SolarEdge (SEDG) 2 Aug 232023 Q2 Earnings call transcript

Welcome to the SolarEdge Conference Call for the Second Quarter ended June 30, 2023. This call is being webcast live on the company's website at www.solaredge.com in the Investors section on the Events/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 express 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 J.B. Relations, for Investor of Head Investor SolarEdge. Relations Lowe,

as afternoon, you operating for for you, XX, for David. us the Thank good And XXXX June XXXX. ended SolarEdge's Thank third joining quarter company's everyone. to second quarter as of well the the outlook results discuss

Ronen Chief June are for company's review brief Ronen review followed will the Officer, results Faier, XX, begin Chief for With me quarter third Executive will a today Financial second outlook quarter with ended quarter the XXXX. Zvi Lando, results second financial and Officer. Zvi the the XXXX. for of of the the by

call will open the for We then questions.

to encourage contained in forward-looking the note that slides could and statements involve differ this you Safe for management's Harbor release risks description. press results published that more materially expectations. current to today will Please a from that review We include the in statements uncertainties our actual call cause complete

in the reserved. contained webcast rights material is all and sole copyright SolarEdge with the All of Technologies property

this presentation describes net GAAP. non-GAAP non-GAAP U.S. and share, accordance note, earnings in measures, non-GAAP per prepared income are diluted net which including with not certain measures Please

are to they or the means presented be for, with US in presentation The prepared non-GAAP non-GAAP should the These with measures substitutes management believe of GAAP. isolation measures as superior that not company's considered this measures evaluates in we provide evaluating as company's and in from, how the investors financial understanding accordance operating performance.

copy supplemental have the Relations press XX, material not company's Investor website. obtain of June a section XXXX visiting the who quarter or a the copy by of do the ended may release Listeners

over turn will the to Zvi. I Now call

while thank you at approximately solar quarter we conference businesses non-solar concluded million, quarter joining Good record revenues J.B. Revenues record Starting with on with $XX the from all a $XXX our for business second highlights results, you, were were our million. from million. revenues of our our Thank of afternoon. $XXX call today. us And

inverters. we shipped quarter, XXX,XXX optimizers and This X.X million power

we megawatt quarter. quarter, a shipped XXX XX% of from last hours also batteries, residential This increase

X% revenue rest Our solar business in United Africa revenues in mostly revenue XX% in States decrease year-over-year, Kingdom, Europe, quarter-over-quarter this by world. United revenues by in the South offset grew We a Thailand. Switzerland, saw quarter, and driven Germany, record countries of and many including and record the by by

XXXX in is X.X go which the segment, noteworthy shift year discussing the several we quarter. megawatts has the in gigawatts Particularly growth gigawatt quarter been the from have first of X.X gigawatts for to seen X.X shipments quarter of this in quarters fourth commercial this of to

The rates is emerging inventory. through solar from period excess high of transition, and higher prices interest the and component rapid going a impacted shortages, now by market growth recent one to energy

Given the this affects review would it we that how trends and the are major shift, our like I in regions seeing to various company.

be In in continue rates and commercial. residential Europe, installation both to high

and the heading the due lower was concerns over electricity moderate largely market is milder what to resilience winter, more in somewhat strength into anticipated energy than However, prices. a reduced XXXX,

commercial. With growth in XX% Overall, quarter-over-quarter, was and the Europe in megawatt quarter-over-quarter that our residential quarter in XX% to XX% including grew mind, in growth second our by Europe very shipments in strong.

Additionally, sell-through year-over-year XXX% by our and commercial. quarter in in distributors XX% up in residential the was up second year-over-year

levels, solar Europe to it in On the especially optimal relates modules. higher supply side, are the inventory as experiencing than distribution channels

ensure in order expectations shortages modules to and distributors period stability During orders growing for large to the recent placed support of the supply of inverters high demand. growth, for and

approach order manage in off, their As a growth taking in flow. better demand cash has are distributors cautious tapered to more

a period dynamic the accelerated to of more actions levels, portfolio, during which a a period of number This extreme in the and before period industry in suppliers are taking to distributors had growth seen reduce availability. is inventory shortage the of reducing a expanded product addition growth In shift their undisrupted gradual to of during also from shortages. and

for could quarter fourth seasonality also the taking quarters, when next this two the Europe. expect into account continue adjustment especially We effect inventory period typical in

deal We see based becoming at market hardware to is where and rates an that this opportunity energy the growing the very our and on this advanced more offering our complexity, common. moments. with as announced about grow management dynamic suitable sort I tariffs environment negative a we few will which to software elaborate Intersolar customers require of of grid, To the complexity and share, are growing in recently European

markets, the compared Net US demand to a Metering of California half interest X.X has second in regime new of rates to higher combination decrease year. in the the residential to Moving last and the led

a that inventories are in product higher as they normal, As of result, not market growth did in our various built substantial than were of anticipation channels materialize.

from a US the last down quarter. XX% quarter result, to As were shipments our this residential the markets

rose by actually over same our period. however, by the product of during distributors, Sell-through our XX%

We to expect year. least inventory through of end last process the the at of normalization the

trends as are into positive Looking our business. view there market that two we for XXXX,

the installations, to with lease First, loan on the market, increase by can more a when expected solution. energy electronics X.X the the increase offer battery our versus financing, DC shift optimized basis in non-DC market particular system our of And evolving annual in up coupled storage module second an to a driven has third-party compared higher. sub-segment installations, been level expected ownership XX% where traditionally NEM is share where

who that and begin to that market, adder module had to commercial take domestic related move execution which we as XX% stable anticipation This of US halted with than in after continue IRA demand, clarifications the developers projects see ITC expect to project as forward. is longer grow expected project manufacturing IRA some hold move the In likely of on gradually will lower as to the result forward clarity anticipated. were we prices a realizing

such higher countries due experiencing some are as growing as a Thailand, instability regulatory picture a rapidly due such favorable mixed and and where South headwinds Africa others of world, are to rest to environments. grid In while rate, we see interest

discussing few increased focused are solution three want moments Moving across spend to on is we products, digital the I which main our platform, pillars. now a investments to making

energy as First, known Munich. we SolarEdge in introduced management which Intersolar ONE, software recently at our

business their helps home consumption energy storage. and ONE owners and production, optimize SolarEdge

