Earnings call transcript Q4 2022

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Operator

Welcome to the SolarEdge Conference Call for the Fourth Quarter and Full Year Ended December 31, 2022. This call is being webcast live on the company's website at www.solaredge.com in the Investors section on the Event/Calendar page.

This call is the sole property and copyright of SolarEdge with all rights reserved, and any recording, reproduction or transmission of this call without the expressed written consent of SolarEdge is prohibited.

You may listen to a webcast replay of this call by visiting the Event/Calendar page of the SolarEdge Investor website.

I would now like to turn the call over to Erica Mannion at Sapphire Investor Relations, Investor Relations for SolarEdge.

Erica Mannion

afternoon. Good outlook joining and SolarEdge's XX, full well the for the results XXXX to quarter as quarter first fourth year company's us you operating discuss for as of Thank XXXX. the for ended December

results December Executive review the are Financial the Faier, followed full fourth for will with quarter Chief Zvi the of review ended and a Ronen and quarter With me outlook brief and Lando, XX, the of quarter Officer; will full today the begin Zvi by financial XXXX. for Chief Ronen Officer. first results the fourth year XXXX. for year, company's

We questions. will for call open then the

that to our press and for management's and harbor materially note the prepared contained material that this from a in call could certain All description. review statements non-GAAP measures statements expectations. complete contained to forward-looking involve reserved. non-GAAP uncertainties per Please non-GAAP encourage We diluted published the with differ share, Please current measures, not all risks GAAP. slides net presentation today U.S. more safe you will cause this release include that actual the in earnings property in SolarEdge are which note, describes net including accordance webcast is Technologies with and rights income in sole copyright the of results

in substitute the U.S. superior and These be how or we financial they performance. a GAAP. for provide that should understanding not believe management investors company's are with prepared as means to isolation The considered presentation measures the of this or from measures measures non-GAAP evaluating in presented evaluates as accordance non-GAAP with in operating company's the

Investors release, material of not XXXX section have of ended website. the company's the copy a may supplemental Listeners or quarter by XX, the visiting a who the do copy December obtain press

Now will turn call Zvi. to the I over

Zvi Lando

thank Good Erica. afternoon, and call today. joining you our on for conference you, all Thank us

start revenues record how main quarter $X.X them revenues with summary to and expect we themes moving our and of report XXXX a business record have to and forward. will with pleased the concluded for that are XXXX the I year we $XXX of We of the shaped year million impact which billion. the

XXXX the over in revenues solar in we -- saw the business. we and practically France. in the in and Total business in all the regions Italy, which in notable Netherlands, XX% United previous UK year operate. the grew previous States, segments and growth years the solar Germany, in was country across every XX% Most and Growth significant year-over-year, the

and markets we in several new significant Taiwan and generate including XXXX, Additionally, significant showing Brazil. reached potential saw future size meaningful for revenue, growth,

batteries that as revenues in the specific the to well XX% by EV XXXX of the coming A customers. ever of prices increase our the key a year-over-year. portfolio from beginning well our have growth function of came power is of to highlight Europe, our market the by since the boost been This and batteries from introduction to was European prior own and include revenues needs. our Ukraine-Russia additional as expansion the which chargers increases conflict our An annual addressing globally of growth received accelerated remarkable of grew the inverters,

growth our quarter that batteries our with of for attached increased our This, other of were are systems XX% installations battery in first -- inverter quarter the systems. rate, to our healthy batteries. fourth own to suppliers batteries attachment PV of Note indication of of new XXXX, potential of the the continued the inverter together for and sales attached trend XX% from were an with battery

portfolio saw we of growth revenue view, expansion significant both and of segments. point in our segment a From key

control home, launched side, residential including place. the and system app the energy homeowner single complete in them one EV-charging, for offering load all a we management manage to backup, Home, SolarEdge the PV, On battery

to is this the growth in PV with Brazil. safety segment, it applications all share provides market with designer gains, U.S., combined corporations, solution well working box. And the programs. our of their our floating year of software, the commercial available customers and proposal, our the In together expansion offering segment is adoption SolarEdge as Australia attributed now rate for of as such out our new and into as ESG successful commercial progressing Europe, commissioning, its design, in the installation Home an portfolio end-to-end fast-growing

demand XXXX. our commercial into segment Based we backlog, the the in are seeing in on the momentum continue to substantial we expect

On which We developed are we challenging and Mexico believe and Despite increase. year. the half in with demand infrastructure shutdowns shipments faced that ramp the the and of us we factory component to COVID-related our of challenges, demand. these In first the in very in very particular, that inverter resilience challenges, and the needed our we will in pleased side, our serve able XXXX, well factory as accomplishments optimizer gigawatt light to in were for volumes to operational year-over-year. continues were overall the XX% XXXX support growth products to we was increase a XXXX,

