SolarEdge (SEDG) 8 May 242024 Q1 Earnings call transcript

Hello, and welcome to the SolarEdge conference call for the first quarter, ended March 31, 2024. 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 record 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 J.B. Relations Investor of Head for SolarEdge. Lowe, begin. Please

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

We open will questions. then

today include cause posted The that forward-looking harbor the non-GAAP share, expectations. our and measures U.S. measures, and uncertainties statements more results risks in the description with this actual complete will We earnings review in and involve from release. diluted website call risks income encourage our that this slides management's could GAAP. statements safe on of filings contained SEC not differ accordance our such a Please that to net materially ahead and describes non-GAAP for certain of including note presentation which non-GAAP are net per current uncertainties. to note with you call Please press prepared this

and XXXX be who of should These Investor how visiting obtain as because company's these Reconciliation presented filings. found website. presentation means supplemental provide in in measures XX, the not Relations financial or quarter we are do release company's evaluating U.S. copy company's substitutes with measures have non-GAAP release, Listeners GAAP. not our [indiscernible] this by the or earnings the prepared a be can operating management of the considered of ended that material to non-GAAP copy March a understanding presentation in believe may the SEC The in measures investors evaluates press the the and performance. accordance with of from, superior section isolation for they

now over call I to And Ziv. the will turn

Thank with conference our from results. approximately and revenues $XXX quarter Revenues of afternoon, $XXX with all were first on Starting We nonsolar were call. businesses $XX Good you, million for thank in our while highlights concluded us business million. quarter joining our J.B. the you . million, from our approximately approximately Solar revenue.

X.X we and XX,XXX million This hour optimizers, quarter, inverters XXX-megawatt batteries. power shipped of

calls, regions market will As in the dynamics markets, the sell-through markets the and cleanup. on demand our see in done I we start previous these with implications on inventory we various have and and end underlying

with the U.S. Starting Residential segment.

quarter, interest electricity commented market, remain did recent and we levels. in last at As long rates not significant we changes this as as expect prices

result, largely a quarter-over-quarter. quarter sell-through seasonality results optimizer our As down XX% reflect first traditional and with inverter

accelerating adoption However, quarter-over-quarter. we in the capability. tied battery California is as well with of up systems, as of This our have market X.X in battery sell-through strength coming backup product Rico, the was full product of battery where U.S. uptake the our single-phase customers seen XX% and from need strength Puerto NEM continued

when for is incremental well many that Our suited DC-coupled compared energy these particularly given products. solution applications, is generated alternative the with

seasonality. a to down largely record fourth XX% from Moving commercial. Sell-through U.S. to quarter, was due

to global standardize on encouraged expected to among are their trajectory due, this which who demand product. want enterprise from market, year the reasons, to of is this portfolios large customers, the grow We our by other continued

a U.S. basis, XX% On our the sell-through commercial year-over-year of in was up inverters

down quarter-over-quarter, XX% winter slightly Residential, and changes. than of sell-through Europe XX% seasonally year usual batteries due the a XX%. inverters longer slowly Moving was In and in and recent down down to Europe. The digestion market optimizers continued started to regulatory with

that In good when the on reflecting position same was we major have markets in X%, dynamics market. discussing strength Commercial, based the and the the relative market this mentioned on of our I Europe. sell-through of Touching commercial some down U.S.

market declining impacted electricity X ago, by as expectation regulatory Solar year will requirements German In that solar simplify the have will more won passing of the new slowly an started economics weeks There than the on installations. the market however, given which Germany, improve anticipated, negatively package is, the dynamics Solar. prices parliament of

the installations in feed given incremental we specifically in strengths which confidence consumer for Netherlands, years. increased the support our quarter, Among fourth photovotaic remains recent levels following will to market our other compared the measures, net tariffs expect In metering is increase commercial projects, slowly products, depressed agri and around package, at for recovering segments. or clarifications these while for demand in the relatively

moment. market. these We of the particular on share market side slowly, we I on dynamics initiatives rest the expand of Israel. have recover and market to on derived revenues continue in to Africa, of expect software are seasonality significant will continue in largely we focusing be this Thailand, developing seen to and Australia in from changes and a not South enable our world, some us In will typical gain solutions, the to outside in that Taiwan,

million seasonal slightly dynamics which trended lower our and approximately of resulted the call was slower The Germany, first aggregation below quarter. and our sell-through the of million sell-through range, us at end anticipated in undershipping in The $XXX expectations. the particular, of we the lower demand by of approximately last these discussed pickup in to million in quarter of million, $XXX $XXX level trends $XXX pace

the us as the end them trends of into to account today, period. for market of bring quarter underlying traditional at of year seasonality rate that our Taking the previous lower that range the the run in end would see we the we patterns and call estimated assuming business and first level

to expectation undership versus million by expect should $XXX we demand up be the is quarter sell-through first $XXX to to accept the second the quarter we meaning second in for million. Our -- XX% quarter, that approximately XX%

announced to Vivo fleet and charging month, than control Last been IoT industrial Vivo, of XXX,XXX been augment of X,XXX Asia solutions apartment the we corporate in together Vevo optimization, HARC, buildings. at conducted provides products. platform North platform. Vivo and load on the The platform C&I together and the charging and we already the ONE in acquisition for sessions charging software the form acquired approximately XXXX for energy EV and with SolarEdge integrated sites charging deployed which employee solution date Europe, and more to C&I. have management second SolarEdge quarter has management for Moving energy optimization America for C&I charging, that

is energy real-time management that achieved all manage PV consolidating to storage, enables C&I and electrical optimizes for external loads. ONE a decisions asset owners is by PV platform production, on-site and basis. charging SolarEdge This an all, data and make In and on of to internal hundreds intelligent power EV energy

