Name: SolarEdge Technologies Inc. (NASDAQ:SEDG) | Cash Flow Statement
Creator: Stock Analysis on Net

Cash Flow Statement

The cash flow statement provides information about a company cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on the company balance sheet.

The cash flow statement consists of three parts: cash flows provided by (used in) operating activities, cash flows provided by (used in) investing activities, and cash flows provided by (used in) financing activities.

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SolarEdge Technologies Inc., consolidated cash flow statement

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income	93,779)	169,170)	140,322)	144,957)	128,046)
Depreciation of property, plant and equipment	40,580)	29,359)	22,355)	17,261)	11,426)
Amortization of intangible assets	9,096)	10,176)	9,479)	9,634)	1,193)
Amortization of debt discount and debt issuance costs	2,916)	2,903)	3,185)	—)	—)
Amortization of premium and accretion of discount on available-for-sale marketable securities, net	9,310)	9,462)	1,168)	92)	1,242)
Impairment of goodwill and intangible assets	118,492)	—)	—)	—)	—)
Stock-based compensation expenses	145,539)	102,593)	67,309)	60,353)	30,618)
Gain from sale of privately held company	(7,719)	—)	—)	—)	—)
Deferred income taxes, net	(11,055)	(12,045)	(2,738)	(6,037)	(7,093)
Exchange rate fluctuations and other items, net	10,052)	20,697)	3,860)	8,174)	551)
Inventories, net	(341,085)	(43,051)	(149,661)	(22,544)	(20,178)
Prepaid expenses and other assets	(64,991)	(39,444)	(3,276)	(67,323)	(2,711)
Trade receivables, net	(457,610)	(247,723)	86,538)	(124,071)	(60,514)
Trade payables, net	194,524)	91,709)	3,333)	47,837)	31,482)
Employees and payroll accruals	26,238)	26,519)	18,315)	18,592)	4,583)
Warranty obligations	120,169)	60,524)	32,274)	50,780)	41,878)
Deferred revenues and customers advances	44,376)	29,936)	(21,438)	83,137)	37,041)
Accrued expenses and other liabilities, net	98,673)	3,344)	11,630)	38,158)	(8,485)
Changes in assets and liabilities	(379,706)	(118,186)	(22,285)	24,566)	23,096)
Adjustments to reconcile net income to net cash provided by operating activities	(62,495)	44,959)	82,333)	114,043)	61,033)
Net cash provided by operating activities	31,284)	214,129)	222,655)	259,000)	189,079)
Proceed from sales and maturities of available-for-sale marketable securities	231,210)	202,188)	141,839)	142,744)	129,345)
Purchase of property, plant and equipment	(169,341)	(149,251)	(126,790)	(72,562)	(38,608)
Investment in available-for-sale marketable securities	(507,171)	(579,377)	(223,705)	(160,054)	(142,627)
Investment in a privately-held company	—)	(16,643)	—)	—)	—)
Proceeds from sale of a privately-held company	24,362)	—)	—)	—)	—)
Withdrawal from (investment in) bank deposits, net	—)	60,096)	(54,752)	4,860)	(6,001)
Withdrawal from (investment in) restricted bank Deposits, net	(242)	798)	25,267)	(26,145)	—)
Business combinations, net of cash acquired	—)	—)	—)	(38,435)	(94,737)
Other investing activities	4,138)	(2,022)	1,504)	(3,261)	—)
Net cash used in investing activities	(417,044)	(484,211)	(236,637)	(152,853)	(152,628)
Proceeds from secondary public offering, net of issuance costs	650,526)	—)	—)	—)	—)
Repayment of bank loans	(138)	(16,073)	(15,595)	(9,514)	(3,786)
Proceeds from exercise of stock-based award	4,030)	6,486)	16,671)	9,066)	10,021)
Tax withholding in connection with stock-based awards, net	3,023)	(4,283)	4,829)	—)	—)
Proceeds from issuance of convertible senior notes, net	—)	—)	617,869)	—)	—)
Proceeds from bank loans	—)	—)	16,944)	249)	—)
Change in non-controlling interests	—)	—)	—)	(71,468)	(14,190)
Other financing activities	(2,834)	(1,308)	(234)	(1,354)	—)
Net cash provided by (used in) financing activities	654,607)	(15,178)	640,484)	(73,021)	(7,955)
Effect of exchange rate differences on cash and cash equivalents	(15,824)	(11,797)	(23,257)	3,011)	86)
Increase (decrease) in cash and cash equivalents	253,023)	(297,057)	603,245)	36,137)	28,582)
Cash and cash equivalents at the beginning of the period	530,089)	827,146)	223,901)	187,764)	164,679)
Cash and cash equivalents at the end of the period	783,112)	530,089)	827,146)	223,901)	193,261)

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).

The financial trajectory from 2018 to 2022 reveals a significant divergence between accounting profitability and cash generation, culminating in a liquidity challenge in the final year of the period. While net income grew steadily until 2021, it experienced a sharp decline in 2022, falling to 93.7 million USD from a peak of 169.2 million USD in 2021.

Operating Cash Flow and Working Capital: Net cash provided by operating activities remained robust between 2018 and 2021, ranging from 189 million USD to 259 million USD. However, a critical contraction occurred in 2022, with operating cash flow dropping to 31.3 million USD. This decline was primarily driven by a massive increase in working capital requirements. Specifically, outflows for inventories surged to 341.1 million USD and trade receivables increased by 457.6 million USD in 2022. Although trade payables rose by 194.5 million USD to partially offset these outflows, the net impact on liquidity was severely negative.
Investing Activities and Asset Management: A consistent upward trend in capital expenditure is evident, with purchases of property, plant, and equipment increasing annually from 38.6 million USD in 2018 to 169.3 million USD in 2022. The company maintained a volatile relationship with marketable securities, characterized by large-scale investments and periodic sales. A notable event in 2022 was the recognition of a 118.5 million USD impairment of goodwill and intangible assets, suggesting a write-down of previously acquired assets.
Financing Strategy and Liquidity: The company utilized capital markets to maintain its cash position during periods of operating volatility. In 2020, liquidity was significantly bolstered by the issuance of convertible senior notes totaling 617.9 million USD. In 2022, facing a sharp decline in operating cash flow, the company executed a secondary public offering that provided 650.5 million USD in net proceeds. These financing activities allowed the ending cash balance to recover to 783.1 million USD in 2022, despite the operational cash drain.
Non-Cash Adjustments: Stock-based compensation expenses exhibited a strong growth trend, rising from 30.6 million USD in 2018 to 145.5 million USD in 2022. This indicates an increasing reliance on equity-based remuneration to manage cash outflows for talent retention. Depreciation and amortization also trended upward, reflecting the expanded asset base resulting from increased capital expenditures.

In summary, the period is characterized by an initial phase of growth and cash efficiency followed by a period of significant working capital absorption. The ability to sustain operations in 2022 was dependent upon external equity financing rather than internal cash generation from core business activities.

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