SOLAREDGE TECHNOLOGIES, INC. (SEDG)

CIK: 0001419612. SIC: 3674 Semiconductors & Related Devices. Latest 10-K as of: 2026-02-25.

SIC breadcrumb: Manufacturing > Electronic And Other Electrical Equipment And Components, Except Computer Equipment > SIC 3674 Semiconductors & Related Devices

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1419612. Latest filing source: 0001178913-26-000632.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-23. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001419612.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001419612.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001178913-26-002432.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-05-07. Report date: 2026-03-31.

ITEM 2. 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements
contained in this Form 10-Q or statements incorporated by reference from documents we have filed with the Securities and Exchange Commission
may contain forward-looking statements that are based on our management’s expectations, estimates, projections, beliefs and assumptions
and on information currently available to our management. The forward-looking statements should be read in conjunction with our unaudited
condensed consolidated financial statements and related notes included in Part 1, Item 1 of this report. This discussion contains certain
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements include information concerning our possible or assumed future results of
operations, business strategies, technology developments, new products and services, financing and investment plans, competitive position,
backlog, industry and regulatory environment, effects of acquisitions, growth opportunities, potential future impairments, and the effects
of competition. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipate,”
“believe,” “could,” “seek,” “estimate,” “expect,” “intend,” “may,”
“plan,” “potential,” “predict,” “project,” “should,” “will,” “would”
or similar expressions and the negatives of those terms.

          Forward-looking
statements inherently involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking
statements. Given these uncertainties, you should not place undue reliance on forward-looking statements. Forward-looking and other statements
regarding our sustainability efforts and aspirations are not an indication that these statements are necessarily material to investors
or requiring disclosure in our filing with the Securities and Exchange Commission (“SEC”). In addition, historical, current
and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal
controls and processes that continue to evolve and assumptions that are subject to change in the future, including future rule-making.
Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this filing. Important
factors that could cause actual results to differ materially from our expectations include:

•

Future demand for renewable energy, including
solar energy solutions;

•

our ability to be profitable in the future;

•

the rapidly evolving and competitive nature of
the solar industry; changes in tax laws, tax treaties, regulations, guidance or the interpretation of them, including the Inflation Reduction
Act and the H.R.1;

•

fluctuations in demand for solar energy solutions,
including if demand for solar energy solutions does not resume growth or grows at a slower rate than anticipated;

•

macroeconomic conditions in our domestic and international
markets, such as inflation concerns, interest rates and recessionary concerns;

•

changes in the U.S. and global trade environments,
including the imposition and/or increase of import tariffs or other restrictive trade measures;

•

the retail price of electricity derived from the
utility grid or alternative energy sources;

•

interest rates and supply of capital in the global
financial markets in general and in the PV market specifically;

•

competition, including introduction of power optimizers
and inverters, electric vehicle ("EV") chargers, batteries and photovoltaic (“PV”) system monitoring products by our competitors;

•

our reliance on distributors and large installers
to assist in selling our products, and the failure of these customers to perform as expected.

•

developments in alternative technologies or improvements
in distributed solar energy generation;

•

historic cyclicality of the solar industry and
periodic downturns;

•

product quality or performance problems in our
products;

•

changes in our geographic footprint or product
and service offerings;

•

our dependence upon a small number of outside
contract manufacturers and limited or single source suppliers;

•

delays, disruptions, and quality control problems
in manufacturing;

•

shortages, delays, price changes, or cessation
of operations or production affecting our suppliers of key components;

SOLAREDGE
TECHNOLOGIES INC. | 2026 Form 10-Q | 3

•

capacity constraints, delivery schedules, manufacturing
yields, and costs of our contract manufacturers and availability of components;

•

changing political, geopolitical conditions, and
the conditions of the global energy market;

•

performance of distributors and large installers
in selling our products;

•

consolidation in the solar industry among our
customers and distributors;

•

our ability to implement our new Enterprise Resource
Planning ("ERP") system;

•

discontinuation of our e-Mobility business, energy
storage business, and PV Tracker business;

•

our ability to successfully operate our global
operations with a reduced work force;

•

our ability to recognize expected benefits from
restructuring plans;

•

any unauthorized access to, disclosure, or theft
of personal information or unauthorized access to our network or other similar cyber incidents;

•

attempts by third parties, our employees, or our
vendors might gain unauthorized access to our network or seek to compromise our products and services;

•

emerging issues related to the development and
use of artificial intelligence;

•

loss of key executives, and our ability to retain
key personnel and attract additional qualified personnel;

•

disruption to our business operations due to the
evolving conflict in Israel and other conditions in Israel that affect our operations;

•

tax benefits that are available to us under Israeli
law require us to meet various conditions and may be terminated or reduced in the future;

•

difficulty to enforce a judgment of a U.S. court
against our officers and directors, to assert U.S. securities laws claims in Israel;

•

our dependence on ocean transportation to timely
deliver our products in a cost-effective manner;

•

entry into business engagements with South Korean
military bodies;

•

fluctuations in global currency exchange rates;

•

the impact of evolving legal and regulatory requirements
including emerging corporate social responsibility requirements;

•

existing and future responses to and effects of
pandemics, epidemics or other health crises;

•

reduction, elimination or expiration of government
subsidies and economic incentives for on-grid solar electricity applications;

•

changes to net metering policies may reduce demand
for electricity from PV systems;

•

stringent and changing data privacy and security
laws, rules, regulations and other obligations;

•

existing electric utility industry regulations
and changes to regulations, may present technical, regulatory, and economic barriers to the purchase and use of PV systems;

•

business practices and regulatory compliance of
our raw material suppliers;

•

our ability to maintain our brand and to protect
and defend our intellectual property;

•

claims for remuneration or royalties for assigned
service invention rights by our employees;

•

impairment of our goodwill or other long-lived
and intangible assets;

•

volatility of our stock price;

•

provisions in our certificate of incorporation
and by-laws may have the effect of delaying or preventing a change of control or changes in our management;

•

our certificate of incorporation includes a forum
selection clause, which could limit our stockholders’ ability to obtain a favorable judicial forum;

•

our customers’ financial stability, creditworthiness,
and debt leverage ratio;

•

our liquidity and ability to service our debt;
and

the
other factors set forth below in Part II, Item 1A under “Risk Factors” and in Part I, Item 1A under ”Risk Factors”
in our Annual Report on Form 10-K/A for the year ended December 31, 2025 and in other documents we file from time to time with the SEC
that disclose risks and uncertainties that may affect our business.

The
preceding list is not intended to be an exhaustive list of all of our forward-looking statements. You should not rely upon forward-looking
statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking
statements will be achieved or will occur. Except as required by law, we assume no obligation to update these forward-looking statements,
or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new
information becomes available in the future.

SOLAREDGE
TECHNOLOGIES INC. | 2026 Form 10-Q | 4

Overview

We
are a global smart energy technology company. We develop, manufacture and sell products that address a broad range of energy market segments
through our diversified product offering, including residential, commercial and large scale photovoltaic or PV, energy storage and backup
solutions, EV charging capabilities, home energy management, grid services and virtual power plants. By leveraging engineering capabilities
and with focusing on innovation, safety and reliability, we create smart energy solutions that power our lives and drive future progress.

We
launched or ramped up sales of several new products in the first quarter of 2026. Most notably, after we successfully launched our next-generation
residential product portfolio, called SolarEdge Nexis, we continued the roll out with units installed in key markets. We also expanded
our commercial energy storage business with CSS-OD, a102.4 kWh rated solution scalable up to megawatt hour size sites and with the 197
kWh battery, the CSS-OD 197, featuring a 50 kW or 100 kW battery inverter output, scalable up to 4MW hour size sites. Both solutions are
suitable for outdoor or indoor installations.

In
Q1 2026, we continued the transition of our inverter products to a Single SKU concept. This is a software-defined platform that significantly
reduces the complexity of our business for residential and commercial applications globally. It allows us to manufacture and ship one
SKU of an inverter to the residential market, and minimal SKUs for the commercial market, which can then be programmed to the desired
kilowatt rating in the field. This framework simplifies forecasting, manufacturing, inventory management, logistics, service and support,
for both us and our customers. It also adds flexibility for home and business owners who can boost the inverter rating if a larger system
is needed in the future.

