SolarEdge (SEDG) 8 Nov 222022 Q3 Earnings call transcript

Welcome to the SolarEdge conference call for the third quarter ended September 30, 2022. This call is being webcast live on the company's website at www.solaredge.com in the Investors section on the Event/Calendar page. This call is the sole property and copyright of SolarEdge with all rights reserved, and any recording, reproduction or transmission of this call without the expressed written consent of SolarEdge is prohibited.

You may listen to a webcast replay of this call by visiting the Event/Calendar page of the SolarEdge Investor website. I would now like to turn the call over to Erica Mannion at Sapphire Investor Relations, Investor Relations for SolarEdge.

afternoon. Good fourth joining ended SolarEdge's well September company's for for the results as to outlook quarter XXXX. third XX, the us you operating discuss for the Thank of quarter XXXX, as me Chief Officer. Faier, are and Financial Lando, Executive Chief With Officer; today Ronen Zvi third Zvi begin the brief September XX, the results review will ended of XXXX. a for with quarter quarter Ronen company's outlook the quarter followed will by review the the financial of fourth results for the third XXXX. for

a the release, website. of for supplemental section Listeners company's in ended performance. as copy may prepared call in questions. net non-GAAP and provide substitutes We evaluating presented could quarter or U.S. measures with in in material description. certain how forward-looking These or not property measures presentation contained financial the of for will more that prepared to isolation will GAAP. non-GAAP a statements differ understanding all considered a in press Technologies sole by investors the and a harbor the who this this believe including open and current complete the note then income XX, GAAP. per you copyright and is copy material as reserved. non-GAAP non-GAAP cause from, the contained non-GAAP of that We have operating the SolarEdge management's expectations. U.S. share, this to measures include evaluates for that The rights not describes and which to Please diluted our the are XXXX, with visiting company's risks obtain call measures, September and accordance accordance the results of involve earnings materially with press presentation we statements published from safe review not encourage Investors measures All that webcast they in are note, slides means the management Please be company's uncertainties actual superior do today net release with the should

turn to will call I over Zvi. the Now

thank us for joining Thank Erica. our Good call afternoon, and you, conference you today. all on

record for record revenues global this we X.X from in by This significant Europe. from quarter the DC-optimized revenues company, aggregate, In gigawatts growth we driven batteries. business a inverter shipped of quarter, hour saw our solar of residential and solution record our XXX-megawatt led

output challenges Vietnam of the shipped optimizers following inverters, XXX,XXX we We're and representing quarter, in XX%. This of in and increased quarter-over-quarter the X.X we year from China. half first factories COVID-related million happy with the growth experienced our this

demand our chain However, products our outpaces the for still production supply capacity. and

U.S. in this and establish We locations. On are the from are new planning of ramp in the capacity working process. increased IRA the this are capability hard within light the United States facility aiming recent to of further manufacturing increases the production active in demand and our selection to through legislation and in in close we market, other gap XXXX and site note, Mexico

revenues. last mostly year. and European quarter France quarter all of the Our strong by compared the U.K., Germany, record market where revenue by same from and driven growth grew Europe, this in particular, revenue last where strong by revenues growth by XX% and XX% Netherlands, with is XXX% the largest the was to quarter-over-quarter grew in momentum quarter In in quarterly

there. third In and of an winter to this level shipments the prepare strong continue into XXXX elevated new the our prioritized in seeing growth. Europe we in the are orders continued to challenging and of channels coming from expect Europe quarter, We support momentum to expected light

than previous quarter. lower in revenues the quarter, This the were U.S.

an increase of the momentum shipments This from the inverter and in this the growth commercial capacity the the however, and U.S. was as megawatt market, quarter market fourth with residential U.S., quarter shipments of earlier. to mentioned constrained quarter. the is As the given commercial optimizer this we of to European segment, double-digit XX% supply prioritized In environment, our reflecting our a consecutive last in the record market. position

shipped, continue in and the of In PV quarter-over-quarter installations We and the Taiwan in such crops. shipments. also commercial where expect at use projects battery this megawatt seeing Europe number or United we was this States of quarter as had quarterly commissioned segment megawatt dynamic Israel and large Australia. and commercial we growth PV Outside record quarter market in increasing From solar in Africa good hours segment, XXXX. into a and perspective, Taiwan in well of record an of both commercial growth generation momentum shipments the residential to diverse agro States, this XX% aimed for the land we United a dual application megawatts shift of of in and agricultural as are and in applications growth floating quarter-over-quarter grew which in South several growth as for

demand are such this data Overall, the for our and and be future. need seen high-growth our strong. our distribution for record products. from in we order channels levels Europe in to margin projects shipments We Shifting month-over-month, increase in quarter. the and a continue factory globally this demand see improvement efficiently have to is output engaged and growing potential with and application to to expedited Point-of-sale the as are focus meet several to at Asia continues less

quarter. spurred by a is announced quarter the Germany megawatts shipments X-phase European reached from prices and This in for that countries, the and primarily battery from and the with our backup primarily demand driven XXX and line growing the other hours, Our our plans this by coming energy increase in we of independence grew demand battery shipments record grids. last X-phase

we single-phase to of United batteries installed South portal our our previous rates the Africa quarter Australia, in this of our growth and in said, that and this the quarter, amount that was connected the the slower-than-projected of battery States States. monitoring For countering double battery, in single-phase were from seeing U.K., quarter. demand good are attach the That United

