SolarEdge Announces Second Quarter 2019 Financial Results

FREMONT, Calif.--(BUSINESS WIRE)--Aug. 6, 2019-- SolarEdge Technologies, Inc. (Nasdaq: SEDG), a global leader in smart energy, today announced its financial results for the second quarter ended June 30, 2019.

Second Quarter 2019 Highlights

• Record revenues of $325.0 million
• Record revenues from solar products of $306.7 million
• GAAP gross margin of 34.1%
• GAAP gross margin from sale of solar products of 36.4%
• Non-GAAP gross margin from sale of solar products of 36.9%
• GAAP net income of $33.1 million
• Record Non-GAAP net income of $49.3 million
• GAAP net diluted earnings per share (“EPS”) of $0.66
• Record Non-GAAP net diluted EPS of $0.94
• 1.3 Gigawatts (AC) of inverters shipped

“We are pleased to conclude a strong second quarter of record revenues, record non-GAAP net income and record non-GAAP net diluted EPS. We continue to generate strong cash flow while strengthening our position as the global leader in the inverter market,” said Guy Sella, founder, Chairman and CEO of SolarEdge. “Despite the effect of increased tariffs on certain Chinese made products, our non-GAAP solar business gross margin was strong, at approximately 37%, slightly higher than the same quarter last year. The integration of the acquired non-solar businesses is proceeding on schedule and we expect growth in each new line of business in the upcoming quarters. We see strong customer demand for our products worldwide and we are building the needed capacity both in China and outside of China to meet the needs of our customers.”

Second Quarter 2019 Summary

The Company reported record revenues of $325.0 million, up 20% from $271.9 million in the prior quarter and up 43% from $227.1 million in the same quarter last year.

Revenues related to the solar business were $306.7 million, up 21% from $253.1 million in the prior quarter and up 35% from $227.1 million in the same quarter last year.

GAAP gross margin was 34.1%, up from 31.7% in the prior quarter and down from 36.1% year over year. This quarter’s gross margins were negatively impacted by the increase in US tariffs on China made products.

Non-GAAP gross margin was 35.7%, up from 32.8% in the prior quarter and down from 36.5% year over year.

GAAP gross margin for the solar business was 36.4%, up from 33.8% in the prior quarter.

Non-GAAP gross margin for the solar business was 36.9%, up from 34.3% in the prior quarter.

GAAP operating expenses were $65.3 million, up 12% from $58.1 million in the prior quarter and up 58% from $41.3 million in the same quarter last year.

Non-GAAP operating expenses were $54.9 million, up 14% from $48.0 million in the prior quarter and up 56% from $35.1 million in the same quarter last year.

GAAP operating income was $45.4 million, up 62% from $28.0 million in the prior quarter and up 12% from $40.7 million in the same quarter last year.

Non-GAAP operating income was $61.0 million, up 48% from $41.2 million in the prior quarter and up 28% from $47.8 million in the same quarter last year.

GAAP net income was $33.1 million, up 74% from $19.0 million in the prior quarter and down 4% from $34.6 million in the same quarter last year.

Non-GAAP net income was $49.3 million, up 50% from $32.9 million in the prior quarter and up 21% from $40.6 million in the same quarter last year.

GAAP net diluted EPS was $0.66, up from $0.39 in the prior quarter and down from $0.72 in the same quarter last year.

Non-GAAP net diluted EPS was $0.94, up from $0.64 in the prior quarter and up from $0.82 in the same quarter last year.

Cash flow from operating activities was $50.8 million, down from $56.5 million in the prior quarter and up from $43.9 million in the same quarter last year.

As of June 30, 2019, cash, cash equivalents, bank deposits, restricted bank deposit and marketable securities totaled $373.6 million, compared to $398.7 million on March 31, 2019 after all payments related to the acquisition of SMRE shares.