And now quarter. let's turn to fourth the

global record aggregate, revenues quarter, significant a quarter-over-quarter our this DC-optimized United This the of we in inverter gigawatts solution, generated XXX-megawatt batteries. residential led X.X In by shipped solar quarter States. the record business we hour driven of record revenues company, and growth our for from from

power shipped inverters. and quarter, This million X.X XXX,XXX optimizers we

Brazil. this delivered and quarter also France, Spain to We the Netherlands, shipments record

versus new result In low our sales a strong and in markets from view, channel. the see of demand products these as of installations. came continue countries, for this Europe From optimizers portion and inventory our we growth inverters a of point demand global to very all strong solar inventory across products the and higher and and quarter in demand in general, batteries particular for for levels of from relatively a

for levels at validated products. in by November from past. and the recent are distributors North Early was -- in so prior recent reports than with is of improvement. In fourth sell-through sales from XXXX for America, seasonally data residential were commercial the season record holiday seen down which This our in showing we to reports quarter the for our the the more years both an have residential distribution Europe, start

the we related of However, uncertainties of the X.X of are to NEM cautious the our light economic recently the rate corporations market in market, said, confident Forever. market the two the and announcing and Sunnova in in the strengthened residential environment, by the long-term recovery. we Freedom That are in market U.S. this strength players of important in with and and position mindful

gigawatts than the last we and and optimizers, quarter. more of point product, segment quarter of X.X a XX% inverters From increase view, shipped residential of X% commercial quarter; last gigawatts from X.X this a

dynamics opportunities export NEM the new In discussing this by XX% X.X a segment, I the X.X, the misleading average to policy. April. coming comes approximately elaborate is Under NEM bit the policy to tariffs, to from a if attractive coupling as export the year were power in and want proposition and days residential PV number times effect in California, where homeowners, rates for there in metering at especially new a But on the the times. make under more they and actually This are the into compared current specific which dropped will the right used are import X.X. battery, solar export higher NEM is with of smartly California battery rates the than

in to installation in experienced in the battery like We and takes transitions time reality, in the have past such seen tariff And plus Europe, typically Belgium. the rates the growth to Germany PV while significant happen new countries it UK, market adjust such transition. following we

algorithms use of Our maximize enabled optimization. import has base in and specific us such self-consumption installed as large of as plus the export time well both experience or use develop gain batteries to TV cases managing to markets

without to coupled from Additionally, amount inverter even AC clipping energy schemes such our for maximize XXX% architecture is oversizing. DC the solar can system the TV power due DC size, as stores suitable the of at at specifically the panels

power every in from DC-coupled discharging when this system battery for battery, X% in day, three to of XX lost stored ours. in like We up charging DC coupling to to opposed the there stored And architecture. estimate is conversion is that year energy AC as can days a only amount power also energy additional means the conversions. to these to X% and DC AC-coupled an conversions every one of

Finally, DC connection batteries one only mode, are the coupled to DC as commission in simple and not require self-consumption they to require do install upgrades. inverter and panel main

after good adoption As a we market that period our such, to we California. solutions believe plus solar will and in coming recovery X.X battery a PV NEM see effect, of transition gradual following

United where across and Moving seeing are to Europe Asia the we including States. all Pacific, geographies, segment, the commercial strength

footprint, carbon multiple of mentioned corporate growth to and is as in reduce Commercial push as carports PV, product Our I ESG, others. earlier, the trends, such community solar, the segment, a floating

have is which prioritize we segments PV as government use land. agri and recently, segment and traction additional dual And we this others. Taiwan initiatives of Italy, and seen such grow in countries in Japan, to increased see Most

of recently For solutions our trackers this for attractive from offer the portfolio of solution land growing flexibility product offering and and design this we application, released The comprehensive we optimizers subsidiary are safety based inverters adaptable our a our on make SolarGik. application. features our

from segments Moving to products.

needed have inverter XXX-megawatt of shipments This this batteries. as volumes not up these caught battery of in inverters residential, last the lower battery hour mentioned shipped than quarter single for on quarter, we X-phase our cases, As we specific is and some installations. yet

new strong We to are discussed the this the ramping on plus X-phase of last backup batteries. demand focused that for address quarter, inverters we inverter configuration

with residential to for in X.X% of is are highest of the increased quarter. global an UK rate where an to the batteries this attach attach our rate The batteries to Overall, inverters rate attach new new compared XX%, XX.X% inverters Italy Germany, of installations the quarter with attach that the to we in third the of rate XX%. and attach for rates our XX% see installations

like would address signs. installation to now I

installation, becoming need grows, systems their for both day, times the critical them to of well short installation manage a of to complete and is customers. battery PV of aiming plus enable of adoption predictability battery require of crews. to time They in installation our as installation time better time to better plan the as single often installation a As electricians

from focusing system design and We installer physical commissioning. the on experience installation to are

to helps homeowner automatically then and of commissioning the it design installer Our entire the and exact the needs SolarEdge meet app, design then export installation installation guide system. physical enables system the which the software to to

home and our installation communication controls, upgrades. can load time-consuming often inverter costly time-consuming architecture charger the between battery, avoid you network and eliminating while Our EV wireless means of wires, coupled communication SolarEdge provides main panel DC

than XX approximately minutes. backup in Our a step-by-step PV complete system system commissioning PV-only battery minutes XX and less process a enables in commissioning with

the in aiming the XX% are year. We reduce than to more by commissioning coming time

a install less plus consistently Our to day. battery system one PV in goal enable is to our customers than

the and placing growth, availability increased on worldwide product product for the crews demand systems that and we is becoming fact a simplicity emphasis bottleneck via installation PV time and are Given applications. the installation qualified of support all portfolio across training automated of our development, for significant

get management and transparency, granular acquisition Systems. companies early smart an IoT Hark machinery, the systems, HVAC, integrates then Hark company what meters It in building and they allows and of storage, In Service, Leeds of are acting suite EV analytics in start Software industrial UK. assets. a we solar is as based systems, charging with products energy on January, to services, Their announced seeing. energy lighting SaaS of the other level factory

within as can expect that and we awaiting play our space. and to the and offering at start-up of product our increase regulatory can companies, out capability the which the role roll stakeholders up to chain, closing XXXX, a that to The their UK, processing customers approval Hark estate product, adding portfolio transaction and has us first the the of great overall in intend receive a we is to stand-alone half in this energy which real we customers believe includes team value point different deliver industrial demonstrated services. selected of scale Besides of of which innovative commercial new in to XXXX. we is group this a supermarket Hark it in companies support

to Moving non-solar our business.