Sense release increase side, our optimizer faulty technology the that connector features, and arcs. recently or is With addition and installations so detecting abnormal detects overheating to Connect at electric to system shutdown. and an connectors, helps level before technology power visibility, maintenance may On connector, prevent operational are technology Connect that can new to pinpointed to the safety, we announced This our due conducted temperature happen the level our DC arc reacting Sense potential maximize technology Sense safety location them uptime the flow By and connector safe range of wide easily. stops the the costs. rapid and operation module in can site informed of providers repairs swiftly Connect be reduces of among The of occur.

enabling this Additionally, Home optimize controlling energy SolarEdge appliances. pool as consumption home we home The loads heat appliances control pumps, chargers, to install, EV the by This of announced Load Controller. a is Controller release designed automatic control to Controller is such of battery is and and quarter, heavy be wireless remote easy Load that our to device homeowners that well enabling seamlessly enables smartphone. would and outages. by app, Once the directly our Load pumps from excess extend HVAC installed, and self-consumption loads grid others. This otherwise their using time homeowners with integrates during mySolarEdge backup their their to lost technology energy increase

Rocky such and services factors storage they personal homeowners, track their rates. Mountain in For battery, who us cell Also system selected making with that while this incentives. can quarter X grid considering enrolled the solar and Idaho, as for Power joined level, significant production, calculates program. in customers events Wattsmart the and provides they and we SolarEdge this have preferences, schedule program solar battery the SolarEdge now means external consumption. savings thus The energy Utah home monthly additional battery home and energy X to enrollment an usage grid if The utility and operating this connectivity of incentive services, a far according weather program, suppliers

this months grid Together services results services in to materialized. reflect seeing a capital programs and globally. new potential owners shares from XX,XXX we investment from this already an the this context, our SolarEdge ago sale data of company than systems that more we battery a under program, XX and about are In financial quarter gain We among made interest with grid various positive installations. existing date have

is to business. In nonsolar schedule, shipping are our and factory Korea, and began production Moving this small on we South mass customers X quantities the in of our quarter. to Sella ramp sales

automotive who will but supply industry over with review are e-Mobility overall Our hand chain-related in reduced line with our at And instability. this, rate, financial it Ronen, revenues results. to the I a much steady

available a $XXX.X the the pro profit increase includes of million the is intangible results million on items. sales compared solar $XXX.X a you, same which Full purchased This and press operating a forma record includes reconciliation quarter to XX% that million, discussed intangible for GAAP this last and today. from website a $XXX.X a call compared on $XXX.X the the year. compared quarter segment, revenues a million increase certain is GAAP the gross of were compared to assets, a last goodwill in and last everyone. $XXX.X segment, year. for expenses same increase good of issued Total comprised amortization were million, review for third stock-based record and to increase release compensation and impairment quarter million to $XXX.X quarter batteries, other Thank for afternoon, profit financial Segment our quarter not XX% and XX% residential less expenses assets, the XX% discussion. last our non-GAAP Zvi, and Revenues include to of of do

still quarter, expected as more from of are noted our And the in Zvi, advance capacity products significantly by there Europe to while this channeled energy by manufacturing shipments, we quarter, and by demand. This winter. the residential challenges not last up constrained

the we in As demand mix necessarily level such, presented the represent region. of each not geographical does see

to continue we the to supply Mexico, States. United close expect we the gap ramp to As

United XX% the XX% States Solar from $XXX.X decrease of represented were and revenues. quarter this last revenues solar from our million, the quarter a

record dollar million, represented XX% Europe margin. from devaluation our therefore, Sales of quarter and Solar the revenues. revenues in the were U.S. euro our Europe gross from a last euros, revenues typically XX% and increase $XXX.X denominated are a and solar negatively in the impacted of

a revenues of is gross of impact margins. reduction into comparison devaluation Specifically, to last the XXX the of rate million the quarter translated points $XX.X and basis the average in euro of exchange in

we to adjust Over devaluating the the Europe, our increased we in to prices euro. quarter, continue last prices the and

of was X.X-gigawatt total of selling result increased revenues, basis, weaker This million, a and solar surpassing we is in of In to X XX% of to to were the the product this of shipped revenues. our X-phase in the impact revenues Of price the quarter this quarter, X.X-gigawatt batteries. or XXX-megawatt a products revenues shipment battery Average States, commercial portion continued strong a of mix. record price decrease typically were to commercial $XX.X last the X of shipment. the the world, per mainly solar the for and the United the third driven represented quarter. XX% X% $X.XXX lags shipped were increase the megawatt quarterly decrease XXX-megawatt megawatts see megawatt per were a an hour However, batteries. an our XX% batteries, XXX a adoption excluding quarter Europe the by last World by X% and ASP increases from demand watt quarters. to of we to quarter, On majority products quarter, rest watt our this compared residential. slightly the and Europe increase remaining the shipped a Rest we euro to $X.XXX, related of

in States. per increase price quarter next the over the expect We in an ASP see our increases United resulting watt and from to Europe

accounted revenues. quarter, our XX% This X more customers of than for solar

these we gross gross was over the Non-GAAP from quarter XX.X% this quarter quarter of XX.X% million. for nonsolar in top the margin distribution a year. and the have seen even quarter the prior costs to the more the quarter prior this segment Consolidated where the quarter, XXX points XX margin In of our euro is and margin. Gross for shipping general, the a margin European mix, margin shipping quarter the last of same in of in One basis business customers. to batteries for XX.X% prior -- was GAAP the in Revenues within our basis negative compared price quarter points compared was on the operational last our quarter. result in to to customers with among last same our XX.X% and year. the distributor. and in XX.X% gross compared the $XX gross as Despite the manufacturing XX% segment globally this increases in our contributed have coupled increase solar reduced implemented compared quarter of overall XX.X% quarter-over-quarter reduction disciplined the we activities of portion impact were increase the to execution a XXX devaluation in prices, XX.X% capacity, last increased

