SolarEdge Announces Third Quarter 2020 Financial Results

Rhea-AI Summary

SolarEdge Technologies, Inc. (SEDG) reported its Q3 2020 financial results, showcasing revenues of $338.1 million, a 2% increase from the prior quarter but a 18% decline compared to last year. Solar product revenues totaled $312.5 million, up 1% sequentially but down 19% year-over-year. The company achieved a GAAP net income of $43.8 million and a diluted EPS of $0.83. For Q4 2020, SolarEdge projects revenues between $345 million and $365 million.

Positive

• GAAP net income increased 19% sequentially to $43.8 million.
• GAAP diluted EPS rose to $0.83, up from $0.70 in the last quarter.
• Projected Q4 revenues of $345 million to $365 million indicate strong recovery.

Negative

• Total revenues significantly declined 18% year-over-year.
• Cash flow from operating activities decreased to $28.4 million, down from $59.3 million in the previous quarter.

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

Third Quarter 2020 Highlights

• Revenues of $338.1 million
• Revenues from solar products of $312.5 million
• GAAP gross margin of 32.0%
• GAAP gross margin from sale of solar products of 34.1%
• Non-GAAP gross margin from sale of solar products of 34.8%
• GAAP net income of $43.8 million
• Non-GAAP net income of $65.9 million
• GAAP net diluted earnings per share (“EPS”) of $0.83
• Non-GAAP net diluted EPS of $1.21
• 1.45 Gigawatts (AC) of inverters shipped

“Our third quarter results reflect significant growth in Europe, despite the current economic slowdown caused by the global pandemic,” said Zivi Lando, CEO of SolarEdge. “Our solar business outside the U.S. reached an all-time high and the U.S. market is showing signs of return to pre-pandemic installation levels. In our non-solar business, our e-Mobility team is gearing up to deliver to our customer the first significant batch of full powertrain solutions for assembly in electric vehicles in the fourth quarter. In addition to continuing to generate significant cash from operations this quarter, we raised $618 million, net of expenses, in convertible debt providing additional support for our continued organic and non-organic growth.”

Third Quarter 2020 Summary

The Company reported revenues of $338.1 million, up 2% from $331.9 million in the prior quarter and down 18% from $410.6 million in the same quarter last year.

Revenues related to the solar business were $312.5 million, up 1% from $310.1 million in the prior quarter and down 19% from $387.8 million in the same quarter last year.

GAAP gross margin was 32.0%, up from 31.0% in the prior quarter and down from 33.9% year over year.

Non-GAAP gross margin was 33.5%, up from 32.4% in the prior quarter and down from 35.1% year over year.

GAAP gross margin for the solar business was 34.1%, up from 33.1% in the prior quarter and down from 35.0% year over year.

Non-GAAP gross margin for the solar business was 34.8%, up from 33.8% in the prior quarter and down from 35.4% year over year.

GAAP operating expenses were $77.7 million, up 6% from $73.0 million in the prior quarter and up 6% from $73.3 million in the same quarter last year.

Non-GAAP operating expenses were $63.2 million, up 3% from $61.1 million in the prior quarter and up 15% from $54.8 million in the same quarter last year.

GAAP operating income was $30.4 million, up 1% from $30.0 million in the prior quarter and down 54% from $66.0 million in the same quarter last year.

Non-GAAP operating income was $50.0 million, up 7% from $46.6 million in the prior quarter and down 44% from $89.2 million in the same quarter last year.

GAAP net income was $43.8 million, up 19% from $36.7 million in the prior quarter and up 5% from $41.6 million in the same quarter last year.

Non-GAAP net income was $65.9 million, up 26% from $52.1 million in the prior quarter and up 4% from $63.6 million in the same quarter last year.

GAAP net diluted EPS was $0.83, up from $0.70 in the prior quarter and up from $0.81 in the same quarter last year.

Non-GAAP net diluted EPS was $1.21, up from $0.97 in the prior quarter and same as in the same quarter last year.

Cash flow from operating activities was $28.4 million, down from $59.3 million in the prior quarter and down from $68.7 million in the same quarter last year.

As of September 30, 2020, cash, cash equivalents, bank deposits, restricted bank deposits and marketable securities totaled $553.8 million, net of debt, compared to $577.4 million on June 30, 2020.