In
light of the Inflation Reduction Act (the “IRA”) in the United States, which incentivizes the local manufacturing of renewable
energy products by providing benefits to installers for the purchase and installation of products with domestic content, as well as by
incentivizing local manufacturing of our products, we manufacture the vast majority of our products in the United States. This includes
inverters in Texas, power optimizers and inverters in Florida, and batteries in Utah. As part of our effort to streamline and centralize,
we have discontinued manufacturing in China, Mexico, and Hungary. We continue to manufacture a minor portion of our products in Israel
at our Sella 1 facility. We also continue to maintain manufacturing capabi

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-25. Report date: 2025-12-31.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the section of this Annual Report on Form 10-K captioned “Business” and our consolidated financial statements and the related notes to those statements included elsewhere in this Form 10-K. In addition to historical financial information, the following discussion and analysis contains forward looking statements that involve risks, uncertainties, and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward looking statements as a result of many factors, including those discussed under the sections of this Annual Report captioned “Special Note Regarding Forward Looking Statements” and “Risk Factors”. For discussion related to changes in financial condition and the results of operations for the year ended December 31, 2024, refer to Item 7- Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 25, 2025.

Overview

We are a global smart energy technology company. We develop, manufacture, and sell products that address a broad range of energy market segments through our diversified product offering, including residential, commercial and large scale photovoltaic or PV, energy storage and backup solutions, electric vehicle or EV charging capabilities, home energy management, grid services and virtual power plants. By leveraging engineering capabilities and with a focus on innovation, safety and reliability, we create smart energy solutions that power our lives and drive future progress.

We launched or ramped up sales of several new products in 2025. Most notably, we launched our next-generation residential product portfolio, called SolarEdge Nexis, with initial units delivered toward the end of 2025. We also expanded our commercial energy storage business with CSS-OD, a 102.4 kWh rated solution scalable up to megawatt hour size sites, suitable for outdoor or indoor installations.

At the end of 2025, we transitioned our inverter products to a Single SKU concept. This is a software-defined platform that significantly reduces the complexity of our business for residential and commercial applications globally. It allows us to manufacture and ship one SKU of an inverter to the market, which can then be programmed to the desired kilowatt rating in the field. This framework simplifies forecasting, manufacturing, inventory management, logistics, service and support, for both us and our customers. It also adds flexibility for home and business owners who can boost the inverter rating if a larger system is needed in the future.

In light of the IRA legislation in the United States, which incentivizes the local manufacturing of renewable energy products by providing benefits to installers for the purchase and installation of products with domestic content, as well as by incentivizing local manufacturing of our products, we manufacture the vast majority of our products in the United States. This includes inverters in Texas, optimizers and inverters in Florida, and manufacturing of batteries in Utah. As part of our effort to streamline and centralize, we have discontinued manufacturing in China, Mexico, and Hungary. We continue to manufacture a minor portion of our products in Israel, at our Sella 1 facility. We also continue to maintain manufacturing capabilities in Vietnam, with a third-party manufacturer.

In 2025, we began to strategically focus on our core markets and product lines to better align resources with markets and product lines that exhibit the strongest potential. As part of this strategic portfolio rationalization, we are concentrating our operations in key jurisdictions while discontinuing local activities in certain countries.

Following the sale of Automation Machines and the discontinuation of the Company's Energy Storage activity in 2024, we operate as one operating segment that constitutes consolidated results.

Further information regarding our business is provided in “Part I, Item 1. Business” of this Annual Report.

For the year ended December 31, 2025, one customer accounted for 18.6% of our revenues and our top three customers together represented 35.8% of our revenues.

Our revenues were $1,184.4 million and $901.5 million for the year ended December 31, 2025 and 2024, respectively. For the year ended December 31, 2025 our gross profit was 16.6% as compared to gross loss of 97.3% for the year ended December 31, 2024. For the year ended December 31, 2025, our net loss was $405.4 million as compared to our net loss of $1,806.4 million for the year ended December 31, 2024.

47

Performance Measures

In managing our business and assessing financial performance, we supplement the information provided by the financial statements with other operating metrics. These operating metrics are utilized by our management to evaluate our business, measure our performance, identify trends affecting our business and formulate projections. As discussed in our quarterly report on Form 10-Q for the third quarter of 2025, we re-evaluated the key operating metrics that we have historically used to measure our operating performance to improve their accuracy and relevance to the Company's business. This process included our application of new data, technologies, and/or product changes that may allow us to identify metrics that we view to be the most reflective of our business.

Specifically, the markets that we serve are increasingly transitioning away from discreet product purchases and toward more comprehensive systems and solutions. This trend is occurring across all of our regions and end markets. As a result of these market trends, we are adjusting our technology platform and go to market strategies to cater to this trend by offering more comprehensive solutions. These trends also result in the cost of our inverter, optimizer, and energy storage products becoming a widely varying fraction of the overall value of the solutions that we provide. In addition, the ASP calculation for these units also widely varies due to diverse end market exposure. As such, trends in costs and selling prices per megawatt and megawatt hour are less representative of our overall business performance. We believe that this trend will only continue to become more prevalent in the future. Additionally, the Company believes that revenue recognition is a more accurate measurement than products shipped, for the purpose of assessing the Company’s actual earnings rather than mere operational activity. In some cases, products shipped may not be recognized as revenue in a specific quarter due to timing of delivery, and results may differ as such in the metrics previously used in our financial statements. Accordingly, and further to the Company's quarterly report on Form 10-Q for the third quarter of 2025, management determined that the third quarter of 2025 would be the last report in which it would include i) inverters shipped, ii) optimizers shipped, and iii) MWh of batteries shipped, as metrics, before being discontinued in this annual report on Form 10-K. Management has replaced these key operating metrics with i) inverters recognized as revenue, ii) optimizers recognized as revenue, and iii) MWh of batteries recognized as revenue, which management believes more accurately reflect the Company’s actual operations. In addition, we have begun disclosing revenue derived from inverters, optimizers and batteries on a quarterly basis within our quarterly reports on Form 10Q and in this annual report on Form 10K.

In an effort to simplify the Company’s product portfolio and streamline our business, we have reduced the variety of SKUs, in a manner in which we are no longer  able to track Megawatts shipped as a metric. The move to our Single SKU concept means that the Company is not able to determine the AC power rating of inverters at the time of shipment. The AC power rating can only be determined once it is installed in the field, which typically occurs at least 6 months after shipment and can be altered in accordance with an end user's needs. As a result, the Company  no longer provides Megawatts shipped as key operating metrics, starting with this fourth quarter of 2025.

Year ended December 31,

2025

2024

Inverters recognized as revenue (in thousands)

349.6

245.7

Power optimizers recognized as revenue (in thousands)

10,571.4

6,645.8

Megawatt hours recognized as revenue - batteries

897.4

556.2

Limited Market Portfolio Rationalization

In 2025, we began to strategically focus on our core markets and product lines to better align resources with markets and product lines that exhibit the strongest potential. As part of this strategic portfolio rationalization, we are concentrating our operations in key jurisdictions while discontinuing local activities in certain countries.

48

Global Circumstances Influencing our Business and Operations

Demand for Products

A prolonged slowdown in demand in the global market for PV products has continued to adversely impact the solar industry. Additionally, uncertainty related to changes in tariffs, trade policies, legislation, and guidance including from H.R.1, may further contribute to market volatility and adversely impact customer demand for our products, pricing and our financial performance. Despite a prolonged softness in demand, we have seen an increase in sales, in 2025, due to more normalized channel inventory in both the United States and in Europe. Additionally, the attachment rate of batteries within solar installations is rising globally, which we believe has led an increase in demand for our batteries.