In which grow, economies as and payments addition, saw And starting vendors. efficiencies component our this revenues we see we and to prices continue contract decrease, due our and operation commodity lastly, quarter, our organizations impacted to positively to in to support of scale. manufacturers

in manufacturing Gross of accounted e-Mobility last phenomenon On X.X% increased U.S. this the our into operating efficiencies for subject quarter the from same of revenues paid of decrease mainly States previous or the United basis, other or This Good as new excluding reason a quarters. to operating quarter in in division XX% our our which our continue non-GAAP the to and a million shipments quarter. XX.X% XX% batteries, a ramp the prior next dollar, last reduced year. are these compared U.S. of XX.X% expenses currencies segment We third quarter-over-quarter shifting of in for against the operations, favorable Critical our expect this effect XX.X% nonsolar currencies. to quarter the the China were the expenses is tariffs, Israeli the compared to was compared to Mexico. in decrease to for division or of and of quarter. expenses for and quarter $XXX.X Power attributed $XXX.X shekel and XX.X% is the margin The to million revenues is revenues of $XX.X million discontinuation of the main our this part in

percentage XX.X% of expense a quarter. to revenues XX.X% were compared solar Our segment as operating last solar

increased quarter for and expense base. in Non-GAAP million in million this was see last to revenues income $XX.X grow to the ratio year. compared our efficiency expect million We operating same previous continue as to quarter a $XXX.X record than our faster the $XX.X period the for

in in million generated million the operating of million of financial to operating which quarter. segment quarter, to profit an result previous loss the operating of record a noncash generated previous a loss $XX.X for $XX.X last nonrealized foreign expense operating to of devaluation $XX.X million expense the financial million $XX.X profit segment U.S. was Non-GAAP the against quarter The currency are of solar compared an are compared a compared This $X.X non-GAAP expenses. an million dollars, $XX.X quarter. the the quarter. of majority and $XXX.X nonsolar million of

balances offset EUR to accounts our amounted XXX amount EUR a respectively. quarter As euro-denominated million, derived this income cash and interest approximately partially reference, euro was balances receivable XXX by million This and investments. from

a and for million to expenses and previous on focus little coming compared million guidance million this quarter like last Our year. non-GAAP the $XX.X tax the I on quarters. $XX.X the provide tax expense was to for same period in would $X our

opposed a is and in States to the into expensed amortized parent change U.S. of of result purposes not U.S. $XX years expenses period tax expenses, an and X-year on will States. outside treatment Corporation, over portion years over of went tax X-year year-over-year creates will structure in million corporate the R&D of capitalized is be are date our United million of year tax activities for tax outside a for of XX $XX.X which year treated are of This if approximately majority that while States States. over as period tax next and the company are development that as quarterly this and diminish expense financials recently as The period. and are of a in is a effect, Based our greater regulations, be United to purposes United amortized beginning for will to performed the recognized R&D our performed tax burden the United our group purposes. XX research the be a Our on and the such expenses period R&D the expenses

$XX taxable for as lower income stock are In addition, recognized awards price, the the our the we year. of this the $XX.X overall quarter income quarter $XX.X as Difficulty] expected price our current year-over-year stock lower tax. income portion higher was increases tax was to stock is reduce last quarter GAAP to the and million same generated previous on income employee be a expenses our next expenses. tax GAAP effective Under quarter to expect third lower this net of in rate and impact the quarter vested slightly million and net research and lower, our of for million the compared development [Technical a in for rate

a was the quarter was million million non-GAAP and the net same income for $X.XX of was previous in last $X.XX to same the on foreign net of earnings earnings compared last net Non-GAAP The $X.XX to $XX.X non-GAAP $X.XX $XX.X had compared to Our per compared GAAP for income quarter and non-GAAP $XX.X to quarter in and financial the per same share net impact approximately the diluted in EPS. million third year. diluted year. the negative previous share our expenses last a the quarter in exchange $X.XX related previous quarter $X.XX quarter $X.XX in year. quarter

Turning balance to sheet. the now

amount Accounts to billion. restricted increased of to compared of September bank $X.X last $XXX.X quarter XX, Net debt, net cash, XXXX, and bank million this As quarter. deposits is million million. this receivable $XXX.X investments cash were deposits, equivalents, $XXX.X

million the raw $XXX.X material of ramp million to at As Sella a of result to our of some of in September X level related are level, quarter, mainly factory. the net inventory higher which prior compared XX, reserve of was our $XXX.X

Turning fourth of XXXX. for now the of within to We're guidance to million. guiding $XXX our million quarter revenues the $XXX range to be

be of margins XX% range to XX%. the expect within We non-GAAP gross to

turn the our the range to Revenues range of up of expect over within are will the I of our are We to within non-GAAP $XXX Operator, be please. the be expected $XXX segment it XX%. Gross margins questions. $XXX to solar the operating range million. expected from be call to now million to $XXX for million operator within open profit solar XX% for segment to and million. to the

And Instructions]. Goldman first [Operator Sachs. Lee we'll Brian with move to

since while. Ronen, It as start focus through, soft. to to then little margins like point have such alluding there's a maybe seems a some with gross guidance, talked breakdown agree here going you you of here. a I'm you the And off that XQ benefit us for improvement Would then bit a walk margins -- margins assessment? basis think in about And about. your XXX clearly, with slight

else walk kick us that drivers new are? from whether or the what on maybe is drivers a Just what think And you in quarter? bit this TAP, after that through even then incremental the drivers XQ can

Brian, very for question. much the you thank Okay.

