SolarEdge Technologies Inc. (NASDAQ:SEDG)

Current Technology

The value of current technology assets displayed a significant increase from 30,821 thousand US$ in 2018 to a peak of 78,375 thousand US$ in 2020. After reaching this peak, there was a slight decline in 2021 to 74,976 thousand US$, followed by a marked decrease to 29,196 thousand US$ in 2022. This indicates volatility with a notable reduction in recent years.

Customer Relationships

Customer relationships showed a gradual upward trend from 3,857 thousand US$ in 2018, peaking at 4,351 thousand US$ in 2019. However, from 2020 onwards, the value consistently declined each year, reaching 2,958 thousand US$ by 2022. This decreasing trend suggests diminishing value attributed to customer relationships.

Trade Names

Trade names increased substantially from 3,721 thousand US$ in 2018 to 5,990 thousand US$ in 2019 but then decreased steadily over the next three years, ending at 3,287 thousand US$ in 2022. The initial growth was followed by a continuous decrease, indicating possible impairment or reduced valuation.

Assembled Workforce

Values for the assembled workforce appeared only in 2021 and 2022, both recorded at 3,575 thousand US$, showing a stable assessment for this category in the most recent years of the data.

Patents

Patents remained constant at 1,400 thousand US$ across the entire period from 2018 to 2022, reflecting no additions or write-downs over the five years.

Backlog

Backlog was recorded at 193 thousand US$ in 2018 and 2019 but no values were reported from 2020 onwards, indicating either a reclassification or cessation of backlog recording under intangible assets.

Gross Intangible Assets

Gross intangible assets increased sharply from 39,992 thousand US$ in 2018 to a high of 88,282 thousand US$ in 2020. Although values remained relatively stable into 2021, a sharp decline to 40,416 thousand US$ occurred in 2022, mirroring the pattern seen in current technology.

Accumulated Amortization

Accumulated amortization grew significantly in magnitude over the period, from -1,488 thousand US$ in 2018 to a peak amortization expense reflected by -28,965 thousand US$ in 2021, then receded to -20,487 thousand US$ in 2022. The increase signifies increasing amortization charges over time, partially offset in the last year.

Intangible Assets, Net

Intangible assets net of amortization increased from 38,504 thousand US$ in 2018 to a maximum of 74,008 thousand US$ in 2019, followed by a steady decline each year to 19,929 thousand US$ by 2022. The decline suggests the amortization and impairment effects outweigh additions.

Goodwill

Goodwill showed a dramatic surge from 34,874 thousand US$ in 2018 to a peak of 140,479 thousand US$ in 2020. Thereafter, it decreased to 129,629 thousand US$ in 2021 and dropped sharply to 31,189 thousand US$ in 2022. The fluctuations indicate significant acquisitions or revaluations in early years with considerable impairments or disposals recently.

Intangible Assets and Goodwill Total

The combined value of intangible assets and goodwill followed a similar trajectory, ascending from 73,378 thousand US$ in 2018 to a peak of 208,297 thousand US$ in 2020, then receding to 188,490 thousand US$ in 2021 before a steep decline to 51,118 thousand US$ in 2022. This trend highlights major growth followed by substantial reductions, likely due to impairments or asset write-offs.

The financial data reveals several key trends regarding the company's assets, equity, and income over the five-year period ending December 31, 2022.

Total Assets

Reported total assets exhibited a consistent upward trajectory, increasing from approximately $964 million in 2018 to about $4.27 billion in 2022. Adjusted total assets followed a similar pattern, moving from roughly $930 million to $4.23 billion during the same period. This steady growth in asset base indicates an expansion in the company's overall resources and investment capacity.

Stockholders’ Equity

Reported stockholders' equity also showed a robust increase, rising from $562 million in 2018 to nearly $2.18 billion by the end of 2022. The adjusted equity figures, which account for goodwill adjustments, reflected slightly lower values but maintained the growth trend, expanding from about $528 million to $2.15 billion. The growth in equity suggests strengthening financial position and increased retained earnings or capital contributions over time.

