U.S. dollars in thousands (except share and per share data)
The accompanying notes are an integral part of the condensed consolidated financial statements.
SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
U.S. dollars in thousands (except share and per share data)
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
Trade payables, net
|
|
$
|
81,610
|
|
|
$
|
69,488
|
|
Employees and payroll accruals
|
|
|
23,510
|
|
|
|
22,544
|
|
Warranty obligations
|
|
|
18,964
|
|
|
|
14,785
|
|
Deferred revenues
|
|
|
3,407
|
|
|
|
2,559
|
|
Accrued expenses and other accounts payable
|
|
|
26,480
|
|
|
|
20,378
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
153,971
|
|
|
|
129,754
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
Warranty obligations
|
|
|
78,327
|
|
|
|
64,026
|
|
Deferred revenues
|
|
|
47,595
|
|
|
|
31,453
|
|
Lease incentive obligation
|
|
|
1,616
|
|
|
|
1,765
|
|
Non-current tax liabilities
|
|
|
16,830
|
|
|
|
16,840
|
|
|
|
|
|
|
|
|
|
|
Total
long-term liabilities
|
|
|
144,368
|
|
|
|
114,084
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock of $0.0001 par value - Authorized: 125,000,000 shares as of June 30, 2018 (unaudited) and December 31, 2017; issued and outstanding: 45,498,414 and 43,812,601 shares as of June 30, 2018 (unaudited) and December 31, 2017, respectively
|
|
|
5
|
|
|
|
4
|
|
Additional paid-in capital
|
|
|
353,470
|
|
|
|
331,902
|
|
Accumulated other comprehensive loss
|
|
|
(1,138
|
)
|
|
|
(611
|
)
|
Retained earnings
|
|
|
132,554
|
|
|
|
66,172
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
484,891
|
|
|
|
397,467
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
783,230
|
|
|
$
|
641,305
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (Unaudited)
U.S. dollars in thousands (except share and per share data)
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
227,118
|
|
|
$
|
136,099
|
|
|
$
|
436,989
|
|
|
$
|
251,153
|
|
Cost of revenues
|
|
|
145,172
|
|
|
|
89,033
|
|
|
|
275,446
|
|
|
|
165,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
81,946
|
|
|
|
47,066
|
|
|
|
161,543
|
|
|
|
85,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
19,551
|
|
|
|
12,725
|
|
|
|
37,426
|
|
|
|
24,183
|
|
Sales and marketing
|
|
|
15,954
|
|
|
|
11,961
|
|
|
|
32,159
|
|
|
|
22,736
|
|
General and administrative
|
|
|
5,776
|
|
|
|
3,265
|
|
|
|
10,465
|
|
|
|
7,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
41,281
|
|
|
|
27,951
|
|
|
|
80,050
|
|
|
|
54,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
40,665
|
|
|
|
19,115
|
|
|
|
81,493
|
|
|
|
31,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income (expenses), net
|
|
|
(2,480
|
)
|
|
|
3,595
|
|
|
|
(1,896
|
)
|
|
|
5,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
64
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes on income
|
|
|
38,185
|
|
|
|
22,710
|
|
|
|
79,533
|
|
|
|
36,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes on income (tax benefit)
|
|
|
3,617
|
|
|
|
186
|
|
|
|
9,279
|
|
|
|
(575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
34,568
|
|
|
$
|
22,524
|
|
|
$
|
70,254
|
|
|
$
|
36,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net basic earnings per share of common stock
|
|
$
|
0.76
|
|
|
$
|
0.54
|
|
|
$
|
1.57
|
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net diluted earnings per share of common stock
|
|
$
|
0.72
|
|
|
$
|
0.50
|
|
|
$
|
1.46
|
|
|
$
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in computing net basic earnings per share of common stock
|
|
|
45,216,253
|
|
|
|
41,700,399
|
|
|
|
44,726,382
|
|
|
|
41,525,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in computing net diluted earnings per share of common stock
|
|
|
48,291,280
|
|
|
|
44,831,590
|
|
|
|
47,984,817
|
|
|
|
44,335,521
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (Unaudited)
U.S. dollars in thousands (except share and per share data)
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
34,568
|
|
|
$
|
22,524
|
|
|
$
|
70,254
|
|
|
$
|
36,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in unrealized gains (losses) net of tax expenses (benefit)
|
|
|
(6
|
)
|
|
|
5
|
|
|
|
(516
|
)
|
|
|
33
|
|
Net change
|
|
|
(6
|
)
|
|
|
5
|
|
|
|
(516
|
)
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in unrealized gains, net of tax expense
|
|
|
-
|
|
|
|
66
|
|
|
|
-
|
|
|
|
975
|
|
Reclassification adjustments for loses, net of tax expense included in net income
|
|
|
-
|
|
|
|
(599
|
)
|
|
|
-
|
|
|
|
(994
|
)
|
Net change
|
|
|
-
|
|
|
|
(533
|
)
|
|
|
-
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments, net
|
|
|
3
|
|
|
|
186
|
|
|
|
(11
|
)
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss
|
|
|
(3
|
)
|
|
|
(342
|
)
|
|
|
(527
|
)
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
34,565
|
|
|
$
|
22,182
|
|
|
$
|
69,727
|
|
|
$
|
36,656
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited)
U.S. dollars in thousands
|
|
Six months ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
Unaudited
|
|
Cash flows provided by operating activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
70,254
|
|
|
$
|
36,699
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization of property, equipment and intangible assets
|
|
|
5,053
|
|
|
|
3,130
|
|
Amortization of premiums on available-for-sale marketable securities
|
|
|
1,014
|
|
|
|
791
|
|
Stock-based compensation
|
|
|
13,977
|
|
|
|
7,646
|
|
Deferred tax assets, net
|
|
|
(3,018
|
)
|
|
|
(2,105
|
)
|
Loss on disposals of fixed assets
|
|
|
64
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
(18,952
|
)
|
|
|
11,153
|
|
Prepaid expenses and other accounts receivable
|
|
|
(2,135
|
)
|
|
|
(12,675
|
)
|
Trade receivables, net
|
|
|
(9,203
|
)
|
|
|
(8,399
|
)
|
Trade payables, net
|
|
|
12,143
|
|
|
|
2,007
|
|
Employees and payroll accruals
|
|
|
1,028
|
|
|
|
1,206
|
|
Warranty obligations
|
|
|
18,479
|
|
|
|
6,965
|
|
Deferred revenues
|
|
|
13,120
|
|
|
|
6,935
|
|
Accrued expenses and other accounts payable
|
|
|
6,194
|
|
|
|
3,958
|
|
Lease incentive obligation
|
|
|
(148
|
)
|
|
|
(148
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
107,870
|
|
|
|
57,163
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(21,385
|
)
|
|
|
(7,611
|
)
|
Investment in available-for-sale marketable securities
|
|
|
(89,389
|
)
|
|
|
(74,106
|
)
|
Maturities of available-for-sale marketable securities
|
|
|
46,825
|
|
|
|
31,674
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(63,949
|
)
|
|
|
(50,043
|
)
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
SOLAREDGE TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Cont.)