and example tenants customer the a their ranging benefit with I'd a real energy world way generate and optimization G&I real a logistics software to storage that how supermarkets solution relevant parity optimize selling them from being them facilities own tenants offering. company that roughly clean of needs. hardware to XXX management, energy like enables one portfolio help and electricity complete to To were from has and estate cold give office enable the is SolarEdge wanted buildings. assets, to explain, by including assisting This This a of the deployed estate generated cheap Solar in real will and centers, and company

flexibility of the Given asset the application site per combined of the the basis will diversity portfolio, on and configuration software portfolio. hardware of and the optimized be our

and ability In for months, for rollout the PV sites ONE will sites to in on C&I deploying the that believe profitability to all our we to the the revenue. recurring of solution deliver will coming We creates basis that will the XX% features and that the quarters C&I us through for we of share to subscription. sell that SolarEdge ONE software services and including improve be capture coming deliver of approximately additional enable market differentiation the

began battery piece earnings hardware be is battery be of the commercial the This we the with optimized announced additional rest commercial and quarters. along rolling chargers C&I that of We and inverters, Europe recently the the new the world for C&I, our across of our orders commercial EV to markets solution and first Italy, also we'll our and taking ONE out call, our coming product shipments in will for On meters. key a by last any battery outdoor managed solution. in

commercial is a At Intersolar next storage for in year. next optimized some with indoor shipments common month, showing will which planned system applications, application European an be for markets, early we additional DC-coupled

[indiscernible] space first pushing Continuing space angle with its into C&I, an this on in is decarbonization MDU taking that is is market support the our and gaining MDU in relatively broadening the addressable market. untapped market to is multi-dwelling journey. various countries a unit or additional steps The

comprehensive This people batteries, live. type market where capabilities. the We of to provider chargers, the transition XX% solutions heat these of will a aim will hardware energy portfolio in leading be require and EV buildings, PV, solutions software incorporate and level pumps that energy that bring roughly to of management OECD

space, smart software exposure portfolios provide Germany. benefits To design large in and plans to MDU investments renewable Munich, to based Amperes Both owners IV to made software Amperes and implement and the solutions. and real energy the in signed multi-dwelling broaden estate partnerships with their energy commercial in based our and space, California companies X this solutions of we help recently IV decarbonize harvest

added Energy and and enrolled residential month, for continue we have for in out U.K. to SolarEdge rate the optimization we residential. Netherlands a we approximately and management feature roll important space, also X,XXX the an dynamic ONE users is features across the enabler Last new

rolling months. Poland with out and Sweden, capability in additional X Germany Belgium, the countries, be will coming We new including this

The SolarEdge dynamic residential ONE Netherlands. added for we the to year rate rate negative the in joins optimization last capability tool,

today, We fourth in since the XXX rate of XXXX. of mitigated XX,XXX product the and in events optimization as launching have have negative enrolled quarter sites negative rate

features residential market additional We space. us will the maintain out will share gain the roll and in leadership continue help technological months, coming in our to that

are of utility commercial given to importance. critical reliance increases, security the the on connected software As cyber and PV is grid, residential directly that and systems

the and multiple and topic regulations at quarters, past we in on cybersecurity particular, this drafted activity the Over as of investment will certification. increased [indiscernible] jurisdictions. few forefront are being our have and in implemented are we And we capabilities

consumers for inverter At that we capacity new released weeks, large be increase a year. need self-consumption the the is is for for all and about system that the countries, be where optimized and electricity residential This utilize European few residential is products. expected sizes. larger now in X-phase Let's leading system will we seeing German-speaking sizes are roof next-generation inverter Intersolar early increasingly and to displaying XX-kilowatt the next rooftops increased talk our to surfaces new in market,

have plus products switches our been segment. this better improved solution our carbide inverter enhance will safety efficiencies optimized historically, PV in for residential As further on drive installability new is as will and well. and features larger based differentiation power systems, this incorporate storage This to silicon

inverter, a single To battery X-phase next-generation next-generation one. complement residential battery. platform we into phase our that also will on this platforms single developing and This based unite are be our will

We on customers, will market to American more saving earning and products on elaborate for precious new our and North These in new site. other installability the time watt this will improved down cost call. on our help pipeline per drive next products them the deliver residential

released XXX demand product for parallel to year. our continue product, have are XX which the approximately scheduled the for we are the to the that be are in coming be to growing quarters. we been installation quarters, process In process released in the and ramp that in confirm this last or few products On tracker and megawatts, installed to see over are are additional of there megawatts installed orders approximately the above,

XX-megawatt XXX-kilowatt an recently order project. a began inverter, and our installation TerraMax we On PV of received floating

operations. target in facility, In roughly quarter phase we Austin, and manufacturing Texas rate first quarter. the are the our XXX-megawatts inverters to made meet second of to Moving XXX-megawatt single run on in the

consolidate on North both facility American our located the the we in portfolio quarter, commercial product the and from will an American second across second platforms number portfolio. Florida. XXX-watt U.S. and U.S. of shipments operational Also reduce contract market, we our the to inverter in of of side, optimizer the around hardware assets in platform. in initiative number will manufacturing made our and optimizers the plan North XX.X-kilowatts The begin Additionally, inverters

efficiencies improve more result services. will process chain, inventory management a This logistics, in streamlined and manufacturing across and supply

upgrades. a main to single panel which with more validation the will means new come costly avoiding all platform, Following can customers PV, while install PCS, inverters much pre-equipped

inventory of and first closing, our with clearing aligned In results our quarter expectation typical were seasonality.

of In next As ourselves products we and growth revenues rise, in improve. we decline to the historically the industry. suite that parallel, to installations enter to focused inventory spring, tend quarters on we plan several to are continue channel when release cycle the to next expect we to in for our position new

I hand over now will it to Ronen.