With an attach storage our the proliferation plus this differentiation batteries, of time for become and area of use of tariffs we will of PV rate solutions. and dynamic growing believe increased

we set to Second PV sell, September, selling short in manner. and toolkit, and times, aimed will fast a be of helping the At be and at in launching and improvements systems RE+ at step-by-step to PV installation design, our battery which will efficient commission is install, system a our tool, be tools customers installer to is effective commissioning when demonstrating sophisticated proposal in platform we new kitchen our table. addition more plus a storage installers already software help installer our a

And commercial the grid Netherlands, programs. into other States, of two total enrolled grid services the in enrolled number services infrastructure, to grid aimed commercial third, of grid balancing of the the grid services, at XX% by digital already second which In sites In advanced we quarter and XX% our includes applications. services our program. dozens in first through grew our sites installations over and enrolled the now United aggregators, battery sites. launched, program, are field of XX,XXX electricity In

additional integrating of additional looking number high a coming in months. enrollment aggregators with requests, the have and at are We

Another increasingly digital this earlier based offering on complex capabilities part monitoring customers systems. which our Systems, of Hark is commercial energy year our across significant acquisition offers connectivity of and

our likely won't and numbers, absolute and in digital significant in commercial leadership broad particularly our quarters, be the and not solidifies still augments in While market. for residential several the significant offering

installation. of We other interaction markets grid, as for management more with importantly, well at electrical positive for become penetration and key the an home in critical SolarEdge this of inverter reason business, don't companies renewables optimized More increases, see the will we as opportunity functionality as optimized technology believe commoditized. and the grids constrained the differentiation that to a and solar distributed will be as economics and the solar become like and energy why the

has side, in product is process installation. tracker as of This seeing on megawatts both which provides More with and to PV product, new which agri us are progress now we regulatory opportunities, us enable good for than the lately segment, the to initially XX small will new access the offer trackers significant and growing of receiving we or installed have market more offering, our lightweight a solution either to footprint, is full a support.

both to our shipped supply charging the chargers, versions, EV standalone inverter units AC date electrical have and On integrated the globally. to over and we XX,XXX front, continue vehicle

to DC charging DC charger coupled, plan As we to release efficiency our few fewer through at AC will year, next bidirectional that we greater enabling be Intersolar, conversions. DC EV unveiled

In to we Moving partner several strides growing ship this XX,XXX the manufacturing towards to inverters expect site, we to manufacturing this quarter. fourth to the number out quarter, from contract are expect operations, US inverters site above third thousand building ship we with making that from in our footprint.

that are the More fact mentioned the earlier levels some for we inventory broadly, high products.

demand years as critical such us ahead. required. the are purchase phase availability delivering Part inverters have in via quarter, with of significantly long assurance air power and week relief last products European give though even Infineon certain we market, second below in we output term three that help on However, still will components the been in announced the be in the we increased thus semiconductor agreement this of the area the will in shipments

the Sella continues to to reach by capacity is business, year. on end battery its non-solar X our full of this our track factory and In ramp

next cells a in portfolio with of initiated generation of the of of planned residential battery new of Additionally, first next the that the we used batteries, half manufacturing for have will type starting be our year. release

In actual many is discuss world. the PV while grow market place, taking to we closing, inventory the continuing places in corrections around the

anticipated largest solar to one expected in is the with XXXX from in gigawatts in markets, For XX installed example, installed growth XXXX Germany, gigawatts of further to X.X XXXX. grow

I in benefit believe some areas and markets that portfolio within in positioning begin our grow as markets to diverse applications will recover others. and continue to we us and

over now Ronen. to will I hand it

a And pro our This the of available Zvi. to call financial review forma discussed includes afternoon, this on is Full press in and issued and on GAAP non-GAAP website you, GAAP today. the reconciliation release Thank good discussion. everyone. results

include of amortization that not assets, other purchased segment profit comprised for certain and of and intangible operating gross compensation stock-based impairment expenses Segment is goodwill intangible items. expenses of assets, the profit do less

second million increase a a $XXX.X the record revenues same last $XXX.X $XXX.X million were X% for quarter increase year. compared quarter XX% Total million, to last and to quarter for the compared

a from and quarter last million solar a our were $XXX.X year. batteries for sales of $XXX.X trackers, same million, residential increase X% $XXX.X increase XX% record a Revenues to million to the quarter which and segment, include the compared last compared

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

XX% from of record increase revenues same year, XXX% $XXX.X last Solar representing a revenues. solar were and a increase quarter the quarter from million, XX% last from Europe the our

we quarter-over-quarter with growth In and United revenue million the Kingdom revenues. records in to with Europe, meaningful XXX% with Slovenia to quarterly with reaching noticeable and growth XX% close of growth. growth, quarter-over-quarter growth $XXX continue general in Germany, see Sweden, XX% XX%

Revenues in that by needed this inverter constrained systems. is Europe, coupled fact from batteries still grew are phase slightly we quarter for supply, battery by which the three limited

inventory excess phase some as This delivering shipments with inverter residential buildup in up deliveries which alleviated the in European three up of new backup our will We the manufacturing second ramp half of pace. in our lower lead battery catches battery the do and be will identify the to year. channels, battery inventory

order and single resolve air to in installed typically We is to to for product the and demand this third imbalance our fulfill with batteries. use in as three a shipments in two this fourth intend segment, the inverter quarters

XX% revenues the to solar Rest a and compared from to X% world of last of quarter year representing solar increase million, decrease and revenues. a the were XX% the close last our $XX.X

South record revenue in This quarter, and Africa Thailand. we saw

rest gigawatts and XXX quarterly we United X.X a XXX of X.X basis, to gigawatt inverters of the the to record shipped megawatt shipments. surpassing world, of megawatts a Europe record the to inverter megawatts On States,