Outlook for the Third Quarter 2019

The Company also provides guidance for the third quarter ending September 30, 2019 as follows:

• Revenues to be within the range of $395 million to $410 million
• Gross margin expected to be within the range of 32% to 34%
• Revenues from solar products to be within the range of $375 million to $390 million
• Gross margin from sale of solar products expected to be within the range of 33% to 35%

Conference Call

The Company will host a conference call to discuss these results at 4:30 P.M. ET on Tuesday, August 6, 2019. The call will be available, live, to interested parties by dialing 800-353-6461. For international callers, please dial +1 334-323-0501. The Conference ID number is 9972180. A live webcast will also be available in the Investors Relations section of the Company’s website at: http://investors.solaredge.com

A replay of the webcast will be available in the Investor Relations section of the Company’s web site approximately two hours after the conclusion of the call and will remain available for approximately 30 calendar days.

About SolarEdge

SolarEdge is a global leader in smart energy. By leveraging world-class engineering capabilities and with a relentless focus on innovation, SolarEdge creates smart energy solutions that power our lives and drive future progress. SolarEdge developed an intelligent inverter solution that changed the way power is harvested and managed in photovoltaic (PV) systems. The SolarEdge DC optimized inverter seeks to maximize power generation while lowering the cost of energy produced by the PV system. Continuing to advance smart energy, SolarEdge addresses a broad range of energy market segments through its PV, storage, EV charging, batteries, UPS, electric vehicle powertrains, and grid services solutions. SolarEdge is online at solaredge.com

Use of Non-GAAP Financial Measures

The Company has presented certain non-GAAP financial measures in this release, such as non-GAAP net income, non-GAAP net diluted EPS, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income and non-GAAP gross margin from sale of solar products. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States, or GAAP. Reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure can be found in the accompanying tables to this release. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same captions and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. As such, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

The Company uses these non-GAAP financial measures to analyze its operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. The Company believes that these non-GAAP financial measures reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This release contains forward looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include information, among other things, concerning: our possible or assumed future results of operations; future demands for solar energy solutions; business strategies; technology developments; financing and investment plans; dividend policy; competitive position; industry and regulatory environment; general economic conditions; potential growth opportunities; and the effects of competition. These forward-looking statements are often characterized by the use of words such as “anticipate,” “believe,” “could,” “seek,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or similar expressions and the negative or plural of those terms and other like terminology.

Forward-looking statements are only predictions based on our current expectations and our projections about future events. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Given these factors, you should not place undue reliance on these forward-looking statements. These factors include, but are not limited to, the matters discussed in the section entitled “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 28, 2019, Current Reports on Form 8-K and other reports filed with the SEC. All information set forth in this release is as of August 6, 2019. The Company undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in its expectations.

SOLAREDGE TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
		Three months ended June 30,							Six months ended June 30,
		2019				2018			2019			2018
		Unaudited							Unaudited
Revenues		$	325,010			$	227,118		$	596,881		$	436,989
Cost of revenues			214,340				145,172			400,101			275,446
Gross profit			110,670				81,946			196,780			161,543
Operating expenses:
Research and development			29,505				19,551			55,704			37,426
Sales and marketing			22,127				15,954			42,299			32,159
General and administrative			13,685				5,776			25,376			10,529
Total operating expenses			65,317				41,281			123,379			80,114
Operating income			45,353				40,665			73,401			81,429
Financial expenses (income), net			(773	)			2,480			5,378			1,896
Income before taxes on income			46,126				38,185			68,023			79,533
Taxes on income			13,213				3,617			17,135			9,279
Net income		$	32,913			$	34,568		$	50,888		$	70,254
Net loss attributable to non-controlling interests			215				-			1,256			-
Net income attributable to SolarEdge Technologies, Inc.		$	33,128			$	34,568		$	52,144		$	70,254