Net Income Attributable to the Company

Reported net income displayed moderate fluctuations, with an initial increase from approximately $129 million in 2018 to a peak near $169 million in 2021, followed by a notable decline to about $94 million in 2022. Conversely, the adjusted net income, which factors in goodwill adjustments, showed consistent growth, culminating at approximately $184 million in 2022. This divergence hints at non-cash or extraordinary items impacting the reported net income in the most recent year, with adjusted figures portraying underlying operational profitability more accurately.

Overall, the analyzed data signals sustained growth in both asset and equity bases, reflecting effective capital management and potential reinvestment strategies. The variances between reported and adjusted net income in the last year warrant further examination to understand the nature of adjustments and their implications for operational performance and earnings quality.

Net Profit Margin

The reported net profit margin exhibits a consistent downward trend from 13.75% in 2018 to 3.02% in 2022, indicating a significant decline in profitability over the period. The adjusted net profit margin, which accounts for goodwill adjustments, follows a similar pattern but remains higher than the reported margin in 2022 (5.91% versus 3.02%), suggesting that goodwill adjustments positively impact the company's profitability measurement.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios decrease sharply from 2018 to 2020, with the reported ratio dropping from 0.97 to 0.6 and the adjusted from 1.01 to 0.64. From 2020 onwards, there is a recovery trend with ratios improving modestly, reaching around 0.73 by 2022. The adjusted total asset turnover consistently surpasses the reported figure slightly, reflecting the adjustments made to asset values.

Financial Leverage

Financial leverage shows an increasing trend from 2018 through 2020, peaking at 2.24 (reported) and 2.43 (adjusted), indicating heightened use of debt or equity financing relative to assets during this period. Post-2020, leverage decreases steadily to 1.96 (reported) and 1.97 (adjusted) in 2022, implying a reduction in reliance on financial leverage in recent years.

Return on Equity (ROE)

The reported ROE declines markedly from 22.91% in 2018 to 4.31% in 2022, demonstrating a substantial reduction in shareholder returns. The adjusted ROE, while also falling, remains above the reported figures in all years, reflecting the impact of goodwill adjustments on equity returns. Notably, even adjusted ROE drops significantly to 8.57% by 2022, indicating diminished profitability from an equity holder perspective.

Return on Assets (ROA)

Reported ROA follows a downward trend from 13.36% in 2018 to 2.2% in 2022, showing decreased efficiency in generating profits from total assets. The adjusted ROA is consistently higher than reported, with a less steep decline, ending at 4.34% in 2022. This suggests that asset quality adjustments via goodwill accounting have a material impact on the assessment of asset profitability.

Net Income Analysis

The reported net income exhibited an increasing trend from 2018 to 2021, rising from 128,833 thousand US dollars in 2018 to a peak of 169,170 thousand US dollars in 2021. However, in 2022, there was a notable decline to 93,779 thousand US dollars. In contrast, the adjusted net income, which presumably accounts for goodwill and other adjustments, followed a similar upward trajectory from 128,833 thousand US dollars in 2018 to 169,170 thousand US dollars in 2021, but unlike the reported figure, it increased further in 2022 to 183,883 thousand US dollars.

Net Profit Margin Analysis

The reported net profit margin demonstrated a steady decline over the analyzed period. Starting at 13.75% in 2018, it dropped to 10.28% in 2019 and continued decreasing progressively to 3.02% by 2022. The adjusted net profit margin mirrored this downward trend from 13.75% in 2018 to 5.91% in 2022 but remained consistently higher than the reported margin in 2022, indicating adjustments that positively impacted profitability metrics.

Comparative Observations

The divergence observed in 2022 between reported and adjusted net income suggests that adjustments made for goodwill or other non-cash items had a substantial positive effect on the adjusted results, leading to a significant difference of approximately 90 million US dollars. Similarly, the adjusted net profit margin in 2022 (5.91%) was almost double the reported margin (3.02%), highlighting the impact of these adjustments on profitability ratios.