U.S. dollars in thousands
|
|
Six months ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
Unaudited
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Proceeds from issuance of shares under stock purchase plan and upon exercise of stock-based awards
|
|
|
7,591
|
|
|
|
2,123
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
7,591
|
|
|
|
2,123
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash, cash equivalents and restricted cash
|
|
|
51,512
|
|
|
|
9,243
|
|
Cash, cash equivalents and restricted cash at the beginning of the period
|
|
|
164,679
|
|
|
|
105,580
|
|
Effect of exchange rate differences on cash, cash equivalents and restricted cash
|
|
|
398
|
|
|
|
(274
|
)
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at the end of the period
|
|
$
|
216,589
|
|
|
$
|
114,549
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
|
a.
|
SolarEdge Technologies, Inc. (the “Company”) and its subsidiaries design, develop, and sell an intelligent inverter solution designed to maximize power generation at the individual photovoltaic (“PV”) module level while lowering the cost of energy produced by the solar PV system and providing comprehensive and advanced safety features
.
The Company’s products consist mainly of (i) power optimizers designed to maximize energy throughput from each and every module through constant tracking of Maximum Power Point individually per module, (ii) inverters which invert direct current (DC) from the PV module to alternating current (AC) and (iii) a related cloud-based monitoring platform, that collects and processes information from the power optimizers and inverters of a solar PV system to enable customers and system owners as applicable, to monitor and manage the solar PV systems. In addition, the Company has a storage solution that is used to increase energy independence and maximize self-consumption for homeowners by utilizing a battery that is sold separately by third party manufacturers, to store and supply power as needed (the “StorEdge solution”). The StorEdge solution is designed to provide smart energy functions such as maximizing self-consumption, Time-of-Use programming for desired hours of the day, and home energy backup solutions.
|
The Company and its subsidiaries sell their products worldwide directly to large solar installers and engineering, procurement and construction firms (“EPCs”), as well as through large distributors and electrical equipment wholesalers to smaller solar installers.
|
b.
|
New accounting pronouncements not yet effective:
|
In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (Topic 842) "Leases." Topic 842 supersedes the lease requirements in Accounting Standards Codification (ASC) Topic 840, "Leases." Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures. Leases will continue to be classified as either finance or operating. As currently issued, entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. There are additional optional practical expedients that an entity may elect to apply. The Company is in the process of implementing changes to its systems and processes in conjunction with the review of lease agreements. The Company will adopt Topic 842 effective January 1, 2019 and expect to elect certain available transitional practical expedients.
The Company is evaluating the potential impact of this pronouncement.
In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". ASU 2017-04 was issued to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The amendments in ASU 2017-04 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019.
The Company is evaluating the potential impact of this pronouncement.
In June 2018, the FASB issued ASU 2018-07, "Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting". ASU 2018-07 was issued to simplify several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards.
The Company will adopt the new standard effective July 1, 2018, and does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
|
c.
|
Recently issued and adopted pronouncements:
|
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flow arising from contracts with customers. The guidance permits two methods of modification: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company adopted the new standard, effective January 1, 2018, using the modified retrospective method applied to those contracts which were not substantially completed as of the adoption date. See “Revenue Recognition” below for further details
.
In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted ASU 2016-18 during the first quarter of 2018. The adoption of this new guidance had no material impact on the Company’s condensed consolidated balance sheets, statements of income and cash flows.
Revenue Recognition
:
The Company adopted Accounting Standards Codification 606, Revenue from Contracts with Customers (ASC 606), effective on January 1, 2018. As a result of this adoption, the Company revised its accounting policy for revenue recognition as detailed below
.
The Company and its subsidiaries generate their revenues mainly from the sale of power optimizers, inverters and cloud-based monitoring services to distributors, installers and PV module manufacturers
.
The Company recognizes revenue under the core principle that transfer of control to the Company’s customers should be depicted in an amount reflecting the consideration the Company expects to receive in revenue. In order to achieve that core principle, the Company applies 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
.
|
(1)
|
Identify the contract with a customer
|
A contract is an agreement between two or more parties that creates enforceable rights and obligations. In evaluating the contract, the Company analyzes the customer’s intent and ability to pay the amount of promised consideration (credit risk) and considers the probability of collecting substantially all of the consideration.
The Company determines whether collectability is reasonably assured on a customer-by-customer basis pursuant to its credit review policy. The Company typically sells to customers with whom it has a long-term business relationship and a history of successful collection. For a new customer, or when an existing customer substantially
expands its commitments, the Company evaluates the customer’s financial position, the number of years the customer has been in business, the history of collection with the customer, and the Customer’s ability to pay, and typically assigns a credit limit based on that review.
|
(2)
|
Identify the performance obligations in the contract
|
At a contract’s inception, the Company assesses the goods or services promised in a contract with a customer and identifies the performance obligations.
