SolarEdge Technologies Inc. (NASDAQ:SEDG)

Current Taxes

The current tax expense exhibits a generally increasing trend over the five-year period. Starting at $16,170 thousand in 2018, it rose sharply to $39,683 thousand in 2019. In 2020 and 2021, the current tax expense showed some fluctuation, with a decrease to $26,778 thousand in 2020 followed by a slight increase to $29,692 thousand in 2021. A significant increase is observed in 2022, reaching $94,430 thousand, the highest value in the period under review.

Deferred Taxes

The deferred tax amounts are consistently negative throughout the period, indicating deferred tax benefits or reductions in tax expense. In absolute terms, the deferred tax amount decreased from -$7,093 thousand in 2018 to -$6,037 thousand in 2019, followed by a further reduction in magnitude to -$3,434 thousand in 2020. However, in 2021, the deferred taxes increased sharply in absolute value to -$11,638 thousand and slightly decreased to -$11,054 thousand in 2022, indicating more significant deferred tax benefits during these later years.

Net Income Taxes

Net income tax expense, which is the combined effect of current and deferred taxes, shows a steady increase from $9,077 thousand in 2018 to $33,646 thousand in 2019. This is followed by a decrease to $23,344 thousand in 2020 and a further decrease to $18,054 thousand in 2021. However, in 2022, net income taxes rose sharply to $83,376 thousand, driven primarily by the large increase in current taxes despite the continued deferred tax benefits.

The analysis of the annual financial data reveals distinct trends in the company's income tax metrics over the five-year period ending December 31, 2022.

Statutory Tax Rate

The statutory tax rate remained constant at 21% throughout the period, indicating no changes in the underlying corporate tax policy affecting the company's statutory obligations.

Income Tax at Rate Other than the U.S. Statutory Tax Rate

This component was consistently negative, reflecting tax benefits or reductions attributable to jurisdictions with rates different from the U.S. statutory rate. The negative percentage moderated from -12.7% in 2018 to -5% in 2019, with minor fluctuations thereafter, ending at -10.8% in 2022. This suggests variability in the impact of foreign tax rates on the effective tax rate.

Losses and Timing Differences for Valuation Allowances

Valuation allowances related to losses and timing differences showed no data in 2018 but then increased steadily from 1.3% in 2019 to 5.2% in 2022. This upward trend indicates a growing consideration for deferred tax assets that may not be realized, possibly reflecting increased uncertainty or changes in expected future profitability.

Prior Year Income Taxes (Benefit)

This item fluctuated over the years with a negligible impact in 2019, a slight negative adjustment in 2020 (-0.4%), a more significant negative adjustment in 2021 (-4.4%), and reversed to a positive 2.9% in 2022. These variations suggest adjustments or corrections related to previous tax years, reflecting changing estimations or audit outcomes.

R&D Capitalization and Other Effects of TCJA

The influence of research and development capitalization and the Tax Cuts and Jobs Act (TCJA) effects were slightly negative in 2018 and 2019, became negligible in 2020, and turned slightly positive in 2021. Notably, in 2022, this factor surged significantly to 18.9%, indicating a substantial one-time or cumulative tax effect related to R&D capitalization or TCJA adjustments in the latest year.

Disallowable and Allowable Deductions

The percentage for this category showed variability: a small negative effect in 2018 (-0.5%), followed by a positive impact in 2019 (2.3%), a return to negative in 2020 (-2.6%), positive again in 2021 (2%), and a notable increase to 13.2% in 2022. The sharp rise in 2022 points to significant tax deductions impacting the effective tax rate that year.

Other Individually Immaterial Income Tax Items, Net

This category was consistently negative across the period, with minor fluctuations: -0.2% in 2018 and 2019, increasing in negativity to -1.3% in 2020, then a larger negative impact in 2021 (-4.4%), and somewhat reduced negativity in 2022 (-3.3%). These minor items cumulatively have a small but notable effect on tax expenses.

Effective Tax Rate

The effective tax rate experienced significant fluctuations, starting low at 6.6% in 2018, rising sharply to 18.8% in 2019, then decreasing to 14.2% in 2020 and further to 9.6% in 2021. In 2022, it spiked dramatically to 47.1%. The volatile nature of the effective tax rate is influenced by the interplay of various factors including foreign tax rates, valuation allowances, TCJA-related effects, and deductions. The substantial increase in 2022 is primarily driven by the marked rise in R&D capitalization and allowable deductions, alongside other tax adjustments.