revenues you, afternoon, PV batteries, the Revenues million. from segment, the Total everyone. sales for $XXX.X Good and Thank which million. first commercial Zvi. were residential attached our quarter of includes Solar $XXX.X were

States of from our million, were Total the XX% this revenues quarter United Solar $XX.X revenues. representing

Solar million Europe representing representing of Rest revenues million, revenues. total our of revenues. $XX.X world from our Solar $XX.X of XX% were the XX% revenues Solar were Solar

Europe States, the megawatt the rest world to a basis, and megawatts just total megawatts XXX- shipments. On of XXX-megawatts for United under to XXX- the we to shipped XXX-megawatts of

revenues mainly quarter, geographical XXXX, the the and channel installation result of quarter or is a mix long-term not in our is rates, environment situation inventory of fourth trends. the necessarily in this competitive representing As the of the

megawatt XX% inventory rates. shipments where lower commercial this of in gross portion significantly residential. a our XXX-megawatt United the of Similar single-phase the quarter, batteries shipments and our that that batteries quarter, of sales the States XX% carries growth of with products the steady see majority shift manufactured were we hour there installation last was the we are quarter to were In cost margins. of higher residential first remaining to large shipped using

first In a continued of in imbalances the optimizers. the to to channels, ratio quarter, distribution we shipped the inverters due higher inventory

ratio ratio was excluding price X watt selling quarter, $X.XXX battery X this is typical inverters XX% last average to X was optimizers, revenues, a to inverter inverter $X.XXX, quarter, per the the from XX result, to to this decrease -- of a X optimizers while optimizers. quarter As XX

This our be channel order quarter, regions decreases will distribution in reflected of we starting to help in their in which and our reach targeted products next balanced levels initiated some inventory, financials partners quarter. price

was $XXX decreases hour decrease on price kilowatt Our and commercial The hour by $XXX residential this previous from batteries. in battery quarter, the to down changes our quarter. due announced largely ASP per the residential per our mix kilowatt is offset batteries, between previously

our business, segment comprising storage our Revenues in were all other energy $XX.X this quarter from of Nonsolar million.

in year. LCV of business, which following mostly back to end Following the storage is discontinuation seasonal and this industry, our sees this energy of higher is revenue of our the division revenues attributed the pattern the

negative prior was for Non-GAAP operations of quarter, margins XXX gross This GAAP Consolidated the a consolidated gross quarter included quarter. net to last compared compared in negative the higher the quarter this basis benefit. XX.X% quarter from includes in as was to positive XX.X%, charges amount discontinued X.X% X.X% activities. and IRA points margin prior restructuring

Solar negative quarter, margin, the was in to Gross continued the movement the revenues. like last margin positive quarter. the of our to given on X% for compared additional Similar gross environment segment give to would prior I color some the depressed of X.X%,

define as to our margin, only layer between paid price the but costs we manufacturers. dependent and our layer by which the not margin a our direct This is direct is gross the difference revenue product mix. As on gross paid on level and customers first our geographical reminder, contract of margin

the of quarter, relatively XXXX revenues. had quarter. in similar of what mix we gross our direct In of was impact anticipated the negative first margin a product the initially QX fourth reversal to saw We

battery to exceeded customers States pricing. single-phase QX, in gross weigh benefit lower-margin revenues our from significantly of adoption margin in from benefiting continued direct expectations offsetting our margins derived less and volume the from the continued However, the our United on

And will utilized the batteries allow higher a next residential purchased States, sold target we return battery our prices. products. consumed, the in sales, cells on margin generation our the those once single-phase battery are to at reminder, mainly As the United

In roughly are quarter, But points relatively of second first basis led our to XXX that basis. that The in we costs. other our of lowered the which the of COGS margins. goods fixed XX% not and sold up our impact layer our dollar COGS higher of an expenses on make directly but revenues -- costs decline to negative margin, define as Solar non-GAAP related volumes gross a first economies sold product gross largely quarter had entirely these we large other by on not or absolute scale

we in steady well On use see warranty COGS, to side, rates our a that installed in reduced relation is the as base automotive-grade to costs as transition improve a activities in new a our other components sale our continue result of positive resilience. accrual of improvement certain and the to products. This

We've also revenues, significantly costs. seen, lower of a shipment as result lower

accruals obsolete we for quarter, increased $X This inventory million. by approximately our also

high policy needed inventory inventory and risks applies to our inventory to requires and continue to obsolescence accrual level, actions. evaluate the unnaturally of Our take absolute us

It accrual higher probability mean of itself by is important obsolete, reflects that to note such rather the that obsolescence. inventory doesn't but a the is

working We finished Gross of low margin Nonsolar materials. and inventory X reducing lower both Sella was Nonsolar sales our a last and result business from on utilizing raw are down seasonally for quarter, negative diligently segment of levels of X.X% for factory. XX.X%, negative our goods utilization storage and

typically the prior quarter quarter million of On in in non-GAAP basis, the the expenses quarter seasonality business, first and operating a margins storage first lowest to were quarter. improved and our the we coming compared $XXX.X marks million, $XXX.X revenues The for expect quarters.

range, largely lower Our OpEx due -- our due was items. to to than guided onetime

to we and to We including range implemented continue and million a while of impact development. resources technology new down, our reduction continue anticipate will the significant allowing our $XXX our for we in expenses go the first to of at quarter, to expenditures $XXX operating for to million workforce stabilize push product

million to previous the million compared of was operating Non-GAAP million, the to operating an quarter loss $XXX.X for million the $XXX.X for in compared an GAAP the quarter. of was operating $XXX.X quarter. loss $XXX.X operating previous loss in quarter loss

Operating $XXX.X in quarter quarter. segment previous $XX.X segment an loss $XX.X this of was from million compared Solar loss $XX.X operating operating our operating from million to the compared the the previous million in an Nonsolar was and to quarter million quarter loss loss of this

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

Our million in previous non-GAAP was tax this quarter, tax of to benefit quarter. $XX.X compared non-GAAP million benefit $XX.X a the

first million expect rate $XXX.X net non-GAAP quarter. XX% was quarter the and Our previous GAAP to business net was tax of profitability. quarter $XXX.X million the in for to as loss the GAAP to returns a we grow the XX%, for it compared to loss

Our [indiscernible] previous million quarter. million to $XX.X share compared loss per was to net compared net $X.X quarter. a $X.XX loss in non-GAAP the diluted of the $X.XX previous in GAAP

$X.XX GAAP net previous to loss compared $X.XX, per quarter. diluted in share was the

Turning balance the to now sheet.

