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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

SolarEdge Technologies Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net operating profit after taxes (NOPAT)¹	249,862)	253,512)	154,600)	278,986)	203,920)
Cost of capital²	15.68%	15.50%	15.74%	16.44%	16.40%
Invested capital³	2,608,920)	1,700,638)	1,734,649)	909,829)	559,312)

Economic profit⁴	(159,280)	(10,012)	(118,387)	129,442)	112,191)

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

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 249,862 – 15.68% × 2,608,920 = -159,280

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	SolarEdge Technologies Inc. economic profit increased from 2020 to 2021 but then decreased significantly from 2021 to 2022.

SolarEdge Technologies Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income attributable to SolarEdge Technologies, Inc.	93,779)	169,170)	140,322)	146,549)	128,833)
Deferred income tax expense (benefit)¹	(11,054)	(11,638)	(3,434)	(6,037)	(7,093)
Increase (decrease) in allowance for credit losses²	576)	(260)	413)	2,046)	299)
Increase (decrease) in deferred revenues³	44,232)	29,325)	(20,777)	85,776)	41,009)
Increase (decrease) in warranty obligations⁴	119,897)	60,166)	32,431)	50,737)	43,015)
Increase (decrease) in equity equivalents⁵	153,651)	77,593)	8,633)	132,522)	77,230)
Interest expenses	11,538)	10,665)	10,120)	5,826)	3,211)
Interest expense, operating lease liability⁶	1,355)	868)	776)	581)	565)
Adjusted interest expenses	12,893)	11,533)	10,896)	6,407)	3,776)
Tax benefit of interest expenses⁷	(2,708)	(2,422)	(2,288)	(1,345)	(793)
Adjusted interest expenses, after taxes⁸	10,185)	9,111)	8,608)	5,062)	2,983)
(Gain) loss on marketable securities	736)	(16)	—)	91)	137)
Interest income on marketable securities	(10,551)	(2,973)	(3,750)	(4,590)	(5,629)
Investment income, before taxes	(9,815)	(2,989)	(3,750)	(4,499)	(5,492)
Tax expense (benefit) of investment income⁹	2,061)	628)	788)	945)	1,153)
Investment income, after taxes¹⁰	(7,754)	(2,361)	(2,963)	(3,554)	(4,339)
Net income (loss) attributable to noncontrolling interest	—)	—)	—)	(1,592)	(787)
Net operating profit after taxes (NOPAT)	249,862)	253,512)	154,600)	278,986)	203,920)

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

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for credit losses.

³ Addition of increase (decrease) in deferred revenues.

⁴ Addition of increase (decrease) in warranty obligations.

⁵ Addition of increase (decrease) in equity equivalents to net income attributable to SolarEdge Technologies, Inc..

⁶ 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 62,439 × 2.17% = 1,355

⁷ 2022 Calculation
Tax benefit of interest expenses = Adjusted interest expenses × Statutory income tax rate
= 12,893 × 21.00% = 2,708

⁸ Addition of after taxes interest expense to net income attributable to SolarEdge Technologies, Inc..

⁹ 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 9,815 × 21.00% = 2,061

¹⁰ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	SolarEdge Technologies Inc. NOPAT increased from 2020 to 2021 but then slightly decreased from 2021 to 2022.

SolarEdge Technologies Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Income taxes, net	83,376)	18,054)	23,344)	33,646)	9,077)
Less: Deferred income tax expense (benefit)	(11,054)	(11,638)	(3,434)	(6,037)	(7,093)
Add: Tax savings from interest expenses	2,708)	2,422)	2,288)	1,345)	793)
Less: Tax imposed on investment income	2,061)	628)	788)	945)	1,153)
Cash operating taxes	95,076)	31,486)	28,279)	40,084)	15,810)

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

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	SolarEdge Technologies Inc. cash operating taxes increased from 2020 to 2021 and from 2021 to 2022.

