SOLAREDGE TECHNOLOGIES INC

Previous wording

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Current wording

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

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the section of this Annual Report on Form 10-K captioned “Business” and our consolidated financial statements and the related notes to those statements included elsewhere in this Form 10-K. In addition to historical financial information, the following discussion and analysis contains forward looking statements that involve risks, uncertainties, and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward looking statements as a result of many factors, including those discussed under the sections of this Annual Report captioned “Special Note Regarding Forward Looking Statements” and “Risk Factors”. For discussion related to changes in financial condition and the results of operations for the year ended December 31, 2022, refer to Item 7- Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 22, 2023.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the section of this Annual Report on Form 10-K captioned “Business” and our consolidated financial statements and the related notes to those statements included elsewhere in this Form 10-K. In addition to historical financial information, the following discussion and analysis contains forward looking statements that involve risks, uncertainties, and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward looking statements as a result of many factors, including those discussed under the sections of this Annual Report captioned “Special Note Regarding Forward Looking Statements” and “Risk Factors”. For discussion related to changes in financial condition and the results of operations for the year ended December 31, 2023 (including as compared to 2022), refer to Item 7- Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 26, 2024.

Previous wording

We develop, manufacture and sell products in a solar segment that addresses a broad range of energy market segments through our diversified product offering, including residential, commercial and large scale photovoltaic or PV, energy storage and backup solutions, electric vehicle or EV charging capabilities, home energy management, grid services and virtual power plants, as well as products in our non-solar businesses including lithium-ion cells, batteries and energy storage systems, which are part of our Energy Storage Segment as well as automation machines ("Automation Machines") and in prior years, we also had product offerings for the e-mobility market. In October 2023, we decided to discontinue our light commercial vehicle e-Mobility ("LCV") activity and the remaining e-mobility activity which include PV applications, will be included under the solar segment starting January 1, 2024.

Current wording

We develop, manufacture, and sell products that address a broad range of energy market segments through our diversified product offering, including residential, commercial and large scale photovoltaic or PV, energy storage and backup solutions, electric vehicle or EV charging capabilities, home energy management, grid services and virtual power plants, as well as products in our non-solar businesses including lithium-ion cells, batteries and energy storage systems, prior to October 2024, automation machines ("Automation Machines") and in prior years we also had product offerings for the e-mobility market. In October 2023, we decided to discontinue our LCV activity and the remaining e-mobility activity. Starting January 1, 2024, all e-mobility activity, which includes PV solutions are included under our solar segment. In October 2024, the Company completed the sale of Automation Machines. Additionally, in November 2024, the Company announced the closure of its Energy Storage Division, as part of its focus on its core solar activities

Previous wording

In the fourth quarter 2023 the Company identified two reportable segments: the Solar segment and Energy Storage segment. The Solar segment includes the design, development, manufacturing, and sales of its DC optimized inverter solutions designed to maximize power generation at the PV module level and batteries for PV applications. The Solar segment solution consists mainly of the Company’s power optimizers, inverters, batteries and cloud‑based monitoring platform. The Energy Storage segment includes the design, development, manufacturing, and sales of high-energy, high-power, lithium-ion cells and BESS solutions for C&I and Utility markets. The Energy Storage segment provides purpose-built components and solutions, hardware and software, as well as pre and post sales engineering support to design, build, and manage battery and system solutions according to the customer’s use cases and mission profiles. The “All other” category includes the design, development, manufacturing and sales of e-Mobility products, automated machines and UPS products (in prior periods).

Current wording

In the fourth quarter 2024 the Company identified one reportable segment: the Solar segment.

Previous wording

In the year ended December 31, 2023, two customers accounted for 24.0% of our revenues and our top three customers (all distributors) together represented 31.1% of our revenues.

Current wording

For the year ended December 31, 2024, one customer accounted for 12.9% of our revenues and our top three customers (all distributors) together represented 31.3% of our revenues.

Previous wording

We provide the “megawatts shipped” and "megawatts hour shipped" metrics, which are calculated based on inverter or battery nameplate capacity shipped respectively, to show adoption of our system on a nameplate capacity basis. Nameplate capacity shipped is the maximum rated power output capacity of an inverter or battery, and corresponds to our financial results in that higher total nameplate capacities shipped are generally associated with higher total revenues. However, revenues may increase in a non-correlated manner to the "megawatt shipped" metric since other products such as Power Optimizers, are not accounted for in this metric.