As XX, the deposits, of these cash we cash, million, XXXX, restricted and point March lowest deposits to this bank expect approximately cash which were bank be $XXX equivalents investments year. for

Net approximately million. is of amount debt, this $XXX

was activities This our million. we the cash a We to in to the believe of operation manufacturing required that first inventory the vendor current commitments quarter, the $XXX -- buildup the completed in and cash the manufactured manufacturing. inventory inventory This is used quarter, adjustment result associated utilization amid related our of payments position. level

quarter. As of reserve net level our $X.XX of the in prior $X.XX to at billion, XX, compared billion inventory March was

in significant XXX payment receivables, reduction in by a terms. collections from Our to flow cash days customers despite used the average for quarter. as lengthened The inventory in manufacturing we continue days accounts the partially fourth offset quarter was make first days increased XXX from to

this $XXX.X last decreased million quarter. net to receivable compared $XXX.X to quarter Accounts million

from first As days in brought to quarter DSO fourth days down a the XXX quarter. in result, the we XXX

in repurchase of fourth of share million $XXX Directors authorized by Board our our program of part quarter the XXXX. As

purchase shares total of a an approximately This per gross of share XXX,XXX our quarter, stock for price $XX.XX repurchased common for million. $XX we average

to April, our purchases continued we responsibly on continue based implement and the expectations. flow Further development cash shares will in program and

'XX. in guidance to Turning

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

non-GAAP approximately the IRA of X% benefit. XXX including points net basis expect We of to to be within gross negative range margins X%,

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

to is Solar within are million. range net of expected XXX range to expected Gross to margins be $XXX including of our X%, $XXX the approximately of to from million Revenues IRA X% Solar within benefit. negative segment from basis the positive segment the points be

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

Andrew [Operator with Instructions] we'll Stanley. Percoco And to first Morgan move

unpack. mix first I on a guess here but missed. a line guidance, that it understanding guess, just is quarter. somewhat lack And your guidance, in the at start with shift reversal you of out to margins my if shift, revenue were the fourth But just was your margin actually I following I to to look quarter, expecting obviously, related mix in was lot mostly

prior the back just in ability what So you're you by quarter remainder year? for guidance expecting to you're can sense of range comfortable XXXX whether terms beyond the or of the get second XX% the for in give a to us end and of not your your the

for thank Andrew, Sure, the and question. you

we with better level the certain States I'll approximately that we it So additional And batteries is rule we the bit. we explain sales the in just start was our playing fact demand given than the of expected. guided single-phase to the by saying we're just gross United exceeded general, that still battery our did batteries that relatively. battery for numbers a that of when anticipate, small In not by a for margin of amount planned that little

regular of Had actually the the quarter This at low And margin the a revenue it's large. compared be planned batteries entire this level. where to or the at it to But market result minimal been at [indiscernible] level, regular related a is business it. very very relatively difference would we effect.

are acquired basically in little quickly a lot we them we're right will we of a of game to it's a we [indiscernible] all bit it's just all of inventory. now, year sell zero-sum can are already next less based essence, them because question sell a if going more them. how these And of that of when we've of battery consume of in batteries on cells our Now already

the of margin. a shift just it's So

higher quarter this sales already we a gross started and baked year. second assuming the we we general, battery the into is slightly guidance, we than what anticipated margin In initially doing, are when are

is, -- that will there. the for any grow in towards the assume we of of difference impact the will very we have that And end very, assume that size of the thing very in the course, given minimal. at So that second small they beginning, revenues mix that year, it's be we already and

So no change call in it, projection. our, stabilized would margin I

Understood.

Okay. That's helpful. maybe debt as how that, follow-up management, can But year the maturity think flow next a and think maybe to guess, you bridge I about. cash year for I a to expectations that you to you're thinking about liability have

thinking you to are as this how year management? cash that and relates So it about flow expectations liability

Sure.

the one of especially in course, point of fact these times that, see our of for this is my QX the your -- The keeping to now the low prepared we is we mentioned for lowest have here that we eyes position I remarks, QX, be quarter inventory expect actually and year. the items for declining that for manufacturers. in already on. well, we're very we're for the did for as So contract is commitments procurement still major And reason revenue right cash main also towards cash and revenues guided manufacturing then you the when

is going more course, reversing And And manufactured vendors. the we actually selling -- are is quarter, first we quarter happens during more the our pay in we What to start of fact this, phenomenon are that that we the means our we in we sold. that had second this than the actual than inventory pay to had results for actually manufacturing. and that to still

sitting start expect of the again. And we're actually, we $X.XX And just to utilize billion we're the cash form going those, once to generated to be cash to the that going products. of inventory in start reversing is

we So see not utilization revenues, we QX, that already -- where QX, the expect will generation into in and to going intensified will also QX see we of higher and have just to inventory. have cash generation we're higher

to these work treat way, pick -- as debt, assumption We under make we currently, them something And we money. into the that to out account simply take can course, is of of sure And to these that debt have of will treat convertible are that that by the the all the are they're such, on them them we not the be one, amounts, we holders. use. money our positions that we is cash refunded taking just as