SOLAREDGE TECHNOLOGIES INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
		June 30,				December 31,
			2019				2018
		Unaudited
CURRENT ASSETS:
Cash and cash equivalents		$	176,575			$	187,764
Short-term bank deposit			5,961				9,870
Restricted bank deposits			1,060				824
Marketable securities			109,610				118,680
Trade receivables, net			237,804				173,579
Prepaid expenses and other assets			50,642				45,073
Inventories, net			148,892				141,519
Total current assets			730,544				677,309
LONG-TERM ASSETS:
Marketable securities			79,616				74,256
Operating lease right-of-use assets			36,788				-
Property, plant and equipment, net			140,200				119,329
Deferred tax assets, net			14,751				14,699
Intangible assets, net and goodwill			211,340				73,378
Other long term assets			8,455				5,501
Total long-term assets			491,150				287,163
Total assets		$	1,221,694			$	964,472
CURRENT LIABILITIES:
Trade payables, net		$	116,795			$	107,079
Employees and payroll accruals			34,555				29,053
Current maturities of bank loans and accrued interest			16,454				16,639
Warranty obligations			38,819				28,868
Deferred revenues			15,708				14,351
Accrued expenses and other liabilities			71,447				29,728
Total current liabilities			293,778				225,718
LONG-TERM LIABILITIES:
Bank loans			5,519				3,510
Warranty obligations			111,819				92,958
Deferred revenues			73,796				60,670
Operating lease liabilities			30,009				-
Deferred tax liabilities, net			8,663				1,499
Other long term liabilities			18,062				9,391
Total long-term liabilities			247,868				168,028
STOCKHOLDERS’ EQUITY:
Common stock			5				5
Additional paid-in capital			431,684				371,794
Accumulated other comprehensive loss			(895	)			(524	)
Retained earnings			243,277				191,133
Total SolarEdge Technologies, Inc. stockholders’ equity			674,071				562,408
Non-controlling interests			5,977				8,318
Total stockholders’ equity			680,048				570,726
Total liabilities and stockholders’ equity		$	1,221,694			$	964,472

SOLAREDGE TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
		Six months ended June 30,
		2019				2018
		Unaudited
Cash flows provided by operating activities:
Net income		$	50,888			$	70,254
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment			8,147				4,981
Amortization of intangible assets			4,895				72
Amortization of premium and accretion of discount on available-for-sale marketable securities			(12	)			1,014
Stock-based compensation			21,076				13,977
Loss from disposal of assets			552				64
Realized loss from sale of available-for-sale marketable securities			91				-
Changes in assets and liabilities:
Inventories, net			1,723				(18,952	)
Prepaid expenses and other assets			(2,574	)			(2,135	)
Trade receivables, net			(56,562	)			(9,203	)
Operating lease right-of-use assets and liabilities, net and effect of exchange rate differences			1,466				(148	)
Deferred tax assets and liabilities, net			(1,960	)			(3,018	)
Trade payables, net			5,493				12,143
Employees and payroll accruals			5,151				1,028
Warranty obligations			28,860				18,479
Deferred revenues			11,764				13,120
Other liabilities			28,236				6,194
Net cash provided by operating activities			107,234				107,870
Cash flows from investing activities:
Business combination, net of cash acquired			(38,435	)			-
Purchase of property, plant and equipment			(22,244	)			(21,385	)
Withdrawal from bank deposits			3,909				(342	)
Investment in restricted bank deposits			(203	)			(191	)
Investment in available-for-sale marketable securities			(63,655	)			(89,389	)
Proceeds from sales and maturities of available-for-sale marketable securities			68,407				46,825
Net cash used in investing activities		$	(52,221	)		$	(64,482	)
Cash flows from financing activities:
Repayment of bank loans, net		$	(4,675	)		$	-
Proceeds from issuance of shares under stock purchase plan and upon exercise of stock-based awards			3,764				7,591
Change in non-controlling interests			(66,474	)			-
Net cash provided by (used in) financing activities		$	(67,385	)		$	7,591
Increase in cash and cash equivalents and restricted cash			(12,372	)			50,979
Cash, cash equivalents and restricted cash at the beginning of the period			187,764				163,163
Effect of exchange rate differences on cash, cash equivalents and restricted cash			1,183				398
Cash, cash equivalents and restricted cash at the end of the period		$	176,575			$	214,540