Current wording

We provide the “megawatts shipped” and "megawatt hours shipped" metrics, which are calculated based on inverter or battery nameplate capacity shipped respectively, to show adoption of our system on a nameplate capacity basis. Nameplate capacity shipped is the maximum rated power output capacity of an inverter or battery, and corresponds to our financial results in that higher total nameplate capacities shipped are generally associated with higher total revenues. However, revenues may increase in a non-correlated manner to the "megawatt shipped" metric since other products such as Power Optimizers, are not accounted for in this metric.

Previous wording

1 Excluding batteries for PV applications, 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.

Current wording

1 Excluding batteries for PV applications, based on the aggregate nameplate capacity of inverters shipped during the applicable period.

Previous wording

We have seen a slowdown in demand for our products in our Solar segment from our direct customers since the second part of the third quarter of 2023. This was a result of slowed market demand in the third quarter of 2023 as distributors began to take actions to reduce inventory levels. In particular, beginning in the second part of the third quarter of 2023, we experienced substantial unexpected cancellations and push outs of existing backlog from our European distributors. We attribute these cancellations and pushouts to high inventory in the channels and slower than expected installation rates both in the United States and Europe. This trend continued in the fourth quarter of 2023.Additionally, the Company anticipates significantly lower revenues in the first quarter of 2024 as the inventory destocking process continues.

Current wording

We have seen a slowdown in demand for our products in our Solar segment from our direct customers since the second part of the third quarter of 2023 and throughout 2024. This was a result of slowed market demand in the third quarter of 2023 and throughout 2024 as distributors began to take actions to reduce inventory levels. In particular, beginning in the second part of the third quarter of 2023, we experienced substantial unexpected cancellations and push outs of existing backlog from our European distributors. We attribute these cancellations and pushouts to high inventory in the channels and slower than expected installation rates both in the United States and to a greater extent in Europe. This trend continued in the subsequent quarters, throughout 2024. Additionally, the Company anticipates that this trend will continue in the first quarter of 2025, as our inventory destocking process continues.

Previous wording

Due to the war that began on October 7, 2023, approximately 10% of our employees in Israel were called to active reserve duty and additional employees may be called in the future, if needed. About half of these employees have returned to work. While our offices and facilities are open worldwide, including in Israel, and, to date, we have not had disruptions to our ability to manufacture and deliver products and services to customers, a prolonged war or an escalation of the current conditions in Israel could materially adversely affect our business, financial condition, and results of operations. Due to the recency of these events, and their ongoing and evolving nature, the extent of the adverse effect on our business operations is still unknown.

Current wording

Due to the war that began on October 7, 2023, some of our employees in Israel were called to active reserve duty and additional employees may be called in the future, if needed. In the year ended December 31, 2024 approximately 319 or 13% of our employees in Israel have been called to active reserve duty for varying periods. While our offices and facilities are open worldwide, including in Israel, and, to date, we have not had disruptions to our ability to manufacture and deliver products and services to customers. Although the situation is somewhat stabilized due to ceasefires between Israel and Hamas, as well as Israel and Hezbollah, an escalation of the current conflicts in Israel could materially adversely affect our business, financial condition, and results of operations. Due to the ongoing and evolving nature of the conflict in Israel, and the extent of these events, the adverse effect on our business operations is still unknown.

Previous wording

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. In 2022, rising global interest in becoming less dependent on gas and oil led to higher demand for our products. The conflict adversely affected the prices of raw materials arriving from Eastern Asia and resulted in an increase in gas and oil prices. 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 decreased in 2023, a change or escalation of this ongoing conflict could increase the impacts from the circumstances described above and may lead to an adverse effect on our business and results of operations.

Current wording

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. While the impact of this conflict continued to decreased in 2024, an escalation of this ongoing conflict could lead to an adverse effect on our business and results of operations.