Outlook for the Fourth Quarter 2020

The Company also provides guidance for the fourth quarter ending December 31, 2020 as follows:

• Revenues to be within the range of $345 million to $365 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 $320 million to $335 million
• Non-GAAP Gross margin from sale of solar products expected to be within the range of 34% to 36%

Conference Call

The Company will host a conference call to discuss these results at 4:30 P.M. ET on Monday, November 2, 2020. The call will be available, live, to interested parties by dialing 800-458-4121. For international callers, please dial +1 323-794-2093. The Conference ID number is 7783916. 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 website 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 November 2, 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 September 30,								Nine months ended September 30,
		2020				2019				2020				2019
Revenues		$	338,095			$	410,556			$	1,101,164			$	1,007,437
Cost of revenues			230,032				271,247				750,130				671,348
Gross profit			108,063				139,309				351,034				336,089
Operating expenses:
Research and development			40,817				30,747				115,610				86,451
Sales and marketing			21,924				22,026				67,113				64,325
General and administrative			14,928				12,214				45,077				37,590
Other operating expenses (income)			-				8,305				(4,900	)			8,305
Total operating expenses			77,669				73,292				222,900				196,671
Operating income			30,394				66,017				128,134				139,418
Financial expenses (income), net			(15,765	)			17,023				(10,725	)			22,401
Income before income taxes			46,159				48,994				138,859				117,017
Income taxes			2,408				7,270				16,192				24,405
Net income		$	43,751			$	41,724			$	122,667			$	92,612
Net loss (income) attributable to Non-controlling interests			-				(97	)			-				1,159
Net income attributable to SolarEdge Technologies, Inc.		$	43,751			$	41,627			$	122,667			$	93,771

SOLAREDGE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
		September 30,				December 31,
		2020				2019
CURRENT ASSETS:
Cash and cash equivalents		$	1,048,109			$	223,901
Short-term bank deposits			20,011				5,010
Restricted bank deposits			2,242				27,558
Marketable securities			110,585				91,845
Trade receivables, net of allowances of $6,690 and $2,473, respectively			183,141				298,383
Prepaid expenses and other current assets			83,866				115,268
Inventories, net			297,027				170,798
Total current assets			1,744,981				932,763
LONG-TERM ASSETS:
Marketable securities			21,003				119,176
Deferred tax assets, net			10,678				16,298
Other long-term assets			5,609				9,904
Property, plant and equipment, net			257,717				176,963
Operating lease right-of-use assets, net			36,965				35,858
Intangible assets, net			68,122				74,008
Goodwill			133,221				129,654
Total long-term assets			533,315				561,861
Total assets		$	2,278,296			$	1,494,624
CURRENT LIABILITIES:
Trade payables, net		$	122,106			$	157,148
Employees and payroll accruals			50,814				47,390
Current maturities of bank loans and accrued interest			15,642				15,673
Warranty obligations			65,080				65,112
Deferred revenues and customers advances			27,267				70,815
Accrued expenses and other current liabilities			101,628				80,576
Total current liabilities			382,537				436,714
LONG-TERM LIABILITIES:
Convertible senior notes, net			570,332				-
Warranty obligations			130,614				107,451
Deferred revenues			109,439				89,982
Deferred tax liabilities, net			5,195				4,461
Operating lease liabilities			29,442				30,213
Other long-term liabilities			18,700				14,133
Total long-term liabilities			863,722				246,240
STOCKHOLDERS’ EQUITY:
Common stock			5				5
Additional paid-in capital			574,326				475,792
Accumulated other comprehensive loss			(2,643	)			(1,809	)
Retained earnings			460,349				337,682
Total stockholders’ equity			1,032,037				811,670
Total liabilities and stockholders’ equity		$	2,278,296			$	1,494,624

