Home Quarter Results SolarEdge Announces Third Quarter 2018 Financial Results
SolarEdge Announces Third Quarter 2018 Financial Results

SolarEdge Announces Third Quarter 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 third quarter ended September 30, 2018.

Third Quarter 2018 Highlights

  • Record revenues of $236.6 million, up 42% year-over-year
  • GAAP net income of $45.6 million
  • GAAP net diluted EPS of $0.95
  • Non-GAAP net diluted EPS of $0.86
  • 1,083 Megawatts (AC) of inverters shipped

“This quarter we continued to grow our revenues and market share,” said Guy Sella, Founder, Chairman and CEO of SolarEdge. “We shipped 1.1GW of systems and delivered over three million power optimizers, with record high shipments of commercial products.”

“While continuing to expand our existing business, we closed the asset acquisition of a new UPS division, Gamatronic. In the first weeks of October, we also signed and closed the Kokam acquisition which will expand our smart energy offerings, adding proven battery storage options to our product portfolio. These acquisitions will take us a further step toward offering full solutions that are more comprehensive, smarter and beneficial.”

Third Quarter 2018 Summary

The Company reported record revenues of $236.6 million, up 4% from $227.1 million in the prior quarter and up 42% from $166.6 million year over year.

GAAP gross margin was 33.0%, down from 36.1%, in the prior quarter and down from 34.9% year over year.

GAAP operating expenses were $43.9 million, up 6% from $41.3 million in the prior quarter and up 35% from $32.7 million year over year.

GAAP operating income was $34.0 million, down 16% from $40.7 million in the prior quarter and up 34% from $25.4 million year over year.

GAAP net income was $45.6 million, up 32% from $34.6 million in the prior quarter and up 63% from $28.0 million year over year.

Non-GAAP net income was $42.7 million, up 5% from $40.6 million in the prior quarter and up 35% from $31.5 million year over year.

GAAP net diluted earnings per share (“EPS”) was $0.95, up from $0.72 in the prior quarter and up from $0.61 year over year.

Non-GAAP net diluted EPS was $0.86, up from $0.82 in the prior quarter and up from $0.66 year over year.

Cash flow from operating activities was $ 34.3 million, down from $43.9 million in the prior quarter and up from $33.7 million year over year.

As of September 30, 2018, cash, cash equivalents, restricted cash, bank deposit and marketable securities totaled $453.2 million, compared to $437.6 million on June 30, 2018.

Outlook for the Fourth Quarter 2018

The Company also provides guidance for the fourth quarter ending December 31, 2018 as follows:

  • Revenues to be within the range of $245 million to $255 million;
  • GAAP gross margins expected to be within the range of 30% to 32%, depending on the effects of recent M&A and
  • Non GAAP gross margins 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 Thursday, November 1, 2018. 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 2786736. 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, 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 and non-GAAP net diluted EPS. 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 August 2, 2018. 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
September 30,

Nine months ended
September 30,

2018201720182017
UnauditedUnaudited
Revenues$236,578$166,552$673,567$417,705
Cost of revenues158,596108,498434,042273,909
Gross profit77,98258,054239,525143,796
Operating expenses:
Research and development20,10914,36357,53538,546
Sales and marketing16,93813,21749,09735,953
General and administrative6,8985,07817,42712,782

Total operating expenses

43,94532,658124,05987,281
Operating income34,03725,396115,46656,515
Financial expenses (income), net689(2,666)2,585(7,671)
Income before taxes on income33,34828,062112,88164,186
Taxes on income (tax benefit)(12,295)91(3,016)(484)
Net income$45,643$27,971$115,897$64,670

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

September 30,December 31,
20182017
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$192,876$163,163
Short-term bank deposits7,779
Restricted cash2,0831,516
Marketable Securities148,25277,264
Trade receivables, net151,088109,528
Inventories107,17982,992
Prepaid expenses and other current assets46,39642,223

Total current assets

655,653476,686
LONG-TERM ASSETS:
Marketable securities102,240103,120
Property and equipment, net73,41551,182
Deferred tax assets, net13,2188,340
Intangible assets, net3,7621,115
Goodwill2,782
Other non-current assets1,108862