Previous wording

In August 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “IRA”), which includes several provisions intended to accelerate U.S. manufacturing and adoption of clean energy, battery and energy storage, electrical vehicles, and other solar products and is expected to impact our business and operations. As part of such incentives, the IRA, among other things, extends the investment tax credit and production tax credit through 2034 and is therefore expected to increase the demand for solar products. The IRA also further incentivizes residential and commercial solar customers and developers through the inclusion of a tax credit for qualifying energy projects of up to 30%. Section 45X of the IRA offers advanced manufacturing production tax credits that incentivize the production of eligible components within the U.S. To that end, we established manufacturing capabilities in the U.S. in 2023 and announced additional capacity expected during 2024. These provisions of the law are new and regulations and guidance concerning their implementation are gradually being published by the U.S. Treasury Department. We continue to monitor the benefits that may be available to us, such as the availability of tax credits for domestic manufacturers. To the extent that tax benefits or credits may be available to competing technology and not to our technology, our business could be adversely disadvantaged.

Current wording

In August 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “IRA”), which includes several provisions intended to accelerate U.S. manufacturing and adoption of clean energy, battery and energy storage, electrical vehicles, and other solar products and is expected to impact our business and operations. As part of such incentives, the IRA, among other things, extends the investment tax credit and production tax credit through 2034 and is therefore expected to increase the demand for solar products. The IRA also further incentivizes residential and commercial solar customers and developers through the inclusion of a tax credit for qualifying energy projects of up to 30%. Section 45X of the IRA offers advanced manufacturing production tax credits ("AMPTC") that incentivize the production of eligible components within the U.S. To that end, we established manufacturing capabilities in the U.S. in 2023. These provisions of the law are new and regulations and guidance concerning their implementation are gradually being published by the U.S. Treasury Department. On October 24, 2024, final regulations concerning the application of IRC §45X were published. The regulations contain detailed rules concerning the eligibility, qualifying and accounting for AMPTCs. Of particular relevance to the Company are the rules concerning the qualification and measurement of AMPTCs to Residential Inverters, Commercial Inverters and DC-Optimized Inverter Systems, that are included in the definition of Microinverters. In 2024 we sold a significant part of the AMPTCs we generated from our U.S. production of eligible components.

Previous wording

We generate revenues from the sale of DC optimized inverter systems for solar PV installations, which include power optimizers, inverters, storage and backup solutions, EV chargers, smart energy devices, our cloud-based monitoring platform and grid services. Our customer base mainly includes distributors, large solar installers, wholesalers, and EPCs. In addition, we also generated revenues from the sale of lithium-ion cells, batteries and energy storage solutions, automation machines and EV powertrain solutions for electric vehicles.

Current wording

We generate revenues from the sale of DC optimized inverter systems for solar PV installations, which include power optimizers, inverters, storage and backup solutions, EV chargers, smart energy devices, our cloud-based monitoring platform, extended warranty for our products and grid services. Our customer base mainly includes distributors, large solar installers, wholesalers, and EPCs. In addition, we also generated revenues from the sale of lithium-ion cells, batteries and energy storage solutions and automation machines.

Previous wording

Our revenues from the sale of solar-related products are affected by changes in the volume and average selling prices of our DC optimized inverter systems. The volume and average selling price of our systems is driven by the supply and demand for our products, changes in the product mix between our residential and commercial products, the customer mix between large and small customers, the geographical mix of our sales, sales incentives, end user government incentives, seasonality, and competitive product offerings. Revenues from the sale of lithium-ion cells, batteries, energy storage system or ESS products, are affected by the type of product sold (cell, battery or system) and the type of the battery that is sold. Revenues from the sale of Automation Machines and e-Mobility products are affected by the changes in the volumes, customers’ size and average selling prices of the products we sell.

Current wording

Our revenues from the sale of solar-related products are affected by changes in the volume and average selling prices of our DC optimized inverter systems. The volume and average selling price of our systems is driven by the supply and demand for our products, changes in the product mix between our residential and commercial products, the customer mix between large and small customers, the geographical mix of our sales, sales incentives, end user government incentives, seasonality, and competitive product offerings. Revenues from the sale of lithium-ion cells, batteries, energy storage system or ESS products, are affected by the type of product sold (cell, battery or system) and the type of battery that is sold.

Previous wording

Our revenue growth is dependent on our ability to expand our market share in each of the geographies in which we compete, expand our global footprint to new evolving markets, manage our production capabilities to meet demand, continue to develop and introduce new and innovative products that address the changing technology and performance requirements of our customers and expand of the new businesses we acquired.