XX% European of European products commercial megawatt our remaining this total and of XX% and higher strong mix. the our in were shipped products the residential, result revenues of were adoptions quarter a

shipped hour hour shipped continue The In to megawatt XXX our our residential the be an second megawatt we increase vast XXX quarter, of from last majority batteries quarter. batteries, Europe. to of

stronger overall this in battery $X.XXX, not the result $X.XX is ASP XX% per by quarter, a prices this ASP per watt In did inverters commercial quarter. decrease last from offset excluding was of increased a mix, euro. partially watt This predominantly revenues, our decrease a general, quarter. change

per euro. $XXX up result kilowatt $XXX, a was stronger ASP from hour of quarter, last slightly a battery mostly Our

Revenues revenues. from a segment increase non-solar higher quarter, this of million, million an quarter were result last from our $XX.X $XX.X storage division

same the margin for solar GAAP quarter XX.X% mostly last of quarter and the product slight year. a XX.X% compared Consolidated this the for the year. the same in segment changes. XX.X% and XX.X%. in in result XX.X% to The gross gross quarter mix quarter was quarter solar was XX%, the increase the in compared the a margin to same were and prior quarter last quarter prior in Gross to year. margins XX% XX.X% in was quarterly last prior compared margin XX.X% change quarter Non-GAAP

continued approximately XX%, margins mix. XX%, margin to phase of residential This slightly were batteries quarter, division, XX% our higher our battery due and solar to portion product and below a single the inverter exceed were in margins and within optimizer our inverter gross our optimizer

Goods from expect a to Mexico level X% manufacturing our batteries United next accounted subject of US maintain in which the record in to of we the up result shipped on into the at ramp facility, tariffs the China the lowest as quarters. that excluding is this States our quarter, for shipments

was segment to non-solar our quarter. minus for in margin previous XX.X% X.X% Gross minus compared the

revenues in X contributing ramp this the margin from as and increased improvement up storage are Sella division Our division. to planned, continues our the

results. include quarter, first Hark our of time This Systems acquired in our we for the also financial results newly

characterized revenue, with still small gross high Hark are sales portion While of our very margins. a software very

On basis, were and quarter or expenses quarter the revenues of for revenues XX.X% compared a $XXX.X of to million or XX.X% the of $XXX.X the year. in or XX.X% non-GAAP for quarter second same million million operating revenues last prior $XXX.X

that second as Our result process the operating quarter. of place merit in expenses of our revenue as annual percentage employee a increased takes

of Our solar XX.X% solar were reason. percentage XX.X% to revenues last same segment operating resulting the expenses quarter, as compared from

year. compared a record compared operating for to million the segment from Non-GAAP $XX.X last million $XXX.X million million income up was $XX.X solar generated $XX.X in segment The the this of $XXX last for quarter income of record The quarter. slightly operating previous quarter. million to operating loss the in an of previous quarter $XXX million a the period generated operating $XXX.X million and quarter, an same non-solar the loss

of the income a the for quarter million Non-GAAP $X.X compared in quarter. financial income to financial was previous non-GAAP $XX million

frequency is the dollars. $X.X US above euro, reduce the to currency per euro to continue conversions the As dollar to rate exposure we US our of euro by to higher

Our the maintain on non-GAAP expense the the this of $X both and million for non-GAAP rate compared tax year. period in quarter and XX% And million expect $XX.X approximately for last to million rest tax quarter previous we to basis year. same $XX GAAP was the

GAAP to year. the second million income net compared last for the income the was in same $XXX.X of $XXX.X for quarter previous million and $XX.X million GAAP quarter quarter net

net compared diluted last and quarter $XXX.X the in was income in compared last million $X.XX for million $X.XX quarter same quarter net $XX.X was in income year. period $X.XX to quarter same $XXX.X million share previous net non-GAAP Our year. the the the per the for second and GAAP of to previous a earnings non-GAAP

diluted and in $X.XX same in compared net quarter quarter $X.XX the to year. EPS Non-GAAP the was $X.XX last previous

cash cash, restricted $X.X equivalents, amount were restricted this balance of the XX, deposits Net million. cash, and bank investments is sheet, bank to as June $XXX.X XXXX, now debt, of Turning deposits, billion.

cash inventory operation million, buildup. was related quarter, This $XX.X mostly in used to

bottom QX. starting we in that substantial have buildup our in expect we of believe use, next the the we cash As quarters cash seen

representing towards the net to our $XXX.X our to and increased credit XXX compared extension States. receivable of outstanding, United cases, of certain last days the of million were quarter, reflection end in to $X.XX billion that revenues this the a skewed mainly customers, quarter increased Accounts in terms quarter,

the our As million $XXX.X was in net $XXX.X XX, million prior of of June inventory quarter. to level compared reserve

we slowly the slower component At slowdown the a rates manufacturing, and as finished in Europe of battery result of goods availability to increased our a the component issue. same becomes inventory less reducing quarter. United our substantially time, stocks cells streamlined and As are safety shipments the more in this growth an States,

third our of guidance quarter the to for XXXX. Turning

are to $XXX million. We of range to the million $XXX revenues guiding within be

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

non-GAAP income expect million to operating of million. We the $XXX be within range to $XXX

solar be is $XXX segment from from of the expected the to segment to to the Revenues XX% the are margins within be expected $XXX million. range to of within Gross solar range XX%. million

it to turn open will to over operator questions. now I call please. for the up Operator, the

from will Mark take Morgan. first we with our And Strouse question Instructions]. [Operator J.P.

to start issue at US, you million look It for we I like should rest just wanted about $XX XX%, $XX by XQ think the is quarter-over-quarter. the Europe, of sounds of if driven million, kind guide. break Europe dip the When similar change and the mix of down much US how is curious revenue inventory that is of of kind the your I'm – fairly revenue with world? can XX% that but quarter-over-quarter, is broad, if we

when Europe. guidance because little region Actually, bit look first quarter, we the revenues that batteries, most would of from see mostly say of the we in of little all is coming look at bit to a region the a we less a I by reduction dynamics. different that of need we for next see

shipments with As the will up ability prepared little our during is by situation the phase why, to that three inventory inverters more through shipments. as a and result, is we order faster in ramp And inverters. way, to channels quarter. come them, in And from the this a we a mostly mostly adoption fourth there remarks, continue also the and than the be air were cleared be within And to we're a getting found cleared increasing our our us batteries needs mentioned that this that bit inverters the the or third there built grow.