Sella customers. Our will we schedule, factory temperature shipping for cycles, we storage and into through energy shipping, X sale which sales our designed range. X,XXX on our to is power and from application, be are wide are incorporated can ramp-up factory stationary batteries, also to the optimized The residential is reach density and energy high up has and throughput high commercial a and new

lower in this revenues further additional to parallel, intangible E-Mobility which scale as a Our to at than rate engaged assets has original Ronen. supply at to the to will we division write-off electrification as related continue powertrain acquisition however, steady initially of continue a led are opportunities, Stellantis. detailed by we units the of In anticipated, be

the hand on U.S. our like update over to I would Before to Ronen, for I call plans manufacturing.

a and owned are domestic U.S. manufacturing of executing on manufacturing facilities. of inverters and the We contract of a basis for plan optimizers combination

We and third by and expect U.S. to the be commercial in quarter half first the residential products of second the to of market for manufactured be the are XXXX. manufactured aiming credited the for domestically IRA majority products of XXXX

Some clarifications of from on details of dependent this the are impending still the plan treasury. the

well XXXX. expected a some transition remarks, transitions multi-segment pleased have which year, the entire We we the this growth seen -- us global the are during we and approach. in of fourth the will presence To quarter expected market with summarize my of are believe in serve and approach result our

will to And now it hand Ronen. I over

Ronen Faier

Zvi, includes non-GAAP on is the GAAP in Full to release the and other intangible this Thank discussion. financial is not and do call that include of our gross amortization stock-based This impairments GAAP you, on compensation reconciliation certain everyone. pro profit operating review goodwill the segment press issued results afternoon, intangible less purchased assets Segment website profit assets, of and and the expenses expenses forma available of good comprised discussed for of and items. today.

our two like that effect results. while financial Before the I GAAP minimal impacted for having quarter, start to review our I the would to on financials no address issues non-GAAP

and year-end addressed procedures, acquisitions. valuation the to As intangible of related assets existence we past our our of part

deliver by our future as divisions mentioned and is products strategy. Zvi, While to our part continue E-Mobility of

Following the which our the longer financial business and conclusion intangible to included goodwill, is business analysis, we this came that no related assets mostly justified. to

amount representing related As we written assets such, $XXX.X our million entire quarter acquisition. a intangible this have off of this to GAAP

amount we of wrote related the as million intangible automation our $X off operate machine usual. In that addition, to assets business in to continues

approximately tax to noteworthy corporate on Israeli of from item regime, billion second shekels, tax over is of billion subject The is $X.X an XX with technological reduced tax the derived Israeli corporation products. related income expenses. to Israeli Under X% sales new

in United States are, in Following form since we this is impact are actual paid therefore, we year, our whatever expenses crossed threshold have The for both and GILTI our this on growth taxes and our tax. eligible GAAP minimal our in benefits. of reflected results such the saved Israel non-GAAP the in

tax regime. our deferred tax However, in corporate since assets at the be of the is able impact tax significant on will Israel value we assets to utilize lower these

revenues compared the the Turning to now X% same a increase compared year. for quarterly Total quarter million a to last $XXX.X and our XX% review. to last fourth were million million $XXX.X a increase $XXX.X quarter quarter for record

batteries compared year. quarter a include quarter $XXX Revenues compared from for same the residential were last million, to X% our last and which sales XX% $XXX.X increase a million a segment, of $XXX.X million increase solar the record to

from $XXX.X XX% from quarter XX% a solar last Solar increase increase representing were XX% last the same our and revenues quarter a year, million, quarter United from the the revenues. States of this

quarter Solar the were decrease from increase revenues. revenues last our XX% the XXX% $XXX X% Europe representing from and same a million, quarter of from year, last solar

last we quarter. and in quarter the by revenues to seasonal to While inverters Europe quarter optimizers in Europe XX% batteries compared sold factors, this due grew this less our

to representing the last quarter, and This $XX.X Netherlands, XX% solar the our rest record a in decrease the we revenue XXX X% product of record States, total surpassing megawatt the X were million, a On year, a quarter shipped Rest saw the last and XXX compared a Spain increase a to World France. solar the record shipments. X.X gigawatt world, the of of quarterly of revenues. gigawatts Europe, and record from to megawatts United to we X% megawatts basis, revenues

XX% strong fourth and States. majority our were demand In the were a quarter remaining United of by higher XX% while the battery. shipped megawatt the driven megawatt shipped of products were adoption commercial to residential the which the this towards the XXX.X for shipments of Europe residential we battery, hour X-phase products, mix sales vast our quarter, representing

a battery last quarter. as in stronger per portion product was we is this well in $X.XXX, mainly a watt increase from per euro, implemented quarters. previous as the of quarter, decreased result the increase watt X% ASP excluding revenues, ASP a result $X.XXX This commercial mix of increases price of have

single ASP in sold ASP kilowatt are kilowatt quarter. at markets. that and noting this X-phase our based per worth on is different Our hour technologies different was since per hour they different are batteries $XXX It

battery we had both This types. for in selling our no prices quarter, change

gross businesses quarter the the same the was XX.X% in non-solar margin GAAP last compared quarter Revenue to quarter prior XX.X% the from Non-GAAP compared our same XX.X% year. year. the this $XX.X quarter were in was Consolidated gross this XX.X% and for XX.X% quarter in in quarter to million. margin last quarter and prior XX.X%