The main performance obligations are the provisions of the following:
Power optimizers; Inverters; Storage solution; Cloud based monitoring services; Extended warranty services and Communication services.
|
(3)
|
Determine the transaction price
|
The transaction price is the amount of consideration to which the Company is entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.
Generally, the Company does not provide price protection, stock rotation, and/or right of return. The Company determines the transaction price for all satisfied and unsatisfied performance obligations identified in the contract from contract inception to the beginning of the earliest period presented.
Rebates or discounts on goods or services are accounted for as variable consideration. The rebate or discount program is applied retrospectively for future purchases. Provisions for rebates, sales incentives, and discounts to customers are accounted for as reductions in revenue in the same period the related sales are recorded.
When a contract provides a customer with payment terms of more than a year, the Company considers whether those terms create variability in the transaction price and whether a significant financing component exists.
The performance obligations that extend for a period greater than one year are those that include a financial component: (i) warranty extension services, (ii) cloud-based monitoring, and (iii) communication services.
|
(4)
|
Allocate the transaction price to the performance obligations in the contract
|
The Company performs an allocation of the transaction price to each separate performance obligation, in proportion to their relative standalone selling prices.
|
(5)
|
Recognize revenue when a performance obligation is satisfied
|
Revenue is recognized when or as performance obligations are satisfied by transferring control of a promised good or service to a customer. Control either transfers over time or at a point in time, which affects when revenue is recorded.
Revenues from sales of products are recognized when control is transferred (based on the agreed International Commercial terms, or “INCOTERMS”). Revenues related to warranty extension services, cloud-based monitoring, and communication services are recognized over time on a straight-line basis.
Deferred revenues consist of deferred cloud-based monitoring services, communication services, warranty extension services and advance payments received from customers for the Company’s products. Deferred revenues are classified as short-term and long-term deferred revenues based on the period in which revenues are expected to be recognized.
The most significant impact of the standard on the Company’s financial statements relates to advance payments received for performance obligations that extend for a period greater than one year. Applying the new standard, such performance obligations are those that include a financing component, specifically: (i) warranty extension services, (ii) cloud-based monitoring, and (iii) communication services.
The Company recognizes financing component expenses in its condensed consolidated statement of income in relation to advance payments for performance obligations that extend for a period greater than one year. These financing component expenses are reflected in the Company’s deferred revenues balance.
The effect of the changes made to the consolidated January 1, 2018 balance sheets following the adoption of ASC 606, Revenue - Revenue from Contracts with Customers were as follows:
|
|
Balance as of December 31, 2017
|
|
|
Adjustments due following adoption of ASC 606
|
|
|
Balance as of January 1, 2018
|
|
|
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
Deferred Revenues - Current term
|
|
$
|
2,559
|
|
|
$
|
(89
|
)
|
|
$
|
2,470
|
|
Deferred Revenues - Long term
|
|
|
31,453
|
|
|
|
3,961
|
|
|
|
35,414
|
|
Retained earnings
|
|
$
|
66,172
|
|
|
$
|
(3,872
|
)
|
|
$
|
62,300
|
|
In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on the Company’s condensed consolidated statements of income, cash flows, and balance sheets were as follows:
|
|
Three months ended June 30, 2018 (Unaudited)
|
|
|
|
As Reported
|
|
|
Balances before adoption of ASC 606
|
|
|
Effect of change
|
|
|
|
|
|
|
|
|
|
|
|
Statements of operations
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
227,118
|
|
|
$
|
227,067
|
|
|
$
|
51
|
|
Financial income (expenses), net
|
|
|
(2,480
|
)
|
|
|
(1,913
|
)
|
|
|
(567
|
)
|
Net income
|
|
|
34,568
|
|
|
|
35,084
|
|
|
|
(516
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
34,568
|
|
|
|
35,084
|
|
|
|
(516
|
)
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenues
|
|
|
6,139
|
|
|
|
5,623
|
|
|
|
516
|
|
|
|
Six months ended June 30, 2018 (Unaudited)
|
|
|
|
As Reported
|
|
|
Balances before adoption of ASC 606
|
|
|
Effect of change
|
|
Statements of operations
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
436,989
|
|
|
$
|
|
|
|
$
|
51
|
|
Financial income (expenses), net
|
|
|
(1,896
|
)
|
|
|
(817
|
)
|
|
|
(1,079
|
)
|
Net income
|
|
|
70,254
|
|
|
|
71,282
|
|
|
|
(1,028
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
70,254
|
|
|
|
71,282
|
|
|
|
(1,028
|
)
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenues
|
|
|
13,120
|
|
|
|
12,092
|
|
|
|
1,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Revenues - Current
|
|
|
(3,407
|
)
|
|
|
(3,413
|
)
|
|
|
6
|
|
Deferred Revenues - Long term
|
|
|
(47,595
|
)
|
|
|
(42,689
|
)
|
|
|
(4,906
|
)
|
Retained earnings
|
|
$
|
(132,554
|
)
|
|
$
|
(136,426
|
)
|
|
$
|
3,872
|
|
|
d.
|
Basis of Presentation:
|
The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with Article 10 of Regulation S-X, “Interim Financial Statements” and the rules and regulations for Form 10-Q of the Securities and Exchange Commission (the “SEC”). Pursuant to those rules and regulations, the Company has condensed or omitted certain information and disclosures in footnotes that it normally includes in its annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”)
.
In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its condensed consolidated financial position, results of operations, and cash flows. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year.
The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2017, contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 20, 2018, have been applied consistently in these unaudited interim condensed consolidated financial statements, except for the adoption of ASC 606, Revenue - Revenue from Contracts with Customers (see Note 1c).
|
e.
|
The Company depends on three contract manufacturers and several limited or single source component suppliers. Reliance on these vendors makes the Company vulnerable to possible capacity constraints and reduced control over component availability, delivery schedules, manufacturing yields, and costs
.
|
These vendors collectively accounted for 58.3% and 51.6% of the Company’s total trade payables as of June 30, 2018 (unaudited) and December 31, 2017, respectively
.