So, decrease. first of all this comes

that comes to to commercial in modules inverter is of The a they installing other usually the install to three from the United to do at they bit especially make the install optimizers. because faster bit sure the products, they we installers, or then what we actually Europe but moment, simply inverter, were in with also compared happening roof in again, that slower the systems. that once little installation. it. components, the commission installers, on needed because the last complete bit Europe it are a fact Again, is either little of second more in and in inverter the a States one the to overall optimizers actually phase commercial very ramp the get Because see than inverter it's Europe, that more products more of installation shipments little more who comes, the order the and can basically only take they used modules And the characterized

of since phenomena. two because revenues from is Europe, the of came the majority these this the Europe majority from So down of quarter coming also the

much At we indeed, there to fact seen and the still missing time, when of a the still them. go are United basically we not that on because amount one same inventories mentioned, quarter we some expect go to ship of we're the the going needed products we but are next are as Zvi that that, high, hand, lower have in the do the States, that believe lower to

flattish. something be it comes would mixed rest say, world, to of the where, we when relatively again, again, see, I it's relatively And to a will that expect situation

flattish down. and from majority will that of be the come to maybe come slightly and delivered, were all the will rest majority will from first So relatively Europe, batteries optimizers

suppliers. number European distributors kind Your and managing the comments the interesting regarding of were of

a high environment. Just competitive give what level you're curious if us you with can update on seeing fairly overall the

they have seen shortage, I today have needed. are because the that new give I that's the hold whatever they're carrying base, the Six module described, is that through is years, brands inverters. dynamic this Europe times. into has carrying as it they the for cycles. installer economic of if just stabilized, repeated the it, pronounced that now that you in have in took during that and Mark, it's classical could will. And phenomena call And get of solution, didn't And before multiple can that and in we've are the things a those that Poland active number they the more they're some of it's indeed combination that, the seven down example – what brands for high something an the paring our or them distributors end, on XX of, of a itself more you period side. a of been

from a market significantly And were on if emphasize purchased. abnormally that at module modules the of by they is our are inventory distributors, in that modules and some reports – you've is lot with now levels seen high. of lower the prices the those discussions pricing the inventory also which the And than

that are financials. distributors period, normally that, to than So to because levels control lot overall they in in demand just of of their still the are carry a offering, especially they on a going that by lower is high, those And type but form maybe this would order in challenge. inventory of that resolving low overall financial are the some of to, with

So, equipment the drawn. for demand is is And market are very active. Installations up.

side and more adjustment the during Just their the sustainable on limit shortage channel to accumulated of of there's a growth portfolio, get volumes closing they've the back an months that period, model. type drain to the

our take next We'll with Goldman Brian Lee Sachs. question from

unexpected guidance here. couple persisting, different this that's like XQ of some maybe It appreciate beyond though, for around in Ronen, sounds dynamics maybe world, rest into some here. the just the played of the Europe, weaker, US a Had color off, that of first the the I quarter. you, guess,

well should kind an early battery XQ as as of timing into line. give balance, called down? think expecting read seasonality exiting takes how of what you us about top sort inventory put the Just we you can you there you're us around give some So to Like, US be and on path in the out? as of shipments the for the be flat, up, year is a weakness

give And but missed a then battery you this, specific I as guidance did shipment might well? have

on First quarter Europe, guidance that would dynamics for compared this I didn't substantially second, a no, normally, would to missing be they're to are see, inverter. distributors going we batteries give down batteries, one, in more in have the but the like especially we channels the to they the next specific given the than because still say,

in be it's So lower next quarter. substantially definitely to batteries, going

Now, in our comes puts to life give when center is of take it to start I being try sales little complex of Europe, the there. dynamics in today. the will a quarters, again, very bit And the and area. unfortunately, this the from I'll

channels, and of as this little patterns shorter see which strong see when data the the change at its of it levels are the high much is in but of not as even big And In have, at inventory inventory need that quarters it'll market Europe, people which one situation be the there are case, you in enough sale of strong. hand the and to see levels because adjusted still beginning the strong, point channel, in basically, last very the understanding, a creates from outstanding, that, levels making we sale when from through bit over than we is at demand they're what very orders the supply two say relatively maybe look of level. continuing, from two the there, the actually maybe that a the would not are demand the year, that is fairly sold a a one days They're that how they but the means we that distributors time of is or the looking time that, And, is record where, because are believed the a being from our bit little them the quarters, don't is you more the today, on until high, say all. inventory therefore, normal you at of but result levels some gap. that not

winter Europe usually of The because the third that start nobody is quarter, into of the solar, fourth of back fact too problem going much the is to quarter, enter the all, and in the quarter with And Europe you inventory. the compared days to wants the go is in seasonally of first low to that fourth this normal winter.

the quarter. holidays themselves, because days the less to there during are Second, of install

we let's and here not phenomena volumes. faster known. healthy, inventory are dynamics will and is mixed impact require levels forget in there in believe So recovery see we And a of winter war increase the where the market that Europe. a faster not very is that of And still

sure about going it's to I'm not there. So where the concerns be electricity

be that, see. changed. situation much We Zvi the see at of a a being we more believe In it's quarter, distributors like in products or we improve we higher I two at see do would level. but different the our for until relatively it higher, States, overall, last phenomenon. sale is lower least that that, as that the to is United there And In think quarters to are US, mentioned, still the one than do therefore, going see the point than levels inventory

different try I that I optimistic But summarize sometimes opposite. if So cautiously we're many to say QX up phenomena to quarter with at is the everything, would are again, rather the it happening to time. that are that a being see same flat contradicting

Maybe follow-up that. just on to

Do think it back in in batteries. battery all You adjustment XQ? up goes XQ? happening Is mention the didn't you

basically the performance XX% squeeze down after the some are the freight there? the here. from year On points the embedded my three surprised strong what to going that then of impacts other gross and Just months levers XX% at XQ? go coming understand relative beginning kind last be and at of in entire of of air I'll Are how does in one. the to Is part what by away midpoint just recapturing solar trying that, gross much being there? guided to in terms margins, of there XXX would the basis in the sort margin forward gross the are margins