yes, of is in result are that that from X our in costs of very QX you fulfill to to forward, a reduction weeks, a And reduce underutilization. to of ship that turn, the only contract is Europe. gross XX% all that also, that very of, of vendors moving to our The disciplined in operational gross QX weeks. to revenues. that last sorry. QX we work products. And we What this, was our a that that lasted as generally, we including means margins that pay driven in mostly one stopped than ramp China factories. we strong the continue very worked approximately and And in X we QX reduction we that needed we the that saw our And in in demand additional both And of of Vietnam as payments can than euro-related manufacture by this, rapidly and do our to disruptions we do that see, shipping of this approximately actually means So -- a expensive. last fact portion Europe our income first that to had improve. first increased our coming more expected shipments operations was in a we all, margin gross we combination and X becoming almost very using large manufacturers And saw manufacturers. expedited course, in that that have margins Other factories, did our the are our underutilization in due year had in could customers in contract of was believe other lot our all, were that The we Mexico to prices result that by planned. the the able that pay shipment are

with do or down hand, lately, on that will reduce also by prices reduction that production the little We see see, us air down see points. we expect In still many necessarily this, going an regular down. on but the from going of allowed that we reduce expedited our did freight see going XXX expedited shipping are we send are approximately there. addition to to allowed one also we shipments, shipping But the in that us manner, we do shipping started The bit basis mostly a on that are that products an we expedited prices costs to cost not shipment, prices see combination a of more factories these shipments. to improvement

fourth be capacity quarter. the therefore, it is factories. as be need Mexico Mexico our the in we in ramp. continue majority, all to end we is get the residential expect to the thing shipments. if to times at that United the reduces of expedited This and mentioned product takes the the of first products, the quarter, not that The can that continued rates previous States substantially the the in to will shipped reducing from by And increase do products, they that we of

as be at to are course, expected to shipments not In least before. used overseas this in environment, as this, shipments, addition land of

in fact would coming. expedited The which also allows this, are to seeing like other we that efficiencies are On that to is increasing we second the is us factories, I elements and also do more the One economies turn scale shipments. use of see. thing less that add

operations in creates grow to able that lower a revenues. are margin. also And our at in turn support We and our a the pace slower gross than organizations growth

So to make next this. this to of this to very what impacting shipments short, the I vendors will And long story our the reduced ability the our into reduce question that pay is combination now the price add will and about to increased our payments quarter, is we are referring go increases. your capacity, and and last element, actually to

prices the especially third in that last X, done most the last and are new believe fourth we to price increases by the to and means orders. Usually, in of simply QX, cope have quarter X that that these And our of about fact those see of quarters because newer that that we increases the of on the implemented the will or devaluating X a we we relatively the euro. effect early Over quarter mature. quarters with mostly lagging shipments increased X are that implemented that we

during expect we neighborhood quarter in I last is of motive second the that that March. Analyst by the to to guided in end of be Day very the think So we the the general, 'XX

thought I trend. that Zvi, I sequential like were to implying a of second my flattish was more it question shipments. last And Ronen appreciate and battery quarter, color. you the be sounded all going around

And to XXX-megawatt seeing from line? then and to your you like maybe you're some the sell near-term volumes hours of volume levels? of what to that means trends that it segment? Korean quite do over Maybe So time seems for here. think then battery talk what for looking off supplier the it And is the demand of these transition, margins

we're obviously batteries think, batteries battery this market, with inverters as I shipped and are installed there Brian, Germany, but X-phase European X-phase the the new as introduced the ago either inverters particular, alluded, shipped going or that not demand other are dramatically, is for only going we the up in quarter. that and quarter for the well as And conversation, of a during already typically the some markets. and aimed we inverters, waiting So European

So with output batteries, to volumes of that for that inverters it the of with our targeted also ability those inverters pulled additional beyond previously. that were increase were installed

able the the acceptance we led to effect the United. of and of shipment to meet increase result and the double strong saw. shipment demand, were commented that this as main single market the you the with very that's the is by a we rate battery there good and down, was covered was we're on countries, we And So of In the the the which States, the partially over the in U.K., United that that of introduced but rate World Rest slightly single-phase Africa seeing fact also there. some Australia, south phase,

of level. few shipments we're and we've now phases or our as And on battery we're communicated to quarters a portion the of But still from probably intent, cells. so based of the that us we're none beginning cells and Sella Obviously, hour. beginning maximize aiming of using batteries we ship with give phenomenons today to volumes to continuing in X while flexibility usage and at technology for. just cell of ramp portion long-term our active being along all relationships batteries X battery some those families obviously, We're between were going early to our other providers maintain the the X away not the to that XXX-megawatt yet customers, certain types are is our big a our the right a own offering, of increase saw and cells. cell So this to into strictly Sella X qualification still the these cells

our And from with take we'll Strouse question JPMorgan. next Mark

the still Just an you more for Or from as Would any are being about that? go announcement commentary potentially on but potentially about think waiting up specific that kind back or is being plans than wanted to you're of U.S. finalized storage see something potentially manufacturing. should we that how solar treasury? could the just And color -- made Understand to sooner guidelines there, setting be well? that? made product we that

sure than not doing I'm So things both that detail into parallel. other get in we suggesting much that we're can