The Company has the right to offset its payables to one of its contract manufacturers against vendor non-trade receivables. As of June 30, 2018 (unaudited), a total of $2,574 of these receivables met the criteria for net recognition and were offset against the corresponding accounts payable balances for this contract manufacturer in the accompanying condensed Consolidated Balance Sheets.
|
f.
|
Derivative financial instruments:
|
To protect against the increase in value of forecasted foreign currency cash flows resulting from salary and lease payments of its Israeli facilities denominated in the Israeli currency, the New Israeli Shekels (“NIS”), the Company instituted a foreign currency cash flow hedging program. The Company hedged portions of the anticipated payroll and lease payments denominated in NIS for a period of one to twelve months with hedging contracts. Accordingly, when the dollar strengthens against the foreign currencies, the decline in present value of future foreign currency expenses is offset by losses in the fair value of the hedging contracts. Conversely, when the dollar weakens, the increase in the present value of future foreign currency cash flows is offset by gains in the fair value of the hedging contracts. These hedging contracts are designated as cash flow hedges, as defined by ASC 815 and are all effective hedges.
In addition to the above-mentioned cash flow hedges transactions, the Company also entered into derivative instrument arrangements to hedge the Company’s exposure to currencies other than the U.S. dollar. These derivative instruments are not designated as cash flow hedges, as defined by ASC 815, and therefore all gains and losses, resulting from fair value remeasurement, were recorded immediately in the statement of operations, as financial income (expenses).
As of June 30, 2018 (unaudited), the Company entered into forward contracts and put and call options to sell Euros for U.S. dollars in the amount of €22.5 million. These hedging contracts do not contain any credit-risk-related contingency features. See Note 4 for information on the fair value of these hedging contracts.
As of June 30, 2018 (unaudited), the Company had no derivative instruments that were designated as cash flow hedges
The fair value of the Company’s outstanding derivative instruments is as follows:
|
|
Balance as of June 30,
|
|
|
Balance as of December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
|
|
Derivative assets:
|
|
|
|
|
|
|
Derivatives not designated as cash flow hedging instruments:
|
|
|
|
|
|
|
Foreign exchange option contracts
|
|
$
|
340
|
|
|
$
|
221
|
|
Foreign exchange forward contracts
|
|
|
312
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
652
|
|
|
$
|
221
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
Derivatives not designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
Foreign exchange option contracts
|
|
$
|
(24
|
)
|
|
$
|
(285
|
)
|
Foreign exchange forward contracts
|
|
|
-
|
|
|
|
(116
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(24
|
)
|
|
$
|
(401
|
)
|
The Company recorded the fair value of derivative assets and liabilities, net in “prepaid expenses and other accounts receivable” and in “Accrued expenses and other accounts payable” on the Company’s consolidated balance sheets as of June 30, 2018 and December 31, 2017, respectively.
The net increase in unrealized gains recognized in “accumulated other comprehensive loss” on derivatives, net of tax effect, is as follows:
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
-
|
|
|
$
|
66
|
|
|
|
-
|
|
|
$
|
975
|
|
The net gains reclassified from “accumulated other comprehensive loss” into income, are as follows:
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
-
|
|
|
$
|
(599
|
)
|
|
|
-
|
|
|
$
|
(994
|
)
|
The Company recorded in the financial income (expenses), net, a net loss (gain) related to derivatives not qualified as hedging instruments of $2,042 and $(672) during the three months ended June 30, 2018 and 2017 (unaudited), respectively and $625 and $(672) during the six months ended June 30, 2018 and 2017 (unaudited), respectively.
|
g.
|
Accumulated other comprehensive income:
|
The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of taxes, for the three months ended June 30, 2018 (unaudited):
|
|
Unrealized gains (losses) on available-for-sale marketable securities
|
|
|
Unrealized gains (losses) on foreign currency translation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(943
|
)
|
|
$
|
(192
|
)
|
|
$
|
(1,135
|
)
|
Net other comprehensive income (loss) before reclassifications
|
|
|
(6
|
)
|
|
|
3
|
|
|
|
(3
|
)
|
Net current period other comprehensive income (loss)
|
|
|
(6
|
)
|
|
|
3
|
|
|
|
(3
|
)
|
Ending balance
|
|
$
|
(949
|
)
|
|
$
|
(189
|
)
|
|
$
|
(1,138
|
)
|
The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of taxes, for the six months ended June 30, 2018 (unaudited):
|
|
Unrealized losses on available-for-sale marketable securities
|
|
|
Unrealized losses on foreign currency translation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(433
|
)
|
|
$
|
(178
|
)
|
|
$
|
(611
|
)
|
Net other comprehensive loss before reclassifications
|
|
|
(516
|
)
|
|
|
(11
|
)
|
|
|
(527
|
)
|
Net current period other comprehensive loss
|
|
|
(516
|
)
|
|
|
(11
|
)
|
|
|
(527
|
)
|
Ending balance
|
|
$
|
(949
|
)
|
|
$
|
(189
|
)
|
|
$
|
(1,138
|
)
|
The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of taxes, for the three months ended June 30, 2017 (unaudited):
|
|
Unrealized gains (losses) on available-for-sale marketable securities
|
|
|
Unrealized gains (losses) on cash flow hedges
|
|
|
Unrealized gains (losses) on foreign currency translation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(108
|
)
|
|
$
|
533
|
|
|
$
|
(450
|
)
|
|
$
|
(25
|
)
|
Net other comprehensive income before reclassifications
|
|
|
5
|
|
|
|
66
|
|
|
|
186
|
|
|
|
257
|
|
Net gains reclassified from accumulated other comprehensive loss
|
|
|
-
|
|
|
|
(599
|
)
|
|
|
-
|
|
|
|
(599
|
)
|
Net current period other comprehensive income (loss)
|
|
|
5
|
|
|
|
(533
|
)
|
|
|
186
|
|
|
|
(342
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
