Business Wire | Aug 3, 2020 04:06PM EDT

SolarEdge Announces Second Quarter 2020 Financial Results

Aug. 03, 2020

FREMONT, Calif.--(BUSINESS WIRE)--Aug. 03, 2020--SolarEdge Technologies, Inc. (Nasdaq: SEDG), a global leader in smart energy technology, today announced its financial results for the second quarter ended June 30, 2020.

Second Quarter 2020 Highlights

* Revenues of $331.9 million * Revenues from solar products of $310.1 million * GAAP gross margin of 31.0% * GAAP gross margin from sale of solar products of 33.1% * Non-GAAP gross margin from sale of solar products of 33.8% * GAAP net income of $36.7 million * Non-GAAP net income of $52.1 million * GAAP net diluted earnings per share ("EPS") of $0.70 * Non-GAAP net diluted EPS of $0.97 * 1.44 Gigawatts (AC) of inverters shipped

"This quarter, despite the challenges caused by COVID 19, we maintained healthy profitability while generating cash from operating activity," said Zivi Lando, CEO of SolarEdge. "Our global strength, and in particular our loyal customer base in the Netherlands, Germany, Italy and Australia, softened the decline in U.S. demand this past quarter. While the pandemic has created many operational challenges, I am confident in our financial strength and grateful for the trust of our customers and dedication of our employees which enable us to continue to focus on product innovation and execution of our long term plans even in these challenging times."

Second Quarter 2020 Summary

The Company reported revenues of $331.9 million, down 23% from $431.2 million in the prior quarter and up 2% from $325.0 million in the same quarter last year.

Revenues related to the solar business were $310.1 million, down 24% from $407.6 million in the prior quarter and up 1% from $306.7 million in the same quarter last year.

GAAP gross margin was 31.0%, down from 32.5% in the prior quarter and down from 34.1% year over year.

Non-GAAP gross margin was 32.4%, down from 33.6% in the prior quarter and down from 35.7% year over year.

GAAP gross margin for the solar business was 33.1%, down from 34.6% in the prior quarter and down from 36.4% year over year.

Non-GAAP gross margin for the solar business was 33.8%, down from 35.0% in the prior quarter and down from 36.9% year over year.

GAAP operating expenses were $73.0 million, up 1% from $72.2 million in the prior quarter and up 12% from $65.3 million in the same quarter last year.

Non-GAAP operating expenses were $61.1 million, down 8% from $66.3 million in the prior quarter and up 11% from $54.9 million in the same quarter last year.

GAAP operating income was $30.0 million, down 56% from $67.8 million in the prior quarter and down 34% from $45.4 million in the same quarter last year.

Non-GAAP operating income was $46.6 million, down 41% from $78.6 million in the prior quarter and down 24% from $61.0 million in the same quarter last year.

GAAP net income was $36.7 million, down 13% from $42.2 million in the prior quarter and up 11% from $33.1 million in the same quarter last year.

Non-GAAP net income was $52.1 million, up 3% from $50.7 million in the prior quarter and up 6% from $49.3 million in the same quarter last year.

GAAP net diluted EPS was $0.70, down from $0.81 in the prior quarter and up from $0.66 in the same quarter last year.

Non-GAAP net diluted EPS was $0.97, up from $0.95 in the prior quarter and up from $0.94 in the same quarter last year.

Cash flow from operating activities was $59.3 million, down from $107.7 million in the prior quarter and up from $50.8 million in the same quarter last year.

As of June 30, 2020, cash, cash equivalents, bank deposits, restricted bank deposits and marketable securities totaled $592.7 million, compared to $467.5 million on December 31, 2019.

Outlook for the Third Quarter 2020

The Company also provides guidance for the third quarter ending September 30, 2020 as follows:

* Revenues to be within the range of $325 million to $350 million * Non-GAAP Gross margin expected to be within the range of 32% to 34% * Revenues from solar products to be within the range of $305 million to $325 million * Non-GAAP Gross margin from sale of solar products expected to be within the range of 33% to 35%

Conference Call

The Company will host a conference call to discuss these results at 4:30 P.M. ET on Monday, August 3, 2020. The call will be available, live, to interested parties by dialing 800-256-1007. For international callers, please dial +1 323-994-2093. The Conference ID number is 7031770. A live webcast will also be available in the Investors Relations section of the Company's website at: http://investors.solaredge.com

A replay of the webcast will be available in the Investor Relations section of the Company's web site approximately two hours after the conclusion of the call and will remain available for approximately 30 calendar days.