So or a that assumptions production But a location, the from the a And on to in anything good the probably doing understand processes, time. clear. and -- we're the cetera, there obviously, that to it final as is select regulations. production the until plan it -- since define won't we changes preliminary version is there et the that regulations, of will preliminary some point based to site close even be chance we view significant of on takes

a both with the we're tracking So both planning first as we're the in And just and be better picture. related become sense The and based and in to not we'll likely for we'll focus the we're least running optimizers, is urgency. on it, And clear I things from think on on to site and it regulations. focused assumption current going batteries. the is through selection. of -- we're focused But phase that regulation at process be inverters lot give of now, of able it's elements a parallel sides,

you're say if euro sorry there? missed guidance, did And just what quick. I I'm of baking then, this. you in Okay. Ronen, XQ The real level

level at The per basically looking euro. we're about $X.XX euro, of

next our Colin with take we'll And Rusch question from Oppenheimer.

through about you to the products in of able quarter Could the you the during the storage how during of much energy channel? what bit shipped sell quarter? was And a little talk volume

Yes.

this So single on inverter very and empty days the unlike channels hand more the not of On very to especially edge. channel weren't is on -- on low. loaded. the the robust many shipments still quarter batteries, and not part that phase, particularly compared phase optimizer, X-phase shipment not with where And that the the the and are are -- single battery there that's reason, on the is is channel on the

here? rates we had Okay. U.S. you bit forward? R&D then to Are how in about a particularly should of lowering more a as cadence step-down you That's of able be how about tax helpful. a start any of Could think talk should spending bit that compelling in you offset net robust but operation the that to little capacity the and we and And downs, about rate? pretty You thinking step tax some the you the U.S. about some tax have terms historically. in talked little rate going tax as expense,

Sure. Okay.

regime, together immediately. what years States, plan legislated expense, plan something today going doing and the -- the that a that XX be was And better tax about part not going when vast it -- just little X little the it bit major the that percent and that talking million the in, ago, baked the with this than we a build items. the relatively again, R&D amortized is are quarter -- a stock very to go we're regulations, we that to is under sorry, but less the last I'll approximately employee now R&D saw new quarter over majority can a already impact and a course, XX-something bit. explain This also supposed the The is under of was this first the is, in therefore, although to of forward the saw The stock creates is taxable year, mostly it of the income. United a the but as to was are lower majority and you today impact. stock of on lower vesting this see have of So also quarter, the And of that And expense R&D is we see see fact taxable of we're actually a outside see simply creates related performed of outside of that States not back so previous just as This to away sense, dependent strong we options quarter that we income. in is expenses recognized disappeared in was usually, of United all, are that, the started high the is happening result What about rate we of income. vast $XXX price price.

saw large will very income. and interest that expenses, And this also I also that something we high fact we grow is is what how was that, created we would currency we to expenses exchange had before. one rate our or course, due very of to this to tax First need quarter, compared quickly operating the inflated remember say, rate, the

we we are that thing grow, is to first operating this to the continue going how our profits expect is -- to impacted be So quickly going happen. to

Second amortized to to we quarter quarter, stock project. remember allowed will now, especially I'm for at say the we cannot that payment point, right to IRA, tax that does at granted not corporations between are will not north therefore, is project would supposed in this. not price. And -- The manufacturing I go at to of X to year, be, the move that I few every a tax not but is cash going is X the X say, is them would the look the And American say the Operations fact XX% regulations so we that a tax going be it's XX%. to R&D U.S. XX% be more years. little the that again, rate like, normal, also under that from We just to year, XX%, it I I general, next around and lastly the is bit back stock least help third in the you for to how again, when how in as And forward. see within as a U.S. take be down should thing to fact would if of will percentage of R&D that our taxes. lot. would need I In it we years next least, next say, price benefits sure look know one on out, dependent do from instead expenses can the credit. years, should some we go see given of

done than in a will will be U.S., bit more little inside general, outside the for similar and United States what the we operations the results of see So they are today.

to with Shen And Philip we'll move Partners. ROTH Capital next

manufacturing? maybe probability difference then help And watt? any First between X your What's inverter you latest for in per the to that much you on X might U.S. U.S. secure what's I department. and on credits, the talking view inverters from us gigawatts the clarity resi the understand gigawatts $X.XX that final contemplating? get know to we might you microinverter you the how can't Are to the $X.XX the manufacturing. we up able of be one guys terms can of decisions you until But be about treasury versus think per follow make the $X.XXX watt?

that are site and large talk would possible, we relatively in past, we our heavy, when U.S. that biggest to especially I'll something the one in general, like a manufacturing we one. about maybe continents So believe a have or to with of that which the is second This the we plan most we discussed and countries over in would since start is first In mention volumetric and time, demand United answer that you the Zvi products our from the I States. fulfill just will batteries, the -- the capacity if biggest operate.

And the inverters. it to also most make of U.S. may also maybe you it's the comment Zvi, thing If fact the optimizers, that's Once relevant. to it that So it's U.S. in and again this will The optimizers, us U.S., IRA the that in the right the intention from will be that but in regulations be will sense stopped that now our manufacturing a inverters, the going sense, it was manufacturing to operationally the be assuming sufficient less better economically, the the thing. microinverters If to is the it about favorable going was U.S. TV, than justify U.S. anything else. goes there overall doing production be be is makes for everything in. in to

fairly. Yes,

know, the through applicability clear lot versus in Congress they that are of clarifications quickly. are a as that act the terms And written that you technology the passed to are are it's not actually, secret now, needed. one of no even other. And was As definitions, there cut their technical right

and many relevant up consistent for the various being clear together working reviewing we are confident across we're in the clarifications. appropriate that other with the end the are regulators with companies, regulations it will involved So in terms and applied. way technologies quite of And

then And of couple a questions. Great. housekeeping

recognized And you First should megawatt on bit what be expected might also, in QX quarter, And item one was is guys evolves QX, higher finance line how that Can a then also what for QX? then QX hours in you for share then and think Can revenue. had about beyond? give it the battery that? expenses. you some we on little and more color how in

Okay.

