Home Solar Inverters SolarEdge Announces Fourth Quarter and Full Year 2018 Financial Results
SolarEdge Announces Fourth Quarter and Full Year 2018 Financial Results

SolarEdge Announces Fourth Quarter and Full Year 2018 Financial Results

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FREMONT, Calif.: SolarEdge Technologies, Inc. (Nasdaq: SEDG), a global leader in smart energy technology, today announced its financial results for the fourth quarter and year ended December 31, 2018.

Fourth Quarter 2018 Highlights

  • Total revenues of $263.7 million
  • GAAP gross margin of 30.2%
  • GAAP net diluted EPS of $0.27
  • Non-GAAP net diluted EPS of $0.63
  • 1.1 Gigawatts (AC) of inverters shipped
  • Revenues from solar products of $243.4 million
  • Non-GAAP gross margin from sale of solar products of 32.8%

Full Year 2018 Highlights

  • Total revenues of $937.2 million
  • GAAP gross margin of 34.1%
  • GAAP net diluted EPS of $2.69
  • Non-GAAP net diluted EPS of $3.17
  • 3.9 Gigawatts (AC) of inverters shipped
  • Revenues from solar products of $914.3 million
  • Non-GAAP gross margin from sale of solar products of 35.4%

“We are happy to report another record revenue quarter and a very strong year in which we continued to take market share,” said Guy Sella, Founder, Chairman and CEO of SolarEdge. “In addition to the growth and strong profitability of our solar business, this quarter we continued to lay the foundations for our non-solar future growth with the acquisition of Kokam, a leading provider of lithium-ion batteries and the post quarter acquisition of a majority holding of S.M.R.E, a provider of innovative integrated powertrain technology and electronics for the e-mobility market. I am confident that these acquisitions, which will initially dilute our margins and EPS, will over time and with our investment, innovation and operational excellence, become a meaningful part of the SolarEdge success.”

Fourth Quarter 2018 Summary

The Company reported record revenues of $263.7 million, up 11% from $236.6 million in the prior quarter and up 39% from $189.3 million year over year.

GAAP gross margin was 30.2%, down from 33.0% in the prior quarter and down from 37.5% year over year.

Non-GAAP gross margin was 30.9%, down from 33.6% in the prior quarter and down from 37.9% year over year.

GAAP operating expenses were $55.3 million, up 26% from $43.9 million in the prior quarter and up 52% from $36.4 million year over year.

Non-GAAP operating expenses were $45.1 million, up 22% from $37.0 million in the prior quarter and up 42% from $31.7 million year over year.

GAAP operating income was $24.4 million, down 28% from $34.0 million in the prior quarter and down 29% from $34.6 million year over year.

Non-GAAP operating income was $36.4 million, down 14% from $42.5 million in the prior quarter and down 9% from $40.0 million year over year.

GAAP net income was $12.9 million, down 72% from $45.6 million in the prior quarter and down 34% from $19.5 million year over year.

Non-GAAP net income was $31.5 million, down 26% from $42.7 million in the prior quarter and down 24% from $41.2 million year over year.

GAAP net diluted earnings per share (“EPS”) was $0.27, down from $0.95 in the prior quarter and down from $0.42 year over year.

Non-GAAP net diluted EPS was $0.63, down from $0.86 in the prior quarter and down from $0.85 year over year.

Cash flow from operating activities was $46.9 million, up from $34.3 million in the prior quarter and up from $45.8 million year over year.

As of December 31, 2018, cash, cash equivalents, restricted cash, bank deposit and marketable securities totaled $392.2 million, compared to $453.2 million on September 30, 2018 following a payment of $101.2 million for the acquisition of Kokam shares.

Full Year 2018 Summary

Total revenues of $937.2 million, up 54% from the prior year.

GAAP gross margin was 34.1%, down from 35.4% in the prior year.

GAAP operating income was $139.9 million, up 54% from $91.1 million in the prior year.

GAAP net income was $128.8 million, up 53% from $84.2 million in the prior year.

Non-GAAP net income was $157.3 million, up 37% from $115.0 million in the prior year.

GAAP net diluted earnings per share (“EPS”) was $2.69, up from $1.85 in the prior year.