Impact of the H.R.1 on U.S. Tax Incentives

In August 2022, the U.S. government enacted the IRA, which contains several provisions intended to accelerate U.S. manufacturing and adoption of clean energy such as solar, wind, hydrogen and electric vehicles and therefore had positive impacts on our business and operations along with the overall US solar market. Some of the applicable provisions in the IRA that are positively impacting the market for renewable energy include the extension of 48E, the tech-neutral investment tax credit ITC, and 45Y, the tech-neutral PTC. The IRA includes incentives for residential and commercial solar customers and developers through the inclusion of ITCs for qualifying energy projects of up to 30% with a potential to gain further bonus credits such as through the utilization of Domestic Content. Section 45X of the IRA offers AMPTCs, that incentivize the production of eligible components within the United States. In light of such incentives, we established manufacturing capabilities in the United States starting in 2023, and further expanded such capabilities in 2024 and 2025. On October 24, 2024, regulations concerning the application of Section 45X were published by the U.S. Treasury Department which contain detailed rules concerning eligibility, qualifying and accounting for AMPTCs. Of particular relevance to the Company are the tax credits that we generate as a result of rules concerning the qualification and measurement of AMPTCs to Residential Inverters, Commercial Inverters and DC-Optimized Inverter Systems that we manufacture in the United States. In 2024 and 2025, we sold a significant part of the AMPTCs that we generated from our U.S. production of eligible components.

On July 4, 2025, H.R.1, was enacted into law introducing amendments to the clean energy tax credits contained in the IRA. The IRA provides energy tax credits that are significant to SolarEdge and its U.S. based customers, and material changes thereto could adversely affect our revenue, our eligibility for certain tax credits, tax credits available to our customers, competitiveness and demand for our products and our financial condition.

H.R.1 accelerates the phase-out timeline for certain credits, eliminates the 25D credit, and imposes new eligibility criteria. H.R.1 does not shorten the term of such 45X Credits. Among other changes, H.R.1 shortens the term of the investment tax credit and production tax credit under Sections 48E and 45Y of the Code, used by customers of SolarEdge who are engaged in TPO models, such as residential solar leases and power purchase agreements, and commercial solar customers and developers, shortening the end date from 2034 to 2027. However, H.R.1 also includes a 12-month period in which such customers can begin construction giving them four years to complete their projects. Projects begun after twelve months from enactment of H.R.1 must be placed in service by December 31, 2027, to receive the credit. H.R.1 eliminates the individual residential tax credit under Section 25D of the Code at the end of 2025. These changes may negatively impact the eligibility of our customers and individuals to obtain tax credits, which may negatively affect the overall demand for our products.

H.R.1 also amends the domestic content bonus credit rules for Section 48E projects. Projects commencing construction after June 16, 2025 must meet a 45% domestic content threshold, up from 40%. Since January 1, 2026, such threshold was increased to 50% and shall thereafter be further increased by 5% on an annual basis, until 2029. In addition, H.R.1 introduced new FEOC requirements for Sections 45X, 45Y, and 48E of the Code. These restrictions require threshold percentages of non FEOC components that increase over time, beginning January 1, 2026. Currently, SolarEdge is manufacturing components aimed help our customers meet their non-FEOC percentage requirements. However, if Treasury were to release new rules or guidance that impact our ability to provide components with non-FEOC percentages towards their total requirement, our customers’ eligibility to qualify for certain tax credits could be impaired, which may adversely affect our revenue, gross margins, business operations and competitive position. In addition, as of January 1, 2026, in order to receive the 45X Credit, manufacturers must also reach a required percentage of non-FEOC content in their manufactured components. If the Company is unable to reach that required percentage, it could have adverse impacts on our manufacturing costs, results of operations, cash flows, gross margin, and profits.

On August 15, 2025, the U.S. Treasury Department and the IRS released Notice 2025-42, its first set of guidance for H.R.1 related to beginning of construction requirements applicable to our customers. While it removed the ability for projects over 1.5 MW to utilize the 5% safe harbor method (still allowing projects equal to or less than 1.5 MW to continue using it), but kept in place the physical work test method for all projects.

49

On February 12, 2026, the U.S Department of Treasury and IRS released IRS Notice 2026-15 providing additional guidance on H.R. 1 related to the Prohibited Foreign Entity rules (PFE) enacted in H.R.1. Specifically, this notice confirms the ability to rely on temporary safe harbor tables and existing safe harbor tables for the determination of material assistance from a PFE. This guidance provides answers to several compliance questions related to the Company’s 45X Credits material assistance calculations and its customers' 48E material assistance calculation among other things. While this removed some uncertainty around the Material Assistance Cost Ratio calculation, impending Notice of Proposed Rule and Final Rule on this same topic expected later this year could create challenges for the Company to meet the FEOC requirements or to assist our customers in meeting them. If we are unable to meet the requirements this may adversely affect our revenue, or our customers eligibility to obtain certain tax credits, the overall demand for our products, our results of operations and cash flows.

To the extent that tax benefits or credits may be impacted through new regulation, issued guidance, interpretation, or by new laws passed by Congress, our business could be disadvantaged or advantaged. Reductions in AMPTCs, without an offsetting reduction in our manufacturing costs, would adversely affect our results of operations and cash flows, and have an adverse impact on our gross margin, which may include transitioning into a gross loss. We continue to monitor the benefits that may be available to us, such as the availability of tax credits for domestic manufacturers.

Trade Tariff Uncertainties

The current trade situation is creating uncertainty about what impact new or existing tariffs, trade restrictions or retaliatory actions may have on us, the solar industry, our partners, and our customers. We have relocated our contract manufacturing to the United States, where we manufacture the vast bulk of our products. We continue to manufacture a minor portion of our products in Israel, at our Sella 1 facility. Certain critical subcomponents for our products are still sourced from outside the United States. If not resolved, the escalation in trade tensions or the implementation of broader tariffs, trade restrictions or other retaliatory measures on our products or components or subcomponents originating from countries outside of the United States, could adversely impact our ability to source necessary components or subcomponents, manufacture products at competitive cost, or sell our products at prices customers are willing to pay. In addition, retaliatory measures from other countries on products originating from the United States for export could adversely impact our ability to sell our products at competitive prices in such countries. Certain of the subcomponents used in our products are being imported to the United States from China, which may be subject to significantly increased tariffs. In light of the aforementioned, we continue to adjust our supply chains and are exploring alternative suppliers outside of China, however, there is no assurance that we will be successful in identifying suitable alternatives, or that such alternatives, if identified, will not result in increased costs or reduced operational efficiency.

If the price of solar power systems increases, as well as the cost of manufacturing our products in the United States, the use of solar power systems could become less economically feasible and could further reduce our gross margins or reduce the demand of solar power systems manufactured and sold, which in turn may decrease demand for our products. Additionally, existing or future tariffs may negatively affect key partners, suppliers and manufacturers. Such outcomes could adversely affect the amount or timing of our revenue, results of operations or cash flows, and continuing uncertainty could cause sales volatility, price fluctuations or supply shortages or cause our customers to advance or delay their purchase of our products. Any such developments could materially and adversely affect our business operations, results of operations and cash flows.

Disruptions Due to the War in Israel

Due to the war that began on October 7, 2023, some of our employees in Israel were called to active reserve duty and additional employees may be called in the future, if needed. In the year  ended December 31, 2025, approximately 279 or 13% of our employees in Israel were called to active reserve duty for varying periods. On October 9, 2025, Israel, Hamas, the United States and other countries in the region agreed to a framework for a ceasefire in Gaza between Israel and Hamas. It is unknown whether this ceasefire will endure, or if other conflicts in Gaza, Lebanon, Yemen, Iran, or in the broader region will reemerge or escalate in the future.

While our offices and facilities are open worldwide, including in Israel, and, to date, we have not had material disruptions to our ability to manufacture and deliver products and services to customers. A reemergence of conflicts in Israel could materially adversely affect our business, financial condition, and results of operations. Due to the ongoing and evolving nature of the conflict in Israel, and the extent of these events, the adverse effect on our business operations is still unknown.

The majority of our key employees and officers are residents of Israel. If any of our facilities in Israel were to be damaged, destroyed or otherwise rendered unable to operate, whether due to war, acts of hostility, earthquakes, fire, floods, storms, other natural disasters, employee malfeasance, terrorist acts, power outages or otherwise, or if performance of our research and development is disrupted for any other reason, such an event could delay commercialization of our products, and if we choose to manufacture all or any part of them internally, jeopardize our ability to manufacture our products as promptly as our prospective customers will likely expect, or possibly at all. If we experience delays in achieving our development objectives within a timeframe that meets our prospective customers’ expectations, our business, prospects, financial results and reputation could be harmed.

