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SolarEdge Announces First Quarter 2020 Financial Results

SolarEdge Technologies, Inc. (Nasdaq: SEDG), a global leader in smart energy, today announced its financial results for the first quarter ended March 31, 2020.

First Quarter 2020 Highlights

  • Record revenues of $431.2 million
  • Record revenues from solar products of $407.6 million
  • GAAP gross margin of 32.5%
  • GAAP gross margin from sale of solar products of 34.6%
  • Non-GAAP gross margin from sale of solar products of 35.0%
  • GAAP net income of $42.2 million
  • Non-GAAP net income of $50.7 million
  • GAAP net diluted earnings per share (“EPS”) of $0.81
  • Non-GAAP net diluted EPS of $0.95
  • Record 1.85 Gigawatts (AC) of inverters shipped

“The first quarter of 2020 was an exceptional one with record revenues of more than $430 million,” said Zvi Lando, CEO of SolarEdge. “Despite the challenges triggered by COVID-19 during the quarter, we were able to get products to our customers and satisfy demand. At present, despite many government enforced shut downs, our employees continue to work and operate our business, without any significant interruptions. We are proud of and thankful to our employees who are working relentlessly in this period and to our customers for their continued loyalty. We are confident that our financial strength, technological leadership and global presence will enable us to come out of this uniquely challenging period even stronger.”

First Quarter 2020 Summary

The Company reported record revenues of $431.2 million, up 3% from $418.2 million in the prior quarter and up 59% from $271.9 million in the same quarter last year.

Record revenues related to the solar business were $407.6 million, up 5% from $389.0 million in the prior quarter and up 61% from $253.1 million in the same quarter last year.

GAAP gross margin was 32.5%, down from 34.3% in the prior quarter and up from 31.7% year over year.

Non-GAAP gross margin was 33.6%, down from 35.5% in the prior quarter and up from 32.8% year over year.

GAAP gross margin for the solar business was 34.6%, down from 37.3% in the prior quarter and up from 33.8% year over year.

Non-GAAP gross margin for the solar business was 35.0%, down from 37.8% in the prior quarter and up from 34.3% year over year.

GAAP operating expenses were $72.2 million, down 22% from $92.7 million in the prior quarter and up 24% from $58.1 million in the same quarter last year.

Non-GAAP operating expenses were $66.3 million, up 5% from $63.1 million in the prior quarter and up 38% from $48.0 million in the same quarter last year.

GAAP operating income was $67.8 million, up 34% from $50.5 million in the prior quarter and up 142% from $28.0 million in the same quarter last year.

Non-GAAP operating income was $78.6 million, down 8% from $85.3 million in the prior quarter and up 91% from $41.2 million in the same quarter last year.

GAAP net income was $42.2 million, down 20% from $52.8 million in the prior quarter and up 122% from $19.0 million in the same quarter last year.

Non-GAAP net income was $50.7 million, down 42% from $87.4 million in the prior quarter and up 54% from $32.9 million in the same quarter last year.

GAAP net diluted earnings per share (“EPS”) was $0.81, down from $1.03 in the prior quarter and up from $0.39 in the same quarter last year.

Non-GAAP net diluted EPS was $0.95, down from $1.65 in the prior quarter and up from $0.64 in the same quarter last year.

Cash flow from operating activities was $107.7 million, up from $83.1 million in the prior quarter and up from $56.5 million in the same quarter last year.

As of March 31, 2020, cash, cash equivalents, bank deposits, restricted bank deposit and marketable securities totaled $558.7 million, compared to $467.5 million on December 31, 2019.

Outlook for the Second Quarter 2020

The evolving impact of, and responses to, the COVID-19 pandemic on economies around the world, including all of the Company’s markets, is unprecedented and makes it difficult to predict with confidence its impact on the Company’s business for the next quarter and the rest of this year. Please note that the below guidance for next quarter includes the anticipated impact of the COVID-19 pandemic and related public health measures on the Company’s business, at the time of publication.