one. So by on we'll go

that's quarter, in say, euro of again, Actually, the filed recognized see dollar. X.X U.S. of over the the were would We behave rate. view X, saw stability the months, of the relatively sharply stability almost point against or expense a expenses where all, the U.S. of number. the we over strong of dollar. move does this that you'll beginning see relative last, will From they're all but of and And million was matter a approximately First it's -- against course, which last how I that view, a -- at very $XXX interest the the sorry, euro be from from year devaluated in there, Q the finance next revenues, tax the batteries. point and

the As expense finance long is the euro income on impact of within be the small. as very, staying range or should plus/minus, $X.XX very

benefiting the now, to at little and interest hurt Fed to bank us down, it it seems, from the to Of or is is European our U.S. have I the course, take by we should bit a the we we if our we're stable. euro quarter, -- looking be and Central going see of then, impact, on least the euro-denominated And interest what's right this see at do neutralizing as the the income And balances What course, on seems that the actually, balance over several FX difference stronger euro once both of generate sheet, against in you'll more when decorations such, and and dollars rates, as millions EUR fact today due impact. quarterly the prepared take are in getting $XXX remarks, XXX exactly mentioned dollars, investments. because, million million the goes to be therefore, that, simply we impact.

from we'll Wells question Blum our Michael next And with take Fargo.

few I expect I of into cadence go shipping the understand. one. just have margins the sure throw expedited to Do quarters next just over my to you to I make to all questions wanted paying back gross still were if around when know, I those costs think somewhere be so, said think And costs? margins on And I longer batteries, in XX%. QX? last no shipping the quarter, then paying gross you expedited you'll the And do you

So I'm you to when And to target? XX% wondering would where get expect now? right that stands that

that we supply will the general, there and shipments China, Mexican shipments Michael, biggest one. into actually quarter do free the by of going facilities United result in Europe that the have In of issue itself. second Europe mainly Vietnam, and the Israel expedited questions, end one second where also capacity XXXX, today overseas and ramp-up the our less a that of for limitation in expect the of will States we is shipments the to reduced the demand for compared go be -- see. towards are we to I'll Thanks them diminish of and And require

we at to completely because not of need sure that expect customers they to point. to will shipments those So do ever in disappear that expedited understand reduce. needs that are we sometimes general, related I'm even the

products, about also the For much of we during them Europe. time, cycles there. try the expected shipments Zvi sure mentioned, and striving winter point we installation meeting very this that when that they're example, see customers for are the are talk And expedite anyone make that winter reduced in as and to at to

the be towards sure today. believe I that relief but the And for So gradual extent quarter of will there expedited therefore, will always be to growing ever they the XXXX. think are shipments second I that the not

we in Just feeling XX% Day XX% the we be to being around previous Analyst XX% margins we the solar XX% corporate on and during on this. time level, the level and one comfortable keep guided expected of to to within that the remind questions, gross the

please shipment. remind And me one. So that's second on the expedited

of batteries. margins Gross

yes thanks, batteries, margins -- of margin Zvi margin gross batteries, So Gross of Zvi. Of Gross -- thanks batteries.

going especially phase So quarter, that as but was is gross reflecting XX%, on it growing we margins with get mentioned, bit certainly not XX%, little believe of you Europe is batteries, we're volumes this aiming pricing and more to X batteries the -- where Last XX%. at are the a there better yet bit today at We're way little there. a that margins. to the

everyone us. is XX% with So gross improvement more course, I given way, see mention target margin about And there. is longer my still in there. we one related to do like expedited of an the is general, the and the by would Michael, thing, answer previous the no also, assumption shipments. to COVID question that

you as is yet China, eruptions impacting say very very normally. of with restrictive us. against bit it's also However, of that of or in still little measurements a course, I But much still know, COVID to not everything China, operate is contingent Recently, heard present not in China and continuing taken Covid. we

question next Sandler. from Piper our take we'll Harrison with And

is And for So first basis? does do online? How a follow-up capacity megawatt much question. how a number you Mexico that change And once have had fully on me. facility currently then I the one

Yes.

that. number exact related thanks and for give don't less on be to question. the capacity limitation Kashy, But supply clear, So the more related. is We chain

for was capacity and involves around where our and on components able is vehicles, our be most that's the to where qualify of are get in component component and It at the that we in to growth larger So ramp and to are proximation, and But to some first alternatives next equipment. particular, working that we lines suppliers, increasing also production of beyond. are allocations testing some in and the that targeting we with supply. and we're where and electrical cases, quarter the competing that saw growth quarter limitations limitation is reflected this

bit are, were helpful. looks has cash a And ask of about cash I cycles very cash a And ops. your they like That's in environment. pre-COVID capital in conversion the than flow big as XXXX wanted back think, use it higher year-to-date. from Working been to I my follow-up,

And forth? forward, are so thinking cash you just DSO wondering, Ronen, cycle, so as you and about look how at this conversion business moving

sure. Okay,

bit are: the of we do conversion. one, see for first correct. reasons The is of an So slower a these we inventories. in fact This that little see a all, year, our cash increase you're two

several from see of cash customers China of Sella main also or we there. usage production eliminate we to result ship inventory weeks what call see this Samsung is times the from cell as shipment are This coming we the whole into cash, just have call of a of our also product. crew related see tens X. that -- As of XX% the sold cycle. is top this, million you of extended the that passion and to you some sure making quarter, possible the inventory on This factories increasing much just a I experiencing from to the Both the way, capacity. lengthening stabilized would theirs, more inventories X spend U.S. we will quarter. one golden $XX of it, shipping of don't as had in simply cases time XX as I that inventory -- extending this, building make our, that million manufacturing see, of avoid the of we're dollars millions we very approximately to that means simply this some cases, also, in add On time by that from And to we're And longer that we we the because buying. to that of you have some materials screw, our

in this revert expect We to XXXX.