50

Key Components of Our Results of Operations

The following discussion describes certain line items in our Consolidated Statements of Operations.

Revenues

We generate revenues from the sale of DC optimized inverter systems for PV installations, which include power optimizers, inverters, storage and backup solutions, EV chargers, smart energy devices, our cloud-based monitoring platform, extended warranty for our products and grid services. Our customer base mainly includes distributors, large solar installers, wholesalers, and EPCs.

Our revenues from the sale of our products are affected by changes in the volume and average selling prices of our DC optimized inverter systems. The volume and average selling price of our systems is driven by the supply and demand for our products, changes in the product mix between our residential and commercial products, the customer mix between large and small customers, the geographical mix of our sales, sales incentives, end user government incentives, seasonality, and competitive product offerings.

Our revenue growth is dependent on our ability to expand our market share in each of the geographies in which we compete, retain our global footprint in evolving markets, manage our production capabilities to meet demand, continue to develop and introduce new and innovative products that address the changing technology and performance requirements of our customers.

In the year ended December 31, 2025, 60.6% of our revenues were generated from the United States, 26.8% of our revenues were generated from Europe, and 12.5% of our revenues were generated from our other international markets ("International Markets"). In the year ended December 31, 2024, 42.1% of our revenues were generated from the United States, 35.8% of our revenues were generated from Europe, and 22.1% of our revenues were generated from International Markets.

Cost of Revenues and Gross Profit

Cost of revenues consists primarily of product costs, including purchases from our contract manufacturers and other suppliers, as well as costs related to shipping, customer support, product warranty, personnel, depreciation of testing and manufacturing equipment, amortization of intangible assets and other fixed costs, provision for losses related to slow moving and dead inventory, hosting services for our cloud based monitoring platform, variable utility costs, operational costs related to the manufacturing factories, other logistics services, and contract termination costs, partially offset by AMPTCs we are entitled to under IRA. When evaluating potential manufacturing locations, the Company considers the full cost structure associated with the cost of revenues and the related decision‑making process reflects a holistic review of operational, logistical, financial, and strategic parameters, including market conditions, cost structures, tariffs, and the evolving policy landscape. Our product costs are affected by technological innovations, such as advances in semiconductor integration and new product introductions, economies of scale resulting in lower component costs, improvements in production processes and automation, the volume of products subject to import tariffs (for example, for imports from China to the U.S.) and the volume of products for which manufacturing credits are available (for example, for products made in the U.S.). Some of these costs, primarily personnel, amortization of intangible assets and depreciation of testing and manufacturing equipment, are not directly affected by sales volume.

Cost of revenues also includes our operations, production, and support departments’ costs. Our operations and production departments are responsible for production management such as planning, procurement, supply chain, production methodologies and machinery planning, logistics management, and manufacturing support to our contract manufacturers, as well as the quality assurance of our products. Our support department provides customer and technical support at various levels through our call centers around the world as well as second and third-level support services, which are provided by support personnel located in our headquarters. Our employees headcount in our operations, production and support departments has increased to 1,935 as of December 31, 2025 from 1,804 as of December 31, 2024.

51

In October of 2023, the Company made an announcement regarding its restructuring plans to adjust its manufacturing capacity and increase operating efficiency, including the discontinuation of the Company’s LCV e-Mobility activity. On January 21, 2024, the Company announced adoption of additional measures in response to challenging industry conditions, including reducing its headcount by approximately 900 over the first half of 2024 through involuntary workforce reduction plans, followed by an additional involuntary workforce reduction in July 2024 resulting in the layoff of approximately 400 employees. On November 27, 2024, the Company announced the closure of its Energy Storage Division. Under the closure, the Company expected to reduce its headcount by approximately 500 employees, primarily employees working in manufacturing positions in South Korea. These decisions were made in order to better align the Company with current market conditions (together, the “Restructuring Plans”).

In January 2025, the Company announced the adoption of a restructuring plan, in response to challenging industry conditions, which included an additional reduction in workforce. In April 2025, we divested from our PV tracker business, as part of our effort to focus on our core activities. On September 4, 2025, as part of the decision to close our Energy Storage Division, the Company sold its last battery cell manufacturing facility in South Korea. In 2025, we also began to strategically focus on our core markets and product lines to better align resources with markets and product lines that exhibit the strongest potential. As part of this strategic portfolio rationalization, we are concentrating our operations in key jurisdictions while discontinuing local activities in certain countries (together, the “Restructuring Plans”).

Gross profit (loss) may vary from quarter to quarter and is primarily affected by our average selling prices, product costs, manufacturing ramp-up costs, restructuring costs, product mix, customer mix, geographical mix, location of manufacturing, shipping method, warranty costs, generation and recognition of AMPTCs, ability to benefit from certain tax credits, inventory write-offs, exchange rates, and seasonality.

Operating Expenses

Operating expenses consist of research and development, sales and marketing, general and administrative, goodwill impairment and other operating expenses, net. Personnel-related costs are a significant component of the operating expenses and include salaries, benefits, payroll taxes, commissions, severance and stock-based compensation. Our employees headcount in our research and development, sales and marketing and general and administrative departments, has reduced to 1,641 as of December 31, 2025 from 2,157 as of December 31, 2024 as part of our Restructuring Plans.

Research and development expenses

Research and development expenses include personnel-related expenses such as salaries, severance, benefits, stock-based compensation and payroll taxes. Our research and development employees are engaged in the design and development of power electronics, semiconductors, software, power-line communications, networking and chemistry. Our research and development expenses also include third-party design and consulting costs, materials for testing and evaluation, ASIC development and licensing costs, depreciation and amortization expenses, and other indirect costs. We devote substantial resources to ongoing research and development programs that focus on enhancements to, and cost efficiencies in, our existing products and timely development of new products that utilize technological innovation, thereby maintaining our competitive position.

Sales and marketing expenses

Sales and marketing expenses consist primarily of personnel-related expenses such as salaries, severance, sales commissions, benefits, payroll taxes, and stock-based compensation. These expenses also include travel, fees of independent consultants, trade shows, marketing, costs associated with the operation of our sales offices and other indirect costs. We currently have a sales presence in many countries worldwide. In 2025, we began to strategically focus on our core markets and product lines to better align resources with markets and product lines that exhibit the strongest potential. As part of this strategic portfolio rationalization, we are concentrating our operations in key jurisdictions while discontinuing local activities in certain countries. We may either continue to reduce our presence in certain regions or expand our sales presence to additional regions or , globally, in the future.

General and administrative expenses

General and administrative expenses consist primarily of salaries, severance, employee benefits, and stock-based compensation related to our executives, finance, human resources, information technology, and legal organizations, travel expenses, facilities costs, fees for professional services, and registration fees related to being a publicly-traded company. Professional services consist of audit and legal costs, remuneration to board members, insurance, information technology, and other costs. General and administrative expenses also include expenses related to certain legal claims and provision for expected credit losses in the event of uncollectible account receivables balances.

52

Other operating expenses, net

Other operating expenses, net, consist primarily of impairment and abandonment of long-lived assets, impairment of assets held for sale, loss from business disposition, as well as goodwill impairment tested for impairment at least on an annual basis and certain other nonrecurring items.

Non Operating Expenses

Financial income (expense), net

Financial income (expense), net, consists primarily of interest income, interest expense, gains or losses from foreign currency fluctuations, credit loss related to loans receivable and hedging transactions.

Interest income consists of interest from our investment in available for sale marketable securities, deposits, loans to third parties and accretion of discounts related to our investment in available for sale marketable securities.

Interest expense consists of interest related to bank loans, advance payments received for performance obligations that extend for a period greater than one year, related to Accounting Standard Codification 606, “Revenue from Contracts with Customers” (ASC 606), interest related to Accounting Standard Codification 842, “Leases” (ASC 842), amortization of premium related to our investment in available for sale marketable securities, the amortization of debt issuance cost associated with our Notes due 2029 as well as the contractual interest expenses from our Notes due 2029.