SolarEdge Technologies Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Short-term finance lease liabilities	3,263)	1,875)	1,686)	231)	—)
Convertible senior notes, net	624,451)	621,535)	573,350)	—)	—)
Long-term finance lease liabilities	45,385)	40,508)	26,173)	2,399)	—)
Operating lease liability¹	62,439)	51,640)	46,188)	39,803)	19,814)
Total reported debt & leases	735,538)	715,558)	647,397)	42,433)	19,814)
Total SolarEdge Technologies, Inc. stockholders’ equity	2,176,366)	1,310,039)	1,085,757)	811,670)	562,408)
Net deferred tax (assets) liabilities²	(44,153)	(27,416)	(3,083)	(11,837)	(13,200)
Allowance for credit losses³	3,202)	2,626)	2,886)	2,473)	427)
Deferred revenues⁴	213,577)	169,345)	140,020)	160,797)	75,021)
Warranty obligations⁵	385,057)	265,160)	204,994)	172,563)	121,826)
Equity equivalents⁶	557,683)	409,715)	344,817)	323,996)	184,074)
Accumulated other comprehensive (income) loss, net of tax⁷	73,109)	27,319)	(3,857)	1,809)	524)
Non-controlling interests	—)	—)	—)	—)	8,318)
Adjusted total SolarEdge Technologies, Inc. stockholders’ equity	2,807,158)	1,747,073)	1,426,717)	1,137,475)	755,324)
Assets under construction and payments on account⁸	(47,168)	(112,037)	(48,344)	(59,058)	(22,890)
Marketable securities⁹	(886,608)	(649,956)	(291,121)	(211,021)	(192,936)
Invested capital	2,608,920)	1,700,638)	1,734,649)	909,829)	559,312)

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

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred revenues.

⁵ Addition of warranty obligations.

⁶ Addition of equity equivalents to total SolarEdge Technologies, Inc. stockholders’ equity.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of assets under construction and payments on account.

⁹ Subtraction of marketable securities.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	SolarEdge Technologies Inc. invested capital decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

SolarEdge Technologies Inc., cost of capital calculations

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	16,603,113)	16,603,113)	÷	17,545,200)	=	0.95	0.95	×	16.54%	=	15.65%
Convertible senior notes and finance lease liabilities³	879,648)	879,648)	÷	17,545,200)	=	0.05	0.05	×	0.60% × (1 – 21.00%)	=	0.02%
Operating lease liability⁴	62,439)	62,439)	÷	17,545,200)	=	0.00	0.00	×	2.17% × (1 – 21.00%)	=	0.01%
Total:	17,545,200)					1.00					15.68%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible senior notes and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	12,997,086)	12,997,086)	÷	13,902,436)	=	0.93	0.93	×	16.54%	=	15.46%
Convertible senior notes and finance lease liabilities³	853,710)	853,710)	÷	13,902,436)	=	0.06	0.06	×	0.56% × (1 – 21.00%)	=	0.03%
Operating lease liability⁴	51,640)	51,640)	÷	13,902,436)	=	0.00	0.00	×	1.68% × (1 – 21.00%)	=	0.00%
Total:	13,902,436)					1.00					15.50%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible senior notes and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	16,608,746)	16,608,746)	÷	17,553,910)	=	0.95	0.95	×	16.54%	=	15.65%
Convertible senior notes and finance lease liabilities³	898,976)	898,976)	÷	17,553,910)	=	0.05	0.05	×	2.07% × (1 – 21.00%)	=	0.08%
Operating lease liability⁴	46,188)	46,188)	÷	17,553,910)	=	0.00	0.00	×	1.68% × (1 – 21.00%)	=	0.00%
Total:	17,553,910)					1.00					15.74%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible senior notes and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	6,201,211)	6,201,211)	÷	6,243,644)	=	0.99	0.99	×	16.54%	=	16.43%
Convertible senior notes and finance lease liabilities³	2,630)	2,630)	÷	6,243,644)	=	0.00	0.00	×	2.85% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	39,803)	39,803)	÷	6,243,644)	=	0.01	0.01	×	1.46% × (1 – 21.00%)	=	0.01%
Total:	6,243,644)					1.00					16.44%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible senior notes and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	1,997,006)	1,997,006)	÷	2,016,820)	=	0.99	0.99	×	16.54%	=	16.38%
Convertible senior notes and finance lease liabilities³	—)	—)	÷	2,016,820)	=	0.00	0.00	×	2.85% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	19,814)	19,814)	÷	2,016,820)	=	0.01	0.01	×	2.85% × (1 – 21.00%)	=	0.02%
Total:	2,016,820)					1.00					16.40%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible senior notes and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