Total long term assets

196,525164,619

Total assets

$852,178$641,305
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payables, net$83,459$69,488
Employees and payroll accruals23,68022,544
Warranty obligations21,66014,785
Deferred revenues5,7952,559
Accrued expenses and other current liabilities31,55620,378

Total current liabilities

166,150129,754
LONG-TERM LIABILITIES:
Warranty obligations86,05964,026
Deferred revenues53,66331,453
Other non-current liabilities7,34318,605

Total long-term liabilities

147,065114,084
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS’ EQUITY:
Common stock54
Additional paid-in capital361,744331,902
Accumulated other comprehensive loss(983)(611)
Retained earnings178,19766,172

Total stockholders’ equity

538,963397,467

Total liabilities and stockholders’ equity

$852,178$641,305

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Nine months ended
September 30,

20182017
Unaudited

Cash flows provided by operating activities:

Net income$115,897$64,670
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of property and equipment

7,9974,824
Amortization of intangible assets404108
Amortization of premiums on available-for-sale marketable securities1,2421,310
Stock-based compensation21,92712,183
Deferred tax assets, net(4,789)(3,063)
Loss on disposals of fixed assets64
Realized gain from cash flow hedge(9)
Changes in assets and liabilities:
Inventories(18,120)5,005
Prepaid expenses and other assets(4,800)(17,420)
Trade receivables, net(42,418)(20,168)
Trade payables, net14,0068,667
Employees and payroll accruals1,2004,509
Warranty obligations28,84713,192
Deferred revenues21,5769,699
Accrued expenses and other liabilities(819)7,314
Net cash provided by operating activities142,20590,830

Cash flows used in investing activities:

Purchase of property and equipment(30,051)(13,203)
Acquisitions and purchases of assets(11,223)
Investment in short term bank deposits(7,779)
Investment in available-for-sale marketable securities(143,150)(82,469)
Maturities of available-for-sale marketable securities71,63246,513
Net cash used in investing activities$(120,571)$(49,159)

Cash flows from financing activities:

Proceeds from issuance of shares under stock purchase plan and upon exercise of stock-based awards$7,915$3,795
Net cash provided by financing activities7,9153,795
Net increase in cash, cash equivalents and restricted cash29,54945,466
Cash, cash equivalents and restricted cash at the beginning of the period164,679105,580
Effect of exchange rate differences on cash, cash equivalents and restricted cash731(198)
Cash, cash equivalents and restricted cash at the end of the period$194,959$150,848

SOLAREDGE TECHNOLOGIES INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In thousands, except gross profit and per share data)

(Unaudited)