Gross is XX.X% a quarter. for stronger previous the price segment we in of a gross prior The margin increases margin compared the euro mix quarter result implemented higher a higher to this XX.X% solar quarters, was in and residential of the products. have

the of we impacts United will shipping as in Vietnam. majority our our holiday a of of expect global from a and not to coming further States we the decrease As and U.S. logistic did to our percentage United from products result ramp revenue a into attributed to site Good an we accounted Mexico, have the batteries the quarter our in the expenses, of improvement in a mainly shipped in upcoming continue subject to every as to fourth season supplying residential the This portion continue manufacturing in tariffs, commercial production manufacturing meaningful flow to increased is States decrease which which compared quarters. our products of the quarter. low excluding a that XX% ramp XX% quarter, has our last our is record for of this China, U.S. shipments of

$XXX Gross our to of result quarter in the prior e-mobility $XXX.X the last of revenue, sales. for X.X% XX.X% Sella for costs margin was and compared on or our million XX.X% or million On minus margins and quarter, ramp-up basis, X fourth compared quarter of non-solar a of a same quarter XX.X% were year. expenses or in the segment for previous revenues non-GAAP XX.X% million revenues to operating $XX.X lower the

solar compared quarter. were percentage of Our last as XX% to a operating solar XX.X% expenses revenues segment

see the to in as to expect expense this We grow efficiency revenues increased base. continue quarter ratio our in next faster our than

operating million income $XX.X in was Non-GAAP the previous a quarter for compared million for period $XXX.X last the record to the same million and year. quarter $XXX.X

loss This quarter, non-solar compared operating segment generated solar operating profit $XXX.X $XX.X profit an to of $X.X segment the record loss quarter. generated compared million an million of $XXX.X operating million quarter. previous the million last to The of in an a operating of

$XX.X Non-GAAP the expense compared of previous income quarter. a was quarter for financial to $XX.X the financial million million in non-GAAP

million year. the last the tax non-GAAP $XX.X million quarter same expense period to compared of for was $X.X $XX.X previous and Our million

year. to income quarter United GAAP expense includes net tax compared expenses quarter. fourth the was same the million in quarter for This the the $XX.X capitalization million million, explained $XX.X outside $XX of a previous last GAAP R&D quarter the and last quarter net spent of as in States income of

and million net $XX.X to net million the Our compared of the previous record in quarter a quarter income a last same year. $XXX.X non-GAAP million $XX.X was non-GAAP in income

and the last quarter GAAP was to year. last the net previous was in quarter quarter in $X.XX EPS the in for the $X.XX Non-GAAP $X.XX net diluted and the previous quarter same fourth year. quarter to $X.XX share diluted earnings for same $X.XX per compared $X.XX compared

balance the to now sheet. Turning

investments XX, $X.X restricted cash, and debt, billion. is bank December were of equivalents, As bank cash deposits, Net of billion. this amount XXXX, deposits $X

quarter we last to generated million $XXX.X to this compared This operations. from flow in cash quarter, million $XXX.X quarter. net AR increased million $XXX.X

are inventory Sella a to mainly compared level, ramp X $XXX.X of level some quarter, reserve, net As which of the materials, the at million of battery prior of of to December factory. higher was related $XXX.X our result in our raw of million XX,

year record increase segment $X.XX Let for margin from gross the a to million Non-GAAP XXXX related GAAP was billion, a $X.XX million net full XX% the me in year. a XXXX. XXXX. to margin Non-GAAP GAAP record net year million, a Revenues the million, income were $XX.X $XX.X Revenues to to a year to calendar This summarize the the to in was cash increase billion, was record in $X.XX operations. XX% a of GAAP to XXXX solar we XX% decrease in million increase $X.XX prior non-GAAP diluted $XXX.X prior $X.XX compared the $XXX.X XX% billion year. compared XX.X% prior a was prior for to of compared income XX.X% prior for XX.X% EPS were in to XX% XXXX. compared $X.XX diluted of year. XXXX. and compared year in EPS in And quarter. the record $XXX.X a the compared flow compared in generated $X.XX year, gross

quarter of guidance be to $XXX the $XXX within revenues million to first range to the million. Turning for XXXX. We're of our guiding

We the gross be of XX%. range to non-GAAP margins to expect XX% within

expected range expected to range of solar $XXX $XXX the million. expect be be operating profit the solar within to We XX% $XXX from of non-GAAP is within segment to are the the of to from million be segment Gross XX%. million. Revenues $XXX to range million within our our margin to

please. it turn now will the to over to call I Operator, for the up questions. open operator

Operator

first we'll of our And Julien Instructions] from take with Bank Dumoulin-Smith [Operator question America.