SolarEdge Technologies Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	(159,280)	(10,012)	(118,387)	129,442)	112,191)
Invested capital²	2,608,920)	1,700,638)	1,734,649)	909,829)	559,312)
Performance Ratio
Economic spread ratio³	-6.11%	-0.59%	-6.82%	14.23%	20.06%
Benchmarks
Economic Spread Ratio, Competitors⁴
Advanced Micro Devices Inc.	-19.29%	37.44%	11.18%	-6.94%	—
Analog Devices Inc.	-8.42%	-11.69%	-6.74%	-5.20%	-7.97%
Applied Materials Inc.	28.60%	24.12%	12.31%	11.94%	20.02%
Broadcom Inc.	7.88%	-1.49%	-7.04%	-6.73%	-2.53%
Intel Corp.	-6.97%	10.21%	15.88%	13.96%	—
KLA Corp.	27.23%	15.89%	4.74%	6.24%	24.40%
Lam Research Corp.	25.85%	25.31%	8.33%	4.88%	10.04%
Micron Technology Inc.	2.11%	-2.42%	-8.01%	2.17%	24.77%
NVIDIA Corp.	32.92%	13.35%	-0.64%	59.95%	—
ON Semiconductor Corp.	1.96%	-2.38%	-13.67%	-10.17%	—
Qualcomm Inc.	29.96%	27.37%	12.41%	13.81%	-30.86%
Texas Instruments Inc.	36.23%	34.84%	29.99%	29.67%	—

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

¹ Economic profit. See details »

² Invested capital. See details »

³ 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -159,280 ÷ 2,608,920 = -6.11%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	SolarEdge Technologies Inc. economic spread ratio improved from 2020 to 2021 but then slightly deteriorated from 2021 to 2022 not reaching 2020 level.

SolarEdge Technologies Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	(159,280)	(10,012)	(118,387)	129,442)	112,191)

Revenues	3,110,279)	1,963,865)	1,459,271)	1,425,660)	937,237)
Add: Increase (decrease) in deferred revenues	44,232)	29,325)	(20,777)	85,776)	41,009)
Adjusted revenues	3,154,511)	1,993,190)	1,438,494)	1,511,436)	978,246)
Performance Ratio
Economic profit margin²	-5.05%	-0.50%	-8.23%	8.56%	11.47%
Benchmarks
Economic Profit Margin, Competitors³
Advanced Micro Devices Inc.	-47.83%	14.11%	5.00%	-3.52%	—
Analog Devices Inc.	-31.54%	-75.08%	-21.89%	-15.92%	-23.95%
Applied Materials Inc.	16.52%	15.39%	9.36%	8.28%	11.82%
Broadcom Inc.	14.74%	-3.52%	-19.42%	-17.89%	-5.42%
Intel Corp.	-9.81%	11.44%	16.71%	15.63%	—
KLA Corp.	23.02%	15.66%	5.31%	8.72%	15.82%
Lam Research Corp.	18.76%	18.07%	8.16%	4.26%	8.73%
Micron Technology Inc.	3.62%	-4.04%	-15.81%	3.59%	28.85%
NVIDIA Corp.	22.07%	10.44%	-0.83%	24.48%	—
ON Semiconductor Corp.	2.20%	-2.67%	-17.92%	-12.63%	—
Qualcomm Inc.	19.96%	16.48%	9.36%	12.19%	-25.53%
Texas Instruments Inc.	31.77%	31.17%	26.89%	24.87%	—

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

¹ Economic profit. See details »

² 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × -159,280 ÷ 3,154,511 = -5.05%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	SolarEdge Technologies Inc. economic profit margin improved from 2020 to 2021 but then slightly deteriorated from 2021 to 2022 not reaching 2020 level.

SolarEdge Technologies Inc. (NASDAQ:SEDG)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin