Analysis of Reportable Segments
SolarEdge Technologies Inc. operates in 2 segments: Solar and All other.
Segment Profit Margin
SolarEdge Technologies Inc., profit margin by reportable segment
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Solar | 16.67% | 20.63% | 18.84% | 21.99% | — |
| All other | -23.95% | -26.90% | -35.84% | -19.29% | — |
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).
Analysis of the segment profit margins reveals a stark divergence in performance between the Solar business and other operational areas. While the Solar segment remained the primary driver of profitability, it experienced a general decline in margins over the analyzed period, whereas the other segments consistently operated at a loss but showed signs of gradual recovery after a significant dip.
- Solar Segment Profitability
- The Solar segment maintained positive margins from 2019 to 2022, though the trend was characterized by volatility and a long-term decline. Profitability peaked at 21.99% in 2019, followed by a decrease to 18.84% in 2020. A brief recovery occurred in 2021, with margins rising to 20.63%, before falling to a period low of 16.67% in 2022.
- All Other Segment Performance
- The "All other" segment reported negative profit margins throughout the entire period, indicating a persistent cost burden relative to revenue. A sharp deterioration was observed in 2020, where margins fell to -35.84% from -19.29% in 2019. Following this trough, a steady upward trend in margins occurred, improving to -26.90% in 2021 and further narrowing to -23.95% in 2022.
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Segment Profit Margin: Solar
SolarEdge Technologies Inc.; Solar; segment profit margin calculation
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Segments profit (loss) | 486,862) | 368,746) | 255,728) | 293,944) | —) |
| Revenues | 2,921,175) | 1,787,280) | 1,357,261) | 1,336,618) | —) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 16.67% | 20.63% | 18.84% | 21.99% | — |
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).
1 2022 Calculation
Segment profit margin = 100 × Segments profit (loss) ÷ Revenues
= 100 × 486,862 ÷ 2,921,175 = 16.67%
The financial performance of the solar segment between 2019 and 2022 is characterized by aggressive revenue expansion coupled with fluctuating profit margins. While total revenue grew consistently and accelerated toward the end of the period, the ability to maintain proportional profitability declined.
- Revenue Growth Trends
- Revenues experienced a sustained and accelerating upward trajectory, increasing from 1.34 billion USD in 2019 to 2.92 billion USD by 2022. The most pronounced growth occurred between 2021 and 2022, where revenues increased by approximately 63%, indicating a rapid scaling of market operations.
- Segment Profit Performance
- Absolute segment profits demonstrated a general upward trend over the analyzed period, rising from 293.9 million USD in 2019 to 486.9 million USD in 2022. A temporary contraction was observed in 2020, where profit fell to 255.7 million USD, followed by a recovery and steady increase in the subsequent two years.
- Profit Margin Analysis
- The segment profit margin exhibited volatility and an overall downward trend. After peaking at 21.99% in 2019, the margin declined to 18.84% in 2020, partially recovered to 20.63% in 2021, and ultimately fell to a period low of 16.67% in 2022. The divergence observed in 2022—where revenues reached their peak while the profit margin reached its lowest point—suggests that operating expenses or cost of goods sold increased at a rate that outpaced revenue growth, resulting in diminished operational efficiency relative to scale.
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Segment Profit Margin: All other
SolarEdge Technologies Inc.; All other; segment profit margin calculation
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Segments profit (loss) | (45,137) | (47,387) | (36,844) | (17,174) | —) |
| Revenues | 188,490) | 176,167) | 102,804) | 89,042) | —) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | -23.95% | -26.90% | -35.84% | -19.29% | — |
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).
1 2022 Calculation
Segment profit margin = 100 × Segments profit (loss) ÷ Revenues
= 100 × -45,137 ÷ 188,490 = -23.95%
The "All other" segment has consistently operated at a loss from 2019 through 2022, despite a steady increase in revenue over the same period. While absolute losses widened for the first three years of the observed period, the segment's profit margin has shown signs of stabilization and slight recovery following a significant decline in 2020.
- Revenue Growth Trends
- Revenues within the segment experienced continuous growth, rising from 89,042 thousand US$ in 2019 to 188,490 thousand US$ by 2022. The most pronounced increase occurred between 2020 and 2021, where revenue grew by approximately 71%, indicating a substantial expansion in the scale of operations for this segment.