In summary, the effective tax rate over the analyzed period exhibits considerable volatility with a general upward spike in the latest year. This is associated with increased R&D capitalization effects and allowable deductions, along with evolving valuation allowances and prior year tax adjustments. The stable statutory tax rate indicates that these variations are largely due to operational and jurisdictional tax considerations rather than statutory changes.

Research and Development Carryforward Expenses

This item shows a fluctuating trend over the observed periods. Initially, expenses decreased sharply from 9,482 thousand USD in 2018 to 1,843 thousand USD in 2020, followed by a modest rebound in 2021 to 2,479 thousand USD and a significant increase to 9,335 thousand USD in 2022.

Carryforward Tax Losses

The carryforward tax losses show a general upward trend, starting from 4,155 thousand USD in 2018, increasing substantially to 20,468 thousand USD in 2020, and remaining relatively stable around 19,000 thousand USD through 2022.

Stock Based Compensation Expenses

Stock based compensation costs increased consistently from 3,160 thousand USD in 2018 to 6,400 thousand USD in 2020, then sharply rose to 12,140 thousand USD in 2021 before slightly declining to 9,863 thousand USD in 2022.

Deferred Revenue

Deferred revenue displays a steady increase across all periods, growing from 1,268 thousand USD in 2018 up to 8,954 thousand USD in 2022, indicating consistent growth in advance payments or unearned revenue.

Lease Liabilities

Lease liabilities appear only in 2022 at 6,520 thousand USD, suggesting either new lease obligations or changes in accounting standards recognizing such liabilities starting the last period.

Inventory Impairment

Inventory impairment has continuously declined from 1,471 thousand USD in 2018 to 627 thousand USD in 2022, indicating an improvement in inventory management or valuation.

Allowance and Other Reserves

A significant rising trend is observed in this category, escalating dramatically from 3,072 thousand USD in 2018 to 30,242 thousand USD in 2022, reflecting increased provisions or contingencies.

Gross Deferred Tax Assets, Net

There is a clear upward trajectory with gross deferred tax assets growing from 22,608 thousand USD in 2018 to 85,457 thousand USD in 2022, nearly quadrupling over the period.

Valuation Allowance

This allowance became a negative figure starting in 2019, increasing in absolute value from -2,317 thousand USD to -23,777 thousand USD in 2022, indicating growing reductions against deferred tax assets due to uncertainty in their realizability.

Deferred Tax Assets, Net

Despite increases in gross deferred tax assets, the net deferred tax assets show modest but steady growth from 22,608 thousand USD in 2018 to 61,680 thousand USD in 2022, tempered by the valuation allowance.

Intercompany Transactions

Intercompany transactions are recorded only in the last two periods as negative amounts around -6,000 thousand USD, which may reflect loan settlements or eliminations in consolidation.

Right-of-Use Assets

Recognized only in 2022 at -6,618 thousand USD, this may correspond to assets recognized under lease accounting standards, aligning with the lease liabilities noted.

Convertible Note

A convertible note of -11,830 thousand USD appears in 2020, suggesting issuance or conversion of debt instruments in that year but absent in other periods.

Purchase Price Allocation

Negative values are recorded throughout the periods, decreasing in absolute value from -9,408 thousand USD in 2018 to -4,617 thousand USD in 2022, indicating amortization or write-downs related to acquisitions.

Deferred Tax Liabilities, Net

This category fluctuates significantly, initially at -9,408 thousand USD in 2018, peaking negatively at -27,952 thousand USD in 2020, then moderating to -17,527 thousand USD in 2022, reflecting volatility in deferred tax obligations over time.

Net Deferred Tax Assets (Liabilities)

The net position shows variability, declining from 13,200 thousand USD in 2018 to a low of 3,083 thousand USD in 2020, followed by a strong recovery to 44,153 thousand USD in 2022, emphasizing improved tax asset recoverability or adjustments over these years.

