SolarEdge Announces Second Quarter 2022 Financial Results

SolarEdge Technologies, Inc. (Nasdaq: SEDG), a global leader in smart energy technology, today announced its financial results for the second quarter ended June 30, 2022.

Second Quarter 2022 Highlights

• Record revenues of $727.8 million
• Record revenues from solar segment of $687.6 million
• GAAP gross margin of 25.1%
• Non-GAAP gross margin of 26.7%
• Gross margin from solar segment of 28.1%
• GAAP net income of $15.1 million
• Non-GAAP net income of $56.7 million
• GAAP net diluted earnings per share (“EPS”) of $0.26
• Non-GAAP net diluted EPS of $0.95
• 2.52 Gigawatts (AC) of inverters shipped

“The growing demand for energy in general and clean energy in particular continued to drive top line growth this quarter resulting in record revenues in Europe and the United States,” said Zvi Lando, Chief Executive Officer of SolarEdge. “While we continue to face growing supply chain challenges, some related to our rapid growth in an environment of component shortages, and macro-economic trends as a result of our global footprint, we continue to support our customers while building the infrastructure for sustainable growth.”

Second Quarter 2022 Summary

The Company reported record revenues of $727.8 million, up 11% from $655.1 million in the prior quarter and up 52% from $480.1 million in the same quarter last year.

Revenues from the solar segment were record $687.6 million, up 13% from $608.0 million in the prior quarter and up 59% from $431.5 million in the same quarter last year.

GAAP gross margin was 25.1%, down from 27.3% in the prior quarter and down from 32.5% in the same quarter last year.

Non-GAAP gross margin was 26.7%, down from 28.4% in the prior quarter and down from 33.9% in the same quarter last year.

Gross margin from the solar segment was 28.1%, down from 30.2% in the prior quarter and down from 37.4% in the same quarter last year.

GAAP operating expenses were $146.6 million, up 14% from $128.1 million in the prior quarter and up 46% from $100.6 million in the same quarter last year.

Non-GAAP operating expenses were $109.6 million, up 11% from $98.9 million in the prior quarter and up 35% from $81.5 million in the same quarter last year.

GAAP operating income was $36.0 million, down 29% from $50.9 million in the prior quarter and down 35% from $55.6 million in the same quarter last year.

Non-GAAP operating income was $84.7 million, down 3% from $87.2 million in the prior quarter and up 4% from $81.3 million in the same quarter last year.

GAAP net income was $15.1 million, down 54% from $33.1 million in the prior quarter and down 67% from $45.1 million in the same quarter last year.

Non-GAAP net income was $56.7 million, down 18% from $68.8 million in the prior quarter and down 22% from $72.5 million in the same quarter last year.

GAAP net diluted EPS was $0.26, down from $0.60 in the prior quarter and down from $0.82 in the same quarter last year.

Non-GAAP net diluted EPS was $0.95, down from $1.20 in the prior quarter and down from $1.28 in the same quarter last year.

Cash flow generated from operating activities was $77.4 million, compared with $163.0 million used in operating activities in the prior quarter and $38.7 million generated from operating activities in the same quarter last year.

As of June 30, 2022, cash, cash equivalents, bank deposits, restricted bank deposits and marketable securities totaled $973.3 million, net of debt, compared to $979.0 million on March 31, 2022.

Outlook for the Third Quarter 2022

The Company also provides guidance for the third quarter ending September 30, 2022 as follows:

• Revenues to be within the range of $810 million to $840 million
• Non-GAAP gross margin expected to be within the range of 26% to 29%
• Non-GAAP operating profit to be within the range of $90 million to $110 million
• Revenues from solar segment to be within the range of $765 million to $795 million
• Gross margin from solar segment expected to be within the range of 27% to 30%