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

if pricing jumped been actions saying the you -- I the the I late, addressed apologize I environment? Ronen, already update call the know can is on Are this, you you're you've of in pricing you past, so new on seeing any U.S.? us pretty sort in situation but in taking what U.S. stable.

you And there? Europe, then what then have to Do I market follow-up. Europe any those in you're the more a you And pricing implemented dynamics price potentially see high out implement. in needed to you in single-digit the of already? mid- said to past, actions planning given Have being in terms

question. thanks Sure, for and Brian, the

implement we I reductions to have started quarter. them in actually, So would various price invite already forms to this X.

something price we've means our you that across this one implemented to batteries, at buy reductions first batteries is price across products. simply are today than lower to. a board and the that that The is this And done you the used and

to on we're sitting that that do regions, customers actually our way make a effective large some are is our of little trying reductions other customers help a to amount inventories. bit In they our what in of price more the [indiscernible]

do. is that's don't entering want And are by this the an market And inventory have we yours someone a lot to in bit are that, that of and sometimes or just inventory to those something loyal therefore channels position prices reducing customer damaged inferior of less or being you has this. of if a little course,

is to the distributor the make we the lower in of initiatives price example, are So, to channel allowing sell, what that system What means basically help in better the we gets reduced not we in just at at are we those price. order channels did our the is will to various that them to we pricing. of a price inverters. optimizers today, That the optimizers can them doing this in when is have And buy buying those that that see basically He -- price. temporarily to Europe have or entire optimizers. regions is trying match we by sure way, reductions those -- our we're lower for ratio our optimizers to he that compared have lower more get

to them get some also have. We help of of inventory that the rid they

we clearing. the are this, by And accelerating inventory

to -- way just use put very I And definitely do every yes, we separately. we because how lot say have it. doing a the mentioned this the the We it In that we it but stable. this. So U.S., do amount that We're see lot not the right reduction about of in use thought how is a flexible now relatively we're we to don't environment again, must before, in region properly. as of

surprised to And focus drivers ramp like and fixed there's more? bit gross of in big absorption Okay. lot a gross a margins cost, I'm That's on a back up. part helpful. revenue of the isn't then know drivers I that a ultimately I be or going here. guidance volume there's margin with little that margin improving lot the know are of I a been guess the gross pickup XQ,

isn't to there X guess you And ex the near you back volumes here. IRA, So to margin term? getting target? been still you've challenging of or better XX XX very the is get that more thought? uplift you actions here appropriate in that questions kind And taking of that's are maybe by is target maybe a on anything What surprised I gross if than is to

Sure.

be they still given margins we all end side towards of to no we said the will here gross So year. along, surprises the our see the that from expect where fact

X margin see it's right will the you quarter recover So rid don't consuming those low you again, the see little By we differences revenues, of batteries. relatively a you the compared that 'XX, zero-sum result margin target. that ago we maybe end quicker selling we that just The a that's in get U.S. completely change means products, that, the limited dilute main . And in is bit the way, batteries the in when we here. by is are of have now when thought. them, it's again, and the residential than a quicker game to because one, very our rate margins

part. easier the that's So

you The higher go the because and see the on bit year in expenses to the you second we summer, related during first third all, a of of part of little warranty bit see see easier more, replace replacement higher every roof to actually and units. summer. seasonal sometimes of units quarter regular failure actual a to we little see It's usually a a that rate of second on is effect spending

So here surprises the of again, same. really, sales target a long-term no combination the battery faster our and remains exactly -- with it's COGS, overall target

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

launching is a first be The European promotion guys to or you you have kilowatt, get when may the buy free. in launched an may pricing. buy one follow-up Which is optimizer recently suggest on our new checks Ronen, resi a you segment. a

promotion. civic the on comment could that you if around wondering So

Europe. across it's is sense Our

it's to is September May X X. sense -- Our last will it from

get might you curious coupon And slow segment. can distributors dynamics talk a standpoint, an there the channel because might then at resi still clearing the standpoint from European optimizers a of more And to year so a buy have about it or least more be This from to will product. there. then things down seems left like inventory inventory just the for if

it you little if given when think And channel European slower so dynamic, now. a and can be bit clear that might you agree do the that

everyone What my you exactly that the very had A the Phil, inverters saw of provide of then see to that problem optimizers here of exactly 'XX, ratio the so of we're the that mentioned, in slowdown came the result basically Europe. So fact is and initiative to in to beginning higher at we taking. last channels inverters, we that in. first is of within ordered is one market the the our we all, answer many tools

to given to reduce is of board that identified not. And had whether a And this prices A optimizers. price them. what across of all is decrease, buy need benefit not our they they that what optimizers. means will decided we of the be for really quite the have lot necessity a we they the would will lot have distributors just from it that This fact like of or that products,

around cheaper bit they by an -- giving initiative this that exactly that basically buy under basically quicker. initiative optimizers if -- our full like this distributors sell X kilowatt will them I little was inverter means that to don't So means one can they a a to need the and know, have they need, instead they allowing buy have every it optimizers X, let's system help that where because of now they because with but on

simply helping of So little faster. these the clear to inventory bit initiatives a kind are

this that distributors. the maybe between As and time lot tell much sometimes products very in much some have many many distributors, of of I actually, with given to have inverters didn't too that the 'XX, also the example, clear, you those different various between can it's just time very ordered of of distributors. is a And -- we various them. that commercial fact enough for difference

of board, distributors And a have In And shelves. a didn't that do lower lack not year. finished. will products runoff sorry, see levels continue, of of we those from one be year we much, across -- bit what reflect we And day we so gradual that the X of the that products see one much other little inventory the as just see, average, the order all some inverters. will believe will

on in Europe. But inventory expect, in shelves in gradual in increase total gradual we of most gradual worth the do clearing again, year increase see shipment will inventories. the of continue revenues, to the to cases, see in of we So and a not

on the us question the to a QX? expect you talk over guide. what inverters to ratio Shifting housekeeping QX of Can be to about and optimizers here in you

it fact do quarter, do numbers. that, quarter even to shipment higher of big upcoming those simply quarters. -- to the the this inverters a or making we So expect Every in say this In ratio give is of haven't general, is difference. a because not yet optimizers we difference see in small again, we shifting and would I

than that would be it's we expect So very But again, I normal it one 'XX. environment. to a higher the volatile to say

surprised there 'XX. [indiscernible] to little than more a that diversion here. is bit directionally, not one So of be But I

