 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 .
This increase was partially offset by an increase of
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.
Income taxes
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 decreased by $2.1 million , or 24.2%, in the three months ended
June 30, 2022 , as compared to the three months ended June 30, 2021 , primarily
due to a decrease of $3.1 million in current tax expenses mainly attributed to a
decrease in taxable income. This decrease was partially offset by a decrease of
$1.4 million in deferred tax income.
Income taxes increased by
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--------------------------------------------------------------------------------Net Income
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 decreased by
$30.0 million , or 66.5% in the three months ended June 30, 2022 as compared to
the three months ended June 30, 2021 .
As a result of the factors discussed above, net income decreased by
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 June 30, Six Months Ended June 30,
2022 2021 2022 2021
(Inthousands)
Net cash provided by (used in) operating activities 77,415 38,685 (85,574 ) 62,768 Net cash used in investing activities (310,799 ) (182,416 ) (325,933 ) (335,998 ) Net cash provided by (used in) financing activities (3,929 ) (19,144 ) 648,406 (21,206 ) Increase (decrease) in cash and cash equivalents (237,313 ) (162,875 ) 236,899 (294,436 ) As ofJune 30, 2022 , our cash and cash equivalents were$745.5 million . This amount does not include$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. Our principal uses of cash are for funding our operations, capital expenditures, other working capital requirements and other investments. As ofJune 30, 2022 , we have open commitments for capital expenditures in an amount of approximately$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$1,532.5 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 six months endedJune 30, 2022 , was$85.6 million as compared to$62.8 million cash provided by operating cash flows in the six months endedJune 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 six months endedJune 30, 2022 , compared to the six months endedJune 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. 15 --------------------------------------------------------------------------------
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$10.1 million in the six months endedJune 30, 2022 , as compared to the six months endedJune 30, 2021 , primarily driven by a$82.9 million decrease in purchases of available-for-sale debt investments, net. This decrease was partially offset by a$46.6 million decrease in cash provided by withdrawal from bank deposits and restricted bank 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 six months endedJune 30, 2022 , was$648.4 million compared to$21.2 million cash used in financing activities in the six months endedJune 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 an increase of$3.5 million in cash received from the exercise of stock-based awards net of withholding taxes remitted to the tax authorities.
Secondary public offering
OnMarch 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.
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