(103
|
)
|
|
$
|
-
|
|
|
$
|
(264
|
)
|
|
$
|
(367
|
)
|
The following table summarizes the changes in accumulated balances of other comprehensive
income (
loss
)
, net of taxes, for the six months ended June 30, 2017 (unaudited):
|
|
Unrealized gains (losses) on available-for-sale marketable securities
|
|
|
Unrealized gains (losses) on cash flow hedges
|
|
|
Unrealized gains (losses) on foreign currency translation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(136
|
)
|
|
$
|
19
|
|
|
$
|
(207
|
)
|
|
$
|
324
|
|
Net other comprehensive income (loss) before reclassifications
|
|
|
33
|
|
|
|
975
|
|
|
|
(57
|
)
|
|
|
951
|
|
Net gains reclassified from accumulated other comprehensive income (loss)
|
|
|
-
|
|
|
|
(994
|
)
|
|
|
-
|
|
|
|
(994
|
)
|
Net current period other comprehensive income (loss)
|
|
|
33
|
|
|
|
(19
|
)
|
|
|
(57
|
)
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
(103
|
)
|
|
$
|
-
|
|
|
$
|
(264
|
)
|
|
$
|
(367
|
)
|
The
following table provides details about reclassifications out of accumulated other comprehensive income (loss) (unaudited):
Details about Accumulated
Other Comprehensive Loss Components
|
|
Amount Reclassified from Accumulated Other Comprehensive Loss
|
|
Affected Line Item in the Statements of Income
|
|
|
Three months ended
June 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on cash flow hedges, net
|
|
$
|
-
|
|
|
$
|
108
|
|
Cost of revenues
|
|
|
|
-
|
|
|
|
363
|
|
Research and development
|
|
|
|
-
|
|
|
|
92
|
|
Sales and marketing
|
|
|
|
-
|
|
|
|
82
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
645
|
|
Total, before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
(46
|
)
|
Income tax expense (benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
599
|
|
Total, net of income taxes
|
The
following table provides details about reclassifications out of accumulated other comprehensive income (loss) (unaudited):
Details about Accumulated
Other Comprehensive Loss Components
|
|
Amount Reclassified from Accumulated Other Comprehensive Loss
|
|
Affected Line Item in the Statements of Income
|
|
|
Six months ended
June 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on cash flow hedges, net
|
|
$
|
-
|
|
|
$
|
166
|
|
Cost of revenues
|
|
|
|
-
|
|
|
|
570
|
|
Research and development
|
|
|
|
-
|
|
|
|
151
|
|
Sales and marketing
|
|
|
|
-
|
|
|
|
153
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
1,040
|
|
Total, before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
(46
|
)
|
Income tax expense (benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
994
|
|
Total, net of income taxes
|
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
28,842
|
|
|
$
|
25,887
|
|
Finished goods
|
|
|
73,172
|
|
|
|
57,105
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
102,014
|
|
|
$
|
82,992
|
|
NOTE 3:-
|
WARRANTY OBLIGATIONS
|
Changes in the Company’s product warranty liability for the six months ended June 30, 2018 and 2017 were as follows:
|
|
Six months ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Balance, at beginning of period
|
|
$
|
78,811
|
|
|
$
|
58,375
|
|
Additions and adjustments to cost of revenues
|
|
|
27,546
|
|
|
|
12,976
|
|
Utilization and current warranty expenses
|
|
|
(9,066
|
)
|
|
|
(6,011
|
)
|
|
|
|
|
|
|
|
|
|
Balance, at end of period
|
|
|
97,291
|
|
|
|
65,340
|
|
Less current portion
|
|
|
(18,964
|
)
|
|
|
(12,501
|
)
|
|
|
|
|
|
|
|
|
|
Long term portion
|
|
$
|
78,327
|
|
|
$
|
52,839
|
|
NOTE 4:-
|
FAIR VALUE MEASUREMENTS
|
The Company applies ASC 820 (“Fair Value Measurements and Disclosures”), with respect to fair value measurements of all financial assets and liabilities.
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
A three-tiered fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
|
Level 1-
|
Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
Level 2-
|
Include other inputs that are directly or indirectly observable in the marketplace.
|
|
Level 3-
|
Unobservable inputs which are supported by little or no market activity.
|
NOTE 4:-
|
FAIR VALUE MEASUREMENTS (Cont.)
|
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The following table sets forth the Company’s assets and liabilities that were measured at fair value as of June 30, 2018 (unaudited) by level within the fair value hierarchy:
|
|
Balance as of
|
|
|
Fair value measurements
|
|
Description
|
|
June 30,
2018
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
$
|
6,641
|
|
|
$
|
6,641
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments assets, net
|
|
$
|
628
|
|
|
|
-
|
|
|
$
|
628
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
$
|
128,847
|
|
|
|
-
|
|
|
$
|
128,847
|
|
|
|
-
|
|
Governmental bonds
|
|
$
|
5,974
|
|
|
|
-
|
|
|
$
|
5,974
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
$
|
80,208
|
|
|
|
-
|
|
|
$
|
80,208
|
|
|
|
-
|
|
Governmental bonds
|
|
$
|
5,936
|
|
|
|
-
|
|
|
$
|
5,936
|
|
|
|
-
|
|
The following table sets forth the Company’s assets that were measured at fair value as of December 31, 2017 by level within the fair value hierarchy:
|
|
Balance as of
|
|
|
Fair value measurements
|
|
Description
|
|
December 31,
2017
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
$
|
6,163
|
|
|
$
|
6,163
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments liability, net
|
|
$
|
(180
|
)
|
|
|
-
|
|
|
$
|
(180
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
$
|
68,272
|
|
|
|
-
|
|
|
$
|
68,272
|
|
|
|
-
|
|
Governmental bonds
|
|
$
|
8,992
|
|
|
|
-
|
|
|
$
|
8,992
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
$
|
95,160
|
|
|
|
-
|
|
|
$
|
95,160
|
|
|
|
-
|
|
Governmental bonds
|
|
$
|
7,960
|
|
|
|
-
|
|
|
$
|
7,960
|
|
|
|
-
|
|
NOTE 4:-
|
FAIR VALUE MEASUREMENTS (Cont.)
|
In addition to the assets described above, the Company’s financial instruments also include cash and cash equivalents, restricted and short-term deposits, trade receivables, other accounts receivable, trade payables, accrued expenses and other payables. The fair value of these financial instruments was not materially different from their carrying values on June 30, 2018 due to the short-term maturity of these instruments.