Reconciliation of Non-GAAP Financial Measures
Reconciliation of GAAP to Non-GAAP Gross Profit
Three months endedNine months ended
September 30, 2018June 30, 2018September 30, 2017September 30, 2018September 30, 2017
Gross profit (GAAP)77,98281,94658,054239,525143,796
Stock-based compensation1,1279685383,0191,548
Cost of product adjustment208—-—-208—-
Intangible Assets Amortization193—-—-193—-
Gross profit (Non-GAAP)79,51082,91458,592242,945145,344
Reconciliation of GAAP to Non-GAAP Gross Margin
Three months endedNine months ended
September 30, 2018June 30, 2018September 30, 2017September 30, 2018September 30, 2017
Gross margin (GAAP)33.0%36.1%34.9%35.6%34.4%
Stock-based compensation0.5%0.4%0.3%0.5%0.4%
Cost of product adjustment0.1%—-—-0.0%—-
Intangible Assets Amortization0.1%—-—-0.0%—-
Gross margin (Non-GAAP)33.6%36.5%35.2%36.1%34.8%
Reconciliation of GAAP to Non-GAAP Operating expenses
Three months endedNine months ended
September 30, 2018June 30, 2018September 30, 2017September 30, 2018September 30, 2017
Operating expenses (GAAP)43,94541,28132,658124,05987,281
Stock-based compensation R&D2,9882,6051,4237,9753,908
Stock-based compensation S&M2,2502,0941,4396,5483,673
Stock-based compensation G&A1,5851,4611,1374,3853,054
Intangible Assets Amortization – R&D110—-—-110—-
Intangible Assets Amortization – S&M29—-—-29—-
Fixed Assets disposal—-—-—-64—-
Operating expenses (Non-GAAP)36,98335,12128,659104,94876,646
Reconciliation of GAAP to Non-GAAP Operating income
Three months endedNine months ended
September 30, 2018June 30, 2018September 30, 2017September 30, 2018September 30, 2017
Operating income (GAAP)34,03740,66525,396115,46656,515
Cost of product adjustment208—-—-208—-
Stock-based compensation7,9507,1284,53721,92712,183
Intangible Assets Amortization332—-—-332—-
Fixed Assets disposal—-—-—-64—-
Operating income (Non-GAAP)42,52747,79329,933137,99768,698
Reconciliation of GAAP to Non-GAAP Financial expenses (income), net
Three months endedNine months ended
September 30, 2018June 30, 2018September 30, 2017September 30, 2018September 30, 2017
Financial expenses (income), net (GAAP)6892,480—-2,585—-
Non cash interest(640)(568)—-(1,720)—-
Financial expenses (income), net (Non-GAAP)491,912—-865—-
Reconciliation of GAAP to Non-GAAP Tax on income (Tax benefit)
Three months endedNine months ended
September 30, 2018June 30, 2018September 30, 2017September 30, 2018September 30, 2017
Tax on income (Tax benefit) (GAAP)(12,295)3,61791(3,016)(484)
Deferred tax realized (asset)(1,771)(1,697)(959)(4,789)(3,064)
Transition tax of foreign earnings(10,305)—-—-(9,485)—-
Tax on income (Tax benefit) (Non-GAAP)(219)5,3141,05011,2582,580
Reconciliation of GAAP to Non-GAAP Net income
Three months endedNine months ended
September 30, 2018June 30, 2018September 30, 2017September 30, 2018September 30, 2017
Net income (GAAP)45,64334,56827,971115,89764,670
Cost of product adjustment208—-—-208—-
Stock-based compensation7,9507,1284,53721,92712,183
Intangible Assets Amortization332—-—-332—-
Fixed Assets disposal—-—-—-64—-
Non cash interest640568—-1,720—-
Deferred tax realized (asset)(1,771)(1,697)(959)(4,789)(3,064)
Transition tax of foreign earnings(10,305)—-—-(9,485)—-
Net income (Non-GAAP)42,69740,56731,549125,87473,789
Reconciliation of GAAP to Non-GAAP Net basic EPS
Three months endedNine months ended
September 30, 2018June 30, 2018September 30, 2017September 30, 2018September 30, 2017
Net basic earnings per share (GAAP)1.000.760.662.571.55
Cost of product adjustment0.00

—-

—-

0.00

—-

Stock-based compensation0.170.160.110.490.29
Intangible Assets Amortization0.01

—-

—-

0.01

—-

Fixed Assets disposal—-—-—-0.00—-
Non cash interest0.010.01—-0.04—-
Deferred tax realized (asset)(0.04)(0.03)(0.03)(0.11)(0.08)
Transition tax of foreign earnings(0.23)—-—-(0.21)—-
Net basic earnings per share (Non-GAAP)0.940.900.742.801.76
Reconciliation of GAAP to Non-GAAP Net diluted EPS
Three months endedNine months ended
September 30, 2018June 30, 2018September 30, 2017September 30, 2018September 30, 2017
Net diluted earnings per share (GAAP)0.950.720.612.411.44
Cost of product adjustment—-

—-

—-

—-

—-

Stock-based compensation0.130.120.070.380.19
Intangible Assets Amortization0.01

—-

—-

—-

—-

Fixed Assets disposal—-

—-

—-—-—-
Non cash interest0.010.01—-0.04—-
Deferred tax realized (asset)(0.03)(0.03)(0.02)(0.10)(0.06)
Transition tax of foreign earnings(0.21)—-—-(0.19)—-
Net diluted earnings per share (Non-GAAP)0.860.820.662.541.57
Reconciliation of GAAP to Non-GAAP No. of shares used in Net diluted EPS
Three months endedNine months ended
September 30, 2018June 30, 2018September 30, 2017September 30, 2018September 30, 2017
Number of shares used in computing net diluted earnings per share (GAAP)48,281,24048,291,28046,131,55648,091,18544,937,527
Stock-based compensation1,463,6331,341,2861,535,2581,446,7752,084,722
Number of shares used in computing net diluted earnings per share (Non-GAAP)49,744,87349,632,56647,666,81449,537,96047,022,249

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