Conference Call

The Company will host a conference call to discuss these results at 4:30 p.m. ET on Tuesday, August 2, 2022. The call will be available, live, to interested parties by dialing 888-394-8218. For international callers, please dial [phone]. The Conference ID number is 2902967. 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 technology. 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, electric vehicle powertrains, and grid services solutions. SolarEdge is online at www.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, 2021, filed on February 22, 2022 and our quarterly reports filed on Form 10-Q, Current Reports on Form 8-K and other reports filed with the SEC. All information set forth in this release is as of August 2, 2022. 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 INCOME (Unaudited) (in thousands, except per share data)
		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
Revenues		$	727,774			$	480,057			$	1,382,854			$	885,546
Cost of revenues			545,132				323,865				1,021,254				589,280
Gross profit			182,642				156,192				361,600				296,266
Operating expenses:
Research and development			74,847				52,664				141,196				99,641
Sales and marketing			38,975				29,458				74,291				56,369
General and administrative			28,121				19,370				54,550				39,219
Other operating expenses (income), net			4,687				(859	)			4,687				1,350
Total operating expenses			146,630				100,633				274,724				196,579
Operating income			36,012				55,559				86,876				99,687
Financial expense, net			(14,311	)			(1,743	)			(19,760	)			(7,840	)
Income before income taxes			21,701				53,816				67,116				91,847
Income taxes			6,617				8,724				18,909				16,679
Net income		$	15,084			$	45,092			$	48,207			$	75,168

SOLAREDGE TECHNOLOGIES INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except per share data)
		June 30, 2022				December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	745,534			$	530,089
Marketable securities			150,259				167,728
Trade receivables, net of allowances of $3,805 and $2,626, respectively			669,100				456,339
Inventories, net			470,272				380,143
Prepaid expenses and other current assets			248,643				176,992
Total current assets			2,283,808				1,711,291
LONG-TERM ASSETS:
Marketable securities			709,571				482,228
Deferred tax assets, net			33,400				27,572
Property, plant and equipment, net			489,109				410,379
Operating lease right-of-use assets, net			58,375				47,137
Intangible assets, net			50,372				58,861
Goodwill			116,173				129,629
Other long-term assets			31,970				33,856
Total long-term assets			1,488,970				1,189,662
Total assets		$	3,772,778				2,900,953
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payables, net		$	253,399			$	252,068
Employees and payroll accruals			68,154				74,465
Warranty obligations			91,761				71,480
Deferred revenues and customers advances			30,460				17,789
Accrued expenses and other current liabilities			168,400				109,379
Total current liabilities			612,174				525,181
LONG-TERM LIABILITIES:
Convertible senior notes, net			622,991				621,535
Warranty obligations			232,415				193,680
Deferred revenues			170,235				151,556
Finance lease liabilities			46,680				40,508
Operating lease liabilities			42,849				38,912
Other long-term liabilities			17,902				19,542
Total long-term liabilities			1,133,072				1,065,733
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS’ EQUITY:
Common stock of $0.0001 par value - Authorized: 125,000,000 shares as of June 30, 2022 and December 31, 2021; issued and outstanding: 55,633,090 and 52,815,395 shares as of June 30, 2022 and December 31, 2021, respectively			6				5
Additional paid-in capital			1,418,881				687,295
Accumulated other comprehensive loss			(89,620	)			(27,319	)
Retained earnings			698,265				650,058
Total stockholders’ equity			2,027,532				1,310,039
Total liabilities and stockholders’ equity		$	3,772,778			$	2,900,953

SOLAREDGE TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands, except per share data)
		Six Months Ended June 30,
		2022				2021
Cash flows from operating activities:
Net income		$	48,207			$	75,168
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation of property, plant and equipment			18,861				14,008
Amortization of intangible assets			5,277				4,871
Amortization of debt discount and debt issuance costs			1,456				1,450
Amortization of premium and accretion of discount on available-for-sale marketable securities, net			5,376				3,558
Impairment of goodwill and intangible assets			4,008				—
Stock-based compensation expenses			71,181				47,205
Deferred income taxes, net			(1,092	)			(3,931	)
Loss from sale and disposal of assets			296				2,051
Exchange rate fluctuations and other items, net			24,666				12,983
Changes in assets and liabilities:
Inventories, net			(93,348	)			13,229
Prepaid expenses and other assets			(79,215	)			(20,356	)
Trade receivables, net			(235,316	)			(128,564	)
Trade payables, net			(7,339	)			(20,120	)
Employees and payroll accruals			5,202				9,734
Warranty obligations			59,588				27,298
Deferred revenues and customers advances			32,277				4,524
Other liabilities, net			54,341				19,660
Net cash provided by (used in) operating activities			(85,574	)			62,768
Cash flows from investing activities:
Proceed from sales and maturities of available-for-sale marketable securities			126,287				103,763
Purchase of property, plant and equipment			(91,884	)			(65,267	)
Investment in available-for-sale marketable securities			(362,119	)			(422,470	)
Withdrawal from bank deposits, net			—				46,534
Other investing activities			1,783				1,442
Net cash used in investing activities		$	(325,933	)		$	(335,998	)
Cash flows from financing activities:
Proceeds from secondary public offering, net of issuance costs		$	650,526			$	—
Repayment of bank loans			—				(16,385	)
Proceeds from exercise of stock-based awards			1,642				5,472
Tax withholding in connection with stock-based awards, net			(2,318	)			(9,668	)
Other financing activities			(1,444	)			(625	)
Net cash provided by (used in) financing activities			648,406				(21,206	)
Increase (decrease) in cash and cash equivalents			236,899				(294,436	)
Cash and cash equivalents at the beginning of the period			530,089				827,146
Effect of exchange rate differences on cash and cash equivalents			(21,454	)			(8,598	)
Cash and cash equivalents at the end of the period		$	745,534			$	524,112