Overall Trends

Over the five-year period, both net income and net profit margins initially exhibited growth or stability but faced downward pressure in the latter years, particularly in 2022. The adjustments to net income and margins indicate a more favorable financial position than the reported figures alone. This could imply the presence of non-recurring charges or accounting adjustments that affected the reported results but are excluded in the adjusted figures.

Total Assets

The reported total assets have demonstrated a consistent upward trend over the period from 2018 to 2022. Starting at approximately 964 million US dollars in 2018, the assets increased to about 1.5 billion in 2019, then surged significantly to 2.4 billion in 2020. The growth continued through 2021 and 2022, reaching over 4.2 billion by the end of 2022. The adjusted total assets, which presumably account for goodwill adjustments, follow a similar increasing trend, starting slightly lower than the reported figures but closely mirroring the upward trajectory across all years.

Total Asset Turnover

The total asset turnover ratio, which measures efficiency in using assets to generate revenue, displays different patterns for reported and adjusted values. The reported total asset turnover begins at 0.97 in 2018 and experiences a slight decrease to 0.95 in 2019. It then undergoes a more significant reduction to 0.60 in 2020. After 2020, there is a gradual recovery to 0.68 in 2021 and a slightly higher figure of 0.73 in 2022. The adjusted total asset turnover shows a consistent but marginally higher ratio compared to reported figures in the earlier years, starting at 1.01 in 2018 and peaking at 1.04 in 2019. It similarly declines to 0.64 in 2020 before rising to 0.71 in 2021 and aligning at 0.73 in 2022.

Insights

The substantial increase in total assets, both reported and adjusted, indicates significant growth in the company's asset base over the five years. The decline in asset turnover ratios around 2020 suggests that asset growth may have outpaced revenue growth during that period, potentially reflecting investment in capacity or acquisitions that initially did not generate equivalent revenue. The subsequent improvement in turnover ratios in 2021 and 2022 implies improved utilization of the asset base or revenue growth catching up with asset increases. The close alignment of reported and adjusted asset values and turnover ratios in later years suggests that goodwill adjustments have less impact on the asset base and efficiency metrics in the recent periods measured.

Assets

The total assets, both reported and goodwill adjusted, show a consistent upward trend over the five-year period from 2018 to 2022. Reported total assets increased substantially from approximately 964 million USD in 2018 to about 4.27 billion USD in 2022. Similarly, adjusted total assets followed this growth pattern, rising from around 930 million USD in 2018 to approximately 4.23 billion USD in 2022. This indicates ongoing expansion and asset accumulation by the company across the years.

Stockholders’ Equity

Both reported and adjusted shareholders' equity also displayed significant growth during the period. Reported equity grew from roughly 562 million USD at the end of 2018 to about 2.18 billion USD by the end of 2022. Adjusted equity values, which exclude goodwill, similarly increased from approximately 528 million USD to around 2.15 billion USD. The consistent rise in equity reflects strengthening of the company’s net asset base and retained earnings over the years.

Financial Leverage

Financial leverage ratios indicate a moderate fluctuations over the years. The reported leverage ratio increased from 1.71 in 2018 to a peak of 2.24 in 2020, slightly decreased to 2.21 in 2021, and further declined to 1.96 in 2022. The adjusted financial leverage ratio shows a similar pattern, starting at 1.76 in 2018, peaking at 2.43 in 2020, and then receding to 1.97 by 2022. This trend suggests that the company increased its use of debt relative to equity through 2020 but has since reduced its leverage, indicating a possible shift towards a more conservative capital structure in the most recent year.

General Observations

Overall, the company has demonstrated strong asset growth and equity accumulation across the period analyzed. The peak in financial leverage during 2020 could reflect strategic financing decisions potentially related to investments or acquisitions, with a subsequent reduction signaling deleveraging or capital structure optimization efforts. The close alignment between reported and goodwill adjusted figures indicates that goodwill adjustments have a relatively small impact on the overall asset and equity values, maintaining the integrity of the financial structure representation.