- Segment Profit and Loss Performance
- The segment reported increasing net losses from 2019 to 2021, moving from -17,174 thousand US$ to a peak loss of -47,387 thousand US$. However, this trend reversed slightly in 2022, as losses narrowed to -45,137 thousand US$, suggesting a marginal improvement in cost management or operational efficiency relative to the previous year.
- Profit Margin Analysis
- The segment profit margin exhibited significant volatility. After starting at -19.29% in 2019, the margin deteriorated sharply to -35.84% in 2020. From 2021 onward, a recovery trend is observable, with the margin improving to -26.90% and further to -23.95% in 2022. This improvement in the margin, despite the high absolute losses, is primarily driven by the rapid growth in revenue outstripping the rate of increase in segment expenses.
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Revenues
SolarEdge Technologies Inc., revenues by reportable segment
US$ in thousands
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Solar | 2,921,175) | 1,787,280) | 1,357,261) | 1,336,618) | —) |
| All other | 188,490) | 176,167) | 102,804) | 89,042) | —) |
| Total | 3,109,665) | 1,963,447) | 1,460,065) | 1,425,660) | —) |
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).
Total revenue experienced a substantial upward trajectory between 2019 and 2022, increasing from US$ 1.43 billion to US$ 3.11 billion. The growth profile is characterized by a period of relative stability between 2019 and 2020, followed by an accelerated expansion phase through 2022.
- Solar Segment Performance
- The solar segment serves as the primary driver of growth, with revenues rising from US$ 1.34 billion in 2019 to US$ 2.92 billion in 2022. While growth was marginal between 2019 and 2020, there was a significant surge in the following two years, with the most pronounced increase occurring between 2021 and 2022, where revenue grew by approximately 63%.
- All Other Segment Performance
- Revenues from other segments grew from US$ 89 million in 2019 to US$ 188 million in 2022. A notable spike in growth occurred in 2021, where revenues increased by roughly 71% compared to the previous year; however, this momentum slowed significantly in 2022, reflecting a growth rate of approximately 7%.
- Revenue Concentration and Composition
- The revenue mix remains heavily concentrated in the solar segment. In 2019, solar revenues represented approximately 93.8% of the total. Despite the growth in the other segment during 2021, the solar segment's contribution remained dominant, accounting for approximately 94% of total revenue by the end of 2022. This indicates a high level of reliance on the solar market for overall financial performance.
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Segments profit (loss)
SolarEdge Technologies Inc., segments profit (loss) by reportable segment
US$ in thousands
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Solar | 486,862) | 368,746) | 255,728) | 293,944) | —) |
| All other | (45,137) | (47,387) | (36,844) | (17,174) | —) |
| Total | 441,725) | 321,359) | 218,884) | 276,770) | —) |
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 consolidated profit trajectory between 2019 and 2022 demonstrates a general upward trend, characterized by significant growth in the final two years of the period. Total profitability increased from US$ 276.8 million in 2019 to US$ 441.7 million in 2022, despite a temporary contraction observed in 2020.
- Solar Segment Performance
- The Solar segment serves as the primary driver of profitability. Following a decrease from US$ 293.9 million in 2019 to US$ 255.7 million in 2020, the segment experienced accelerated growth, reaching US$ 368.7 million in 2021 and US$ 486.9 million by the end of 2022. This represents a substantial recovery and sustained expansion of core operations.
- Non-Core Segment Trends
- The "All other" segment consistently reported losses throughout the analyzed period. These losses widened from US$ 17.2 million in 2019 to a peak of US$ 47.4 million in 2021, before stabilizing slightly at US$ 45.1 million in 2022. The persistent negative values indicate ongoing operational costs or strategic investments in auxiliary business lines that have yet to achieve profitability.
- Aggregate Profitability and Segment Contribution
- Total profit is heavily dependent on the Solar segment's performance, which effectively absorbs the losses generated by all other segments. The overall growth in total profit from 2020 to 2022 mirrors the trajectory of the Solar segment, confirming that total corporate profitability is intrinsically linked to the success of the core Solar business.
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