Alex Vrabel

well you their XXXX you a as far here that sort growth. governor do super When What availability I these kick It's sort Vrabel things growth. robust. moving to being or in whether referencing Julien. pieces think there year-over-year, European constraints here? incentive stuff mentioned really bonus some of in as the of one as I about schemes, Obviously, moving for the some with there's growth know you on as pieces it's for actually we on mentioned the installer Italian I'm expect install other just think can European Alex with of If past, really, off

Zvi Lando

that In comfortable year, what factors mentioned our account. to our many to item Analyst I the into capabilities manufacture basically throughout to not We to think And think to demand that number. exceeding we'll needs kind be our see this and Day you add need this ability guidance, Well, yet we last actually other and manufacture production to to But such, than in that annual I and this deliver. that is XX% we growth had the taken in as numbers. we mentioned March, give as we is guided another that do XX% cases, do still with feel we is the far everything capabilities year-over-year. of any to try this, actually exceed this because

Alex Vrabel

And non-GAAP are seems Got on can guide, you the solar-only drag the of think it non-GAAP if big clarify resi like look the I'm as the well at it. what of you XQ margin how I just we pretty you as in margins magnitude there's XX% is Curious in consolidated margins. then when that's Wondering past. there can and and just sort curious, the battery trending? between kind gap segment, referenced number clarify a one if what the

Zvi Lando

into think things several to So account. here, that take I

a, manufacturing. ramp-up the out discrete of very consistent. than related We First a you've and lot little amount usually yield of And until process are our this is need product kind the you're At when it are ramping half increasing which the what stabilizing the process. we understand bit throwing that the of a call of is process, the XXXX production especially in of what way, that process. or different stabilized X process, relatively to non-solar of we by line reflect experienced, over are is all, this throughout actually That the materials factory, that the stabilizing margins small, the is coming is time very beginning, factory. once expenses is actually the means yield away once of Sella we to first that we we

what saw as for that also So I think in in this. QX reflecting mentioned, pretty our and you QX you much is guidance

little of the We this the in is bit batteries in that units a Stellantis, portion powertrain exist also our we're the that related bigger the and the moving general, margin. at driving a of division, is in say non-solar mostly business, quarters it to margins, next in actually there, least of there's And type to the E-Mobility battery what related two component is of factor to I see a providing is one, lower in variance for pieces. bit be X. the would that will the little Sella

to it And batteries actually it the XX% And that year. segment, will part target closer I of said batteries gross in we're margin we XX%. QX as on to about for. targeted actually, are to and that to that residential get reported And XXXX. When this was the segment. the getting closer the is to XX% we assume solar that basically have comes margins our not our this non-solar In case, we get

Operator

And we'll Lee with take our Sachs. next question Goldman Brian from

Unidentified Analyst

Samsung running, higher points This you've Sella X has SDI. basis X,XXX is first got that is, question now Miguel than for margin on you Brian. and Yes, mentioned of up Sella X

So you do Sella questions mix basis expect battery we should realize think about to in points then when from going X How And two Samsung versus margin? the the X,XXX here. forward?

Zvi Lando

So in continue Samsung going cannot of sales to today are other general, residential disclose. One first batteries. that And into player is we batteries a to that the will situation in serve we're batteries. I Sella to going the are have see where one of at going to past, think we as mentioned, our least of two our sources of of have remember the others need we X and we a one that a that combination all, is I've sales maybe and

will a you So here. actually, mixed see result

means comes Sella X, to come of need we coming we the year In batteries we to it general, to overall segment this to remember that that coming battery also year. also Sella is Sella will a X-based other gross R&D stabilize batteries a see X, based we to only battery start is towards coming. different, this basically that way ramp end improvement a the we that arriving of And the making both this to when that to -- battery, will time, the that different and on cell and it continue X late we from the XXXX. solar year. need that usually not because on market Sella the in bit whole margin going development little will towards and that the which our a of until the means happen new requires on the in is the Samsung And see will have through is that see expect end player process that the Now

the past, but There last time the we thing will to And be cost is combination always this mention, of important be selling margin prices adjusted is is is what to environment the also we and gross the believe actually a said most is because one as battery that, price likely going also time. have at certain downwards to price. in over a that

that there, we, the for Sella together, margins batteries, solar by we'll we're think that, will down. where long target batteries looking X batteries prices to even gross you term, we out maybe have I the should again, adjust XX% the way, at for with have competition So we at see when the look once

Unidentified Analyst

And it guys are XX% Day, XX% Analyst color. pass that long outlined margin question of, that target. term all as The I'll in me, appreciate ahead I target to already last I you of for think, Okay. then the long-term gross and on.

margins think in could are on presumably and to takes what improving. freight savings get also margins and XXXX, more given where puts from we cost what upside is the battery So

us Just hoping that as through if walk well. could you

Ronen Faier

higher enjoyed the QX percentage New get the in can due continued all that shipment Chinese in of once expenses QX Year to are lowering impact say, additional of mix revenues we a you within come is together, of would by and all capacity manufacturing the that the of batteries the mix. phenomena said prepared not In the as general, fully, have be product So I I actually have here, going think way, a as to will income online. and mentioned of that main in extent the yet overall I benefits from to my we factor remarks,

stabilizing guided usually lower And for see to because an this on there a are the batteries of fact that may profit net mix. margins will to will expect And XX% still do bit either that of margins, the push OpEx see we gross that we little towards improvement we all better one they chunk expect as to XX% was, of our operating margins the that upside bit we them, what we mix taking they believe add by Analyst here batteries. you on amount your have a the some will more while as us profit of little the margin than our note, to require that to higher is down. to continued getting the of will But Same of or batteries target and do the as means again, continue because is we while start what operating in question, much R&D. that the in long-term batteries the guided in Analyst see see maybe around mentioned, the the actually numbers to overall XX% a the carrying our get Day, when be we way business carry is we gross therefore, to believe XX%. revenues. though, selling The also thing expect offset to this operating bigger Day, simply overall bigger also much which time We capabilities that today less that see in we to improvements