Current wording

Our revenue growth is dependent on our ability to expand our market share in each of the geographies in which we compete, expand and retain our global footprint to new evolving markets, manage our production capabilities to meet demand, continue to develop and introduce new and innovative products that address the changing technology and performance requirements of our customers and expand of the new businesses we acquired.

Previous wording

In the year ended December 31, 2023, 64% of our revenues were generated from Europe, 25.5% of our revenues were generated from the United States and 10.5% of our revenues were generated from ROW. In the year ended December 31, 2022, 54.3% of our revenues were generated from Europe, 36.5% of our revenues were generated from the United States and 9.2% of our revenues were generated from ROW.

Current wording

In the year ended December 31, 2024, 42.1% of our revenues were generated from the United States, 35.8% of our revenues were generated from Europe, and 22.1% of our revenues were generated from the rest of the world ("ROW"). In the year ended December 31, 2023, 64.0% of our revenues were generated from Europe, 25.5% of our revenues were generated from the United States and 10.5% of our revenues were generated from ROW.

Previous wording

Cost of revenues consists primarily of product costs, including purchases from our contract manufacturers and other suppliers, as well as costs related to shipping, customer support, product warranty, personnel, depreciation of testing and manufacturing equipment, amortization of intangible assets and other fixed costs, provision for losses related to slow moving and dead inventory, hosting services for our cloud based monitoring platform, variable utility costs, operational costs related to the manufacturing factories, other logistics services, contract termination costs and renewable electricity production credits. Our product costs are affected by technological innovations, such as advances in semiconductor integration and new product introductions, economies of scale resulting in lower component costs, improvements in production processes and automation, the volume of products subject to import tariffs (for example, for imports from China to the U.S.) and the volume of products for which manufacturing credits are available (for example, for products made in the U.S.). Some of these costs, primarily personnel, amortization of intangible assets and depreciation of testing and manufacturing equipment, are not directly affected by sales volume.

Current wording

Cost of revenues consists primarily of product costs, including purchases from our contract manufacturers and other suppliers, as well as costs related to shipping, customer support, product warranty, personnel, depreciation of testing and manufacturing equipment, amortization of intangible assets and other fixed costs, provision for losses related to slow moving and dead inventory, hosting services for our cloud based monitoring platform, variable utility costs, operational costs related to the manufacturing factories, other logistics services, and contract termination costs, partially offset by AMPTCs we are entitled to under IRA. Our product costs are affected by technological innovations, such as advances in semiconductor integration and new product introductions, economies of scale resulting in lower component costs, improvements in production processes and automation, the volume of products subject to import tariffs (for example, for imports from China to the U.S.) and the volume of products for which manufacturing credits are available (for example, for products made in the U.S.). Some of these costs, primarily personnel, amortization of intangible assets and depreciation of testing and manufacturing equipment, are not directly affected by sales volume.

Previous wording

Cost of revenues also includes our operations, production and support departments’ costs. The operations and production departments are responsible for production management such as planning, procurement, supply chain, production methodologies and machinery planning, logistics management and manufacturing support to our contract manufacturers, as well as the quality assurance of our products. Our support department provides customer and technical support at various levels through our call centers around the world as well as second and third-level support services, which are provided by support personnel located in our headquarters. Our employees headcount in our operations, production and support departments has grown to 2,857 as of December 31, 2023 from 2,383 as of December 31, 2022.

Current wording

Cost of revenues also includes our operations, production and support departments’ costs. The operations and production departments are responsible for production management such as planning, procurement, supply chain, production methodologies and machinery planning, logistics management and manufacturing support to our contract manufacturers, as well as the quality assurance of our products. Our support department provides customer and technical support at various levels through our call centers around the world as well as second and third-level support services, which are provided by support personnel located in our headquarters. Our employees headcount in our operations, production and support departments has reduced to 1,804 as of December 31, 2024 from 2,857 as of December 31, 2023.

Previous wording

In October of 2023, the Company made an announcement regarding its restructuring plans to adjust its manufacturing capacity and increase operating efficiency,including, terminating the manufacturing process in Mexico, reducing manufacturing capacity in China, and discontinuing the Company’s LCV e-Mobility activity, and on January 21, 2024, the Company announced adoption of additional measures in response to challenging industry conditions, including reducing its headcount by approximately 16% over the first half of 2024 through an involuntary workforce reduction plan (together, the “Restructuring Plan”). These decisions were made in order to better align the Company with current market conditions. The majority of these activities related to the discontinuation of LCV activity and the reduction of our manufacturing footprint which occurred in December 2023 and the significant part of the workforce reduction occurred in January 2024.