Our functional currency is the U.S. dollar. With respect to certain of our subsidiaries, the functional currency is the applicable local currency. Financial income (expenses), net, also consists of gains or losses from foreign currency fluctuations, the fair value remeasurement of hedging contracts not designated as cash flow hedge and bank charges. Foreign currency fluctuations primarily consist of the effect of foreign exchange differences between the U.S. dollar and the New Israeli Shekel, the Euro, and other currencies related to our monetary assets and liabilities.

Other income (loss)

Other income (loss) consists primarily of realized and unrealized gains and losses on investments in privately-held companies and realized gains and losses on investment in available for sale marketable securities.

Income taxes

We are subject to income taxes in the countries where we operate.

In the year ended December 31, 2025, we recorded a net income tax expense of $13.4 million, which consists of a $14.2 million current income tax expense and $0.8 million of deferred tax income. In the year ended December 31, 2024, we recorded a net income tax expense of $96.1 million, which consists of a $16.9 million current income tax expense and a $79.2 million deferred tax income. Our effective tax rate for 2025 was negative 3.5%, compared to negative 5.63% for 2024.

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was signed into law, making significant changes to U.S. income tax law. These changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years 2018 onwards and created new taxes on certain foreign-sourced earnings (including tax on Global Intangible Low Taxed Income (“GILTI”) and certain related-party payments. The Tax Act also amended Section 174 of the U.S Internal Revenue Code, effective from January 1, 2022, eliminating the option to deduct research and development expenditures currently and requiring taxpayers to amortize them over five years (if incurred in the U.S.) or fifteen years (if incurred outside the U.S.).

53

Furthermore, the Tax Act required the Company to pay U.S. income taxes on accumulated foreign subsidiaries earnings not previously subject to U.S. income tax at a rate of 15.5% to the extent of foreign cash and certain other net current assets, and 8% on the remaining earnings. The total tax liability will be paid over the eight-year period provided in the Tax Act (ending 2025).

SolarEdge Technologies Ltd., our Israeli Subsidiary, is taxed under Israeli law. Income not eligible for benefits under the Investments Law is taxed at the corporate tax rate. The Israeli corporate tax rate is 23%.

Our Israeli Subsidiary elected tax year 2012 as a ”Year of Election” for “Benefited Enterprise” under the Israeli Investments Law, which provides certain benefits, including tax exemptions and reduced tax rates. Upon meeting the requirements under the Israeli Investments Law, the two-year tax exemption has ended on December 31, 2018.

The Investment Law was amended in 2005 and was further amended as of January 1, 2011 and in August 2013 (the “2011 Amendment”). The 2011 Amendment canceled the availability of the benefits granted in accordance with the provisions of the Investments Law prior to 2011 and, instead, introduced new benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (both as defined in the 2011 Amendment). Under the 2011 Amendment, income derived by Preferred Companies from Preferred Enterprise would be subject to a uniform rate of corporate tax. The tax rate applicable to such income, referred to as “Preferred Income”, would be 7.5% in areas in Israel that are designated as Development Zone A and 16% elsewhere in Israel starting in the year 2017 and thereafter. Our Israeli Subsidiary has established its own manufacturing facility in Israel, located in a Development Zone A, therefore income from manufacturing attributed to that facility is subject to a 7.5% tax rate.

In December 2016, Amendment 73 to the Investments Law (the “2017 Amendment”) was published. According to the 2017 Amendment, special tax tracks for technological enterprises have been introduced, which are subject to rules that were issued by the Israeli Ministry of Finance. A Preferred Technological Enterprise (PTE), as defined in the 2017 Amendment, that is located in the central region of Israel, will be subject to a tax at a rate of 12% on profits deriving from intellectual property, or 6% if its annual revenues exceed New Israeli Shekel 10 billion.

On June 14, 2017, the Encouragement of Capital Investments Regulations (Preferred Technological Income and Capital Gain for Technological Enterprise), 2017 (the “Regulations”) were published. The Regulations describe, inter alia, the mechanism used to determine the calculation of the benefits under the PTE regime. A company that complies with the terms under the PTE regime, may be entitled to certain tax benefits with respect to certain income generated during the company’s regular course of business and derived from the preferred intangible asset.

As of January 2019, our Israeli Subsidiary elected to implement the 2011 and 2017 Amendments starting as of tax year 2019 and as a result, under the PTE regime with respect to our business activities in Israel. Our PTE income was subject to a 12% tax rate in Israel in the years 2019-2021, and in 2022-2023 to a 6% tax rate as we surpassed 10 billion New Israeli Shekel revenues threshold. In 2024 and 2025 the Company incurred losses for tax purposes.

The Law for the Encouragement of Industry (Taxes), 1969, (the “Industry Encouragement Law”), provides certain tax benefits for an ‘Industrial Company’ as such term is defined in the Industry Encouragement Law. An Industrial Company is entitled to certain tax benefits including, inter alia, amortization over an eight-year period of the cost of purchased know-how, patents and accelerated depreciation rates on equipment and buildings. We qualify as an Industrial Company under the Law and benefit from its provisions as applicable.

Loss from equity method investments

Loss from equity method investments consists of our proportionate share of the net loss of equity method investments.

54

Results of Operations

The following tables set forth our consolidated statements of income for the years ended December 31, 2025 and 2024. We have derived this data from our consolidated financial statements included elsewhere in this Annual Report. This information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report. The results of historical periods are not necessarily indicative of the results of operations for any future period.

Comparison of year ended December 31, 2025 and year ended December 31, 2024

Year ended December 31,

2024 to 2025

2025

2024

Change

(In thousands)

Revenues

$

1,184,444

$

901,456

$

282,988

31.4

%

Cost of revenues

988,163

1,778,660

(790,497

)

(44.4

)%

Gross profit (loss)

196,281

(877,204

)

1,073,485

(122.4

)%

Operating expenses:

Research and development

221,255

277,237

(55,982

)

(20.2

)%

Sales and marketing

117,332

146,865

(29,533

)

(20.1

)%

General and administrative

101,035

147,455

(46,420

)

(31.5

)%

Other operating expenses, net

58,338

259,527

(201,189

)

(77.5

)%

Total operating expenses

497,960

831,084

(333,124

)

(40.1

)%

Operating income (loss)

(301,679

)

(1,708,288

)

1,406,609

(82.3

)%

Financial expense, net

(71,999

)

(14,570

)

(57,429

)

394.2

%

Other income (loss), net

(17,428

)

14,547

(31,975

)

(219.8

)%

Loss before income taxes

(391,106

)

(1,708,311

)

1,317,205

(77.1

)%

Income taxes

(13,382

)

(96,150

)

82,768

(86.1

)%

Net loss from equity method investments

(960

)

(1,896

)

936

(49.4

)%

Net loss

$

(405,448

)

$

(1,806,357

)

$

1,400,909

(77.6

)%

Revenues

Year ended December 31,

2024 to 2025

2025

2024

Change

(In thousands)

Revenues                    

$

1,184,444

$

901,456

$

282,988

31.4

%

Revenues increased by $283.0 million, or 31.4%, in the year ended December 31, 2025, as compared to the year ended December 31, 2024, primarily due to (i) an increase of $261.1 million related to an increase in the number of inverters and power optimizers sold; (ii) an increase of $94.9 million related to the number of batteries sold, mainly in Europe and the U.S; (iii) a decrease of $33.5 million in revenues due to the discontinuation of our Energy Storage Business; and (iv) a decrease of $30.4 million in the amount of ancillary solar products sold.

Revenues from outside of the U.S. comprised 39.4% of our revenues in the year ended December 31, 2025 as compared to 57.9% in the year ended December 31, 2024.

The number of power optimizers recognized as revenues increased by approximately 3.9 million units, or 59.1%, from approximately 6.6 million units in the year ended December 31, 2024, to approximately 10.6 million units in the year ended December 31, 2025. The number of inverters recognized as revenues, increased by approximately 103.9 thousand units, or 42.3%, from approximately 245.7 thousand units in the year ended December 31, 2024 to approximately 349.6 thousand units in the year ended December 31, 2025. The megawatt hours of batteries recognized as revenues increased by approximately 341.2 megawatts hour, or 61.3% from approximately 556.2 megawatts in the year ended December 31, 2024 to approximately 897.4 megawatts in the year ended December 31, 2025, as a result of increase in demand.