First question that answer one. first all, higher sneaked will I was be the of the that a think than

QX from third we again, them the expected an exit reason again, with of batteries is, one. in we the quarter. to inventory. So of not too the Nobody it's the and end up and maybe guide start to – similar In to would I'll expect be first And year here, the like slightly compared the general, year. yet, we but do much

more is related management So we this of assume inventory that less and to dynamics. more market dynamics

understand, sometimes themselves. is of the can Brian, they distributors know and by once availability and bit days, relatively that load the have the close especially, expensive. suppliers that the the that that of a is little their in to availability the batteries vendors they within the that try them, the the a this And they product have look at way year market availability And do end to way, is shift and their because you they know to manufacturers get or to financials the relatively

little to ahead, rather stabilizing or growth of a would It's say quarters, least at that, three end a a from determining that, play – take be factor. year like there's two bit just or is not if say phenomena is again, inventory pattern of let's but the than I a declining going would or the one. of quarters I one where two

little situation. different here, actually, a a of bit On the it's margins,

in ship QX other that any more and much except are Europe. that to of products our The phase margins inverters is that product lowest going for inverters the product commercial the compared we the is This way. compared And is this first by QX. usually are mostly missing is that the during three inverters to thing batteries, to gross carrying is

And the gross of the ship the this bigger that is it, characteristics The two more of of of inverters you overall that than we're the optimizers coupled see of the into shipping margin maybe when This that commercial to you the amount the when that on usually this very modules the QX look see actually more contributing because second the do because one margin. solution, but we inverter. inverters, thing large is a per QX, optimizer not we into installations entire than margin in gross on actually, to now has going a better gross entire only fact to also mix, is QX, in. you optimizer, we're when inverters expect already something impact at solution the imbalance commercial

QX. So major And that, say air we actually shipment, that is something than also I and away of during it's very of The of air would rather be the the course, again, more inverter to substantial. this it part will expect expensive is go shipment.

go that So and the I them of two after QX. are these are major supposed away factors would to both say

We'll Philip take our next question with Shen MKM. from ROTH

go We to Oppenheimer move Please on will Colin Company. & Rusch ahead. with next

a talk of Infineon? R&D relationship we a how that with little attending spending, anything about bit perspective, R&D how [indiscernible] prepayment Anything thinking the streamline you the should some agreement? be about Can and your that spend you're from else might to

mild continuing growth with areas, next existing continuing significantly. and serve. We're for new spending think has expanding develop invest I we R&D that into markets not generation as the products we're to to new products the changed pattern

it. Infineon to cooperation elements has within two The

The assurance of that the first supply masse use is to product. en we current our components in

this That's R&D, view. that operational inverter semiconductors in obviously. most every that corporation first an That's not So IGBTs of used significantly the and layer with the them. that are does do. we is And impact

it's one one investment a of big as not this with power together not well with. element or companies that way R&D leading nitride. on by in the a companies working our work The of other as is It's semiconductors generation area power next that working we future is preparing cooperation semiconductors gallium the another. silicon swing second term and like long it's again And that carbide on is –

it's So strategic supply, impact and direct for our not that us. it's Obviously, assurance something partnership roadmaps of a R&D has a spend, but our on more on

in market growth about in of to market you see price the solar action the perspective, a multiple some through share profile need over in to take think taking of and demand and to some pricing years of gone how From the start to what the market terms then long rationalizations guess share point ways. adjusted I would pricing business? you've of we've at importance the you continue various term

technology there's to sure as constantly the you on usual end within in high as make the being mode a market exactly and business is and for value differentiation relative for our we that competitors. the a and our focus justified where think I supplier pricing described, differentiation by market,

cost there's in value. to competitors making historically, price look increase, you where, in reduction. that that reductions in on a improvements an again, our relative volumes enables If justified sure, dynamic the suppliers the invest turn, by our we supports lot market, is is there's that, there our and gap that And some a also cost annual basis, make, reduction, and cost

of type well is So will the situation I years activity following of on likely reasonable in more more be disruptive of then very think year, of area area of dynamics that, the dynamics. are And next terms do been back last we as described price it's reduction here, where stable. the normal its over different the activity in in the that market of some there couple as or things more reduction. have that of cost the very

So sometime prices prices happening environment the we're I next and of not to hold been out we our Right now, and need that that see type stable reduce year. still recently. have in don't don't

Philip we'll And back ROTH Shen of to with go the line MKM.

end how may and in inventory is how through talked by XXXX? and also to by pricing talk geography be you talk And you can about also, That said, you through in You geography? perhaps weeks open many market by channel it reductions early are by stable. And price end the can of market?

I level, the say, high inventory quarter, months. two in at are part, Europe, of in levels still, second probably below the would with range the Starting a

the like less products inverters, a three month. it's some For than phase

single two are it's very some market. these products And For like more historically, inverters, European months. levels probably than phase the for inventory reasonable

it and risk way control What's it levels but end installation bubble, you reasonable, taking reasonable. it's before, of rates, happening they're they're in I the maybe edge dynamic levels that a high sell-through are, and on Europe and of not in the the terms inventory on of I maybe is in we the if inventories the very, overall and very call and where described high range the that trying in to financials, considering is But are modules sitting that what large described the or being the holding, will. think very major considered on inventory

will a The US although probably work inventory – They're the more more significant level. longer, to NEM will described, gradual in quarter inventory X.X to through as we're of rates higher. probably there's a and levels have seeing it two in our unless sell-through, understanding closer are in installation we of that seeing And architecture I longer US, DC we much installation Maybe value the of inventory. for pickup terms commercial discussed begin major there But if work to up. in pick anticipation bit California. And the more that through a coupled that take activity in that rate. type uptick becomes bit take installation uptick Ronen are as to isn't rates will the also a clear,