About SolarEdge

SolarEdge is a global leader in smart energy technology. By leveraging world-class engineering capabilities and with a relentless focus on innovation, SolarEdge creates smart energy solutions that power our lives and drive future progress. SolarEdge developed an intelligent inverter solution that changed the way power is harvested and managed in photovoltaic (PV) systems. The SolarEdge DC optimized inverter seeks to maximize power generation while lowering the cost of energy produced by the PV system. Continuing to advance smart energy, SolarEdge addresses a broad range of energy market segments through its PV, storage, EV charging, batteries, UPS, electric vehicle powertrains, and grid services solutions. SolarEdge is online at solaredge.com

Use of Non-GAAP Financial Measures

The Company has presented certain non-GAAP financial measures in this release, such as non-GAAP net income, non-GAAP net diluted EPS, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income and non-GAAP gross margin from sale of solar products. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States, or GAAP. Reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure can be found in the accompanying tables to this release. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same captions and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. As such, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

The Company uses these non-GAAP financial measures to analyze its operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. The Company believes that these non-GAAP financial measures reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This release contains forward looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include information, among other things, concerning: our possible or assumed future results of operations; future demands for solar energy solutions; business strategies; technology developments; financing and investment plans; dividend policy; competitive position; industry and regulatory environment; general economic conditions; potential growth opportunities; and the effects of competition. These forward-looking statements are often characterized by the use of words such as "anticipate," "believe," "could," "seek," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "will," "would" or similar expressions and the negative or plural of those terms and other like terminology.

Forward-looking statements are only predictions based on our current expectations and our projections about future events. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Given these factors, you should not place undue reliance on these forward-looking statements. These factors include, but are not limited to, the matters discussed in the section entitled "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2019, filed on February 27, 2020, Current Reports on Form 8-K and other reports filed with the SEC. All information set forth in this release is as of August 3, 2020. The Company undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in its expectations.

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands, except per share data)

Three months ended Six months ended June 30, June 30,

2020 2019 2020 2019



Revenues $ 331,851 $ 325,010 $ 763,069 $ 596,881

Cost of revenues 228,888 214,340 520,098 400,101



Gross profit 102,963 110,670 242,971 196,780



Operating expenses:



Research and development 38,098 29,505 74,793 55,704

Sales and marketing 20,936 22,127 45,189 42,299

General and administrative 13,964 13,685 30,149 25,376

Other operating income - - (4,900) -



Total operating expenses 72,998 65,317 145,231 123,379



Operating income 29,965 45,353 97,740 73,401



Financial income (expenses), 11,565 773 (5,040) (5,378)net



Income before income taxes 41,530 46,126 92,700 68,023



Income taxes 4,862 13,213 13,784 17,135



Net income $ 36,668 $ 32,913 $ 78,916 $ 50,888



Net loss attributable to - 215 - 1,256Non-controlling interests



Net income attributable to $ 36,668 $ 33,128 $ 78,916 $ 52,144SolarEdge Technologies, Inc.

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands)

June 30, December 31,

2020 2019

CURRENT ASSETS:

Cash and cash equivalents $ 428,372 $ 223,901

Short-term bank deposits 3,432 5,010

Restricted bank deposits 2,135 27,558

Marketable securities 113,032 91,845

Trade receivables, net of allowances of $6,273 and 181,700 298,383$2,473, respectively

Prepaid expenses and other current assets 79,867 115,268

Inventories, net 264,460 170,798

Total current assets 1,072,998 932,763



LONG-TERM ASSETS:

Marketable securities 45,684 119,176

Operating lease right-of-use assets, net 36,951 35,858

Property, plant and equipment, net 226,416 176,963

Deferred tax assets, net 19,121 16,298

Intangible assets, net 68,211 74,008

Goodwill 128,279 129,654

Other long-term assets 8,166 9,904

Total long-term assets 532,828 561,861



Total assets $ 1,605,826 $ 1,494,624



CURRENT LIABILITIES:

Trade payables, net $ 158,264 $ 157,148

Employees and payroll accruals 48,764 47,390

Current maturities of bank loans and accrued 15,256 15,673interest

Warranty obligations 68,674 65,112

Deferred revenues and customers advances 25,625 70,815

Accrued expenses and other current liabilities 88,482 80,576

Total current liabilities 405,065 436,714



LONG-TERM LIABILITIES:

Bank loans - 173

Warranty obligations 124,010 107,451

Deferred revenues 103,181 89,982

Operating lease liabilities 29,991 30,213

Deferred tax liabilities, net 1,112 4,461

Other long-term liabilities 17,666 13,960

Total long-term liabilities 275,960 246,240



STOCKHOLDERS' EQUITY:



Common stock 5 5

Additional paid-in capital 511,640 475,792

Accumulated other comprehensive loss (3,442) (1,809)

Retained earnings 416,598 337,682

Total stockholders' equity 924,801 811,670



Total liabilities and stockholders' equity $ 1,605,826 $ 1,494,624

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

Six months ended June 30,

2020 2019

Cash flows provided by operating activities:

Net income $ 78,916 $ 50,888

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of property, plant and equipment 10,646 8,147

Amortization of intangible assets 4,615 4,895

Amortization of premium and accretion of discount on 373 (12)available-for-sale marketable securities, net

Stock-based compensation expenses 26,734 21,076

Deferred income tax benefit, net (6,424) (1,960)

Other adjustments, net (1) 643

Changes in assets and liabilities:

Inventories, net (94,230) 1,723

Prepaid expenses and other assets 37,066 (2,574)

Trade receivables, net 116,045 (56,562)

Operating lease right-of-use assets and liabilities, (451) 1,466net and effect of exchange rate differences

Trade payables, net (1,823) 5,493

Employees and payroll accruals 1,457 5,151

Warranty obligations 20,198 28,860

Deferred revenues and customers advances (31,834) 11,764

Other liabilities 5,768 28,236

Net cash provided by operating activities 167,055 107,234



Cash flows from investing activities:

Proceeds from sales and maturities of 89,739 68,407available-for-sale marketable securities

Purchase of property, plant and equipment (53,706) (22,244)

Investment in available-for-sale marketable (36,815) (63,655)securities

Withdrawal from (investment in) restricted bank 25,634 (203)deposits

Business combination, net of cash acquired - (38,435)

Other investing activities 2,024 3,909

Net cash provided by (used in) in investing $ 26,876 $ (52,221)activities



Cash flows from financing activities:

Repayment of bank loans $ (15,119) $ (4,891)

Proceeds from bank loans 15,113 216

Proceeds from issuance of shares under stock purchase 9,114 3,764plan and upon exercise of stock-based awards

Change in Non-controlling interests - (66,474)

Other financing activities (112) -

Net cash provided by (used in) financing activities 8,996 (67,385)



Increase (decrease) in cash and cash equivalents 202,927 (12,372)

Cash and cash equivalents at the beginning of the 223,901 187,764period

Effect of exchange rate differences on cash and cash 1,544 1,183equivalents



Cash and cash equivalents at the end of the period $ 428,372 $ 176,575

SOLAREDGE TECHNOLOGIES INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

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

(Unaudited)

Reconciliation of GAAP to Non-GAAP Gross Profit Three months ended Six months ended June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019Gross profit 102,963 140,008 110,670 242,971 196,780(GAAP)Stock-based 2,359 2,273 1,651 4,632 3,005compensationCost of product --- 313 319 313 1,001adjustmentAmortizationand 2,325 2,356 3,307 4,681 4,384depreciation ofacquired assetsGross profit 107,647 144,950 115,947 252,597 205,170(Non-GAAP) Reconciliation of GAAP to Non-GAAP Gross Margin Three months ended Six months ended June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019Gross margin 31.0% 32.5% 34.1% 31.8% 33.0%(GAAP)Stock-based 0.7% 0.5% 0.5% 0.6% 0.5%compensationCost of product --- 0.1% 0.1% --- 0.2%adjustmentAmortizationand 0.7% 0.5% 1.0% 0.6% 0.7%depreciation ofacquired assetsGross margin 32.4% 33.6% 35.7% 33.1% 34.4%(Non-GAAP) Reconciliation of GAAP to Non-GAAP Operating expenses

Three months ended Six months ended

June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019

Operating 72,998 72,233 65,317 145,231 123,379expenses (GAAP)Stock-based (5,847) (5,378) (4,176) (11,225) (7,666)compensation -R&DStock-based (3,445) (3,192) (2,722) (6,637) (5,126)compensation -S&MStock-based (2,310) (1,930) (2,823) (4,240) (5,279)compensation -G&AAmortizationand (25) (26) (9) (51) (45)depreciation ofacquired assets- R&DAmortizationand (292) (295) 51 (588) (807)depreciation ofacquired assets- S&MAmortizationand (9) (8) (26) (17) (26)depreciation ofacquired assets- G&AAcquisition --- --- (151) --- (949)relatedexpensesAssets disposal --- --- (552) --- (552)

Other operating --- 4,900 --- 4,900 ---income(expenses)Operating 61,070 66,303 54,909 127,373 102,929expenses(Non-GAAP) Reconciliation of GAAP to Non-GAAP Operating income

Three months ended Six months ended

June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019

Operating 29,965 67,775 45,353 97,740 73,401income (GAAP)Cost of product --- 313 319 313 1,001adjustmentStock-based 13,961 12,773 11,372 26,734 21,076compensationAmortizationand 2,651 2,686 3,291 5,337 5,262depreciation ofacquired assetsAcquisition --- --- 151 --- 949relatedexpensesAssets disposal --- --- 552 --- 552