Current wording

In October of 2023, the Company made an announcement regarding its restructuring plans to adjust its manufacturing capacity and increase operating efficiency, including, terminating the manufacturing process in Mexico, reducing manufacturing capacity in China, and discontinuing the Company’s LCV e-Mobility activity, and on January 21, 2024, the Company announced adoption of additional measures in response to challenging industry conditions, including reducing its headcount by approximately 900 over the first half of 2024 through involuntary workforce reduction plans, followed by an additional involuntary workforce reduction in July 2024 resulting in the layoff of approximately 400 employees (together, the “Restructuring Plans”). These decisions were made in order to better align the Company with current market conditions.

Previous wording

Gross profit may vary from quarter to quarter and is primarily affected by our average selling prices, product costs, manufacturing ramp-up costs, restructuring costs, product mix, customer mix, geographical mix, location of manufacturing, shipping method, warranty costs, inventory write-offs, exchange rates and seasonality.

Current wording

Gross profit (loss) may vary from quarter to quarter and is primarily affected by our average selling prices, product costs, manufacturing ramp-up costs, restructuring costs, product mix, customer mix, geographical mix, location of manufacturing, shipping method, warranty costs, inventory write-offs, exchange rates and seasonality.

Previous wording

Operating expenses consist of research and development, sales and marketing, general and administrative, goodwill impairment and other operating expenses, net. Personnel-related costs are a significant component of the operating expenses and include salaries, benefits, payroll taxes, commissions, severance and stock-based compensation. Our employees headcount in our research and development, sales and marketing and general and administrative departments, has grown to 2,776 as of December 31, 2023 from 2,543 as of December 31, 2022. Under the 2024 Restructuring Plan described above, we expect to reduce our headcount over the first half of 2024.

Current wording

Operating expenses consist of research and development, sales and marketing, general and administrative, goodwill impairment and other operating expenses, net. Personnel-related costs are a significant component of the operating expenses and include salaries, benefits, payroll taxes, commissions, severance and stock-based compensation. Our employees headcount in our research and development, sales and marketing and general and administrative departments, has reduced to 2,157 as of December 31, 2024 from 2,776 as of December 31, 2023. Under the 2024 and 2025 Restructuring Plans described above, our headcount will be further reduced over the first half of 2025.

Previous wording

Sales and marketing expenses consist primarily of personnel-related expenses such as salaries, severance, sales commissions, benefits, payroll taxes, and stock-based compensation. These expenses also include travel, fees of independent consultants, trade shows, marketing, costs associated with the operation of our sales offices and other indirect costs. We currently have a sales presence in many countries worldwide and intend to continue to expand our sales presence to additional regions.

Current wording

Sales and marketing expenses consist primarily of personnel-related expenses such as salaries, severance, sales commissions, benefits, payroll taxes, and stock-based compensation. These expenses also include travel, fees of independent consultants, trade shows, marketing, costs associated with the operation of our sales offices and other indirect costs. We currently have a sales presence in many countries worldwide. We may either continue to expand our sales presence to additional regions or reduce our presence in certain regions, globally.

Previous wording

General and administrative expenses consist primarily of salaries, severance, employee benefits and stock-based compensation related to our executives, finance, human resources, information technology, and legal organizations, travel expenses, facilities costs, fees for professional services, and registration fees related to being a publicly-traded company. Professional services consist of audit and legal costs, remuneration to board members, insurance, information technology and other costs. General and administrative expenses also include expenses related to certain legal claims and allowance for doubtful accounts in the event of uncollectible account receivables balances.

Current wording

General and administrative expenses consist primarily of salaries, severance, employee benefits and stock-based compensation related to our executives, finance, human resources, information technology, and legal organizations, travel expenses, facilities costs, fees for professional services, and registration fees related to being a publicly-traded company. Professional services consist of audit and legal costs, remuneration to board members, insurance, information technology and other costs. General and administrative expenses also include expenses related to certain legal claims and provision for expected credit losses in the event of uncollectible account receivables balances.

Previous wording

Other operating expenses, net, consist primarily of impairment of long-lived assets and certain other nonrecurring items.