We'll to next Mark move with Strouse JPMorgan.

we've the So of to watt bring kind your years, back your so. per down single cost history kind pandemic of digits kind just your outside high of ability or to thought of mid- looking about over in the

Looking should curious the the we you forward with that be that talk efficiency improvements, step kind expect can more of function talk new about declines kind cost about? to out, in of of kind products just to versus you have learning generally the change if can but -- coming line a you

the you for And thanks yourself. gave answer Mark, think Yes, I the question.

typically, a in a reduce in the rate life of market. at product, -- costs the prices able that are the of we So generation roughly product, over to the decline or average

reduce cost inverters. cost electronics, kind the our larger a of to inverter side, able level per take of of when but advantages when XX% year. on architecture on new with especially of because the module kind is able And watt watt we move moving generations So capacity -- the we're to the to reductions And per the on one is per larger we're step the to that fixed, a cost generations. then we're higher

systems, enables when And a that cost larger to market the goes reduction.

size a per compared that generation, rate, to of So in reduction the you our in in if enough, watt for shift that the Mark. at you was level, about generally if to XX% a high the X-phase look that range function installation compared speaking, to the an inverter at discussing, I next-generation cost in of of step XX%. will, annual very If that's inverter clear generation current will enable XX%

to just very a that. then And Yes. helpful. Ronen. Yes, that's Look seeing forward quick follow-up,

are said a in inventory Any I'm to quantify crystal in the curious, X low think couple the XXXX single-face have to that you year? now. great. what or have back batteries, now, like? be you You the would I with looks mean clearing times that going able of color later you ball you margins Just just do there

look last Thanks, all, way you that we at balls is not on Mark. not easy quarters, at the And few Samsung based performance in basically that the gigawatt that looking way, is the in the here. But acquired this crystal around -- of product are by X a industry here. from is it we general, first in are

around Actually, the be we you always ending, end history this basically it the to of if remember expected in to year.

with We believe will all, that into -- and we'll products. it slower XXXX in -- replacement inventory we this industry course, the the believe this little see market Now we be our will that a is of bit enter be. all to that year new that than that some used with

much do One here of combination the expect the market continue needed to is, talk will question about that ready next product. Now we make call. no will to product But continuing make is in order basically with be we things. we a X to how product be going the product in see have adopts And to and the second as we're again, will Zvi it to when gap. be the sure as this that sure

these right now, better that much than the enjoying we're X-phase say a the It's that in bit also not faster just selling others. given margins that Europe are I them it's is relatively would one fact right now, the situation that the batteries The are for batteries thing sales low fact in little the the Europe.

of look next batteries batteries right very we portion we residential the year, gross not of high. is of what also the and end course, at the this, within this just quickly portion into of sell, factor, are to when this So, overall important margins we're is, now, year it's these how clearing but related improvement it's which batteries of an beginning

be 'XX, of done So with we all will believe middle inventory. this all, in that

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

is you margin product like that you redesigns and level? the going evolution, the about sense to are can important out? of that back With normalized could how talking feel a guys much us cost to give How you a trajectory take you

Yes. Thanks for the question.

year, the because projections this at that first, be the When think the volumes. we discussing of will was of me, financials. the not volumes that and Ronan -- new product correct I the . at we're dependent looking the the will dramatically products on the will before rest Ronen new were the not impacting be margin releasing

from -- varies was I from X it As different alluding products. before,

battery a strongly a sales. the take dominated is cost battery, that by You very

potential is components and cost on next power you reduction electronics, current reduction potential the [indiscernible] you're the can when generation, step So end your prices, about the function cost efficiencies, dependent generation of from to and significant. the cell you're you move When talking new inverter, at in but on mechanics the for efficient is a for limited. the day, of more

So when looking of that a as account that so I was X-phase targeting inverter, inverter into referring the before to residential installation, large segment range for we installation at solution the side will about new that we're with of probably XX% per the the with able generation serving a application watt that to current in the cost compared is serve inverters. be to lower of inverter, taking

range think be target necessarily is to is that's size how we do we per reduction be driver of cost in That XX%. to watt application move, reducing not and And a the the the cost be will for and market. say, and electronics in every generational and that for we achieved of the design, point, size the XX% the main cost for like of I that the the can going power optimize we that targets, the

the level, monetize and and the residential your to of ability investments That's the that of talk that little you ability the it your commercial really some commercial some but bit how that Can have -- a those of the get level? both is particularly emergence with evolution evolution of level you embedded what in helpful, are on customers, guys. quickly cadence plants, to offerings And your the with and of guys importantly the at made. virtual about more power

long application the my are monetize one I a the we have the -- subscription is the some a under VPP. is remember separate we or So today in is batteries of program as I commercial. brand between power than in And of it of able not services more huge. to residential or VPP, top that as today off prevalent of active. would is grid residential the head, VPP that systems form in virtual is It don't number

margin to growing. not when would happens, it have because VPP able we we huge. But it. generate And better is of The from XXX% growth of much probably is is been report flow revenue Otherwise, rate not margin cash. a can

than capabilities software are residential part, is most story. much, generating are broader plant. in for power enable not The of different any type the Commercial a What we offering a much revenue. virtual other is there

value, and software be to ratio a relatively It energy high be range ratio or And management, et that a provides more efficiency, and a of expect high cetera. it's load there, -- wide to we'll a we and capabilities recurring of out from able rolling higher revenue -- it will process. services it It's something generation, and of but will be grow gradually. gradually, have

in be but long a that source don't months, will run the our is revenue. see the high-margin XX on big impact again, it next in something a So having numbers it of I