just XXXX, as will I this the and the coming the have it during can't better is more I question the for we be to say structure this previous on to we think regards that, to stable condition. not market that in first a relevant few management answer in the that something In discussion it's At topic rule a question pricing, point, going months. out. cost our is that topic back a view on

operating Can that. whether Or are if not XX% the margins just rate just there's think targets or could bit, is deleverage, of your lower Shifting XXXX then curious for in I EBIT you exit us EBIT financial address the margin to to XX% on is structural. you backlog over update implied something was what of if more a the QX there. about targets, still achievable? terms for if C&I And wondering you

at First the that in don't when look financials anything of levels, we working operating point our in our at see way is margins that business structural we time. all, the of

that pricing say and level level. I on not the the of that will in that exactly rather the we're we're anything – actually be to happening QX, guiding, yet to or the of related related revenues but going than level majority would QX, this same of see to the the on leverage So is phenomena, the the less margins is of again,

of correction exists it, call case of I see, general. a was related crisis more I disappeared, the bit we're Now, in at of would We market. going seen that that say, overall, let's Germany, been rather through in we've XXXX growing little or not and a than again, in the Europe relatively general, when do market operating various restrictive see we this can a that's We've availability financing to around stage, solar there. the and expenses say stages in it's on as situation

whether once the will exactly same. margin are up. I will on to not, the model issue revenues And or achievable point a operating will provide else. at And it's the be based only forecast be be of time. will exactly anything So resume operating the that improvement is the target It this rather would revenue leverage same fourth we quarter revenues it than say that that

train question. lost the your first I on the but apologize, of of thoughts part I Phil,

C&I on problem. It's No backlog.

the about, of delivered the on already the backlog, of C&I beginning first last the half. I already entire have volumes first and what of volume is all, close that very have this to then for So, very want than a is year, From And the point that talk we we view, to volume have from year. delivered more the we backlog backlog.

even more last it quarter, that again, with for And simple happening year. this see year, gigawatt. we had So can our be products, see very This when about we'll on number we still this said math, you based something is that availability, could we XX bigger. have which, a

product, on binding sometimes good lead orders. XX of buildup, place, to is as changing they into because very the that saw distributors order a there's that a the as this hand, time long From an the is for other knew something backlog knew months reasoning installers and put

that And sure it's get they possible to so, product. make

places. that And by simply wanted because it little the of they knew way, so a going sometimes, was there bit to did they to allocation, they ensure be their

inventory way, a regions, for year put goods particular and healthy availability shipment finished no if now at in levels are in any our field levels now. the costs to the from is look reduce there inventory in that various reason building, Once product we're backlog you by a and moving to distributor into the a also way into

a can they QX, we quarters, QX. QX where and So by would take in see will over backlogs even that the can means few QX, that compared already, the to From year know, we before simply orders of that quarter ago. sometimes few This smaller being ago the way, were we to revenues we same tell manufacture a actual It we is were than not necessarily spoiled shorter estimate sell. quarters still situation that, backlog compared nature you the solid we the orders maybe that where in that I turn and we backlog we will next where more of into indicative I volumes. have we can started course, everything we for see

from Percoco next question our Stanley, take Andrew Morgan We'll with

think on customers about on like commercial disclosed basis? megawatts think third average look continues sales should the on the through, on margins? If what be in gross to go higher to we of question for of of just margins level the lower an higher driver I if Just floor commercial trying the those segment. Have quarter. sounds grind XXXX, commercial some potential another XQ had into drive, that's quarter-over-quarter, to total a it follow-up to in percentage continues on margin going maybe and like what you

the dependent is case the installation, usually, all, little say the the that on the the commercial product. numbers. where, the of installation the And still we We were first XXX than points have by, the start points margins. margin margins when lower lower I'll way, the basis bigger size by is, a bit is, on residential of usually this of used XXX basis – to to

that view, point an I that gives of it from us answer. So think

inverters and our of not remember are again, three markets sell phase, three shortages are we're and in Austria, are phase inverters. shipping are that markets because both We commercial that And phase also, Switzerland, residential. where today all three that most phase by way, to we in the need commercial especially Germany, three Europe,

draw thing, at are of one close same add to this gross they and usually, the like bigger, more these in less would course, similar you the them margins, margin that are but operating that the time, the expenses. more commercial of their yes, to lower simply I because see, fact the the is much residential what to with operating because see is to contribution installations you that,

see gross comes almost So products while you profit do can see you when lower it margin, operating similar usually these to specifically.

you just answer if solar Europe to specifically revenue, quarter-over-quarter broken third the on of the missed and I your Maybe up, this, follow your down have but between trends? to and the apologies in expectation what US quarter is terms in

a break it usually forward-looking on don't We basis.

take next with Truist Securities. Jordan We'll our question from Levy

and maybe the ramp of you Most of But new of volumes you just any and the maybe the thought state updated battery kind next just ask current them roll some year then of my the battery I'll out questions are out there. ship as of as first looking performance on the answered. side, and on into sort initiatives the thinking on progression

the is hear understand of didn't question you But about I the that We battery. great. correctly, if performance

are specifically, of So yet lifetime challenged in and terms batteries cycles. not

on take answer more few will a clear give to a hard those. years. it's It So,

and consider and The failure the point ease would a the commissioning at rates. is – and first time is parameters I second of is that two critical installation this time our reliability

clear. Commissioning topic. we're we're getting think improvements I the on installation market introduced that market we're said, and that area. think so feedback has been picture on installation guides well, as but perfect, that on positive will the times. We've and the we're robust, wizard been And low take have on again, And good both. I far feedback and reliability and some time failure software satisfied that are on from the very performance in getting continuous until from that rates lifetime installers it doing process cycles, through for is pretty good

Deutsche from We'll next our question Corinne Blanchard take with Bank.

quarter. the you But of call, beginning clean I this increase think your follow-up, think did XX% the a the [indiscernible] product at in as to mentioned of you probably I by the two the channel quarter Maybe US. mentioned that

follow-up the battery just and will after. I wanted I on this, have a then side So, to clarify

think, I again, bit about a it's magnitudes.