The Company also provides guidance for the second quarter ending June 30, 2020 as follows:

  • Revenues to be within the range of $305 million to $335 million
  • Gross margin expected to be within the range of 30% to 32%
  • Revenues from solar products to be within the range of $285 million to $315 million
  • Gross margin from sale of solar products expected to be within the range of 32% to 34%

Conference Call

The Company will host a conference call to discuss these results at 4:30 P.M. ET on Wednesday, May 6, 2020. The call will be available, live, to interested parties by dialing 800-479-1004. For international callers, please dial +1 323-794-2598. The Conference ID number is 4132956. 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 PV systems. 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; the expected impact of the COVID-19 pandemic and related public health measures on our business, results of operations, financial condition and liquidity; 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, 2019, filed on February 27, 2020, Current Reports on Form 8-K, our quarterly reports on Form 10-Q and other reports filed with the SEC, noting that many of the risks, uncertainties and other factors identified therein are, and will be, amplified by the COVID-19 pandemic. All information set forth in this release is as of May 6, 2020. 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
March 31,

2020

2019

Revenues

$

431,218

$

271,871

Cost of revenues

291,210

185,761

Gross profit

140,008

86,110

Operating expenses:

Research and development

36,695

26,199

Sales and marketing

24,253

20,172

General and administrative

16,185

11,691

Other operating income

(4,900

)

-

Total operating expenses

72,233

58,062

Operating income

67,775

28,048

Financial expenses, net

16,605

6,151

Income before income taxes

51,170

21,897

Income taxes

8,922

3,922

Net income

$

42,248

$

17,975

Net loss attributable to Non-controlling interests

-

1,041

Net income attributable to SolarEdge Technologies, Inc.

$

42,248

$

19,016

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands)

 

March 31,

December 31,

2020

2019

CURRENT ASSETS:

Cash and cash equivalents

$

324,072

$

223,901

Short-term bank deposits

8,085

5,010

Restricted bank deposits

27,515

27,558

Marketable securities

95,143

91,845

Trade receivables, net of allowances of $4,509 and $2,473, respectively

235,673

298,383

Prepaid expenses and other current assets

66,874

115,268

Inventories, net

198,557

170,798

Total current assets

955,919

932,763

LONG-TERM ASSETS:

Marketable securities

103,863

119,176

Operating lease right-of-use assets, net

37,896

35,858

Property, plant and equipment, net

195,982

176,963

Deferred tax assets, net

17,095

16,298

Intangible assets, net

69,111

74,008

Goodwill

125,520

129,654

Other long-term assets

8,454

9,904

Total long-term assets

557,921

561,861

Total assets

$

1,513,840

$

1,494,624

CURRENT LIABILITIES:

Trade payables, net

$

139,138

$

157,148

Employees and payroll accruals

58,894

47,390

Current maturities of bank loans and accrued interest

15,048

15,673

Warranty obligations

70,158

65,112

Deferred revenues and customers advances

30,706

70,815

Accrued expenses and other current liabilities

75,737

80,576

Total current liabilities

389,681

436,714

LONG-TERM LIABILITIES:

Bank loans

-

173

Warranty obligations

116,099

107,451

Deferred revenues

98,134

89,982

Operating lease liabilities

30,336

30,213

Deferred tax liabilities, net

2,202

4,461

Other long-term liabilities

10,970

13,960

Total long-term liabilities

257,741

246,240

STOCKHOLDERS’ EQUITY:

Common stock

5

5

Additional paid-in capital

491,873

475,792

Accumulated other comprehensive loss

(5,390

)

(1,809

)

Retained earnings

379,930

337,682

Total stockholders’ equity

866,418

811,670

Total liabilities and stockholders’ equity

$

1,513,840

$

1,494,624

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

 

Three months ended
March 31,

2020

2019

Cash flows provided by operating activities:

Net income

$

42,248

$

17,975

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of property, plant and equipment

5,004

3,870

Amortization of intangible assets

2,321

1,971

Amortization of premium and accretion of discount on available-for-sale marketable securities, net

120

(59

)