Operator

next move Philip Capital Shen Partners. with And we'll Roth to

Philip Shen

you up XX% being about 'XX. in talked Europe think year-over-year I Zvi,

be growth you Our know multiple that growth about standpoint for you you see that to well. a perhaps might the do standpoint leading what first from be that the talked be wondering just ultimately, I is a might do XX% is half? you a to back you 'XX distributors the expected might I Europe. forward-looking little ‘XX strength two, confidence and to half slowdown? any XX% be see quarter. with maybe But signs you trends you expect could indicator a that weaker Or was seeing -- in just talk you seeing of see compare in you back you give by to year-over-year. half? that For half bit Are But the through you their example, how in the able can't inverter back large checks suggest the quantify outlook versus as if the it

Zvi Lando

more globally XXXX indicator we demand. I Phil, dependent what most in can it's in but for than particular, I in, for that be in Yes, volumes large we is extent, current think similar a company on delivered to our our give is produce whole, were our to well XXXX as ability an the Europe, true Europe backlog which you in the and by also the will in a Europe. XXXX, in indicated as pronounced the which to condition is above XXXX Ronen,

is strong, So the to as and market good are production far the that the and demand market we as ramping we -- is demand. is can see, meet

able now I the on we're well, market final production, product, the is the moving needing rate bit said, ramp from think than still rate be -- where is our will constrained demand. on as that determining a faster right market the growth I space think that less factor run focused. And we to year-over-year question Our to single-phase in I are the we much to little XXXX are that, solutions, the XXXX, ramping of that's and the closer

Philip Shen

that? the acceleration share that but any have through megawatts states? that stable? guidance, of you the a slowdown outlook and QX perhaps could -- Can year-over-year Is talk with you recent some U.S. the at of we in prepared And you you seen talk have Or the of rest flat Are for a or can you're can And remarks, could giving dynamics we down not definitely the Enphase. And bit much U.S.? you I you if to in then about in about table? your have shift you change? U.S. U.S. in be there's it talked think over the market. qualitatively, the the year? know think then a growth of I on Great. do the Or your How changes in cautious

Zvi Lando

Yes.

and I'll all hit on of So try them.

growth. that which the a is On strong U.S. demand for on now the impacting of discussed, I as of still meaningful mentioned right speculate softening seeing First commercial, it's NEM residential, I recent and and was residential, combination X.X, we're rates wouldn't I California. all, anticipating the interest

United California general affecting business, not is residential across our environment is in Now States. of meaningful business, but percentage the interest a our but true huge rate the it's

recovery of think installation a demand will up function get X.X terms environment. be of implications everyone of of stabilizing and the the I properly stabilization the and and offering set cetera, et understands -- in the the general And once NEM them the capability, for

post very exactly when going growth, for ITC that things I have recover venture So it when that and can nice areas and and will when and what the those predict. solar to at happening, I'm from we happen higher you that a see confident but to think the at other other IRA of that's not than to from that is in up back pick terms going we're the installations, don't outlook with rate, to providing attractiveness begin to those come you But different a will of rate. predictability are

Operator

Mark to Strouse next move JPMorgan. with we'll And

Mark Strouse

wanted one visibility. I C&I to start with on

the well Analyst on that your on you gigawatts at was time. provide ability as this you Day be you or your Can might that backlog March, last an deliver about of to -- as to year? update talked backlog X.X think that that able what in of kind I percentage at

Zvi Lando

So it's good Mark. a memory,

Our current in C&I was backlog beginning it XXXX. double than than of is more the

of healthy described And very the overall prepared of completeness as remarks market really focused the rate meet earlier, terms to very good our and that we're solution adoption the and increasing in environment The in into XXXX. are very able answered And backlog. momentum. on portfolio it. the putting I deliver on it's in to backlog So is the I we're focused demand looking the the us be and of to dynamics that and there, capacity

Mark Strouse

the manufacturers. there planning a whatever that Is you think looking Okay. Or mentioned into a I And owned me. clarifying of question just production, then regards With you're you where ahead potential U.S. both out to contract for for have both? using just and comes that might scenario is treasury?

Zvi Lando

a Yes, both the potential flexibility might have to out we might we there -- maximize where the scenario benefit of have legislation. and in order where is the

Operator

Blanchard Corinne move next Bank. And to Deutsche with we'll

Corinne Blanchard

guidance detail you is a maybe into the timing. bit FX terms manufacturing. at? in taken then rate the And want question to looking you're I And for provide the the the consideration on and capacity can back go any of the U.S. more Is second margin? on which you more there on that little have

Zvi Lando

and -- mentioned, we the direction products from U.S. the that being timing, and mentioned regarding the and ramp to -- own we're we able that the believe reason So we the contract of quickly XXXX manufacturing to combination going as of in will the production I of is third will factory manufacture begin within the deliver in before. quarter I is of part that

Ronen Faier

we right I many of feel exchange very at there that now. say we parts, time, terms on this based would are that guided moving In margin, gross only since comfortable rate

Operator

Truist. And we with move to Jordan Levy

Jordan Levy

in inverters up that X-phase you was of the coming see On apologies over production rate, attach keep but just battery you of sort demand, terms the answered, how with if battery quarters? the of can already progressing the this talk ramping to about

Zvi Lando

answered of an inverter released many Yes, And one of and that I terms is in inverter our features. strong demand least last mentioned to XX% at Germany, cases, X-phase there's installing than battery. more ramp. battery us, the new people more for and as quarter earlier the one with We very are items our in that attaching actually, that -- I example, focus one backup met than for our that X-phase of questions a in other and capability

from supply. now and a our us are really that demand matches we quarters until take will It at probably run rate

frame the target that's quarter manufacturing backup time will be for where that's inverter. capacity at the the if So probably third towards the we residential question, X-phase the

Operator

we'll And Colin with Rusch our next take from question Oppenheimer.