Current wording

Other operating expenses, net, consist primarily of impairment and abandonment of long-lived assets, as well as goodwill impairment assigned to our reporting units and tested for impairment at least on an annual basis and certain other nonrecurring items.

Previous wording

Financial income (expense), net, consists primarily of interest income, interest expense, gains or losses from foreign currency fluctuations and hedging transactions.

Current wording

Financial income (expense), net, consists primarily of interest income, interest expense, gains or losses from foreign currency fluctuations, credit loss related to loans receivable and hedging transactions.

Previous wording

Interest expense consists of interest related to bank loans, 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), interest related to Accounting Standard Codification 842, “Leases” (ASC 842), amortization of premium related to our investment in available for sale marketable securities and the amortization of debt issuance cost associated with our Notes due 2025.

Current wording

Interest expense consists of interest related to bank loans, 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), interest related to Accounting Standard Codification 842, “Leases” (ASC 842), amortization of premium related to our investment in available for sale marketable securities, the amortization of debt issuance cost associated with our Notes due 2025 and 2029 as well as the contractual interest expenses from our Notes due 2029.

Previous wording

Our functional currency is the U.S. dollar. With respect to certain of our subsidiaries, the functional currency is the applicable local currency. Financial (expenses) income, net, also consists of gains or losses from foreign currency fluctuations, the fair value remeasurement of hedging contracts not designated as cash flow hedge and bank charges. Foreign currency fluctuations primarily consist of the effect of foreign exchange differences between the U.S. dollar and the New Israeli Shekel, the Euro, the South Korean Won and other currencies related to our monetary assets and liabilities.

Current wording

Our functional currency is the U.S. dollar. With respect to certain of our subsidiaries, the functional currency is the applicable local currency. Financial income (expenses), net, also consists of gains or losses from foreign currency fluctuations, the fair value remeasurement of hedging contracts not designated as cash flow hedge and bank charges. Foreign currency fluctuations primarily consist of the effect of foreign exchange differences between the U.S. dollar and the New Israeli Shekel, the Euro, and other currencies related to our monetary assets and liabilities.

Previous wording

In the year ended December 31, 2023, we recorded a net income tax expense of $46.4 million, which consists of a $89.5 million current income tax expense and $43.1 million of deferred tax income. In the year ended December 31, 2022, we recorded a net income tax expense of $83.4 million, which consists of a $94.4 million current income tax expense and a $11.0 million deferred tax income. Our tax rate for 2023 is 57% compared with 47% in 2022. The increase in tax rate was mainly attributed to the GILTI effect of IRC Section 174, requiring the capitalization of R&D expenditures outside the U.S. (see below), and impairments and losses that did not have a corresponding tax effect.

Current wording

In the year ended December 31, 2024, we recorded a net income tax expense of $96.2 million, which consists of a $79.2 million of deferred tax expense and $16.9 million current income tax expense. In the year ended December 31, 2023, we recorded a net income tax expense of $46.4 million, which consists of a $89.5 million current income tax expense and a $43.1 million deferred tax income. Our tax rate for 2024 is a negative 6% compared with 57% in 2023. The change in effective tax rate for the year ended December 31, 2024 compared to the year ended December 31, 2023, is mainly due our transition to a significant loss position in 2024 and the valuation allowance recorded against the tax benefit of such loss, as well as the valuation allowance booked against deferred tax assets of the company and its subsidiaries from previous years.

Previous wording

As of January 2019, our Israeli subsidiary elected to implement the 2011 and 2017 Amendments starting as of tax year 2019 and as a result, under the PTE regime with respect to our business activities in Israel. Our PTE income was subject to a 12% tax rate in Israel in the years 2019-2021, and in 2022-2023 to a 6% tax rate as we surpassed 10 billion New Israeli Shekel revenues threshold. We currently expect not to meet the threshold in 2024 and consequently expect our tax on our PTE income to be 12% in 2024.

Current wording

As of January 2019, our Israeli Subsidiary elected to implement the 2011 and 2017 Amendments starting as of tax year 2019 and as a result, under the PTE regime with respect to our business activities in Israel. Our PTE income was subject to a 12% tax rate in Israel in the years 2019-2021, and in 2022-2023 to a 6% tax rate as we surpassed 10 billion New Israeli Shekel revenues threshold. In 2024, the Company incurred losses for tax purposes.