Stock-based compensation expenses

12,773

9,704

Deferred income tax benefit, net

(2,859

)

(973

)

Other expenses, net

235

186

Changes in assets and liabilities:

Inventories, net

(29,004

)

964

Prepaid expenses and other assets

49,888

10,885

Trade receivables, net

59,420

(7,379

)

Operating lease right-of-use assets and liabilities, net and effect of exchange rate differences

(1,247

)

828

Trade payables, net

(17,589

)

(21,720

)

Employees and payroll accruals

11,821

3,250

Warranty obligations

13,809

14,947

Deferred revenues and customers advances

(31,729

)

1,730

Other liabilities

(7,466

)

20,271

Net cash provided by operating activities

107,745

56,450

Cash flows from investing activities:

Proceeds from sales and maturities of available-for-sale marketable securities

42,333

44,575

Purchase of property, plant and equipment

(27,053

)

(10,620

)

Investment in available-for-sale marketable securities

(31,924

)

(15,316

)

Withdrawal from (investment in) bank deposits

(3,316

)

3,813

Withdrawal from (investment in) restricted bank deposits

36

(182

)

Business combination, net of cash acquired

-

(39,315

)

Net cash used in investing activities

$

(19,924

)

$

(17,045

)

Cash flows from financing activities:

Repayment of bank loans

$

(15,232

)

$

(1,003

)

Proceeds from bank loans

15,295

51

Proceeds from issuance of shares under stock purchase plan and upon exercise of stock-based awards

3,308

309

Change in Non-controlling interests

-

(1,987

)

Other financing activities

(56

)

-

Net cash provided by (used in) financing activities

$

3,315

$

(2,630

)

Increase in cash, cash equivalents and restricted cash

91,136

36,775

Cash, cash equivalents and restricted cash at the beginning of the period

223,901

187,764

Effect of exchange rate differences on cash, cash equivalents and restricted cash

9,035

1,939

Cash, cash equivalents and restricted cash at the end of the period

$

324,072

$

226,478

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

March 31, 2020

December 31, 2019

March 31, 2019

Gross profit (GAAP)

140,008

143,249

86,110

Stock-based compensation

2,273

2,268

1,354

Cost of product adjustment

313

448

682

Amortization and depreciation of acquired assets

2,356

2,489

1,077

Gross profit (Non-GAAP)

144,950

148,454

89,223

Reconciliation of GAAP to Non-GAAP Gross Margin

Three months ended

March 31, 2020

December 31, 2019

March 31, 2019

Gross margin (GAAP)

32.5%

34.3%

31.7%

Stock-based compensation

0.5%

0.5%

0.5%

Cost of product adjustment

0.1%

0.1%

0.2%

Amortization and depreciation of acquired assets

0.5%

0.6%

0.4%

Gross margin (Non-GAAP)

33.6%

35.5%

32.8%

Reconciliation of GAAP to Non-GAAP Operating expenses

Three months ended

March 31, 2020

December 31, 2019

March 31, 2019

Operating expenses (GAAP)

72,233

92,721

58,062

Stock-based compensation - R&D

(5,378)

(4,937)

(3,490)

Stock-based compensation - S&M

(3,192)

(3,157)

(2,404)

Stock-based compensation - G&A

(1,930)

916

(2,456)

Amortization and depreciation of acquired assets - R&D

(26)

(30)

(36)

Amortization and depreciation of acquired assets - S&M

(295)

33

(858)

Amortization and depreciation of acquired assets - G&A

(8)

45

----

Acquisition related expenses

----

----

(798)

Assets disposal

----

(56)

----

Other operating income (expenses)

4,900

(22,391)

----

Operating expenses (Non-GAAP)

66,303

63,144

48,020

Reconciliation of GAAP to Non-GAAP Operating income

Three months ended

March 31, 2020

December 31, 2019

March 31, 2019

Operating income (GAAP)

67,775

50,528

28,048

Cost of product adjustment

313

448

682

Stock-based compensation

12,773

9,446

9,704

Amortization and depreciation of acquired assets

2,686

2,441

1,971

Acquisition related expenses

----

----

798

Assets disposal

----

56

----

Other operating ( income) expenses

(4,900)