Colin Rusch

chain supply on products? efforts the engineers plans start up taking bit things little of able to up side you some loosen cadence you're some about as to Can a you out and and to reduction talk bit engineering? the you're going the the a Could cost do through incremental free cost about little talk that around

Zvi Lando

the somewhat think component situation better in terms while I of Yes, is Colin, availability.

We the in the still point for components, in order, the resources especially R&D did portion position of for and to production to multiple the are of various ourselves significant a vendors That still at cost activity. order in robust suppliers supply future qualifying meet resume engaged are only a we where not in multiple but demand, said, reduction components. of capacity for also having put R&D

take things this majority is of we're reduction that in expecting logistics around It year But improvement improvement areas efforts and time that. the will think like margin for still cost take the I to effect. R&D-related

Colin Rusch

getting to Okay. want some terms of guiding balance operating for you through the the bit understanding of can targeted you of kind little cadence that but that work operating of year, for That's not the some about cadence of targeted super to around of I the you're year, optimization. the realize just as think how a you helpful. then you're in talk the And expecting the leverage margins, that

Zvi Lando

and a to account to we it's -- battery, have an salesperson to especially the because and that selling simple So it's selling working more fast the tell of also actually to sales and given is he an efforts bit inverter it's smaller relatively are the little that an the are fact smaller revenues batteries. low. same a an related Colin, going here, it's how are This the a developing is just to batteries when also can products on I do much teams that as we And and is does than due mostly a sold inverter. growing And -- working going ones more here, that product. fact inverter actually distributor develop than a you

not the just is we actively see we to it this falling efficient that see, when attachment that something to even place that battery more I So -- and rate comes the simply into in that everything it's order more be we more fact do efficiency. think the

or each do. a every is minded say So sell I that that efficiency effort increase than more in there sale and the other to a to wouldn't thought we the simply fact how of

Operator

next we'll Blum And Michael take our with Fargo. from Wells question

Michael Blum

back that. but U.S. wanted on go ask other just question manufacturing, to I to to the Sorry one

residential a of U.S. have language clearly, heading kind into on the 'XX. cautious So market you

trying to Just square how market expect? you to need flex implicitly longer is plans persists just to capacity And U.S. your it with that easy capacity that that later this year. how weakness the capacity? assuming understand you'll recover you you -- than add that maybe if Are will is so market that

Zvi Lando

I that production case, positive residential in increases in and the think for that I ITC, price the So any for seeing many are and power predictable the long-term is regions. reasons mentioned think you're we process. gradual combination American price very ramping the North And terms outlook as in I of of increases, the of

bit we ramp way, are long-term advance time, will we of in actually, be we it's what a having of you So to in the the factories of market. believe are a of will, softness strength if the

and positive, capacity few the quarter next we're outlook for and aimed with not factories quarters, I able residential contract give momentum order are manufactured to some The only seeing between a we is also and among generally the obviously. for combined -- in in demand the softness factories. our But are be approach domestic or that fluctuations to manufacturing segment, maybe or us the two product other long-term is to mentioned but strong and in things, speaking, flexibility the and long-term mid- it we meet in market expecting building

for segment commercial capability very States, are we expect us that segment United well, in grow segment that to we domestic and one as as and building a the is The well. strong for product supply to

Operator

Steve with we'll And to Fleishman next move Wolfe Research.

Steve Fleishman

views of able IRA potential optimizers. to the update full you mentioned you call, in the inverters your to level that be and any last give the credit get? you're on on mix get to of think what watt us $X.XX I per hopeful Could for on credit likely you're

Zvi Lando

to account. obviously, are topic. we the plans And are on official and of our to still come we optimistic. this So for take ruling treasury waiting that guidance But into out

Operator

Kasope next move Sandler. with we'll Piper Harrison And to

Kasope Harrison

first gross despite why margins are more looks just It help XQ have in are flat much gross solar follow-up one you guidance. despite bridge FX in So XQ versus is flat question. like And I margins Can a solar us FX on tailwinds? then XQ. favorable .