distributors a inventory say, indicator, of levels quarter-over-quarter. sufficient think this a I I But positive increase the seeing in the is such has XX% described, are this by enough by sell-through US drain that are inventories We still as not quickly. our would that the I increased to

to least go current will So, sell-through much this through will an of inventory. inventories indicator will is installation it at the improve a rates the But quarters higher. and longer get rate, and take to the decline, at for continue will couple either to take unless it a that bit

trend? But And if follow-up do cages. missed see And on I The update going XX or where battery the a over battery so? maybe it, maybe just did. on and the give you on months where pricing you quick so X the apologize can you next Sella I

are using Remember, Sella yet offerings X not X. is – residential cells our battery to current from Sella

the beginning we So, will the our remarks, cells first and capacity Meanwhile, half also and parallel in Sella its year batteries use are application. introduced to they type prepared X in is of in year. intend that of produce to batteries ramping and, by selling the end full is as will be – be other next cells we introduced described to reach generation for beginning in that next of the the

will And in in more us the cells of of our own capacity that technology of give terms the optimized that Sella in and the really are flexibility of system terms into application inverters. pricing batteries assurance will of of and own gradually, making supply, in move for also So, our also also of terms the sure batteries. X

So, that's the picture regarding Sella X.

pricing, we're of batteries. single on we the our shifts prices pricing quarters. trends. seeing major phase slightly reduce battery battery major additional again, couple battery not on coming in did Regarding But, see generally, don't We

our Bank from take question with Dumoulin-Smith next Julien We'll of America.

European some think up here, on I XXXX follow-up we qualify? back XXX here to To that a make of ramping just Actually, that can, to just overall a love update as got conversation. advantage few volume on you to ultimately off. the even different as could here you an first extent leverage would the comments off, of XXX, following margin percent if get into what sure production, I've here. wanted we ultimately take on Just on front. final get double do you to front, that think, clarity could first What Then

As but to I the of delivering in we have manufacturing. And inverters from inverter point won't current described, delivering they starting when the that XX,XXX impact. Already, XXX off view. be we're with financial will for and will significant in inverters more begin we qualify a it be fourth that's quarter, will than quarter, an be

We what is intend to other demand. of time. manufacturing continue that to and course, lot ramp, for the optimizer possible the to milestone will same of add into regulations reach the capacity mix will more we US satisfy the XXXX, After from be benefit assuming that's course, continue incentives, to add take of initially, then, regions, what ramp for can and not. going to purposes, by to think clear in terms And we the I IRA of is a and still

So units on quickly. jump C&I like. But – to it XX,XXX in it especially looking plan and think somewhat that dynamic the off but about conversation can the the compliance margin is still question the seems sounds flux, if scale as you actually XQ, to in real back the front I

you that do quarters XX% you going to margin How to healthier. mix, want right, a don't XX% contributions seem I going to here, imply target as side too far C&I much about persisting inventory on total C&I you of the earlier, see – to that. about issue higher the into is materially clarify but residential think but earlier or to this the at talked the least for Just looks that some to as percent as back read XXXX obviously, you see

of we're half yes that right side very I now, little down Again, is of this by is which growing. QX And would impact What that dynamics And commercial be Europe to say second margin. would especially also the growing. course, to is time, also anticipated that the is now, surprised But with market by same which, residential regions, as mix, compared bit XXXX of us the higher way, see. we see is much, the QX, resi negatively portion the also is because takes see the XXXX. at fact follows. least high is that right QX to is other a characterized and in usually or commercial the than slowing something at bit a little US down we margins, and the overall correcting higher because anticipate compared our in to the in QX And

If XXXX, we seen, we've quicker go to margin two, still in than nicely be where in these, the market much of will that, last that, come is back also back should course again, up margins an residential. should within this in do all, the quarters, combine yes, at very we that and fact don't that the I that three, quarters. XXXX, you contributes expectation United first least four course, Europe come of expect but the going levels know, to believe within, the States that is XXXX to US to also will see, Plus increase we there

at we major mentioned target XX%. gross batteries the should battery going to be ace go as do down now. is to again, margin prices continue before, batteries around that least here because right said, that we've With be And see

I'm it's in this, that some even or persist. will sure this than higher quarters So if today not

can is on next it cautiously downside of the would And by the I suggest on that, even second may part first should case XXXX say that there course, year back this be which this as some way, yes, that the in the also rather than So for of model, we the are of that all, be two well upside XXXX that it be, the of believe quarters. part drivers

And actually back go XXX, to any just part. expectations the there to

that least where are. already I'm is that $X.XXX a said, in pocket. have from the we – the something we as But expectations not our sure believe at we

at will US bit we'll least we of more everything $X.XXX. XX% margins, will manufacture fact least the is We that that expensive. our believe be that little So at given manufacturing this the to retain year in a these

next Harrison our from take with Kashy Sandler. Piper We'll question

back is going Maybe time think they process XXXX, do that's cash as that higher a just supply, just these want flow to think is just normal do distributor distributors' two month? but your given more to dynamics? was some et the they a go months of to get what if of and dynamics, equipment this a define think decline availability that by given thought, become Or increasing cetera. the at thought you to structurally of you of normal normal? flow months you cash Or temporary how about of two month point, level, or thing a some before, definition the sense Just where half new you

the type recently, What experience but and on conversations seen could dynamics be that saying be is that, some point, the it would had that different. the in I'm based But distributors at our of we've we back with past. judgment it to goes

today want installers are is period picture holding following clear. that of and all, which usually the actually phenomena on how And today, much then inventory inventory of also in hold look – of installers that installers first you the holding shortages – the If top don't inventory. of not are to is

On top of of similar that, distributors, a types seven, they're number nine inverters, suppliers. carrying eight, of module

smaller many have For line a It's bring much much control. interest really part behavior and card classical inventory, to each it one, down numbers. to holding more and they're their their in and

But of the where to the of going product and within back model dynamics. to time have a type inventory will holding range amount that the in will adjustment of anymore, classical I distribution or of the products, of equipment In be inventory it the that hold installers the suppliers will type portfolio return quarter likely environment that's distributors the hold the worth believe, the and though a on that go channel, this to steady give take, state I availability, manufacturers of even think don't of still, following limited it channels depending takes. and