55

Cost of Revenues and Gross Profit (loss)

Year ended December 31,

2024 to 2025

2025

2024

Change

(In thousands)

Cost of revenues                    

$

988,163

$

1,778,660

$

(790,497

)

(44.4

)%

Gross profit (loss)                    

$

196,281

$

(877,204

)

$

1,073,485

(122.4

)%

Cost of revenues decreased by $790.5 million, or 44.4%, in the year ended December 31, 2025 as compared to the year ended December 31, 2024, primarily due to:

•

a decrease of $757.6 million in inventory costs, which is mainly attributed to inventory write-down;

•

a decrease of $36.0 million in warranty expenses and warranty accruals,  associated primarily with a lower cost of materials and changes in estimates;

•

a decrease in personnel-related costs of $10.1 million, resulting from our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics.

These were partially offset by an increase of $26.3 million, in the direct cost of revenues sold associated primarily with an increase in the volume of products sold, net, of an increase in AMPTC recognized; Excluding such AMPTC incentives would have caused us to transition into a gross loss.

Gross profit as a percentage of revenue increased from gross loss of 97.3% for the year ended December 31, 2024 to a gross profit of 16.6% in the year ended December 31, 2025 primarily due to:

•

a decrease of inventory write-down accruals resulting in higher gross margin of approximately 101%; and

•

lower absolute fixed and other production related costs, which were divided this year by higher revenues, resulting in higher gross margin of approximately 12.8%.

Excluding the AMPTC incentives, would have caused our gross profit as a percentage of revenue, to transition from a gross profit to a gross loss.

Operating Expenses:

Research and Development

Year ended December 31,

2024 to 2025

2025

2024

Change

(In thousands)

Research and development          

$

221,255

$

277,237

$

(55,982

)

(20.2

)%

Research and development costs decreased by $56.0 million or 20.2%, in the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to:

•

a decrease of $40.9 million in personnel-related costs, resulting from our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics;

•

a decrease  in depreciation and amortization of $5.5 million;

•

a decrease  in material consumption in an amount of $5.4 million; and

•

a decrease in expenses related to consultants and sub-contractors in the amount of $3.3 million:

56

Sales and Marketing

Year ended December 31,

2024 to 2025

2025

2024

Change

(In thousands)

Sales and marketing          

$

117,332

$

146,865

$

(29,533

)

(20.1

)%

Sales and marketing expenses decreased by $29.5 million, or 20.1%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to:

•

a decrease of $23.1 million in personnel-related costs, resulting from our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics;

•

a decrease of $1.7 million in other marketing expenses; and

•

a decrease in depreciation and amortization of $1.6 million.

General and Administrative

Year ended December 31,

2024 to 2025

2025

2024

Change

(In thousands)

General and administrative          

$

101,035

$

147,455

$

(46,420

)

(31.5

)%

General and administrative expenses decreased by $46.4 million, or 31.5%, in the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to:

•

a net reversal of allowance for doubtful debt related to the collection of amounts previously reserved in the amount of $20.5 million in the year ended December 31, 2025, compared to an expense of $28.2 million, in the year ended December 31, 2024; and

•

a decrease of $17.1 million in personnel-related costs, resulting from our workforce reduction plan designed to reduce operating expenses and align our cost structure to current market dynamics.

These were partially offset by:

•

an increase of $12.8 million related to potential legal claims; and

•

an increase of $8.1 million, primarily due to a payment for postponing the commencement of our campus lease agreement.

57

Other operating expenses, net

Year ended December 31,

2024 to 2025

2025

2024

Change

(In thousands)

Other operating expenses, net          

58,338

259,527

$

(201,189

)

(77.5

)%

Other operating expenses, net, decreased by $201.2 million, or 77.5% in the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to:

•

a decrease of $219.0 million in losses related to the impairment and abandonment of property, plant and equipment;

•

a decrease of $22.4 million in losses related to the impairment of intangible assets.

These were partially offset by an increase of $43.3 million related to impairment of held for sale assets.

  Financial income (expense), net

Year ended December 31,

2024 to 2025

2025

2024

Change

(In thousands)

Financial income (expense), net          

$

(71,999

)

$

(14,570

)

$

(57,429

)

394.2

%

Financial expenses, net, increased by $57.4 million, or 394.2% in the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to:

•

an increase of $56.6 million in fluctuations in foreign exchange rates, which was primarily driven by a reclassification from accumulated other comprehensive loss to financial income (expense), resulting from the substantial completion of the liquidation of a certain foreign subsidiary.

•

a decrease of $17.9 million in interest income related to our marketable securities investments and loans receivable; and

•

an increase of $5.3 million in interest expenses mainly related to our Notes 2029 (as defined below).

These were partially offset by a reversal of credit loss related to loans receivable in the amount of $7.9 million in the year ended December 31, 2025 compared to a credit loss provision in the amount of $17.5 million in the year ended December 31, 2024.

 Other income (loss), net

Year ended December 31,

2024 to 2025

2025

2024

Change

(In thousands)

Other income (loss), net          

$

(17,428

)

$

14,547

$

(31,975

)

(219.8

)%

Other loss, net was $17.4 million for the year ended December 31, 2025 compared to other income, net of $14.5 million in the year ended December 31, 2024, primarily due to:

•

a decrease in income of $15.5 million in gain from the repurchase of the Notes 2025 (as defined below) recognized in prior year;

•

an increase in expenses of $16.6 million as a result of impairment of investment in privately held company; and

•

a decrease in income of $3.0 million in realized gain from marketable securities;

These were partially offset by $4.0 million income from sale of an investment in a privately held company.

58

Income taxes

Year ended December 31,

2024 to 2025

2025

2024

Change

(In thousands)

Income taxes          

$

(13,382

)

$

(96,150

)

$

82,768

(86.1

)%

Income taxes decreased by $82.8 million, or 86.1%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The significantly higher taxes in 2024 is primarily attributable to the valuation allowance we recorded in the year ended December 31, 2024 against our deferred tax assets for losses and other temporary differences of the company and its subsidiaries.

Loss from equity method investments

Year ended December 31,

2024 to 2025

2025

2024

Change

(In thousands)

Net loss from equity method investments

$

(960

)

$

(1,896

)

$

936

(49.4

)%

Net loss from equity method investments decreased by $0.9 million, or 49.4% for the year ended December 31, 2025 as compared to the year ended December 31, 2024.

Net loss

Year ended December 31,

2024 to 2025

2025

2024

Change

(In thousands)

Net loss          

$

(405,448

)

$

(1,806,357

)

$

1,400,909

(77.6

)%

As a result of the factors discussed above, net loss decreased by $1,400.9 million,or 77.6%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024.

Liquidity and Capital Resources

The following table shows our cash flows from operating activities, investing activities, and financing activities for the stated periods:

Year ended December 31,

2025

2024

(In thousands)

Net cash provided by (used in) operating activities

$

104,261

$

(313,319

)

Net cash provided by investing activities

379,882

416,286

Net cash used in financing activities          

(348,890

)

(20,129

)

Increase in cash, cash equivalents and restricted cash

$

135,253

$

82,838

As of December 31, 2025, our cash and cash equivalents were $455.1 million. This amount does not include $84.8 million restricted cash, $38.1 million invested in available for sale marketable securities, $2.7 million invested in deposits, and $0.5 million invested in restricted deposits. Our principal uses of cash are for funding our operations, capital expenditures, other working capital requirements, other investments, and the repayment of our Notes 2029. As of December 31, 2025, we have open commitments for capital expenditures in the amount of approximately $23.5 million. These commitments reflect purchases of automated assembly lines and other machinery related to our manufacturing operations. We also have purchase obligations in the amount of $513.2 million related to raw materials and commitments for the future manufacturing of our products.