Zvi Lando

reason Here, to Kasope, the of related products. is, mix main again,

mix the as we've QX, in As margins overall mentioned and better. basically last less course, sell part the then batteries more of are batteries the gross shipped we we in quarter of

driver fact into that back higher are the are actually commercial combination of is more we are characterized yielding residential would gross these that The this, and sales see and expect products. come usually guidance margin two that that that compared cautious of the more do gross I to call portion related margin lower products mix Europe, it, QX we with in second to are of gave. to The the sales are

Kasope Harrison

compared resi megawatt year? for then your it And that's And inventories guidance us you extent provide your my give me. wanted you to color of a once in compares resi. sense the follow-up channel on cost to how business up for some question, To I U.S. you can just U.S. can that to year, maybe the you follow QX on again the then on inverters? prior And prior can,

Zvi Lando

inventory. of terms In

than the and described, in what past. fourth was of the where the quarter, result typically in significant a originators, in there decline as is from So decline I distributors sell-out more we're

I the and improving, is expected So the for the a XXXX, little inventories this will first we're of they were how and beginning are few as inventory. positive. sellout We're drain and it over higher not reach on said, a what's going exactly of not last of quarters. in than glance in when And levels were bit

quarter -- expectations in probably flattish the but on I residential have we North can relative the in me, for the We and in numbers regime, America don't more to terms last it's year, specific. provide of exact but in the later of first front check

Ronen Faier

ability to And than call, the supply to that limited I on mentioned, see. demand more that our thing, this this add more as rather I the would we're is like and one just Today, fact we think Kas during

backlog front So is us in see all the to really comfortly that backlog regions of the very, regions. I that various would us between allows in we say, navigate

the the that, world that and is for we demand going market rest expected is be or see in see we than QX, example, in Europe to softer if always the of QX higher. And U.S.

say into throughout can ship and the to regions quantity but would manufacture how here, deliver the to, what I that So actually much we can less products we that related of is rather guidance of quarter.

So much really, not between our the U.S. point deviation of or is at Europe very time. this impacting guidance

Operator

Credit And Suisse. Maheep we'll to with next move Mandloi

Maheep Mandloi

up. to large could Freedom in] deal you follow could What same that you your markets move and talk pricing that just you And leases? Forever. Is with of as How with forward? indicator you switch maybe the does base, talk the if impact U.S. from are that customers if your in have? Is they for an new loans on you that market. end seeing from power then Maybe to going about exclusive? partnering the you And installers [capitalize about

Zvi Lando

it not our Maheep, we small States. large question and sure but the United the Yes. referring -- installers well, it within heard I'm was the to in position

Maheep Mandloi

yes. right, That's

from shift loan to they leases. like As Yes.

Zvi Lando

you. lost we Maheep, Sorry,

Maheep Mandloi

about Sorry that.

move large your curious and small and this as from year. installers see and Just mix especially on to loans we a leases

Zvi Lando

Yes.

strong the as traditionally, our States than our and long tail. you very in United the know, installation historically position is think, position in stronger the large and I PPOs with companies

our to mechanisms We reason we outlook and But we the in said, share that due the a still the companies historically and reasons, our have the also America. and that tail. strong the lot an future be installation some Forever, of example, a do are of effort future, as we IRA, currently, we Freedom yes. that's in believe about also to the with in in North share of many position expect and in that positive variety long increasing stronger of of for is segment part investing are also large And

Maheep Mandloi

on details then And that exclusive? more could Freedom, just is just you some relationship? you. on that And provide Got

Zvi Lando

cannot there on but are exclusive unfortunately, elaborate not many It's them. I and details,

Operator

our question from Osha we'll Partners. last Joseph Guggenheim take And with

Joseph Osha

ones. quick Two it. made I

in in of $X.XX see Or the First, we still Ronen, is the of is in some the past you that issued also, thinking way that delay there, benefits move And and euro? that sort guidance about of XX of each the still yet seen the effect the perhaps Is through sharp have a worth business? could euro there fair in points. all basis we from about flowing some the QX move of QX?

Ronen Faier

Joe. He,

would usually quarters say, that for is of a dollar Europe at usual. number trended is So I the spent XX bit is first to the mix way every of I more tending see bps right all, say sometimes it simply that little the a range the XX you to United of to QX a, look given U.S. again, changing versus States. look at And against euro. usually, would to bps than between be the

XX XX So is number. the to right

then exchange we against per see last U.S. rate, the the compared for exchange over to we was comes what in quarter. overall average the into -- we QX it euro jumped last a months. and about when lower rate the just because the $X have about saw that lower against today the the was It quarter, X, mostly sorry, dollar guided When EUR a month X.X to and rate actually, -- exchange during dollar,

that the So by now. right the than see was we quarter last average levels lower definition,

Joseph Osha

Okay.

that yes? QX, And being flowing there so in incremental even euro flat some financials remains through be the the of benefit should the idea now if

Ronen Faier

is This Yes. correct statement. a

Joseph Osha

Okay. follow-up. And then a quick unrelated just

the to in the something are think I'm more plans But continuing to of are investing run business? continue You've it or just curious of drivetrain Stellantis. for in kind any ship Or in there that EV that as business should down. invest you're to goodwill business not? to the written down all of we what being plans that's

Zvi Lando

Yes.

engaged and evolving at the continue write-off. in is -- we we and comments, potential continuing plan see and opportunities. focused different multiple the invest as are and the scale are in invest this rate and are reflected as the the mentioned we business, to in thus market. this -- But with we we which this But We on and still financial Ronen to are still I

Operator

back to are remarks. And questions Zvi I it it would further turn this now for any closing like no does at appear time. Lando there to

Zvi Lando

pleased everyone, summary, Thank you. for quarter made And Thank are interesting an Thank in progress and XXXX. all today. we've we with this joining are and operational expecting you, us the XXXX you. in on metrics

Operator

you for today's participation. conclude does your Thank program. This

have time, any disconnect and evening. a at may You wonderful

SolarEdge (SEDG) 13 Feb 232022 Q4 Earnings call transcript