NOTE 5:-
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
As of June 30, 2018 (unaudited), contingent liabilities exist regarding guarantees in the amount of $1,389, $55, $176 and $342 in respect of office rent lease agreements, customs transactions, credit card limits and securing projects with customers, respectively.
|
b.
|
Contractual purchase obligations:
|
The Company has contractual obligations to purchase goods and raw materials. These contractual purchase obligations relate to inventories held by contract manufacturers and purchase orders initiated by the contract manufacturers and suppliers, which cannot be canceled without penalty. The Company utilizes third parties to manufacture its products. In addition, it acquires raw materials or other goods and services, including product components, by issuing to suppliers authorizations to purchase based on its projected demand and manufacturing needs.
As of June 30, 2018 (unaudited), the Company had non-cancelable purchase obligations totaling approximately $321,135 out of which the Company already recorded a provision for loss in the amount of $2,393.
As of June 30, 2018, the Company had contractual obligations for capital expenditures totaling approximately $35,810. These commitments reflect purchases of automated assembly lines and other machinery related to the Company’s manufacturing.
From time to time, the Company may be involved in various claims and legal proceedings. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss. These accruals are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter.
In June 2018, the Company was served with a complaint from a trustee of a former customer that filed for bankruptcy in the US. The lawsuit seeks to recover approximately $2,481 based on theories of preferential and fraudulent transfers. The company believe
s
it
has valid defenses to the claims in this lawsuit and do
es
not expect the outcome of the litigation matters to have a material adverse effect on its Balance Sheets, Statements of Income or Cash Flows.
|
|
Authorized
|
|
|
Issued and outstanding
|
|
|
|
Number of shares
|
|
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
|
|
(unaudited)
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
Stock of $0.0001 par value:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
125,000,000
|
|
|
|
125,000,000
|
|
|
|
45,498,414
|
|
|
|
43,812,601
|
|
|
b.
|
Stock Incentive plans:
|
The Company’s 2007 Global Incentive Plan (the “2007 Plan”) was adopted by the board of directors on August 30, 2007. On March 31, 2015, once the Company completed its Initial Public Offering (“IPO”), the 2007 Plan has been terminated and no further awards will be granted thereunder. All outstanding awards will continue to be governed by their existing terms and 379,358 available options for future grant were transferred to the Company’s 2015 Global Incentive Plan (the “2015 Plan”) and are reserved for future issuances under the 2015 plan.
The 2015 Plan became effective upon the consummation of the IPO. The 2015 Plan provides for the grant of options, RSUs and other share-based awards to directors, employees, officers and consultants of the Company and its Subsidiaries. As of June 30, 2018 (unaudited), a total of 8,080,717 (unaudited) shares of common stock were reserved for issuance under the 2015 Plan (the “Share Reserve”).
|
|
The Share Reserve will automatically increase on January 1st of each year during the term of the 2015 Plan commencing on January 1st of the year following the year in which the 2015 Plan becomes effective in an amount equal to five percent (5%) of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year; provided, however, that our board of directors may provide that there will not be a January 1st increase in the Share Reserve in a given year or that the increase will be less than five percent (5%) of the shares of capital stock outstanding on the preceding December 31st
.
|
The aggregate maximum number of shares of common stock that may be issued on the exercise of incentive stock options is ten million (10,000,000).
As of June 30, 2018 (unaudited), an aggregate of 3,611,297 shares of common stock are still available for future grant under the 2015 Plan.
NOTE 6:-
|
STOCK CAPITAL (Cont.)
|
|
c.
|
Options granted to employees
and members of the board of directors:
|
A summary of the activity in the share options granted to employees and members of the board of directors for the six months ended June 30, 2018 (unaudited) and related information follows:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
remaining
|
|
|
|
|
|
|
Number
|
|
|
average
|
|
|
contractual
|
|
|
Aggregate
|
|
|
|
of
|
|
|
exercise
|
|
|
term
|
|
|
intrinsic
|
|
|
|
Options
|
|
|
price
|
|
|
in years
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2017
|
|
|
3,524,310
|
|
|
|
7.40
|
|
|
|
6.35
|
|
|
|
106,251
|
|
Granted
|
|
|
180,983
|
|
|
|
38.05
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,219,007
|
)
|
|
|
4.86
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(22,677
|
)
|
|
|
8.46
|
|
|
|
|
|
|
|
|
|
Outstanding as of June 30, 2018
|
|
|
2,463,609
|
|
|
|
10.90
|
|
|
|
6.68
|
|
|
|
91,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest as of June 30, 2018
|
|
|
2,395,526
|
|
|
|
10.81
|
|
|
|
6.66
|
|
|
|
88,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of June 30, 2018
|
|
|
1,564,382
|
|
|
|
7.12
|
|
|
|
5.93
|
|
|
|
63,722
|
|
The aggregate intrinsic value represents the total intrinsic value (the difference between the fair value of the Company’s common stock as of the last day of each period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last day of each period. The total intrinsic value of options exercised during the six months ended on
June 30, 2018
(unaudited) was $56,071.
The weighted average grant date fair values of options granted to employees and executive directors during the six months ended June 30, 2018 (unaudited) was $20.83.
|
d.
|
A summary of the activity in the RSUs granted to employees and members of the board of directors for the six months ended June 30
, 2018
(unaudited) is as follows:
|
|
|
No. of
RSUs
|
|
|
Weighted average
grant date
fair value
|
|
Unvested as of December 31, 2017
|
|
|
2,087,992
|
|
|
|
24.33
|
|
Granted
|
|
|
531,729
|
|
|
|
48.15
|
|
Vested
|
|
|
(393,939
|
)
|
|
|
21.16
|
|
Forfeited
|
|
|
(125,989
|
)
|
|
|
6.62
|
|
Unvested as of
June 30, 2018
|
|
|
2,099,793
|
|
|
|
30.71
|
|
NOTE 6:-
|
STOCK CAPITAL (Cont.)
|
e.
Options and RSUs issued to non-employee consultants:
The Company has granted options and RSUs to purchase common shares to non-employee consultants as of
June 30
, 2018
(unaudited)
as follows:
|
|
Outstanding
|
|
|
|
|
|
Exercisable
|
|
|
|
|
as of
|
|
|
|
|
|
as of
|
|
|
|
|
June 30,
|
|
|
Exercise
|
|
|
June 30,
|
|
Exercisable
|
Issuance Date
|
|
2018
|
|
|
price
|
|
|
2018
|
|
Through
|
|
|
|
|
|
|
|
|
|
|
|
January 27, 2014
|
|
|
225
|
|
|
|
3.51
|
|
|
|
31
|
|
January 27, 2024
|
May 1, 2014
|
|
|
1,205
|
|
|
|
3.51
|
|
|
|
1,205
|
|
May 1, 2024
|
September 17, 2014
|
|
|
3,936
|
|
|
|
3.96
|
|
|
|
3,831
|
|
September 17, 2024
|
October 29, 2014
|
|
|
2,139
|
|
|
|
5.01
|
|
|
|
361
|
|
October 29, 2024
|
August 19, 2015
|
|
|
6,981
|
|
|
|
0.00
|
|
|
|
-
|
|
-
|
November 8, 2015
|
|
|
928
|
|
|
|
0.00
|
|
|
|
-
|
|
-
|
April 18, 2016
|
|
|
834
|
|
|
|
0.00
|
|
|
|
-
|
|
-
|
July 11, 2016
|
|
|
1,167
|
|
|
|
0.00
|
|
|
|
-
|
|
-
|
September 21, 2016
|
|
|
2,500
|
|
|
|
15.34
|
|
|
|
250
|
|
September 21, 2026
|
September 21, 2016
|
|
|
3,938
|
|
|
|
0.00
|
|
|
|
-
|
|
-
|
March 15, 2017
|
|
|
6,000
|
|
|
|
0.00
|
|
|
|
-
|
|
-
|
March 15, 2017
|
|
|
6,500
|
|
|
|
13.70
|
|
|
|
500
|
|
March 15, 2027
|
March 27, 2017
|
|
|
3,000
|
|
|
|
0.00
|
|
|
|
-
|
|
-
|
November 20, 2017
|
|
|
5,250
|
|
|
|
0.00
|
|
|
|
-
|
|
-
|
January 2, 2018
|
|
|
6,160
|
|
|
|
0.00
|
|
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,763
|
|
|
|
|
|
|
|
6,178
|
|
|
The Company had accounted for its options and RSUs granted to non-employee consultants under the fair value method of ASC 505-50.
In connection with the grant of stock options and RSUs to non‑employee consultants, the Company recorded stock compensation expenses in the six months ended June 30, 2018
(unaudited)
and 2017
(unaudited)
in the amounts $835 and $294, respectively.
|
f.
|
Employee Stock Purchase Plan (“ESPP”):
|
The Company adopted an Employee Stock Purchase Plan (the “ESPP”) effective upon the consummation of the IPO. As of June 30, 2018
(unaudited)
, a total of 1,739,280 shares were reserved for issuance under this plan. The number of shares of common stock reserved for issuance under the ESPP will increase automatically on January 1st of each year, for ten years, by the lesser of 1% of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year or 487,643 shares. However, the Company’s board of directors may reduce the amount of the increase in any particular year at their discretion, including a reduction to zero.
NOTE 6:-
|
STOCK CAPITAL (Cont.)
|
The ESPP is implemented through an offering every six months. According to the ESPP, eligible employees may use up to 10% of their salaries to purchase common stock shares up to an aggregate limit of $10 per participant for every six months plan. The price of an ordinary share purchased under the ESPP is equal to 85% of the lower of the fair market value of the ordinary share on the subscription date of each offering period or on the purchase date.
As of June 30, 2018
(unaudited)
, 323,342 common stock shares had been purchased under the ESPP.
As of June 30, 2018
(unaudited)
, 1,415,938 common stock shares were available for future issuance under the ESPP.
In accordance with ASC No. 718, the ESPP is compensatory and as such results in recognition of compensation cost.
|
g.
|
Stock-based compensation expense for employees and consultants:
|
The Company recognized stock-based compensation expenses related to stock options and RSUs granted to employees and non-employees and ESPP in the condensed consolidated statement of operations for the six months ended on June 30, 2018 (unaudited) and 2017 (unaudited), as follows:
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
$
|
968
|
|
|
$
|
517
|
|
|
$
|
1,892
|
|
|
$
|
1,010
|
|
Research and development
|
|
|
2,605
|
|
|
|
1,280
|
|
|
|
4,987
|
|
|
|
2,485
|
|
Selling and marketing
|
|
|
2,094
|
|
|
|
1,204
|
|
|
|
4,298
|
|
|
|
2,234
|
|
General and administrative
|
|
|
1,461
|
|
|
|
1,033
|
|
|
|
2,800
|
|
|
|
1,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense
|
|
$
|
7,128
|
|
|
$
|
4,034
|
|
|
$
|
13,977
|
|
|
$
|
7,646
|
|
As of
June 30, 2018
(unaudited),
there was a total unrecognized compensation expense of $70,363 related to non‑vested equity‑based compensation arrangements granted under the Company’s Plans. These expenses are expected to be recognized during the period from July 1, 2018 through May 31, 2022.
NOTE 7:-
|
BASIC AND DILUTED NET EARNINGS PER SHARE
|
Basic net earnings per share is computed by dividing the net earnings by the weighted-average number of shares of common stock outstanding during the period.
No shares were excluded from the calculation of diluted net earnings per share due to their anti-dilutive effect for the three and six months ended June 30, 2018 (unaudited).
The total weighted average number of shares related to the outstanding stock options, excluded from the calculation of diluted net earnings per share due to their anti-dilutive effect was 199,950 and 395,032 for the three and six months ended June 30, 2017 (unaudited), respectively.
NOTE 7:-
|
BASIC AND DILUTED NET EARNINGS PER SHARE (Cont.)
|
The following table presents the computation of basic and diluted net earnings per share for the periods presented (in thousands, except per share data):
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
34,568
|
|
|
$
|
22,524
|
|
|
$
|
70,254
|
|
|
$
|
36,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net earnings per share of common stock, basic
|
|
|
45,216,253
|
|
|
|
41,700,399
|
|
|
|
44,726,382
|
|
|
|
41,525,285
|
|
Effect of stock-based awards
|
|
|
3,075,027
|
|
|
|
3,131,191
|
|
|
|
3,258,435
|
|
|
|
2,810,236
|
|
Shares used in computing net earnings per share of common stock, diluted
|
|
|
48,291,280
|
|
|
|
44,831,590
|
|
|
|
47,984,817
|
|
|
|
44,335,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
0.76
|
|
|
$
|
0.54
|
|
|
$
|
1.57
|
|
|
$
|
0.88
|
|
Diluted net income per share
|
|
$
|
0.72
|
|
|
$
|
0.50
|
|
|
$
|
1.46
|
|
|
$
|
0.83
|
|
NOTE 8:-
INCOME TAXES
|
a.
|
Taxes on income (tax benefit) are comprised as follows:
|
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year taxes
|
|
$
|
5,314
|
|
|
$
|
959
|
|
|
$
|
12,297
|
|
|
$
|
2,028
|
|
Deferred tax income net, and others
|
|
|
(1,697
|
)
|
|
|
(773
|
)
|
|
|
(3,018
|
)
|
|
|
(2,603
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes on income (tax benefit)
|
|
$
|
3,617
|
|
|
$
|
186
|
|
|
$
|
9,279
|
|
|
$
|
(575
|
)
|
|
b.
|
Deferred income taxes:
|
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
NOTE 8:-
INCOME TAXES (Cont.)
Significant components of the Company’s deferred tax liabilities and assets are as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Net assets in respect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and Development carryforward expenses- temporary differences
|
|
$
|
7,229
|
|
|
$
|
5,380
|
|
Stock based compensation
|
|
|
2,093
|
|
|
|
1,622
|
|
Allowances, provisions and others
|
|
|
2,229
|
|
|
|
1,338
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
11,551
|
|
|
$
|
8,340
|
|
|
c.
|
Uncertain tax positions:
|
As of June 30, 2018, the Company recognized a total liability for uncertain tax positions in an immaterial amount.
|
d.
|
On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") 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 beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings (the “E&P”) as of December 31, 2017.
|
During the fourth quarter of 2017, the Company calculated its best estimate of the impact of the TCJA in its year end income tax provision in accordance with its understanding of the TCJA and guidance available as of the date of this filing and as a result recorded $19.2 million as an additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted.
The provisional amount related to the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future was $0.5 million. The provisional amount related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings was $18.7 million based on cumulative foreign earnings of $145 million. An additional provisional charge of $0.8 million was recorded in the first quarter of 2018 as a result of IRS guidance issued in January.
Additionally, the TCJA requires certain Global Intangible Low Taxed Income (“GILTI”) earned by controlled foreign corporations (“CFCs”) to be included in the gross income of the CFCs’ U.S. shareholder. GAAP allows the Company to either: (i) treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”); or (ii) factor such amounts into its measurement of deferred taxes (the “deferred method”). Effective the first quarter of 2018, the Company elected to treat any potential GILTI inclusions as a period cost, as we are not projecting any material impact from GILTI inclusions and any deferred taxes related to any inclusion would be immaterial.
NOTE 8:-
INCOME TAXES (Cont.)
The Company has calculated its best estimate of the impact of the GILTI income tax provision in accordance with its understanding of the TCJA and guidance available as of the date of this filing, and as a result has recorded $3.9 million as an additional income tax expense for the six month ended June 30, 2018.
The final impact of the U.S. tax reform may differ, possibly materially, due to factors such as changes in interpretations and assumptions that the Company has made in its assessment, conclusion of the effects of the GILTI provisions, further refinement of the Company’s calculations, and additional guidance that may be issued by the U.S. government.
As these various factors are finalized, any change will be recorded as an adjustment to the provision for, or benefit from, income taxes in the period in which the amounts are determined, not to exceed 12 months from the date of enactment of the TCJA. The Company has not completed its assessment and the tax charge remains provisional as of June 30, 2018.
NOTE 9:-
|
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
|
|
a.
|
For the three month period ended June 30, 2018 (unaudited) and 2017 (unaudited), the Company had one major customer that accounted for 16.25% and 13.31% of its consolidated revenues, respectively.
|
For the six month period ended June 30, 2018 (unaudited) and 2017 (unaudited), the Company had one major customer that accounted for 18.24% and 13.05% of its consolidated revenues, respectively.
|
b.
|
As of June 30, 2018 (unaudited),
one major customer accounted for
approximately 18.3% of the Company’s net accounts receivable and as
of December
31,
2017, two major customers accounted for approximately 35.2% of the Company’s net accounts receivable.
|
NOTE 10:-
SUBSEQUENT EVENTS
On May 9, 2018, the Company signed an agreement for the purchase of substantially all of the assets and activities of Gamatronic Electronic Industries Ltd (“Gamatronic”), a company established in Israel, providing and manufacturing Uninterruptible Power Supplies (UPS) devices.
On July 1, 2018 the Company completed the acquisition of substantially all of the assets and activities of Gamatronic for approximately NIS 41 million (approximately USD 11.2 million), in cash. Asset purchase agreement also includes an earn-out provision of 50% and 33% of the business division’s net income for the first and second years following closing, respectively. Company determined that such acquisition will be accounted as a business combination in accordance with ASC 805 "Business Combinations”. Currently, management assessing the acquisition consideration, purchase price allocation and the related accounting consequences of the acquisition, which, if any, will be reflected in the third quarter interim financial statement.