SOLAREDGE TECHNOLOGIES INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In thousands, except gross profit and per share data) (Unaudited)
		Reconciliation of GAAP to Non-GAAP Gross Profit
		Three months ended						Six months ended
		June 30, 2019		March 31, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Gross profit (GAAP)		110,670		86,110		81,946		196,780		161,543
Stock-based compensation		1,651		1,354		968		3,005		1,892
Cost of product adjustment		319		682		----		1,001		----
Amortization and depreciation of acquired assets		3,307		1,077		----		4,384		----
Gross profit (Non-GAAP)		115,947		89,223		82,914		205,170		163,435
		Reconciliation of GAAP to Non-GAAP Gross Margin
		Three months ended						Six months ended
		June 30, 2019		March 31, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Gross margin (GAAP)		34.1%		31.7%		36.1%		33.0%		37.0%
Stock-based compensation		0.5%		0.5%		0.4%		0.5%		0.4%
Cost of product adjustment		0.1%		0.2%		----		0.2%		----
Amortization and depreciation of acquired assets		1.0%		0.4%		----		0.7%		----
Gross margin (Non-GAAP)		35.7%		32.8%		36.5%		34.4%		37.4%
		Reconciliation of GAAP to Non-GAAP Operating expenses
		Three months ended						Six months ended
		June 30, 2019		March 31, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Operating expenses (GAAP)		65,317		58,062		41,281		123,379		80,114
Stock-based compensation R&D		(4,176)		(3,490)		(2,605)		(7,666)		(4,987)
Stock-based compensation S&M		(2,722)		(2,404)		(2,094)		(5,126)		(4,298)
Stock-based compensation G&A		(2,823)		(2,456)		(1,461)		(5,279)		(2,800)
Amortization and depreciation of acquired assets - R&D		(9)		(36)		----		(45)		----
Amortization and depreciation of acquired assets - S&M		51		(858)		----		(807)		----
Amortization and depreciation of acquired assets - G&A		(26)		----		----		(26)		----
Assets disposal		(552)		----		----		(552)		----
Acquisition related expenses		(151)		(798)		----		(949)		----
Operating expenses (Non-GAAP)		54,909		48,020		35,121		102,929		68,029
		Reconciliation of GAAP to Non-GAAP Operating income
		Three months ended						Six months ended
		June 30, 2019		March 31, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Operating income (GAAP)		45,353		28,048		40,665		73,401		81,429
Cost of product adjustment		319		682		----		1,001		----
Stock-based compensation		11,372		9,704		7,128		21,076		13,977
Amortization and depreciation of acquired assets		3,291		1,971		----		5,262		----
Acquisition related expenses		151		798		----		949		----
Assets disposal		552		----		----		552		----
Operating income (Non-GAAP)		61,038		41,203		47,793		102,241		95,406
		Reconciliation of GAAP to Non-GAAP Financial expenses (income), net
		Three months ended						Six months ended
		June 30, 2019		March 31, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Financial expenses (income), net (GAAP)		(773)		6,151		2,480		5,378		1,896
Non cash interest		(850)		(785)		(568)		(1,635)		(1,080)
Currency fluctuation due to new lease standard adoption		(577)		(948)		----		(1,525)		----
Financial expenses (income), net (Non-GAAP)		(2,200)		4,418		1,912		2,218		816
		Reconciliation of GAAP to Non-GAAP Tax on income
		Three months ended						Six months ended
		June 30, 2019		March 31, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Tax on income (GAAP)		13,213		3,922		3,617		17,135		9,279
Deferred tax realized (asset)		987		973		1,697		1,960		3,018
Transition tax of foreign earnings		----		----		----		----		(820)
Tax on income (Non-GAAP)		14,200		4,895		5,314		19,095		11,477