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As of December 31, 2025, we had a non-cancelable lease commitment for the initial term of a lease of approximately $274,237 for new offices in Israel, which has not yet commenced. The lease is expected to commence during the next twelve months. The initial term of the lease agreement is 15 years commencing on the transfer of possession, and with an option to extend the lease for additional periods of up to 10 years, subject to the conditions of the lease agreement. In November 2025, we amended our lease agreement with the developer for our new campus to reduce the leased area. In connection with the amendment, we agreed to make a lease modification payment of $28,828, recorded under other long-term assets, which is accounted for as prepaid lease consideration under ASC 842, of which $3,143 had been paid as of December 31, 2025.

Beginning in the fourth quarter of 2024, we started to sell AMPTCs to third parties pursuant to tax credit agreements. We plan to pursue additional tax credit sales in the future. Our inability to complete sales or delays in doing so may affect the timing of our cash inflows. Failing to sell AMPTCs could result in delays between 18-24 months in the realization of the credits’ value, and would have a negative effect on our liquidity.

We believe that cash provided by operation activities, as well as our cash and cash equivalents, restricted cash and available for sale marketable securities, will be sufficient to meet our anticipated cash needs for at least the next 12 months as well as in the longer term, including the self-funding of our capital expenditure, operational commitments and the redemption of our debt.

Operating Activities

Operating cash flows consist primarily of net loss adjusted for certain non-cash items and changes in assets and liabilities. Cash provided by operating activities was $104.3 million in the year ended December 31, 2025 as compared to cash used in operating activities of $313.3 million in the year ended December 31, 2024. This was mainly result of a decrease in net loss adjusted for certain non-cash items as well as a decrease in operating working capital requirements.

Investing Activities

Investing cash flows consist primarily of capital expenditures, investment in, sales and maturities of available for sale marketable securities, investment and withdrawal of bank deposits and restricted bank deposits, cash used for acquisitions and disbursements and receipts from collections of loans made by the Company. Cash provided by investing activities decreased by $36.4 million in the year ended December 31, 2025 as compared to the year ended December 31, 2024, primarily driven by an increase of $217.7 million in purchases of available-for-sale debt investments and a decrease of $44.3 million in proceeds provided by sales and maturities of available-for-sale debt investments. These were partially offset by a decrease of $84.7 million in purchase of property plant and equipment, a decrease of $37.5 million in disbursements of loans made by the Company, an increase of $35.8 million in sale of property plant and equipment, a decrease of $25.4 million in the purchase of privately-held companies, an increase of $21.4 million in proceeds from loans receivables, a decrease of $10.4 million in cash used for a business combination, and a decrease of $10.0 million in purchase of intangible assets.

Financing Activities

Financing cash flows consist primarily of repurchases of our common stock, under our share repurchase program, which expired on December 31, 2024, the issuance, partial repurchase and redemption of the convertible senior Notes, and our employee equity incentive plans. Cash used in financing activities for the year ended December 31, 2025 increased by $328.8 million, compared to cash used in financing activities in the year ended December 31, 2024, primarily due to an increase of $342.3 million in cash used for the repayment of our Notes 2025 and a decrease of $329.2 million in cash provided by the issuance of the Notes 2029. These were partially offset by a decrease of $262.8 million in cash used for the repurchase of our Notes 2025, a decrease of $50.2 million in cash used in share repurchases, and a decrease of $28.3 million in cash used to purchase the capped call transactions.

Convertible Senior Notes

On September 25, 2020, we issued $632.5 million aggregate principal amount of our convertible senior notes (“Notes 2025”) in a transaction exempt from registration pursuant to Rule 144A and Regulation S under the Securities Act. Net proceeds from the offering, after underwriters’ discount and commissions and offering expenses, was $617.9 million. In March 2025 the Company repurchased $5,250 principal amount of its Notes 2025. The Company recorded a net gain of $146, under other income, net, from the repurchase. The Company settled all of its remaining Notes 2025 on September 15, 2025. As part of the settlement, the Company paid $342,250 in cash towards principal amount of the Notes 2025 and no shares were issued in connection with the settlement as the conversion value was less than the principal amount of the Notes 2025. Following the settlement, there were no Notes 2025 outstanding as of September 30, 2025.

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On June 28, 2024, we sold an aggregate principal amount of $300 million of 2.25% convertible senior notes due 2029 in a transaction exempt from registration pursuant to Rule 144A and Regulation S under the Securities Act. The net proceeds from the offering of the Notes 2029 were approximately $293.2 million, after deducting fees and estimated expenses. Separately, we have entered into capped call transactions. We used approximately $25.2 million of the net proceeds from this offering to pay the cost of the capped call transactions and approximately $267.9 million of the net proceeds from this offering to repurchase $285.0 million principal amount of its outstanding 0.000% Notes 2025. As a result of the partial repurchase of the Notes 2025, we recognized a gain of $15.5 million which was recorded under other income. We intend to use the remainder of the net proceeds from the offering for general corporate purposes.

On July 8, 2024, we sold an aggregate principal amount of $37 million of our convertible senior notes (“Notes 2029”). The Notes 2029 were sold pursuant to the Initial Purchasers’ (as defined in Note 18) exercise of the option granted by the Company to the Initial Purchasers to purchase additional Notes 2029, as described  in Note 18, “Convertible Senior Notes”.

Share Repurchases

On November 1, 2023, we announced the approval by the Board of Directors of a share repurchase program which authorizes the repurchase of up to $300 million of the Company’s common stock.  The share repurchase program expired on December 31, 2024.

Critical Accounting Policies and Significant Management Estimates

We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the U.S. (“GAAP”). The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain (see Note 2 to our annual financial statements for more information).

Revenue Recognition

We generate revenues from the sale of DC optimized inverter systems for PV installations which include our power optimizers, inverters, batteries, cloud-based monitoring platform as well as other related ancillary products. Our worldwide customer base includes large solar installers, distributors, EPCs, utility companies and other customers. Our products are fully functional at the time of shipment to the customer and do not require production, modification, or customization. We recognize revenue under the core principle that transfer of control to the customers should be depicted in an amount reflecting the consideration we expect to receive in revenue. In order to achieve that core principle, we apply the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. Provisions for rebates, sales incentives and discounts to customers are accounted for as reductions in revenue in the same period that the related sales are recorded.

We generally sell our products to our customers pursuant to a customer’s standard purchase order and our customary terms and conditions. We generally do not offer rights to return our products other than for normal warranty conditions, and as such, revenue is recognized based on the transfer of control, which includes but is not limited to, the agreed International Commercial terms. We evaluate the creditworthiness of our customers to determine that appropriate credit limits are established prior to the acceptance and shipment of an order.

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 We provide our full web-based monitoring platform for our solar products free of charge and revenues associated with the service since that date are being recognized ratably over 25 years. In the absence of third party comparable pricing for such service, management determines the revenue levels of this service based on the costs associated with providing the service plus appropriate margins that reflect management’s best estimate of the selling price. These revenues are minimal and we do not expect this to become a significant source of revenue in the near future.

We recognize financing component expenses in our consolidated statement of income (loss) in relation to advance payments for performance obligations that extend for a period greater than one year. These financing component expenses are reflected in our deferred revenues balance. Such performance obligations are those that include a financing component, specifically: (i) warranty extension services, (ii) cloud-based monitoring, and (iii) communication services.

See Notes 2v and 15 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to revenue recognition.

Product Warranty

We provide a standard limited product warranty for our solar products against defects in materials and workmanship under normal use and service conditions. Our standard limited product warranty period is 25 years for our power optimizers, 12 year limited warranty for the majority of our inverters, and a 10-year limited warranty for our batteries In addition, customers can purchase extended warranties for inverters that extend the warranty period to up to 25 years.

Our products are designed to meet the warranty periods and our reliability procedures cover component selection, design, accelerated life cycle tests, and end-of-manufacturing line testing. However, since our history in selling power optimizers is shorter than the warranty period, the calculation of warranty provisions is inherently uncertain.

We accrue for estimated warranty costs at the time of sale based on anticipated warranty claims and actual historical warranty claims experience. Warranty provisions, computed on a per-unit sold basis, are based on our best estimate of such costs and are included in our cost of revenues. The warranty obligation is determined based on actual and predicted failure rates of the products, cost of replacement and service and delivery costs incurred to correct a product failure. Our warranty obligation requires management to make assumptions regarding estimated failure rates and replacement costs.