Deferred Tax Assets, Net

The net deferred tax assets exhibit a general upward trend over the analyzed period. Starting at 14,699 thousand US dollars at the end of 2018, the figure increased moderately to 16,298 thousand in 2019. In 2020, there was a decline to 11,676 thousand, indicating a possible reduction in deferred tax benefits or changes in tax timing differences during that year. However, this was followed by a significant rebound in 2021, with the amount more than doubling to 27,572 thousand. The upward momentum continued into 2022, reaching 44,153 thousand, the highest value in the observed period. This pattern suggests growing deferred tax assets, potentially reflecting enhanced future tax benefit expectations or increased timing differences favoring deferred tax asset recognition.

Deferred Tax Liabilities, Net

The net deferred tax liabilities display a contrasting trend. Beginning at a modest amount of 1,499 thousand US dollars in 2018, the liabilities surged substantially to 4,461 thousand in 2019 and further escalated to 8,593 thousand in 2020. This sharp increase over two years indicates a rise in taxable temporary differences or shifts in the company's tax positions leading to higher deferred tax obligations. However, in 2021, the liabilities dropped precipitously to 156 thousand, a dramatic reduction that might reflect either reversals of previously recognized deferred tax liabilities or reassessment of tax positions. Data for 2022 is not available, preventing a complete trend analysis for the latest period.

The financial data reveals a consistent growth in total assets over the five-year period. Reported total assets increased substantially from approximately 964 million US dollars at the end of 2018 to over 4.26 billion US dollars by the end of 2022, with adjusted total assets closely tracking this upward trend, showing only minor differences. This indicates significant expansion in the company's asset base.

Similarly, total liabilities saw a marked increase during the same period. Reported liabilities more than quintupled from roughly 394 million US dollars in 2018 to nearly 2.09 billion US dollars in 2022, with adjusted liabilities following a similar trajectory. The rise in liabilities is proportional to the asset growth, reflecting increased leverage or obligations concurrent with the company's expansion.

Shareholders' equity also exhibited growth, but at a comparatively moderate pace relative to total assets and liabilities. Reported equity increased from approximately 562 million US dollars in 2018 to nearly 2.18 billion US dollars in 2022, with adjusted equity slightly lower yet closely aligned. This suggests that the company's net worth improved over the years, supported by asset appreciation and retained earnings, though the increase was less pronounced than the overall asset growth.

Net income attributable to the company showed fluctuations over the examined timeframe. Reported net income rose from roughly 129 million US dollars in 2018 to a peak near 169 million US dollars in 2021, followed by a decline to approximately 94 million US dollars in 2022. Adjusted net income mirrored this pattern, increasing until 2021 and subsequently falling in 2022. The dip in net income during the final year indicates challenges or changes impacting profitability despite the growth in assets and equity.

Overall, the data demonstrates strong asset and liability growth alongside increasing equity, though profitability experienced volatility with a notable decrease in the most recent year. The adjusted figures remain closely aligned with reported data, suggesting that tax adjustments have a relatively modest effect on the key financial metrics.

Total Assets

Steady and significant increase from 2018 through 2022, indicating growth and asset accumulation.

Total Liabilities

Substantial rise in liabilities, proportionate to asset growth, reflecting higher obligations and potential leverage.

Stockholders' Equity

Growth observed over the years, but at a slower pace than assets and liabilities, pointing to gradual strengthening of net worth.

Net Income

Increasing trend up to 2021 followed by a marked decrease in 2022, signalling possible profitability challenges or increased expenses.

Adjusted versus Reported Figures

Consistent alignment between adjusted and reported values suggests that tax adjustments do not substantially alter the financial position or performance insights.

Net Profit Margin Trends

The reported net profit margin shows a consistent decline from 13.75% in 2018 to 3.02% in 2022. The adjusted net profit margin follows a similar downward trajectory, decreasing from 12.99% in 2018 to 2.66% in 2022. The narrowing gap between reported and adjusted margins indicates small but consistent tax-related adjustments over time. Overall, profitability on a margin basis has significantly compressed during the period under review.

Total Asset Turnover Trends

Both reported and adjusted total asset turnover ratios remained relatively stable between 2018 and 2019, close to 0.95-0.99. However, there is a marked decline in 2020 to 0.6, suggesting reduced efficiency in asset utilization. Following this, a modest recovery is evident as the ratio gradually increased to 0.73 (reported) and 0.74 (adjusted) by 2022. The data reflects a temporary drop in asset efficiency with some improvement in recent periods.