Other operating --- (4,900) --- (4,900) ---( income)expensesOperating 46,577 78,647 61,038 125,224 102,241income(Non-GAAP) Reconciliation of GAAP to Non-GAAP Financial expenses (income), net

Three months ended Six months ended

June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019

Financialexpenses (11,565) 16,605 (773) 5,040 5,378(income), net(GAAP)Non cash (1,200) (1,128) (850) (2,328) (1,635)interestCurrencyfluctuation (892) 1,033 (577) 141 (1,525)related tolease standardAmortizationand --- (982) --- (982) ---depreciation ofacquired assetsFinancialexpenses (13,657) 15,528 (2,200) 1,871 2,218(income), net(Non-GAAP) Reconciliation of GAAP to Non-GAAP Tax on income

Three months ended Six months ended

June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019

Tax on income 4,862 8,922 13,213 13,784 17,135(GAAP)Deferred tax 3,236 3,536 987 6,772 1,960realized(asset)Tax on income 8,098 12,458 14,200 20,556 19,095(Non-GAAP) Reconciliation of GAAP to Non-GAAP Net income

Three months ended Six months ended

June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019

Net incomeattributable to 36,668 42,248 33,128 78,916 52,144SolarEdgeTechnologiesInc. (GAAP)Cost of product --- 313 319 313 1,001adjustmentStock-based 13,961 12,773 11,372 26,734 21,076compensationAmortizationand 2,651 3,668 3,291 6,319 5,262depreciation ofacquired assetsAcquisition --- --- 151 --- 949relatedexpensesAssets disposal --- --- 552 --- 552

Other operating --- (4,900) --- (4,900) ---( income)expensesNon cash 1,200 1,128 850 2,328 1,635interestCurrencyfluctuation 892 (1,033) 577 (141) 1,525related tolease standardDeferred tax (3,236) (3,536) (987) (6,772) (1,960)realized(asset)Net incomeattributable to 52,136 50,661 49,253 102,797 82,184SolarEdgeTechnologiesInc. (Non-GAAP) Reconciliation of GAAP to Non-GAAP Net basic EPS

Three months ended Six months ended

June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019

Net basic 0.74 0.86 0.69 1.59 1.10earnings pershare (GAAP)Cost of product --- 0.01 0.01 0.01 0.02adjustmentStock-based 0.28 0.25 0.24 0.54 0.45compensationAmortizationand 0.05 0.08 0.07 0.13 0.11depreciation ofacquired assetsAcquisition --- --- --- --- 0.02relatedexpensesOther operating --- (0.10) --- (0.10) ---( income)expensesAssets disposal --- --- 0.01 --- 0.01

Non cash 0.02 0.02 0.02 0.05 0.03interestCurrencyfluctuation 0.02 (0.02) 0.01 --- 0.04related tolease standardDeferred tax (0.06) (0.07) (0.02) (0.14) (0.04)realized(asset)Net basicearnings per 1.05 1.03 1.03 2.08 1.74share(Non-GAAP) Reconciliation of GAAP to Non-GAAP Net diluted EPS

Three months ended Six months ended

June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019

Net diluted 0.70 0.81 0.66 1.51 1.05earnings pershare (GAAP)Cost of product --- 0.01 --- --- 0.02adjustmentStock-based 0.24 0.21 0.19 0.47 0.35compensationAmortizationand 0.05 0.07 0.07 0.11 0.11depreciation ofacquired assetsAcquisition --- --- --- --- 0.01relatedexpensesOther operating --- (0.09) --- (0.09) ---( income)expensesAssets disposal --- --- 0.01 --- 0.01

Non cash 0.02 0.02 0.02 0.05 0.04interestCurrencyfluctuation 0.02 (0.02) 0.01 --- 0.03related tolease standardDeferred tax (0.06) (0.06) (0.02) (0.13) (0.04)realized(asset)Net dilutedearnings per 0.97 0.95 0.94 1.92 1.58share(Non-GAAP) Reconciliation of GAAP to Non-GAAP No. of shares used in Net diluted EPS

Three months ended Six months ended

June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019

Number ofshares used incomputing net 52,536,437 52,172,720 49,940,034 52,357,838 49,358,280dilutedearnings pershare (GAAP)Stock-based 1,154,279 1,399,732 2,130,135 1,277,006 2,448,673compensationNumber ofshares used incomputing net 53,690,716 53,572,452 52,070,169 53,634,844 51,806,953dilutedearnings pershare(Non-GAAP)

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CONTACT: Investor Contacts SolarEdge Technologies, Inc. Ronen Faier, Chief Financial Officer +1 510-498-3263 investors@solaredge.com

CONTACT: Sapphire Investor Relations, LLC Erica Mannion or Michael Funari +1 617-542-6180 investors@solaredge.com