Non-GAAP net diluted EPS was $3.17, up from $2.43 in the prior year.

Cash flow from operating activities of $189.1 million, up from $136.7 million in the prior year.

Outlook for the First Quarter 2019

The Company also provides guidance for the first quarter ending March 31, 2019 as follows:

  • Revenues to be within the range of $260 million to $270 million
  • Gross margins expected to be within the range of 30% to 32%
  • Revenues from solar products to be within the range of $245 million to $255 million
  • Gross margins 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, February 20, 2019. The call will be available, live, to interested parties by dialing 800-682-0995. For international callers, please dial +1 334-323-0505. The Conference ID number is 3109753. 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, UPS, 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, 2017, filed on February 20, 2018, Current Reports on Form 8-K and other reports filed with the SEC. All information set forth in this release is as of February 20, 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

December 31,

Year ended December 31,
2018 2017 2018 2017
Unaudited
Revenues $ 263,670 $ 189,340 $ 937,237 $ 607,045
Cost of revenues 183,959 118,370 618,001 392,279
Gross profit 79,711 70,970 319,236 214,766
Operating expenses:
Research and development, net 24,710 16,420 82,245 54,966
Sales and marketing 19,210 14,079 68,307 50,032
General and administrative 11,402 5,900 28,829 18,682

Total operating expenses

55,322 36,399 179,381 123,680
Operating income 24,389 34,571 139,855 91,086
Other expenses 435 435
Financial expenses (income), net (288 ) (1,487 ) 2,297 (9,158 )
Income before taxes on income 24,242 36,058 137,123 100,244
Taxes on income (tax benefit) 12,093 16,556 9,077 16,072
Net income $ 12,149 $ 19,502 $ 128,046 $ 84,172
Net loss attributable to non-controlling interests 787 787

Net income attributable to SolarEdge Technologies Inc.

$ 12,936 $ 19,502 $ 128,833 $ 84,172

SOLAREDGE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

December 31,
2018 2017
CURRENT ASSETS:
Cash and cash equivalents $ 191,633 $ 163,163
Short-term bank deposits 6,001
Restricted cash 1,628 1,516
Marketable securities 118,680 77,264
Trade receivables, net 173,579 109,528
Prepaid expenses and other current assets 45,073 42,223
Inventories 141,519 82,992

Total current assets

678,113 476,686
LONG-TERM ASSETS:
Marketable securities 74,256 103,120

Property, plant and equipment, net

119,329 51,182
Deferred tax assets, net 14,698 8,340
Intangible assets, net 38,504 1,115
Goodwill 34,874
Other non-current assets 4,698 862

Total long term assets

286,359 164,619

Total assets

$ 964,472 $ 641,305
CURRENT LIABILITIES:
Trade payables, net $ 107,079 $ 69,488
Employees and payroll accruals 29,053 22,544
Current maturities of bank loans 16,639
Warranty obligations 28,868 14,785
Deferred revenues 14,351 2,559
Accrued expenses and other current liabilities 29,728 20,378

Total current liabilities

225,718 129,754
LONG-TERM LIABILITIES:
Bank loans 3,510
Warranty obligations 92,958 64,026
Deferred revenues 60,670 31,453
Deferred tax liabilities, net 1,499
Other non-current liabilities 9,391 18,605

Total long-term liabilities

168,028 114,084
STOCKHOLDERS’ EQUITY:
Share capital 5 4
Additional paid-in capital 371,794 331,902
Accumulated other comprehensive loss (524 ) (611 )
Retained earnings (accumulated deficit) 191,133 66,172

Total SolarEdge Technologies Inc. stockholders’ equity

562,408 397,467
Non-controlling interests 8,318

Total stockholders’ equity

570,726 397,467

Total liabilities and stockholders’ equity

$ 964,472 $ 641,305

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year ended December 31,
2018 2017

Cash flows provided by operating activities:

Net income $ 128,046 $ 84,172
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment 12,441 7,011
Amortization of intangible assets 1,193 144
Amortization of premium and accretion of discount on available-for-sale marketable securities 1,241 2,061
Stock-based compensation 30,618 17,564
Capital loss from disposal of property 445
Realized loss from sale of available-for-sale marketable securities 137
Realized gain from cash flow hedge (31 ) (994 )
Changes in assets and liabilities:
Inventories (21,194 ) (15,690 )
Prepaid expenses and other assets (2,712 ) (20,943 )
Trade receivables, net (60,514 ) (38,139 )
Deferred tax assets and liabilities, net (7,092 ) (5,455 )
Trade payables, net 31,482 35,455
Employees and payroll accruals 4,583 9,394
Warranty obligations 41,877 20,436
Deferred revenues 37,041 14,106
Accrued expenses, non-current tax liabilities and other liabilities (8,484 ) 27,543
Net cash provided by operating activities 189,077 136,665

Cash flows from investing activities:

Business combinations, net of cash acquired (94,735 )
Purchase of property, plant and equipment (38,608 ) (21,382 )
Purchase of intangible assets
Investment in short term bank deposits (6,001 )
Investment in available-for-sale marketable securities (142,627 ) (143,675 )
Proceed from sales and maturities of available-for-sale marketable securities 129,345 80,269
Net cash used in investing activities $ (152,626 ) $ (84,788 )

Cash flows from financing activities:

Repayment of bank loan (3,786 )
Proceeds from issuance of shares under stock purchase plan and upon exercise of stock-based awards 10,021 7,240
Change in noncontrolling interests (14,190 )
Net cash provided by financing activities (7,955 ) 7,240
Increase (decrease) in cash, cash equivalents and restricted cash 28,496 59,117
Cash, cash equivalents and restricted cash at the beginning of the period 164,679 105,580
Effect of exchange rate differences on cash, cash equivalents and restricted cash 86 (18 )
Cash, cash equivalents and restricted cash at the end of the period $ 193,261 $ 164,679

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 12 months ended
December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017
Gross profit (GAAP) 79,711 77,982 70,970 319,236 214,766
Stock-based compensation 1,323 1,127 703 4,342 2,251
Cost of product adjustment 398 208 —- 606 —-
Intangible assets amortization —- 193 —- 193 —-
Gross profit (Non-GAAP) 81,432 79,510 71,673 324,377 217,017
Reconciliation of GAAP to Non-GAAP Gross Margin
Three months ended 12 months ended
December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017
Gross margin (GAAP) 30.2% 33.0% 37.5% 34.1% 35.4%
Stock-based compensation 0.5% 0.4% 0.4% 0.4% 0.3%
Cost of product adjustment 0.2% 0.1% 0.0% 0.1% 0.0%
Intangible assets amortization 0.0% 0.1% 0.0% 0.0% 0.0%
Gross margin (Non-GAAP) 30.9% 33.6% 37.9% 34.6% 35.7%
Reconciliation of GAAP to Non-GAAP Operating expenses
Three months ended 12 months ended
December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017
Operating expenses (GAAP) 55,322 43,945 36,399 179,381 123,680
Stock-based compensation R&D (3,230) (2,988) (1,795) (11,205) (5,703)
Stock-based compensation S&M (2,564) (2,250) (1,714) (9,112) (5,387)
Stock-based compensation G&A (1,574) (1,585) (1,170) (5,959) (4,224)
Intangible assets amortization – R&D (652) (110) —- (762) —-
Intangible assets amortization – S&M (101) (29) —- (130) —-
Acquisition related expenses (2,140) —- —- (2,140) —-
Operating expenses (Non-GAAP) 45,061 36,983 31,720 150,073 108,366
Reconciliation of GAAP to Non-GAAP Operating income
Three months ended 12 months ended
December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017
Operating income (GAAP) 24,389 34,037 34,571 139,855 91,086
Cost of product adjustment 398 208 —- 606 —-
Stock-based compensation 8,691 7,950 5,382 30,618 17,565
Intangible assets amortization 753 332 —- 1,085 —-
Acquisition related expenses 2,140 —- —- 2,140 —-
Operating income (Non-GAAP) 36,371 42,527 39,953 174,304 108,651
Reconciliation of GAAP to Non-GAAP Financial expenses (income), net
Three months ended 12 months ended
December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017
Financial expenses (income), net (GAAP) (288) 689 (1,487) 2,297 (9,158)
Non cash interest (769) (640) —- (2,489) —-
Intangible assets amortization 528 —- —- 528 —-
Financial expenses (income), net (Non-GAAP) (529) 49 (1,487) 336 (9,158)
Reconciliation of GAAP to Non-GAAP Other expenses
Three months ended 12 months ended
December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017
Other expenses (GAAP) 435 —- —- 435 —-
Fixed assets disposal (435) —- —- (435) —-
Other expenses (income) (Non-GAAP) —- —- —- —- —-
Reconciliation of GAAP to Non-GAAP Tax on income (Tax benefit)
Three months ended 12 months ended
December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017
Tax on income (Tax benefit) (GAAP) 12,093 (12,295) 16,556 9,077 16,072
Deferred tax asset 2,304 1,771 2,392 7,093 5,456
Transition tax of foreign earnings (8,189) 10,305 (18,735) 1,296 (18,735)
Tax on income (Tax benefit) (Non-GAAP) 6,208 (219) 213 17,466 2,793