situation some locations manufacturing, the over is inventories working to in the the in fact build have spending various cash similar the see stabilizing first going we again, would Zvi the of the are to and profit. a our first XXXX return, on days to sometimes The we're very non-GAAP simply generation on is of less also close as days XX this a to fact relief to part of of mentioned, later where spending in to time, boat, XX that combination you due used. Mexico, we The products instead truck. our components I And all area. be able given the do where issue on front, see will then also And capital say, by we should that a

we'll our next with from Julian America. And Dumoulin-Smith take question of Bank

Julian. for Rebel Alex on It's

to tariff on characterizing I logistics follow open Just think out today Ronen, sort how base mind, shipping off? you as the in mentioned as kind the those about or ramp stage. what may, what it if discussion. So expedited like is one that and of more, really you've volumes, sort just and see headwinds as past, far close been mean, far things pretty sort this rolling I the your with looks are I as early Mexico margin looking like you of of in of in at

expense ability roll-off, space. looking break from full the and by optimize again as or down targeting us around volume full quarter for well wondering, one of year-end. that from you logistics resi an component can still volume after at sort as far as the the facility I'm I to next You're that drag and that potential that, mean, carried as

that I'll this in actually we are XX% has beginning a to at prepared can row in way, year. and in the try bearing noted Chinese U.S. just I close remind Mexico stages. much as is one fact This from that correction, as the products brought that And the third to we our the was only quarter by that I as the it a of shipping were I tariffs. with would result, very early Mexico the increasing is of as an volumes. mentioned XX% the remarks, everyone products

I at aim sense, happening. that we're that from year. resi It's of places other Mexico track. there's many track, this By because provide need is the to on products think flavors this is you definitely end have Mexico of certain by flavors our bring the that on in So and way, XXX% we inverters. to And always from

and we So costs on as Mexico used that past. actually, see going planned. in to shipping is the front, headwinds, From

XXX of approximately points the year at of a was compared end in we That QX. basis about ago. As to mentioned last quarter, burden the

allows As until can substantial this And this remaining able second plan this is the we away. about fact say have quarter, the quarter better basis a more a take of were and I that predictable to of we result that we're believe capacity do capacity pure amount. the all, taken a that we part but more with manufacturing the And wouldn't basically the us points mentioned 'XX, we of to customers. of end of have XXX burden our

an see definitely we improvement. front, that on So

that's XXX it As we basis points comes XXX that, mentioned about to the tariffs, before load.

guided it but they also it other some not can over previous be are cannot 'XX. are we of there at of X second my or answers, that foreign see little will course, But is comfortable always will to locations analyst and of do mix here. this that the the to increase lag Now there because least tariffs, past that bearing happen United of overcome it. diminishing. And Again, day our not still going that is And we zero today, States, a to commercial the of are control. demand products we of the the the move the to mentioned at our, of fact in quarter go XXXX. is sometimes, of we We reiterating that order and margin with a areas by we also And exchange manufactured feel given that the see. rates. issue I One, will the products, time get outside we during prices bit end control cannot closer in

helpful. Super it. Got

But announce indirectly, U.S. flag curious from you're can if where Just you're the think what expand one trends. you seeing here? and trends mean, sort the whether I third market weaker think demand the you if single-phase really you're on I seeing to between make you you I a and somewhat on or more X-phase? trends that expand and -- directly can of follow-on. that, bit in demand mean little

Yes.

a spread. So with let's bit a geographical start of

So one the U.S. is residential single-phase markets, largest the

that. single South Italy largest phase market is Netherlands. of most a Australia, like is probably second few and residential The one a the Africa as is countries

then Germany So it's markets around Switzerland. And only associated and are markets Austria X-phase, large and not like residential strictly U.S. the it the

countries countries a offering. European strong. but clearly, are -- that Demand So is not them the very, of the Switzerland being like residential there markets it's to Germany, smaller phase, Austria, related X-phase that are look couple not X inverter essential. and the have the very The share is markets. It's need is you And combined that strictly of the battery battery. the It's well offering. at and market we believe is the to good, And differentiated. and our always combination position the

-- there expected strong very we And it. feel we and our high. the comfortable we very, see growth feel demand, ability So are fulfill to the attach over about in rates

a So with almost going every countries is battery. these solar installation in in

high like the strong. driving markets there is and the what's United markets, to Australia, the South batteries as Africa, the the smaller markets Netherlands. as And and Nonetheless, compared for attach demand are the strong States U.K., markets that's single-phase still rates. In mentioned, Italy, well. So single-phase I the are demand there

Netherlands well. metering as single-phase in for market will big installed the be as is the period self-consumption. strong markets, But is markets, potential happens existing there -- chance base. something quarter mentioned market. there's next that in -- that is for to short record earlier, is in that, still ahead. installed very, At we It there the no same battery huge is retrofit as we big. there the this result the on a base well, and Eventually, batteries over a expected need with not what no still good then this as that very those a quarter And time, take a had in a other incentive big net you a residential of and If not our very is as

other, inventory result of rate States, at obviously as think attach is is the install, look to a big more rates States. than and phase a we are this answering in way battery that to of consumption. attach the single-phase the they as little have obviously, have residential phase the were of the Three To which lot possibly think previous of batteries you of twofold will from that, rates acceleration come in if I rate one occur the for increasing, to but a I from a United a they occur in And I at the still might continue batteries. also, for the of the even our that market we if mentioned States to people in If bit that And grow market, X projected. NIM. and a the batteries quarter channel installation faster on increased changes rate slower projections a and a of -- that to questions, the in increasing encourages market how cell how of growth the learning but United United single sell, mentioned rates prices they're some stabilizing attach accelerate,

potential rates the and of the attach slower year. further have So accelerate in beginning are U.S. than next relatively to still into They're fast growing going they the projected.

our from Company. Osborne Cowen and And question we'll Jeff with next take

that Europe, go over to A going you are couple is wondering, and As ramping . types I products there? commercial understand? U.S. lead for was end. of on on both if be capacity would what's the can resi helpful my up, what the and Zvi, in questions

Yes.