Canaccord. move Moeller to with We'll next Austin

first panels? question or to tariffs U.S.-made batteries to here, the could potential changes benefit my and for any coming similar inverters recent see legislation you bifacial that do change Just

if help the IRA, Beyond can the you question? clarify

The rules. with recent change was tariff

not aware we're anything. of Yes,

that. We're operate of aware bifacial electronics we to increased a to nature an module the because I is good power -- a more from module from panel level is level a think side that than by related harvest anything electronics of of use not added the bifacial similar in. but that's completely that space significant a thing a panels said, of regulation. cooking adoption in for regular providers incremental panel, note power the that

U.S. given trends for like arrangements you leasing have rooftop around remain high, to interest what rates Okay. And California the just markets started solar?

of third-party third-party ourselves or as because of the the that of new So the switch, but creates lease well for increase lease -- versus of providers of in I a as the think white evident for loan see and is tendency benefits expectation black IRA for general ownership. not that trend entrance the dynamic it's a complete Again, the market. because in and we

the markets Puerto evident So more battery it that in definitely evident is Rico. is and like and California

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

joined is but like million becoming on thoughts the apologies million late, you roughly as under cell And this I or your trajectory if business. believe, annualized I share more It forward wondering little was just you was $XX could manufacturing $XX a QX, lost looks the just competitive. bit of if Non-solar covered, I in

so income think it on Solar breakeven the how And focusing or down to the towards about business? core just just wondering shutting path or I'm you either getting and selling operating business the

Kasope. for the Sure, Thanks question.

of point by And the which of that revenues. growth loaded go active, and usually, dynamics, question market, but back I'll in QX general, general, storage been a especially and little view, dynamic storage in market of a So maybe usually, you this itself. bit heart our then the From the the division of is into in the is start low see that, Of see to we much do the with in of -- relatively and means QX. And expect activity revenues very strong year these very segments.

directionally, the the of should the move least storage down in lot at division in therefore, the more first forward year, to not as a So losses the half we but towards related half, half. second go second

Now directionally segment the itself. about

segment to areas I there are look we of at. X need that the that think

there, and applications development to great control helpful not see the see technology are see that the advantage is these continue knowledge, kind if The collected us. is And capabilities, -- we of one or multiple where weather is to even not. you storage solar in batteries of the storage for something a without selling making we're PV, is first very to that having will And we're we this having doing Solar. concentrated collected segment that that

just today just we PV sell way, as residential an sometimes the for backup. By a anecdote, batteries without

we having general, every It's is great like is see a of value product product, a takes a here, while. asset and that developing developmening it And segment in basically So that we invest. in. something an this kind

The actually have owning in X. second the that segment cell is the Sella manufacturing we part of

mentioned As -- Sella X, we sorry.

we We batteries these will our understand not that batteries. used and not generation therefore, residential that use cells are have As in of the be in dynamics compete we cannot to mentioned Chinese with before, those, our NMC market residential cells given will next cheap. so sales the LFP

profitable suitable are are niche much for new applications today what first large more much are, have we that NMC. of And these nicely Sella in they're very very there applications than areas. However, X. And all, to actually enough

are Again, products. developing here, general right in So we the

towards into we these frequency segment. the I will over profitability to spinning moving selling control are from regulations are products We And niches related overall, and believe, control. time, and more see, that and this more coming

able of It's how quickly matter just we're to develop quickly utilize a and the Sella of we X how course, product.

developing So the technology. to business, right time to like in continue this and everything we we our have do value now, see course, having to segment, that it see time, value And we do will in we of evaluate from we of this.

Ronen. helpful. I Very And quick a then that, just follow-up. appreciate

that increasing operating income drivers be for as mentioned given the point should the you still? the $XXX balance cash through cash low think walk I of million just of of for negative us you year, Can year. some the rest the to that

course. Of

painfully of into by of selling to and think hard that want the the manufacturing volumes, be. manufacture manufacturing that adjust that of train the to we I stop quarter the that where other what can us 'XX, large fourth will while . And it -- because the took we to takes in basically we are U.S., while for while the it and a that inventory. of -- this a first happens main and to as it's and we manufacture you levels the manufacturing adjust much as than over 'XX grow to the fact -- today least fourth it layers first level to to takes way, reason you U.S. a when you of to them in capabilities is see, at the the break as the it quarter means where manufacturing quarter

is But already this that ended. something

into QX the manufactured component we continued more by for pay is something will, in happens the meantime. manufacturing means what That itself. slightly And that into to sold. continue than way, our and that either need or the QX, this vendors we we to for So

comes on First we are collection. collecting of a and good when customer very all, to did it we balances, quarter our

continue We this will in to QX. do

is And going And be that doing than United will the still turn in In we flow that have in are now start most inventories related outside manufacturing way coming in cash the generation, see the some we're from be QX, to cash the payments of that cash be that relatively both to revenues this much and flow positive. already see the the will States to for. already of from thing expect or generation to new QX, sales paid to QX on else. lower QX, by in will on but operating, CapEx QX, anything QX. be we will the we also And strong less a spending we