Financial Leverage Trends

Financial leverage increased from about 1.71-1.73 in 2018 to a peak of approximately 2.24 by 2020 and 2021. This indicates a greater use of debt relative to equity over this period. However, a decrease occurred in 2022, bringing leverage down to 1.96-1.98. This suggests a partial reduction in leverage and possibly a strategic effort to deleverage the balance sheet toward the end of the period.

Return on Equity (ROE) Trends

Reported ROE demonstrated a strong downward trend from 22.91% in 2018 to 4.31% in 2022. The adjusted ROE mirrors this decline, moving from 22.17% to 3.88%. The pronounced decline in ROE reflects the combined impact of reduced profitability, lower asset efficiency, and adjustments for tax effects, indicating diminished returns for equity holders over time.

Return on Assets (ROA) Trends

Reported ROA declined steadily from 13.36% in 2018 to 2.2% in 2022. The adjusted ROA also falls consistently from 12.82% to 1.96% over the same period. This persistent decrease in asset returns points to less effective utilization of assets in generating net income, consistent with the trends observed in asset turnover and profit margins.

Overall Observations

The analysis indicates a general deterioration in financial performance and operational efficiency between 2018 and 2022. Key profitability ratios — profit margins, ROE, and ROA — each show marked declines. Asset turnover suffered a notable dip in 2020 with signs of a gradual recovery thereafter, while financial leverage increased until 2021 before decreasing. Adjustments for deferred income taxes have a relatively minor but consistent effect on reported metrics, subtly lowering profitability ratios throughout the period.

Net Income Trends

The reported net income attributable to the company exhibited growth from 2018 to 2021, rising from approximately 128.8 million USD to 169.2 million USD. However, in 2022, there was a notable decline to approximately 93.8 million USD. Similarly, the adjusted net income followed a comparable trajectory, increasing from about 121.7 million USD in 2018 to 157.5 million USD in 2021, then decreasing significantly to 82.7 million USD in 2022.

Net Profit Margin Trends

The reported net profit margin showed a consistent downward trend over the five-year period. Beginning at 13.75% in 2018, it steadily decreased each year to reach 3.02% in 2022. The adjusted net profit margin mirrored this pattern, starting at 12.99% in 2018 and declining to 2.66% in 2022.

Insights

Despite increasing net income figures through 2021, both reported and adjusted profit margins declined each year, indicating that revenue growth may have been outpaced by increases in costs or expenses, negatively impacting profitability ratios. The sharp decline in both net income and profit margins in 2022 suggests challenges in maintaining earnings levels and profitability. The parallel movement of reported and adjusted figures implies that adjustments had a consistent effect over the years and that underlying operational performance experienced similar trends.

The data reveals a consistent growth in both reported and adjusted total assets over the five-year period. Reported total assets increased significantly from approximately 964 million US dollars at the end of 2018 to over 4.26 billion US dollars by the end of 2022. Adjusted total assets followed a similar trend, rising from about 950 million to over 4.22 billion US dollars. This indicates a substantial expansion in the asset base of the company.

Regarding total asset turnover, both reported and adjusted ratios demonstrate a declining trend from 2018 to 2020, dropping from around 0.97-0.99 to 0.60. This indicates a decrease in efficiency in generating sales from the asset base during the initial years. However, from 2020 onwards, the total asset turnover ratios show a moderate recovery. By 2022, both reported and adjusted turnover ratios improved to approximately 0.73-0.74.

Overall, the data suggests strong asset growth accompanied by a temporary decline in asset utilization efficiency that has started to improve in the most recent years. The adjusted figures closely track the reported data, indicating that the deferred income tax adjustments have minimal effect on the overall financial trends observed.

The financial data reveals a consistent upward trajectory in both reported and adjusted total assets over the five-year period from 2018 to 2022. Reported total assets increased from approximately 964 million US dollars at the end of 2018 to about 4.27 billion US dollars by the end of 2022. Adjusted total assets follow a very similar pattern, slightly lower but closely tracking the reported figures, indicating minor adjustments without materially affecting the overall asset base growth.