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

look time We a in have enter as Europe. seem But particular southern spent might a of next the like, in inventory year, in what we Europe. it headwinds, drawdown about bunch we in few does that policy talking particular

you see year if correction I early, inventory So I'm we what in demand out you early of the can it's next opine like wondering, just this know as Europe. picture looking come

few changed example, a higher just our the Actually, of in points, they that a right have less – ago installations of installation data programs and homeowners. for than the despite rates the lucrative were take some Italy, now fact the – are are for some year

having – an seeing impact. countries And in is. more an little negative what are, bit a would So changes we're I think changes not consider maybe explain Europe the opportunity to having policy where it's the what policy there also you

where XXXX, into year, mentioned have to So, this markets was gigawatts expected the like increase large continue in XXXX. between the X.X gigawatts. German of it's XX XX to be I market, installations And it that, to somewhere you and to

is in you of prepared just our an all million in million. of range in our in annually. have €XX in environment. to expected €XX mentioned the with XXXX kinds parallel in different the million revenue Slovenia, remarks, as €XX different And of was size like XXXX, markets be And type example, country to Slovenia that, Slovenia revenue Ronen a In to

such small there are markets but are there that markets. not not many, they're evolving, are multiple so So these and small

position European change. least about going the at small for all, in of and and looking European still the these XXXX. large, in us many mid-sized into the all our market So can again, very optimistic landscape, things But markets, at we're in considering dynamics is

from our question next take Citi. We'll with Vikram Bagri

the and Ronen, first you quarters. about that's about you if generation allocation buildup talk in next or few Can capital off, share cash budget? substantial particularly mentioned the repurchases,

little right do be that I for now will right plans a play reduce We explained and experience that we that start cycle, the to faster. and in now. phenomena longer have are this fact do inventories general, because bit we is out given something starting is bit In collection not the of this to a cash going simply to QX later, a little creation

are to we comprehensive present out that this there is exhausted believe and that them. still raised these have not We're why to last present capital is With year, also and faster more believe, opportunities We a growth that do we still much there opportunities. we said, growth. reviewing

creation portfolio being least by that these better to business a we due and at of companies, rather Some this than building the point, returning acquiring to there at just it investors. of much are them investors as value And is the well. building days diligenced believe

way, the in are created, we that believe against Once, we we I consider I case, it. have don't But to feel to by near believe, cash. opportunities this religion use will this, the this the but any not going be that would be term surely

sell-through question the at quarter? same or My follow-up topic. I your this least but XX%, is on provide Ronen, the the the inventory shipments Can been apologize fourth and you rebalancing were US, third cadence than of more in again, if in magnitude the remarks, hundredth has on rose you down prepared XX%. answered. mentioned

and it it US, big. sounds So Europe, the that not like, inventory – more inventories the like, the XX manageable? seems are is is comments in not still magnitude than are down on already Your rebalancing required

of rebalancing seems third happens quarter. in most like it the So

is more might and quarter out dependent sort in projected of balancing not fourth of caution on the and borne demand So your happen. it

can on the the on happens you impact the comment magnitude, quarter? So much is, of characterize how if rebalancing quarter what cadence, and in third you and the can revenue if fourth

at sure if big least believe you drawback in because, we seasonality the be bit Europe a mentioned, the, as the rightfully are inventory little that, not I'm of is going multiple multiple quicker. I a compared see phenomena all cover can and we QX again, and such it fact in as Europe, segments, so, usually again, regions that to corrections, that multiple which to

be levels the inventories Zvi are that Again, cautiously the again relatively distributors so cash to by think a the it continue like question. that, biggest correction good point high we I'm not quick, yes, within still inventories. given the days, installers answer. the one. from That's how high But the have not perspective, one that, I – when be, fact said larger reflects bigger record to going there question say maintain and to of is should is In what And inventory sorry, that distributors sure and appetite look the I continue I that would sale Europe, maintain see go the think I QX while in and general, I data. a will before of would there. optimistic going mentioned I be that we're

almost than level fact In is relatively other high the from we correct, analysis US, that your the start of inventory. a

the this So is to that sometimes mentioned distributors exiting little quarter. even some close is time exiting This why seen more would inventory. quarter, point two at is time. shipment, bit the is the something And though the where of look we when that a this we we quarters this that Zvi decreased of the we've think take

believe very we this – will to will close is, the of by our Europe very strong continues us, by for is thing that be today, general, the XX% business. rest world, the In strong, this be since of that together, the way, since way, be of two I and know, orders, will where we think of lag, sense. this three patterns don't the in will the say, This that by, correction from kind quarters will more maybe or into quicker area Europe after this moving US normalized would I be that to

Daiwa. we And from our Jonathan will with question take Kees next

– half, that should you be I shift second and a interest Do Is want undertaking saying something I click now. a you're first offset being just some the there's third that the XXXX, – the quite anticipating that's for for double provide more trends obviously see material higher of party more guess ownership, that in – have half that big you're to color? the rates. you to one can on XXXX,

about just you If be color more provide can that, some that'd great.

that for that impact loans. as lot market in are on for IRA It's of party third a the There a trend you of reasons ownership rates people some mentioned. the in interest as benefits the anticipate well the

manner this Some yet. of speak that beginning we the see dramatic shift, are although not in to large a to installers

will it some build take I to to origination. the So, course, of then, time up. think refers And that

the at time contract. the that consumer that's the So close

and bit takes For little a installations purchases that through to move to longer.

there trend direction not seeing visibility that rapid we're by happening in anything that But on is don't people. a We So is any in have this the regard. special this. expected in

here. shift party a in from loan is ownership read to And we lease. to what more be the it's expected meaningful third market So to

line there at And on the are further no questions time. this

I'll closing Lando, CEO, the comments. to turn for SolarEdge So program Zvi

you. Thank

pleased our summary, demonstrate advantages of our markets application. in results So position across we're diverse with the this quarter, and which

So thank you today evening. a good us for all have joining and

you This participation and you does now conclude today's disconnect. for program. Thank your may