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SolarEdge Technologies Inc. (NASDAQ:SEDG)

This company has been moved to the archive! The financial data has not been updated since February 22, 2023.

Common-Size Income Statement

SolarEdge Technologies Inc., common-size consolidated income statement

Microsoft Excel
12 months ended: Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Revenues 100.00 100.00 100.00 100.00 100.00
Cost of revenues -72.84 -67.96 -68.38 -66.38 -65.94
Gross profit 27.16% 32.04% 31.62% 33.62% 34.06%
Research and development -9.32 -11.18 -11.18 -8.51 -8.78
Sales and marketing -5.13 -6.06 -6.58 -6.17 -7.29
General and administrative -3.62 -4.19 -4.33 -3.46 -3.12
Goodwill impairment and other operating income (expenses), net -3.75 -0.07 0.23 -2.15 0.00
Operating expenses -21.82% -21.50% -21.85% -20.30% -19.19%
Operating income 5.34% 10.55% 9.77% 13.32% 14.88%
Exchange rate gain (loss), net -0.05 -1.15 2.27 -0.73 -0.50
Interest income on marketable securities 0.34 0.15 0.26 0.32 0.60
Interest expenses -0.37 -0.54 -0.69 -0.41 -0.34
Hedging 0.15 0.48 -0.28 0.00 0.00
Interest income, net 0.05 0.01 0.00 0.00 0.00
Other -0.01 0.03 -0.11 0.02 0.00
Financial income (expense), net 0.11% -1.01% 1.45% -0.80% -0.25%
Other income 0.25 0.00 0.00 0.00 0.00
Income before income taxes 5.70% 9.53% 11.22% 12.53% 14.63%
Income taxes -2.68 -0.92 -1.60 -2.36 -0.97
Net income 3.02% 8.61% 9.62% 10.17% 13.66%
Net loss attributable to non-controlling interests 0.00 0.00 0.00 0.11 0.08
Net income attributable to SolarEdge Technologies, Inc. 3.02% 8.61% 9.62% 10.28% 13.75%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

A comprehensive analysis of the common-size income statement reveals a sustained contraction in profitability from 2018 through 2022. The primary driver of this trend is a steady increase in the cost of revenues, which has significantly eroded gross margins and subsequent net income margins.

Gross Margin Performance
Gross profit as a percentage of revenue declined from 34.06% in 2018 to 27.16% in 2022. This decrease is directly attributable to the cost of revenues, which rose from 65.94% to 72.84% over the period, indicating an increase in the relative cost of goods sold.
Operating Expense Trends
Total operating expenses increased from 19.19% of revenue in 2018 to 21.82% in 2022. A positive trend is observed in sales and marketing expenses, which decreased from 7.29% to 5.13%, and general and administrative expenses, which ended at 3.62% compared to 3.12% in 2018. However, these gains were offset by research and development spending, which peaked at 11.18% in 2020 and 2021, and a notable goodwill impairment of 3.75% in 2022.
Operating Income Trajectory
Operating income showed a significant downward trend, falling from 14.88% of revenue in 2018 to 5.34% in 2022. The simultaneous pressure of rising production costs and increased operating expenditures has led to a substantial reduction in operating efficiency.
Net Profitability and Non-Operating Items
Net income attributable to the company declined from 13.75% in 2018 to 3.02% in 2022. Financial income and expenses remained relatively volatile but marginal in impact, with financial income (expense), net ranging from a high of 1.45% in 2020 to a low of -1.01% in 2021.

Overall, the financial trajectory is characterized by margin compression. While the organization achieved some efficiencies in sales and administrative spending, these were insufficient to counter the rising cost of revenues, resulting in a significant decline in the percentage of revenue converted to net profit.

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