SOLAREDGE TECHNOLOGIES INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited) (in thousands, except per share data and percentages)
	Reconciliation of GAAP to Non-GAAP
	Three months ended						Six Months Ended
	June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Gross profit (GAAP)	182,642		178,958		156,192		361,600		296,266
Revenues from finance component	(146)		(135)		(99)		(281)		(185)
Stock-based compensation	5,285		5,062		4,291		10,347		10,081
Disposal of assets related to Critical Power	4,314		—		—		4,314		—
Amortization and depreciation of acquired assets	2,185		2,219		2,401		4,404		4,713
Gross profit (Non-GAAP)	194,280		186,104		162,785		380,384		310,875
Gross margin (GAAP)	25.1%		27.3%		32.5%		26.1%		33.5%
Revenues from finance component	0.0%		0.0%		0.0%		0.0%		0.0%
Stock-based compensation	0.7%		0.8%		0.9%		0.7%		1.1%
Disposal of assets related to Critical Power	0.6%		—%		—%		0.3%		—%
Amortization and depreciation of acquired assets	0.3%		0.3%		0.5%		0.3%		0.5%
Gross margin (Non-GAAP)	26.7%		28.4%		33.9%		27.5%		35.1%
Operating expenses (GAAP)	146,630		128,094		100,633		274,724		196,579
Stock-based compensation - R&D	(16,819)		(14,985)		(9,805)		(31,804)		(18,603)
Stock-based compensation - S&M	(7,047)		(6,701)		(5,780)		(13,748)		(11,215)
Stock-based compensation - G&A	(7,923)		(7,359)		(4,176)		(15,282)		(7,306)
Amortization and depreciation of acquired assets - R&D	(300)		(303)		(9)		(603)		(21)
Amortization and depreciation of acquired assets - S&M	(226)		(236)		(236)		(462)		(473)
Amortization and depreciation of acquired assets - G&A	(5)		(6)		(7)		(11)		(15)
Gain (loss) from assets sales and disposal	(8)		410		—		402		62
Other operating income (expenses)	(4,687)		—		859		(4,687)		(1,350)
Operating expenses (Non-GAAP)	109,615		98,914		81,479		208,529		157,658
Operating income (GAAP)	36,012		50,864		55,559		86,876		99,687
Revenues from finance component	(146)		(135)		(99)		(281)		(185)
Disposal of assets related to Critical Power	4,314		—		—		4,314		—
Stock-based compensation	37,074		34,107		24,052		71,181		47,205
Amortization and depreciation of acquired assets	2,716		2,764		2,653		5,480		5,222
Loss (gain) from assets sales and disposal	8		(410)		—		(402)		(62)
Other operating (income) expenses	4,687		—		(859)		4,687		1,350
Operating income (Non-GAAP)	84,665		87,190		81,306		171,855		153,217