And the phase products, XX weeks, XX, probably your by So phase commercial in so. is as and single on reflected than roughly little that, inverters. it that's or question, commercial optimizers inverters on bit product, bit it XX weeks a fee little longer range the X-phase XX to varies a in probably in of

growth. I it. U.S. That's of the had too? I question you and last do the you helpful. highlighted And Got gains what just commercial share attribute think in the double-digit side, quarters is

discussed the think I in past. this we've

we're as long up. part high rooftop of I -- untapped I'm the a purposes type a is market, that drivers as for in I sure of all, corporations think safety people it's a cost-effective think as solution of think there, commercial we are first the these And have. are rates. might this investing solar that So of And market year. have all good the waiting time next And the that of forecasts that huge lot a way, the for position growth. are a not for seeing completely further corporations released, it's but of combination I in because And of been U.S. the a we with ESG for well to in And growth see wake market. requirements the definitely electricity a

growth segment our is in are in projects, we've a that additionally, and small few growth ground introduced mount for works that that And products which of well. the type favor. So community seeing we're of as solar the segment, of quarters, share more trend in last versions optimized

rooftop So gaining was we're in position know in that and this between and clearly, market the the market I there, we we're of shipping the growth segment. previously share growth of to share And our gaining community share solar. X, believe because we're stuff of over and a the now

on I capitalizing think we -- the opportunities. are that's the that's where

question our with take Joseph we'll And Osha from next Guggenheim.

see revenue assume growth, just there's to obviously, to mostly in Just return And whether megawatt terms looking we the if which Europe, on forward, inverters I if significant disconnect to storage. the I in could on, wondering Europe storage math there's on beyond well of suggest? wanted that check any just might the to volume growth kind and megawatt between going continue then of the correct ASP side? is growth driving disconnect what inverter or that's

Yes.

-- impact is also recognized, and secondary you yes. the going probably forward, the other which the mix But to the effect part significant of commercial. because So that a but part what is the market, Europe there an And quarter that batteries, is in very big mix in and strictly on strong effect to a can difficult X a part also a to it more that's of shipments residential there, battery that be of has revenue also makes to from to be variation is both ASPs. compare of only not megawatts going

Okay.

And from installation all at the your all side additional storage, terms something pointing we deliverables on whatnot. you on how or then that with working right. to delays can are U.S. So -- there's the Or some in in software help fair about we're been market you like there That's feel enough. of U.S.? and commissioning looking are single-phase that your customers tools process? Do

this past, that good the lot limiting invested in So in an and as as to reported we not see on times and we front, advantage that In a and training, limiter -- actually, the a we've seeing past. and we're commissioning actually adoption.

customers, from said with working But will previous of and installation, And times, with lot batteries all questions the and adjustment a sell benefits consumers. the progress explain the be are of channel one to believe or improve I to from it, process today but reduce I answering more my to through a coming As the of the seamless. learning to whole the installation conversations training how to still we're then decent elements we on also, even make obviously, simplicity. the to those

And move next Instructions]. we'll Ameet Markets. BMO to [Operator with Thakkar Capital

one Just for me. one quick

You get you back of that of that, guess, to outlook better that in of kind margins. trajectory be little flat, that? the trajectory for times the third just guys out gross your of margins the played operating looks what's of out, quarter margins expect guidance mentioned I going kind It quarter, you implies at couple the laid the terms I second Analyst the that's was by Day to of despite you like a to 'XX. bit gross kind a profit XQ wondering, for on

operating usually 'XX the revenues. and the grow the guided we these to not guided while -- So we the the quarter is that towards return of mentioned, we of margins heels Day, the then pace second grow margin. quarter. And fourth margins will and I as least, to to this same of at trend The Analyst the to that believe, trend and will mean, is expected by fact in general, improve to overall I'll general expenses go are grow start the general to end again margins the see the revenues at expected usually as the on of

lower a had the tailwind But general, the of expenses into and we guidance operating change fact and and therefore, course, have we to quarter in were division of operating which the sorry, QX of take This increase results more the in activities regime, Critical QX, Power division main is we into by a may back of little as for especially headcount. bit reason a to again, And any of here, currencies e-Mobility. the resulted it will in we if operating will that This also the regime errors our movements question like some from to also little continue the that expenses are higher QX. sure bit fact now expenses may despite fourth the and guiding operating are we In because margins. is And careful that compared trajectory. we continue specifically, that in us of trend the it impacted lower revenues margins we and control. change -- margin we're, the the in second coming QX, is go For the the will a reverse actually is our not UPS right in currency way that to closed quarter. that not also, -- going as of higher to course, the growth we're the go in

Zvi call. to remarks. closing back portion I would for to turn conclude now the like And of Q&A this the does it any

you. Thank

progress joining we summary, all all and for with we are this today. made day. on the And in metrics quarter. you pleased Have So quarter are looking next forward great operational thank us to a

This you does your program. conclude participation. for Thank today's

may and evening. at a You have any disconnect wonderful time,