22,391

----

Operating income (Non-GAAP)

78,647

85,310

41,203

Reconciliation of GAAP to Non-GAAP Financial expenses (income), net

Three months ended

March 31, 2020

December 31, 2019

March 31, 2019

Financial expenses (income), net (GAAP)

16,605

(11,058)

6,151

Non cash interest

(1,128)

(1,055)

(785)

Currency fluctuation related to lease standard

1,033

(266)

(948)

Amortization and depreciation of acquired assets

(982)

348

----

Financial expenses (income), net (Non-GAAP)

15,528

(12,031)

4,418

Reconciliation of GAAP to Non-GAAP Tax on income (tax benefit)

Three months ended

March 31, 2020

December 31, 2019

March 31, 2019

Tax on income (GAAP)

8,922

9,241

3,922

Deferred tax realized (asset)

3,536

1,114

973

Tax on income (Non-GAAP)

12,458

10,355

4,895

Reconciliation of GAAP to Non-GAAP Net income attributable to SolarEdge Technologies Inc.

Three months ended

March 31, 2020

December 31, 2019

March 31, 2019

Net income attributable to SolarEdge Technologies Inc. (GAAP)

42,248

52,778

19,016

Cost of product adjustment

313

448

682

Stock-based compensation

12,773

9,446

9,704

Amortization and depreciation of acquired assets

3,668

2,093

1,971

Acquisition related expenses

----

----

798

Assets disposal

----

56

----

Other operating ( income) expenses

(4,900)

22,391

----

Non cash interest

1,128

1,055

785

Currency fluctuation related to lease standard

(1,033)

266

948

Deferred tax realized (asset)

(3,536)

(1,114)

(973)

Net income attributable to SolarEdge Technologies Inc. (Non-GAAP)

50,661

87,419

32,931

Reconciliation of GAAP to Non-GAAP Net basic earnings per share

Three months ended

March 31, 2020

December 31, 2019

March 31, 2019

Net basic earnings per share (GAAP)

0.86

1.08

0.40

Cost of product adjustment

0.01

0.01

0.02

Stock-based compensation

0.25

0.20

0.21

Amortization and depreciation of acquired assets

0.08

0.04

0.04

Acquisition related expenses

----

----

0.01

Other operating ( income) expenses

(0.10)

0.46

----

Non cash interest

0.02

0.02

0.02

Currency fluctuation related to lease standard

(0.02)

----

0.02

Deferred tax realized (asset)

(0.07)

(0.02)

(0.02)

Net basic earnings per share (Non-GAAP)

1.03

1.79

0.70

Reconciliation of GAAP to Non-GAAP Net diluted earnings per share

Three months ended

March 31, 2020

December 31, 2019

March 31, 2019

Net diluted earnings per share (GAAP)

0.81

1.03

0.39

Cost of product adjustment

0.01

0.01

0.01

Nonvested PSUs

----

(0.01)

----

Stock-based compensation

0.21

0.15

0.17

Amortization and depreciation of acquired assets

0.07

0.04

0.04

Acquisition related expenses

----

----

0.01

Other operating ( income) expenses

(0.09)

0.43

----

Non cash interest

0.02

0.02

0.02

Currency fluctuation related to lease standard

(0.02)

----

0.02

Deferred tax realized (asset)

(0.06)

(0.02)

(0.02)

Net diluted earnings per share (Non-GAAP)

0.95

1.65

0.64

Reconciliation of GAAP to Non-GAAP No. of shares used in Net diluted earnings per share

Three months ended

March 31, 2020

December 31, 2019

March 31, 2019

Number of shares used in computing net diluted earnings per share (GAAP)

52,172,720

50,966,778

47,020,218

Stock-based compensation

1,399,732

1,774,490

4,766,230

Number of shares used in computing net diluted earnings per share (Non-GAAP)

53,572,452

52,741,268

51,786,448

Contacts:

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

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