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

Three months ended 12 months ended
December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017

Net income attributable to SolarEdge Technologies Inc. (GAAP)

12,936 45,643 19,502 128,833 84,172
Cost of product adjustment 398 208 —- 606 —-
Stock-based compensation 8,691 7,950 5,382 30,618 17,565
Intangible assets amortization 225 332 —- 557 —-
Acquisition related expenses 2,140 —- —- 2,140 —-
Non cash interest 769 640 —- 2,489 —-
Fixed Assets disposal 435 —- —- 435 —-
Deferred tax asset (2,304) (1,771) (2,392) (7,093) (5,456)
Transition tax of foreign earnings 8,189 (10,305) 18,735 (1,296) 18,735

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

31,479 42,697 41,227 157,289 115,016
Reconciliation of GAAP to Non-GAAP Net basic EPS
Three months ended 12 months ended
December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017
Net basic earnings per share (GAAP) 0.28 1.00 0.45 2.85 1.99
Cost of product adjustment 0.01 0.01 —- 0.01 —-
Stock-based compensation 0.19 0.17 0.12 0.68 0.42
Intangible assets amortization 0.01 0.01 —- 0.01 —-
Acquisition related expenses 0.04 —- —- 0.05 —-
Non cash interest 0.02 0.02 —- 0.05 —-
Fixed Assets disposal 0.01 —- —- 0.01 —-
Deferred tax asset (0.05) (0.039) (0.05) (0.15) (0.13)
Transition tax of foreign earnings 0.18 (0.226) 0.43 (0.03) 0.44
Net basic earnings per share (Non-GAAP) 0.69 0.94 0.95 3.48 2.72
Reconciliation of GAAP to Non-GAAP Net diluted EPS
Three months ended 12 months ended
December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017
Net diluted earnings per share (GAAP) 0.27 0.95 0.42 2.69 1.85
Cost of product adjustment 0.01 —- —- 0.01 —-
Stock-based compensation 0.16 0.13 0.10 0.53 0.30
Intangible assets amortization 0.01 0.01 —- 0.01 —-
Acquisition related expenses 0.04 —- —- 0.04 —-
Non cash interest 0.01 0.01 —- 0.05 —-
Fixed Assets disposal 0.01 —- —- 0.01 —-
Deferred tax asset (0.04) (0.03) (0.05) (0.14) (0.12)
Transition tax of foreign earnings 0.16 (0.21) 0.38 (0.03) 0.40
Net diluted earnings per share (Non-GAAP) 0.63 0.86 0.85 3.17 2.43

Reconciliation of GAAP to Non-GAAP No. of shares used in Net diluted EPS

Three months ended 12 months ended
December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017
Number of shares used in computing net diluted earnings per share (GAAP) 47,637,478 48,281,240 46,876,328 47,980,002 45,425,307
Stock-based compensation 2,204,179 1,463,633 1,375,527 1,636,127 1,907,423
Number of shares used in computing net diluted earnings per share (Non-GAAP) 49,841,657 49,744,873 48,251,855 49,616,129 47,332,730
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