SOLAREDGE TECHNOLOGIES INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited) (in thousands, except per share data and percentages)
	Reconciliation of GAAP to non-GAAP
	Three months ended						Six Months Ended
	June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Financial income (expense), net (GAAP)	(14,311)		(5,449)		(1,743)		(19,760)		(7,840)
Notes due 2025	728		728		726		1,456		1,450
Non cash interest	1,699		1,609		1,439		3,308		2,775
Currency fluctuation related to lease standard	(9,028)		(1,792)		1,300		(10,820)		(989)
Financial income (expense), net (non-GAAP)	(20,912)		(4,904)		1,722		(25,816)		(4,604)
Income tax benefit (expense) (GAAP)	(6,617)		(12,292)		(8,724)		(18,909)		(16,679)
Deferred taxes	(389)		(1,201)		(1,789)		(1,590)		(3,930)
Income tax benefit (expense) (Non-GAAP)	(7,006)		(13,493)		(10,513)		(20,499)		(20,609)
Net income (GAAP)	15,084		33,123		45,092		48,207		75,168
Revenues from finance component	(146)		(135)		(99)		(281)		(185)
Disposal of assets related to Critical Power	4,314		—		—		4,314		—
Stock-based compensation	37,074		34,107		24,052		71,181		47,205
Amortization and depreciation of acquired assets	2,716		2,764		2,653		5,480		5,222
Loss (gain) from assets sales and disposal	8		(410)		—		(402)		(62)
Other operating (income) expenses	4,687		—		(859)		4,687		1,350
Notes due 2025	728		728		726		1,456		1,450
Non cash interest	1,699		1,609		1,439		3,308		2,775
Currency fluctuation related to lease standard	(9,028)		(1,792)		1,300		(10,820)		(989)
Deferred taxes	(389)		(1,201)		(1,789)		(1,590)		(3,930)
Net income (Non-GAAP)	56,747		68,793		72,515		125,540		128,004

SOLAREDGE TECHNOLOGIES INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited) (in thousands, except per share data and percentages)
	Reconciliation of GAAP to non-GAAP
	Three months ended						Six Months Ended
	June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Net basic earnings per share (GAAP)	0.27		0.62		0.87		0.89		1.45
Revenues from finance component	0.00		0.00		(0.01)		(0.01)		(0.01)
Disposal of assets related to Critical Power	0.08		—		—		0.08		—
Stock-based compensation	0.67		0.64		0.47		1.31		0.91
Amortization and depreciation of acquired assets	0.04		0.05		0.05		0.10		0.10
Loss (gain) from assets sales and disposal	0.00		0.00		—		0.00		0.00
Other operating (income) expenses	0.09		—		(0.02)		0.08		0.03
Notes due 2025	0.01		0.01		0.01		0.03		0.03
Non cash interest	0.03		0.03		0.03		0.06		0.05
Currency fluctuation related to lease standard	(0.16)		(0.03)		0.03		(0.20)		(0.02)
Deferred taxes	(0.01)		(0.03)		(0.04)		(0.03)		(0.07)
Net basic earnings per share (Non-GAAP)	1.02		1.29		1.39		2.31		2.47
Net diluted earnings per share (GAAP)	0.26		0.60		0.82		0.86		1.36
Revenues from finance component	0.00		0.00		(0.01)		(0.01)		0.00
Disposal of assets related to Critical Power	0.08		—		—		0.08		—
Stock-based compensation	0.62		0.58		0.42		1.20		0.81
Amortization and depreciation of acquired assets	0.04		0.05		0.04		0.10		0.09
Loss (gain) from assets sales and disposal	0.00		(0.01)		—		(0.01)		0.00
Other operating (income) expenses	0.08		—		(0.01)		0.08		0.03
Notes due 2025	0.00		0.01		0.00		0.01		0.00
Non cash interest	0.03		0.02		0.03		0.05		0.05
Currency fluctuation related to lease standard	(0.15)		(0.03)		0.02		(0.18)		(0.01)
Deferred taxes	(0.01)		(0.02)		(0.03)		(0.03)		(0.07)
Net diluted earnings per share (Non-GAAP)	0.95		1.20		1.28		2.15		2.26
Number of shares used in computing net diluted earnings per share (GAAP)	58,564,734		56,315,193		55,930,562		57,446,416		55,965,369
Stock-based compensation	904,781		927,219		780,309		916,000		773,248
Number of shares used in computing net diluted earnings per share (Non-GAAP)	59,469,515		57,242,412		56,710,871		58,362,416		56,738,617

 

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