SOLAREDGE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
		Nine months ended September 30,
		2020				2019
Cash flows provided by operating activities:
Net income		$	122,667			$	92,612
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment			16,376				12,532
Amortization of intangible assets			7,081				7,514
Amortization of debt discount and debt issuance costs			168				-
Amortization of premium and accretion of discount on available-for-sale marketable securities, net			602				-
Stock-based compensation expenses			42,993				38,685
Deferred income tax benefit, net			(5,263	)			(4,923	)
Other adjustments, net			224				657
Changes in assets and liabilities:
Inventories, net			(121,999	)			15,746
Prepaid expenses and other assets			37,871				(19,795	)
Trade receivables, net			118,044				(114,572	)
Operating lease right-of-use assets and liabilities, net and effect of exchange rate differences			(459	)			2,138
Trade payables, net			(35,499	)			21,301
Employees and payroll accruals			3,132				15,329
Warranty obligations			23,155				49,633
Deferred revenues and customers advances			(24,283	)			19,516
Other liabilities			10,619				39,561
Net cash provided by operating activities			195,429				175,934
Cash flows from investing activities:
Proceeds from sales and maturities of available-for-sale marketable securities			116,419				119,570
Purchase of property, plant and equipment			(90,553	)			(39,679	)
Investment in available-for-sale marketable securities			(36,781	)			(103,711	)
Withdrawal from (investment in) restricted bank deposits			25,538				(243	)
Business combination, net of cash acquired			-				(38,435	)
Withdrawal from (investment in) bank deposits			(14,667	)			4,101
Other investing activities			743				-
Net cash provided by (used in) in investing activities		$	699			$	(58,397	)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes, net		$	618,269			$	-
Repayment of bank loans			(15,194	)			(5,142	)
Proceeds from bank loans			15,185				232
Proceeds from issuance of shares under stock purchase plan and upon exercise of stock-based awards			19,205				4,940
Change in Non-controlling interests			-				(67,089	)
Other financing activities			(152	)			(1,248	)
Net cash provided by (used in) financing activities			637,313				(68,307	)
Increase in cash and cash equivalents			833,441				49,230
Cash and cash equivalents at the beginning of the period			223,901				187,764
Effect of exchange rate differences on cash and cash equivalents			(9,233	)			10,348
Cash and cash equivalents at the end of the period		$	1,048,109			$	247,342