In order to predict the failure rate of each of our products, we have established a reliability model based on the estimated mean time between failures (“MTBF”). The MTBF represents the average elapsed time predicted for each product unit between failures during operation. Applying the MTBF failure rate over our install base for each product type and generation allows us to predict the number of failed units over the warranty period and estimates the costs associated with the product warranty. Predicted failure rates are updated periodically based on data returned from the field and new product versions, as are replacement costs which are updated to reflect changes in our actual production costs for our products, subcontractors’ labor costs, and actual logistics costs.

Since the MTBF model does not take into account additional non-systematic failures, such as failures caused by workmanship or manufacturing or design-related issues, and since warranty claims are at times opened for cases in which the error has been triggered by an improper installation, we have developed a supplemental model to predict such cases. This model, which is based on actual root cause analysis of returned products, identification of the causes of claims and time until each identified problem is revealed, allows us to better predict actual warranty expenses and is updated periodically based on our experience, taking into account the installed base of approximately 142.5 million power optimizers and approximately 6.2 million inverters as of December 31, 2025.

If actual warranty costs differ significantly from these estimates, adjustments may be required in the future, which could adversely affect our gross profit and results of operations. Warranty obligations are classified as short-term and long-term warranty obligations, based on the period in which the warranty is expected to be claimed. The warranty provision (short and long-term) was $357.9 million and $432.4 million, for the years ended December 31, 2025 and December 31, 2024, respectively.

See Notes 2x and 14 "Warranty obligations" to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to product warranty.

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Inventory Valuation

Our inventories comprise sellable finished goods, raw materials bought for our own manufacturing facilities or on behalf of our contract manufacturers, and faulty units returned under our warranty policy.

Sellable finished goods and raw material inventories are valued at the lower of cost or net realizable value, based on the moving average cost method. Certain factors could affect the realizable value of our inventories, including market and economic conditions, technological changes, existing product changes (mainly due to cost reduction activities) and new product introductions. We consider historic usage, expected demand, anticipated sales price, the effect of new product introductions, product obsolescence, and other factors when evaluating the net realizable value of inventories. Inventory write-downs are equal to the difference between the cost of inventories and their estimated net realizable value. Inventory write-downs are recorded as cost of revenues in the accompanying statements of income and were $17.8 million and $738.8 million, for the years ended December 31, 2025 and December 31, 2024, respectively.

Faulty products returned under our warranty policy are often refurbished and used as replacement units. Such products are written off upon receipt.

We do not believe that there is a reasonable likelihood that there will be a material change in future estimates or assumptions that we use to record inventory at the lower of cost or net realizable value. However, if estimates regarding customer demand are inaccurate or changes in technology affect demand for certain products in an unforeseen manner, we may be exposed to losses that could be material.

See Notes 2k and Note 5 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to inventory valuation.

Business Combination

We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair value. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require our management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology and other intangible assets, their useful lives and discount rates. Our management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

See Note 2o to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to business combination.

Intangible and other long-lived assets

We evaluate the recoverability of finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value.

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The more significant estimates and assumptions inherent in the estimate of the fair value of finite-lived intangible assets include (i) assumptions associated with forecasting product profitability, including sales and cost to sell projections, (ii) tax rates which seek to incorporate the geographic diversity of the projected cash flows, (iii) expected impact of competitive, legal and/or regulatory forces on the projections and the impact of technological risk, R&D expenditure for ongoing support of product rights, and (iv) estimated useful lives.

During the year ended December 31, 2025, we recorded an impairment charge of $49.1 million, related to tangible and intangible assets.

Acquired identifiable finite-lived intangible assets are amortized on a straight-line basis or accelerated method over the estimated useful lives of the assets. We believe the basis of amortization approximates the pattern in which the assets are utilized, over their estimated useful lives. We routinely review the remaining estimated useful lives of finite-lived intangible assets. In case we reduce the estimated useful life assumption for any asset, the remaining unamortized balance is amortized or depreciated over the revised estimated useful life.

See Notes 2.p and 9 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to intangible assets.

Goodwill

Goodwill reflects the excess of the consideration transferred, including the fair value of any contingent consideration and any non-controlling interest in the acquiree, over the assigned fair values of the identifiable net assets acquired. Goodwill is not amortized, and is assigned to reporting units and tested for impairment at least on an annual basis.

The goodwill impairment test is performed according to the following principles:

(1)

An initial qualitative assessment may be performed to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

(2)

If the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying mount, a quantitative fair value test is performed. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized.

We estimate the fair values of all reporting units using a discounted cash flow model which utilizes Level 3 unobservable inputs. Key estimates include the revenue growth rates taking into consideration industry and market conditions, terminal growth rate and the discount rate. The discount rate used is based on the WACC, adjusted for the relevant risk associated with country-specific and business-specific characteristics. The carrying value of each reporting unit is determined by assigning the assets and liabilities, including the existing goodwill, to those reporting units. Starting January 1, 2025, we operate as one reporting unit.

We complete the required annual testing of goodwill impairment for the reporting units at least on an annual basis and determine whether goodwill should be impaired. During the year ended December 31, 2025, we did not record an impairment charges.

See Notes 2.r and 10 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to goodwill.

Government grants

Government grants are recognized when there is reasonable assurance that: (1) we will comply with the relevant conditions and (2) the grant disbursement will be received.

In August 2022, the U.S. government enacted the IRA, which includes several incentives intended to promote clean energy, battery and energy storage, and other solar products, and is impacting our business and operations. As part of such incentives, the IRA, among other things, extended the investment tax credit ITC through 2034 and was therefore expected to increase the demand for solar products. The IRA further incentivizes residential and commercial solar customers and developers by providing significant tax credits for qualifying energy projects. In July 2025, the U.S. government enacted the H.R.1 that shortened the ITC credits. The IRA further provides AMPTCs for U.S. manufacturing of eligible components (under IRC §45X), including PV inverters and DC-optimized systems. The duration of this credit was not impacted by H.R.1. H.R.1 introduced new FEOC requirements for Sections 45X, 45Y, and 48E of the Code. These restrictions require threshold percentages of non FEOC components that increase over time, beginning January 1, 2026. Currently, SolarEdge manufactures components that help our customers meet their non-FEOC percentage requirements.  If the U.S. Treasury were to release new rules or guidance that impact our ability to provide components with non-FEOC percentages towards their total requirement, our customers’ eligibility to qualify for certain tax credits could be impaired, which may adversely affect our revenue, gross margins, business operations and competitive position. In addition, as of January 1, 2026, in order to receive the 45X Credits, manufacturers must also reach a required percentage of non-FEOC content in their manufactured components. The Company has been manufacturing eligible products in the U.S. since the fourth quarter of 2023. In addition to using the tax credits to offset tax due to the U.S. government, the IRA allows taxpayers to elect to have AMPTCs refunded in cash (“Direct Pay”) or sell these credits to a third party. The Direct Pay option is available as a one-time election, in any taxable year after December 31, 2022, for a facility in which eligible components are produced, and is applicable for five years. In 2025 the Company sold a significant part of the AMPTCs it generated from the US production of eligible components.

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Refundable and transferable tax credits are similar in essence to government grants. This is because the taxpayer can realize the benefit regardless of whether they owe income tax or not in the relevant years. Therefore, these amounts are not considered income taxes and fall outside the scope of Topic 740. Instead, they are treated as government grants.

The Company recognizes AMPTCs as a reduction in the cost of revenues in the statement of income (loss). The Company does this systematically over time as it recognizes the related expenses. The AMPTCs are also reflected in the consolidated balance sheet, according to the way the Company expects to utilize them: as a reduction of income tax payable within accrued expenses and other liabilities, as a tax prepayment, or, if AMPTCs are to be sold, within prepayment and other assets.

Income taxes

We account for income taxes in accordance with ASC 740, “Income Taxes.” ASC 740, which prescribes the use of the liability method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax basis of assets and liabilities, and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse.

We account for uncertain tax positions in accordance with ASC 740-10 two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% (cumulative probability) likely to be realized upon ultimate settlement.

See Note 2.af and 25 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to income taxes.

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