Previous wording

Revenues decreased by $133.8 million, or 4.3%, in the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to (i) a decrease of $58.2 million in the amount of ancillary solar products sold; and (ii) a decrease of $50.8 million related to the number of batteries for PV applications sold, mainly in Europe; and (iii) a decrease of $26.0 million in revenues generated from e-mobility components, related to the discontinuation of the Company’s LCV e-Mobility activity. The overall decrease in revenues was due to the decline in demand that began in the third quarter of 2023 and continued in the fourth quarter of 2023. This decline was the result of high inventory in the channels and slower than expected installation rates beginning in the third quarter of 2023, leading to substantial unexpected cancellations and push outs of existing backlog, from our European distributors, which continued into the fourth quarter of 2023.

Current wording

Revenues decreased by $2,075.1 million, or 69.7%, in the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to (i) a decrease of $1,713.9 million related to a decrease in the number of inverters and power optimizers sold; (ii) a decrease of $187.8 million related to the number of batteries for PV applications sold, mainly in Europe; (iii) a decrease of $81.8 million in the amount of ancillary solar products sold; and (iv) a decrease of $66.0 million in revenues generated from e-mobility components, related to the discontinuation of the Company’s LCV e-Mobility activity. The overall decrease in revenues was due to a decline in demand that began in the second part of the third quarter of 2023. This decline was the result of high inventory in the channels and slower than expected installation rates, leading to substantial unexpected cancellations and push outs of existing backlog, from our distributors.

Previous wording

Revenues from outside of the U.S. comprised 74.5% of our revenues in the year ended December 31, 2023 as compared to 63.5% in the year ended December 31, 2022.

Current wording

Revenues from outside of the U.S. comprised 57.9% of our revenues in the year ended December 31, 2024 as compared to 74.5% in the year ended December 31, 2023.

Previous wording

The number of power optimizers recognized as revenues decreased by approximately 6.2 million units, or 26.2%, from approximately 23.7 million units in the year ended December 31, 2022 to approximately 17.5 million units in the year ended December 31, 2023 as a result of reduced demand. The number of inverters recognized as revenues, increased by approximately 1.2 thousand units, or 0.1%, from approximately 1,014.6 thousand units in the year ended December 31, 2022 to approximately 1,015.8 thousand units in the year ended December 31, 2023. Revenues from inverters relative to optimizers was higher this year due to a "catch up" in inverter production in the first half of 2023 which was needed to meet backlog demand that we were not able to fulfill in the previous year. The megawatts hour of batteries for PV applications recognized as revenues decreased by approximately 148.3 megawatts hour, or 16.7% from approximately 885.7 megawatts in the year ended December 31, 2022 to approximately 737.4 megawatts in the year ended December 31, 2023 due to a decrease in demand.

Current wording

The number of power optimizers recognized as revenues decreased by approximately 10.8 million units, or 62.0%, from approximately 17.5 million units in the year ended December 31, 2023, to approximately 6.6 million units in the year ended December 31, 2024. The number of inverters recognized as revenues, decreased by approximately 770.1 thousand units, or 75.8%, from approximately 1,015.8 thousand units in the year ended December 31, 2023 to approximately 245.7 thousand units in the year ended December 31, 2024. The megawatt hours of batteries for PV applications recognized as revenues decreased by approximately 181.2 megawatts hour, or 24.6% from approximately 737.4 megawatts in the year ended December 31, 2023 to approximately 556.2 megawatts in the year ended December 31, 2024, as a result of lower demand.

Previous wording

Our blended Average Selling Price or ASP per watt for solar products excluding batteries for PV applications is calculated by dividing solar revenues, excluding revenues from the sale of batteries for PV applications, by the nameplate capacity of inverters shipped. Our blended ASP per watt for solar products shipped decreased by 0.049, or 20.1%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The decrease in blended ASP per watt is mainly attributed to a relatively lower number of power optimizers and other solar products shipped compared to the number of inverters shipped, leading to an overall reduction in our ASP per watt as well as due to an increase in the sale of commercial products that are characterized by lower ASP per watt, out of our total solar product mix. This decrease in blended ASP per watt was partially offset by price increases that went into effect gradually during 2022 and in the first half of 2023, as well as by the appreciation of the Euro against the U.S. Dollar.