Net income attributable to the company

The reported net income shows an overall increasing trend from 2018 through 2021, rising from approximately $128.8 million in 2018 to a peak of about $169.2 million in 2021. However, there is a notable decline in 2022, with net income falling to approximately $93.8 million. In contrast, the adjusted net income, which accounts for goodwill adjustments, also rises steadily from 2018 to 2021, matching the reported figures until 2021, but unlike the reported net income, it increases significantly in 2022, reaching approximately $183.9 million. This divergence suggests that goodwill adjustments had a considerable positive effect on net income in 2022.

Total stockholders’ equity

Reported stockholders' equity increased consistently over the five-year period, growing from about $562.4 million in 2018 to over $2.176 billion in 2022. The adjusted equity values follow a similar upward trajectory but are consistently lower than the reported figures each year, reflecting the removal of goodwill or intangible assets. The gap between reported and adjusted equity widens over time, indicating increasing goodwill-related assets or adjustments affecting the equity base.

Return on equity (ROE)

The reported ROE exhibits a downward trend, decreasing from 22.91% in 2018 to a low of 4.31% in 2022. The adjusted ROE, which excludes goodwill effects, also declines over the same period but remains higher than the reported ROE each year. It decreases from 24.42% in 2018 to 8.57% in 2022. The decline in both ROE measures suggests a relative reduction in net income generation efficiency with respect to equity, with goodwill adjustments moderating the decline but not reversing it.

Summary of trends and insights

Over the analyzed period, the company demonstrates strong growth in both net income and equity until 2021. The divergence between reported and adjusted net income in 2022 highlights the impact of goodwill-related accounting treatments, with adjusted net income showing significant improvement despite the reported decrease. Equity growth is robust, though the increasing difference between reported and adjusted equity indicates accumulating goodwill or intangible assets. The declining ROE metrics underline a decreasing efficiency in equity utilization to generate profits, further accentuated in the reported figures compared to the adjusted ones.

Net Income Trends

The reported net income experienced an overall increase from 2018 through 2021, rising from approximately 128.8 million USD to 169.2 million USD. However, in 2022, there was a notable decline to about 93.8 million USD. In contrast, the adjusted net income, which presumably excludes certain items such as goodwill impairment or other adjustments, also increased consistently from 128.8 million USD in 2018 to 183.9 million USD in 2022, suggesting that the decline in reported net income in 2022 may be attributable to specific non-operating or one-time charges.

Total Assets Trends

The reported total assets of the company grew substantially each year, more than quadrupling from around 964.5 million USD in 2018 to approximately 4.27 billion USD by the end of 2022. Adjusted total assets, which may exclude goodwill or other intangible assets, show a similar growth pattern, rising from around 929.6 million USD to roughly 4.23 billion USD over the same period. The steady increase in both reported and adjusted total assets indicates considerable asset expansion, likely driven by investments, acquisitions, or organic growth in asset base.

Return on Assets (ROA)

The reported ROA exhibited a declining trend over the five-year period, dropping from 13.36% in 2018 to just 2.2% in 2022. This decline suggests that the company’s ability to generate profit from its asset base has diminished significantly. Adjusted ROA, which excludes the effects of goodwill, followed a similar downward trajectory, falling from 13.86% to 4.34% during the same timeframe. Despite the adjustments, the reduction remains notable, pointing to decreasing efficiency or profitability relative to asset size over the years.

Overall Insights

While the company displayed strong growth in its asset base and adjusted net income through 2022, reported net income declined in the final year, likely due to specific non-recurring items. The consistent increase in adjusted net income contrasts with the volatile reported net income, highlighting the impact of adjustments. Simultaneously, the decline in ROA highlights a reduction in asset utilization efficiency, despite growing asset holdings. This may suggest challenges in converting asset growth into proportional profit increases or potential pressure on margins and operational returns. Close monitoring of the causes behind the 2022 reported net income decrease and ROA decline is advisable to assess long-term profitability trends.