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						Nine months ended
		September 30, 2020		June 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Gross profit (GAAP)		108,063		102,963		139,309		351,034		336,089
Stock-based compensation		2,730		2,359		1,691		7,362		4,696
Cost of product adjustment		----		----		107		313		1,108
Amortization and depreciation of acquired assets		2,429		2,325		2,898		7,110		7,282
Gross profit (Non-GAAP)		113,222		107,647		144,005		365,819		349,175
		Reconciliation of GAAP to Non-GAAP Gross Margin
		Three months ended						Nine months ended
		September 30, 2020		June 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Gross margin (GAAP)		32.0%		31.0%		33.9%		31.9%		33.4%
Stock-based compensation		0.8%		0.7%		0.4%		0.7%		0.5%
Cost of product adjustment		----		----		----		----		0.1%
Amortization and depreciation of acquired assets		0.7%		0.7%		0.8%		0.6%		0.7%
Gross margin (Non-GAAP)		33.5%		32.4%		35.1%		33.2%		34.7%
		Reconciliation of GAAP to Non-GAAP Operating expenses
		Three months ended						Nine months ended
		September 30, 2020		June 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Operating expenses (GAAP)		77,669		72,998		73,292		222,900		196,671
Stock-based compensation - R&D		(6,904)		(5,847)		(4,269)		(18,129)		(11,935)
Stock-based compensation - S&M		(4,066)		(3,445)		(2,779)		(10,703)		(7,905)
Stock-based compensation - G&A		(2,559)		(2,310)		(2,628)		(6,799)		(7,907)
Amortization and depreciation of acquired assets - R&D		(26)		(25)		(17)		(77)		(62)
Amortization and depreciation of acquired assets - S&M		(370)		(292)		(440)		(957)		(1,247)
Amortization and depreciation of acquired assets - G&A		(8)		(9)		(54)		(25)		(80)
Acquisition related expenses		----		----		----		----		(949)
Assets disposal		(558)		----		(14)		(558)		(566)
Other operating income (expenses)		----		----		(8,305)		4,900		(8,305)
Operating expenses (Non-GAAP)		63,178		61,070		54,786		190,552		157,715
		Reconciliation of GAAP to Non-GAAP Operating income
		Three months ended						Nine months ended
		September 30, 2020		June 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Operating income (GAAP)		30,394		29,965		66,017		128,134		139,418
Cost of product adjustment		----		----		107		313		1,108
Stock-based compensation		16,259		13,961		11,367		42,993		32,443
Amortization and depreciation of acquired assets		2,833		2,651		3,409		8,169		8,671
Acquisition related expenses		----		----		----		----		949
Assets disposal		558		----		14		558		566
Other operating (income) expenses		----		----		8,305		(4,900)		8,305
Operating income (Non-GAAP)		50,044		46,577		89,219		175,267		191,460
		Reconciliation of GAAP to Non-GAAP Financial expenses (income), net
		Three months ended						Nine months ended
		September 30, 2020		June 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Financial expenses (income), net (GAAP)		(15,765)		(11,565)		17,023		(10,725)		22,401
Notes due 2025		(168)		----		----		(168)		----
Non cash interest		(1,254)		(1,200)		(955)		(3,582)		(2,590)
Currency fluctuation related to lease standard		(243)		(892)		(800)		(102)		(2,325)
Amortization and depreciation of acquired assets		----		----		----		(982)		----
Financial expenses (income), net (Non-GAAP)		(17,430)		(13,657)		15,268		(15,559)		17,486
		Reconciliation of GAAP to Non-GAAP Tax on income
		Three months ended						Nine months ended
		September 30, 2020		June 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Tax on income (GAAP)		2,408		4,862		7,270		16,192		24,405
Deferred taxes		(816)		3,236		2,963		5,956		4,923
Tax on income (Non-GAAP)		1,592		8,098		10,233		22,148		29,328
		Reconciliation of GAAP to Non-GAAP Net income
		Three months ended						Nine months ended
		September 30, 2020		June 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Net income attributable to Solaredge Technologies Inc. (GAAP)		43,751		36,668		41,627		122,667		93,771
Cost of product adjustment		----		----		107		313		1,108
Stock-based compensation		16,259		13,961		11,367		42,993		32,443
Amortization and depreciation of acquired assets		2,833		2,651		3,409		9,151		8,671
Acquisition related expenses		----		----		----		----		949
Assets disposal		558		----		14		558		566
Other operating (income) expenses		----		----		8,305		(4,900)		8,305
Notes due 2025		168		----		----		168		----
Non cash interest		1,254		1,200		955		3,582		2,590
Currency fluctuation related to lease standard		243		892		800		102		2,325
Deferred taxes		816		(3,236)		(2,963)		(5,956)		(4,923)
Net income attributable to Solaredge Technologies Inc. (Non-GAAP)		65,882		52,136		63,621		168,678		145,805
		Reconciliation of GAAP to Non-GAAP Net basic EPS
		Three months ended						Nine months ended
		September 30, 2020		June 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Net basic earnings per share (GAAP)		0.87		0.74		0.86		2.46		1.97
Cost of product adjustment		----		----		0.01		0.01		0.02
Stock-based compensation		0.32		0.28		0.23		0.86		0.68
Amortization and depreciation of acquired assets		0.05		0.05		0.07		0.18		0.18
Acquisition related expenses		----		----		----		----		0.02
Assets disposal		0.01		----		----		0.01		0.01
Other operating ( income) expenses		----		----		0.17		(0.10)		0.17
Notes due 2025		----		----		----		----		----
Non cash interest		0.03		0.02		0.02		0.08		0.06
Currency fluctuation related to lease standard		----		0.02		0.02		----		0.05
Deferred taxes		0.02		(0.06)		(0.06)		(0.12)		(0.10)
Net basic earnings per share (Non-GAAP)		1.30		1.05		1.32		3.38		3.06
		Reconciliation of GAAP to Non-GAAP Net diluted EPS
		Three months ended						Nine months ended
		September 30, 2020		June 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Net diluted earnings per share (GAAP)		0.83		0.70		0.81		2.33		1.87
Cost of product adjustment		----		----		----		0.01		0.01
Stock-based compensation		0.28		0.24		0.19		0.74		0.54
Amortization and depreciation of acquired assets		0.05		0.05		0.07		0.17		0.18
Acquisition related expenses		----		----		----		----		0.02
Assets disposal		0.01		----		----		0.01		0.01
Other operating ( income) expenses		----		----		0.16		(0.09)		0.16
Notes due 2025		----		----		----		----		----
Non cash interest		0.02		0.02		0.02		0.07		0.05
Currency fluctuation related to lease standard		----		0.02		0.02		----		0.05
Deferred taxes		0.02		(0.06)		(0.06)		(0.11)		(0.10)
Net diluted earnings per share (Non-GAAP)		1.21		0.97		1.21		3.13		2.79
		Reconciliation of GAAP to Non-GAAP No. of shares used in Net diluted EPS
		Three months ended						Nine months ended
		September 30, 2020		June 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Number of shares used in computing net diluted earnings per share (GAAP)		53,144,188		52,536,437		51,081,594		52,623,675		49,935,638
Stock-based compensation		1,134,877		1,154,279		1,375,391		1,229,630		2,090,912
Number of shares used in computing net diluted earnings per share (Non-GAAP)		54,279,065		53,690,716		52,456,985		53,853,305		52,026,550