Current wording

Our blended Average Selling Price ("ASP") per watt for solar products excluding batteries for PV applications is calculated by dividing solar revenues, excluding revenues from the sale of batteries for PV applications, by the nameplate capacity of inverters shipped. Our blended ASP per watt, for solar products shipped increased by 0.005, or 2.6%, in the year ended December 31, 2024 as compared to the year ended December 31, 2023. The increase in blended ASP per watt is mainly attributed to a higher number of power optimizers and other solar products shipped compared to the number of inverters shipped. This increase in blended ASP per watt was partially offset by price reduction as well as an increase in the sale of commercial products that are characterized by lower ASP per watt, out of our total solar product mix.

Previous wording

Our blended ASP per hour watt for batteries for PV applications is calculated by dividing batteries for PV applications revenues, by the nameplate capacity of batteries for PV applications shipped. Our blended ASP per watt/hour for batteries for PV applications decreased by 0.016 or 3.3%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The decrease in blended ASP per watt/hour is mainly attributed to an increase in the portion of three phase batteries, which are sold at a lower ASP per watt/hour and a price decrease of our single phase batteries, that went into effect gradually during 2023. This decrease was partially offset by the appreciation of the Euro against the U.S Dollar.

Current wording

Our blended ASP per hour watt for batteries for PV applications is calculated by dividing batteries for PV applications revenues, by the nameplate capacity of batteries for PV applications shipped. Our blended ASP per watt/hour for batteries for PV applications decreased by 0.133 or 28.6%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The decrease in blended ASP per watt/hour is mainly attributed to price reduction of our batteries for PV applications.

Previous wording

Cost of Revenues and Gross Profit

Current wording

Cost of Revenues and Gross Profit (loss)

Previous wording

Gross profit as a percentage of revenue decreased by 3.6% to 23.6% in the year ended December 31, 2023 from 27.2% in the year ended December 31, 2022 primarily due to:

Current wording

Gross profit as a percentage of revenue decreased from 23.6% for the year ended December 31, 2023 to a gross loss of 97.3% in the year ended December 31, 2024 primarily due to:

Previous wording

Other operating expenses, net, increased by $4.9 million, or 18.5% in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to:

Current wording

Other operating expenses, net, increased by $228.2 million, or 728.8% in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to:

Previous wording

Other loss was $0.3 million in the year ended December 31, 2023 compared to other income of $7.3 million in the year ended December 31, 2022, primarily due to a decrease in gains from the sale of an investment in a privately-held company.

Current wording

Other income was $14.5 million for the year ended December 31, 2024 compared to other loss of $0.3 million in the year ended December 31, 2023, primarily due to:

Previous wording

Net loss from equity method investments increased by $0.4 million, or 100% in the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Current wording

Net loss from equity method investments increased by $1.5 million, or 441.7% for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Previous wording

As a result of the factors discussed above, net income decreased by $59.5 million, or 63.4% in the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Current wording

As a result of the factors discussed above, net loss for the year ended December 31, 2024 was $1,806.4 million compared to net income of $34.3 million for the year ended December 31, 2023.

Previous wording

As of December 31, 2023, our cash and cash equivalents were $338.5 million. This amount does not include $929.4 million invested in available for sale marketable securities and $0.3 million invested in restricted bank deposits. Our principal uses of cash are for funding our operations, capital expenditures, other working capital requirements, other investments and potential future share repurchases. As of December 31, 2023, we have open commitments for capital expenditures in the amount of approximately $95.5 million. These commitments reflect purchases of automated assembly lines and other machinery related to our manufacturing operations. We also have purchase obligations in the amount of $1,041.3 million related to raw materials and commitments for the future manufacturing of our products.

Current wording

As of December 31, 2024, our cash and cash equivalents were $274.6 million. This amount does not include $353.9 million invested in available for sale marketable securities, $135.3 million restricted cash, and $3.6 million invested in restricted deposits. Our principal uses of cash are for funding our operations, capital expenditures, other working capital requirements, other investments, and the repayment of our remaining Notes 2025. As of December 31, 2024, we have open commitments for capital expenditures in the amount of approximately $35.0 million. These commitments reflect purchases of automated assembly lines and other machinery related to our manufacturing operations. We also have purchase obligations in the amount of $390.3 million related to raw materials and commitments for the future manufacturing of our products.