Instructions] [Operator to Truist. with next move We'll Levy Jordan

on [indiscernible] here. Jordan for It's

kind just you -- of over inventory dig Just can little reduction around to to the pieces a bit the few start, expect quarters? the see into can you the of deeper some next

hear will it just you didn't -- I sorry? Can well,

you me? hear Yes. Can

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clearing sales now, Europe over the we much States general, how also last there. all, we're were the it sales in X of actually compared inventory first rates again, but in the of higher inventory and into of quarters, quarters, it's United channel few to It's into -- time. to last think the the the also over Because the anticipating, because I our how ratio of relates see using. So of right the inventory

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And the of to finishing the is that we end going the this the will quickly take. that year. it the the of pace X/X I year approximately will about the of started is of we of of the course, inventory, the towards this pace cleared dependent at had from year finished can the how it good year market to take would be When year, recovers. because of assume to kind inventory end in be you end clearing be with X/X comes goods, finished is order get QX there itself that towards the on linearly and of the this we what like assumption But here,

Puerto for has perspective this U.S. Were follow-up quick the in steady regions battery the you from which Outside demand a of just a out relatively other Rico, me. California then there all And that demand on quarter? you mentioned, sales Awesome. any Or all state country? and rest set been main to of

that than of Texas has an think state a but as extent in and level you mentioned. rate also there at increase Yes, Other -- X wasn't also probably. that Arizona of Hawaii I is attach different But as definitely there high story. a Hawaii, is in an states to some some can't the battery take-up

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

can wondering highlight where for sell-through guidance faster XX% the I said quarter, up like you relative to gave that some of middle some in rate believe some wanted the up second -- I underperforming are markets are growing markets than follow on if was to you're seeing strength. markets XX% you that the you that I and I rate. in sort just of quarter. the imagine we're to

of and where seeing strength price where seeing implemented? not If reductions the promotions, that you're impact you're of you that the markets you've identify can level markets some

between it's data. as multidimensional online between split Yes. on really by is segments. for talking distributors question. about the sell-through added to first, we're geographies No between the not Thanks our that well as very because

have us. we're into front in that much fact of So it quarter, the mean the information doesn't that we

are seen. specific slow. The data are can It there a just faster rates is I begin say I Germany that right gets that because accumulated Italy, that expectation some probably ago, and countries are was bit up later. just pick a those bit being to as Europe I've that mentioned before, in a will legislation from growth this Switzerland, now. through it week

say and and and the is also cases, and in a commercial rate how a is Italy in out Switzerland stand bit showing of this we probably that installation sell-through. -- some would growth data faster I track and combination

I of that little mentioned I a more we're can we information there's evident countries other -- bit referred it's more on give don't although think the So this definitive than the I to. is X -- into that lot quarter, probably what a topic month than that is are

residential there is more $XXX Great. talk an you on market and a more going million you We related innovation through C&I line market side? the note, Is in forward. to side don't particularly which about going Could forward, gaining the share only R&D appreciate? on annual be software features SolarEdge in are Europe? basis. on in strategy item, innovations how software, more ONE on side that both And that fully we also see Or mentioned on that on hardware and share gaining and U.S. plan are differentiated upcoming you side

the bread R&D is has or for years in differentiator our expertise our been hardware and Electronics for butter significant our of a the expertise for question. company. Thanks and team Power And the No.

remarks the next-generation example is So a growing core for segment. I inverter priority European large targeting in it's the mentioned, gave that the for definitely my And X-phase market I a as of prepared us.

with of on And traditional -- the in mind to cost there, between and basis the factors the route inverter. around the interaction are all of the we and of capabilities hardware in battery the definitely differentiation efficiency the plan and

refer completely hardware that from are So the and things coming the we where on our in and introducing more unique that this is basis to didn't a lot infrastructure that optimizers safety again, around the of safety feature and conversation of I capability. constantly

or and you where focused to how bigger the today is that to for opportunity of which hardware self-consumption, be a used the on investment important to more another investments, and much years definitely, much are tariff different feed software creates, electricity that than it software takes just based again, when world and a differentiation, much to That R&D from we grid is complex today, world X you which into it more it is and ratio customers refer mattered portion X said, you was oriented, to because the ago on. deliver the a

in it on So very were heavily a approach doing between But did taking than in the the more today we the in because hardware are means invested side. we definitely we're we perspective, past historical balanced X. software that always

next our with take Cho question We'll from Barclays. Christine

margins, similar you it question. the revert phase discount of batteries margin with higher just percentage a for a that one customers for had you with respect to the had But to reason I mentioned expected had quarter. quarter, single were you also that gross Last to gross drag -- batteries back. mentioned on this were

about mix anything customer mention this didn't You quarter.

if back? -- quarter. it was in it curious just with I'm So sorry, you pretty what see revert or Or you last saw did consistent XQ

of you shipped actually for this and remarks, your It's mentioned are actually enjoy my the planned. discounts, this above prepared that we we offsetting did that thank see that Christine, was actually Actually, benefit that question. the in customers what offsetting we ratio lower I saw of was volume batteries additional we

yes, was case. the this So definitely,

think surprise here simply actually was anticipated this at commercially. not thing, selling of more a I good a the actually which was did not Surprise mix The batteries, least one. anticipate. bit we change little was that in We

improvement Or no, in back XQ? expect it's on mix? to customer Do you continued normal the

that I it's only customer would The I something of needs it he a those that it's us because simply in will the a game very and say small would everyone relatively little with is, give numbers. may a say again, large order thing normal. come a bit surprising number that change will surprising

the we more now that right But compared the expect to ratio in what general, saw before. is normal see do we we that

would does like closing are further for remarks. Zvi to it there questions turn time. now this appear no I And at back it to any

and operator, today. you. a on good you, Have our you, everyone, evening. joining Thank for call thank Thank us

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

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