Home Solar Inverters SolarEdge Announces Second Quarter 2019 Financial Results
SolarEdge Announces Second Quarter 2019 Financial Results

SolarEdge Announces Second Quarter 2019 Financial Results

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FREMONT : 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 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)

(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

Anand Gupta Editor - EQ Int'l Media Network