Total stockholders’ equity also shows a significant growth trend during the same period. Reported equity nearly quadrupled, rising from around 562 million US dollars at the end of 2018 to over 2.17 billion US dollars in 2022. Adjusted equity mirrors this growth pattern closely, though it remains marginally lower than the reported equity values, reflecting consistent adjustments that slightly reduce equity figures but preserve the overall upward momentum.

Financial leverage ratios present a notable pattern of initial increase followed by a moderate decline. Beginning at approximately 1.71 in 2018, the reported financial leverage rose to a peak around 2.24 in 2020, indicating increased use of debt relative to equity. This leverage ratio then slightly decreased to 1.96 by 2022. Adjusted financial leverage ratios follow a similar trend, peaking at the same 2.24 level in 2020 and declining to 1.98 at the end of 2022. This suggests a phase of increasing leverage during 2019-2020 followed by a gradual strengthening of equity or reduction in debt relative to assets afterward.

Overall, the data illustrates robust growth in asset base and equity, accompanied by a fluctuating but ultimately consolidating leverage position. The slight differences between reported and adjusted figures indicate minor but consistent accounting adjustments that do not materially alter the underlying financial trends.

The financial data reveals several notable trends in the reported and adjusted net income, stockholders’ equity, and return on equity (ROE) for the periods under review.

Net Income

Reported net income attributable to the company shows a fluctuating pattern, beginning at $128.8 million in 2018, increasing to a peak of $169.2 million in 2021, followed by a considerable decline to $93.8 million in 2022. The adjusted net income follows a similar trajectory, rising from $121.7 million in 2018 to $157.5 million in 2021, then sharply decreasing to $82.7 million in 2022. This downward shift in 2022 may indicate challenges or extraordinary adjustments impacting profitability during that year.

Stockholders’ Equity

The reported total stockholders’ equity demonstrates consistent growth across the entire timeframe. It more than tripled from approximately $562.4 million in 2018 to about $2.18 billion in 2022. The adjusted stockholders’ equity displays a comparable upward trend, increasing from $549.2 million in 2018 to $2.13 billion in 2022. The persistent growth in equity suggests solid capital accumulation and retained earnings, despite the fluctuations in net income.

Return on Equity (ROE)

Both reported and adjusted ROE show a declining trend throughout the period. Reported ROE decreases from 22.91% in 2018 to 4.31% in 2022, while adjusted ROE declines from 22.17% to 3.88% over the same period. The drop in ROE indicates that the company is generating lower returns on its equity base, possibly reflecting the disproportionate increase in equity relative to net income, or pressures on profitability, especially evident in the latest year analyzed.

Overall, the data reflects a company experiencing robust equity growth paired with volatility in income and a significant reduction in profitability efficiency as measured by ROE towards the end of the examined period.

Net Income Trend

Reported net income attributable to the company exhibited growth from 2018 through 2021, rising from approximately $128.8 million to $169.2 million. However, in 2022, there was a notable decline to approximately $93.8 million. A similar pattern is observed in the adjusted net income figures, which increased steadily from about $121.7 million in 2018 to $157.5 million in 2021 before dropping significantly to $82.7 million in 2022.

Total Assets Trend

Reported total assets showed consistent growth throughout the five-year period, starting at roughly $964.5 million in 2018 and increasing substantially to $4.27 billion by the end of 2022. Adjusted total assets followed a very similar pattern, with a steady increase from approximately $949.8 million in 2018 to around $4.22 billion in 2022, indicating overall asset expansion regardless of the adjustment factor.

Return on Assets (ROA) Analysis

The reported return on assets declined steadily from 13.36% in 2018 to 2.2% in 2022, reflecting decreasing efficiency in generating profit from assets over time. The adjusted ROA mirrored this trend, decreasing from 12.82% in 2018 to 1.96% in 2022. The consistent decline in both reported and adjusted ROA suggests that asset growth outpaced net income growth, leading to lower profitability relative to total asset base.

Overall Insights

The data reveal a period of robust growth in net income and total assets from 2018 to 2021, followed by a sharp decline in net income in 2022 despite continued asset growth. The fall in ROA over the entire period indicates diminishing returns on the company's expanding asset base, which could suggest challenges in maintaining profitability at the same pace as asset accumulation. The similarity between reported and adjusted figures across all categories implies that deferred income tax adjustments have a relatively minimal impact on the overall financial trends.