		Reconciliation of GAAP to Non-GAAP Net income
		Three months ended						Six months ended
		June 30, 2019		March 31, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Net income attributable to SolarEdge Technologies Inc. (GAAP)		33,128		19,016		34,568		52,144		70,254
Cost of product adjustment		319		682		----		1,001		----
Stock-based compensation		11,372		9,704		7,128		21,076		13,977
Amortization and depreciation of acquired assets		3,291		1,971		----		5,262		----
Acquisition related expenses		151		798		----		949		----
Assets disposal		552		----		----		552		----
Non cash interest		850		785		568		1,635		1,080
Currency fluctuation due to new lease standard adoption		577		948		----		1,525		----
Deferred tax realized (asset)		(987)		(973)		(1,697)		(1,960)		(3,018)
Transition tax of foreign earnings		----		----		----		----		820
Net income attributable to SolarEdge Technologies Inc. (Non-GAAP)		49,253		32,931		40,567		82,184		83,113
		Reconciliation of GAAP to Non-GAAP Net basic EPS
		Three months ended						Six months ended
		June 30, 2019		March 31, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Net basic earnings per share (GAAP)		0.69		0.40		0.76		1.10		1.57
Cost of product adjustment		0.01		0.02		----		0.02		----
Stock-based compensation		0.24		0.21		0.16		0.45		0.31
Amortization and depreciation of acquired assets		0.07		0.04		----		0.11		----
Acquisition related expenses		----		0.01		----		0.02		----
Assets disposal		0.01		----		----		0.01		----
Non cash interest		0.02		0.02		0.01		0.03		0.03
Currency fluctuation due to new lease standard adoption		0.01		0.02		----		0.04		----
Deferred tax realized (asset)		(0.02)		(0.02)		(0.03)		(0.04)		(0.07)
Transition tax of foreign earnings		----		----		----		----		0.02
Net basic earnings per share (Non-GAAP)		1.03		0.70		0.90		1.74		1.86
		Reconciliation of GAAP to Non-GAAP Net diluted EPS
		Three months ended						Six months ended
		June 30, 2019		March 31, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Net diluted earnings per share (GAAP)		0.66		0.39		0.72		1.05		1.46
Cost of product adjustment		----		0.01		----		0.02		----
Stock-based compensation		0.19		0.17		0.12		0.35		0.24
Amortization and depreciation of acquired assets		0.07		0.04		----		0.11		----
Acquisition related expenses		----		0.01		----		0.01		----
Assets disposal		0.01		----		----		0.01		----
Non cash interest		0.02		0.02		0.01		0.04		0.03
Currency fluctuation due to new lease standard adoption		0.01		0.02		----		0.03		----
Deferred tax realized (asset)		(0.02)		(0.02)		(0.03)		(0.04)		(0.06)
Transition tax of foreign earnings		----		----		----		----		0.01
Net diluted earnings per share (Non-GAAP)		0.94		0.64		0.82		1.58		1.68
		Reconciliation of GAAP to Non-GAAP No. of shares used in Net diluted EPS
		Three months ended						Six months ended
		June 30, 2019		March 31, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Number of shares used in computing net diluted earnings per share (GAAP)		49,940,034		49,026,327		48,291,280		49,358,280		47,984,817
Stock-based compensation		2,130,135		2,760,121		1,341,286		2,448,673		1,438,347
Number of shares used in computing net diluted earnings per share (Non-GAAP)		52,070,169		51,786,448		49,632,566		51,806,953		49,423,164

 

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Source: SolarEdge Technologies, Inc.

Investor Contacts
SolarEdge Technologies, Inc.
Ronen Faier, Chief Financial Officer
+1 510-498-3263
investors@solaredge.com

Sapphire Investor Relations, LLC
Erica Mannion or Michael Funari
+1 617-542-6180
investors@solaredge.com