SEDG SolarEdge Technologies Inc

SolarEdge Technologies, Inc. (Nasdaq: SEDG), a global leader in smart energy technology, today announced its financial results for the fourth quarter and year ended December 31, 2018.

Fourth Quarter 2018 Highlights

• Total revenues of $263.7 million
• GAAP gross margin of 30.2%
• GAAP net diluted EPS of $0.27
• Non-GAAP net diluted EPS of $0.63
• 1.1 Gigawatts (AC) of inverters shipped
• Revenues from solar products of $243.4 million
• Non-GAAP gross margin from sale of solar products of 32.8%

Full Year 2018 Highlights

• Total revenues of $937.2 million
• GAAP gross margin of 34.1%
• GAAP net diluted EPS of $2.69
• Non-GAAP net diluted EPS of $3.17
• 3.9 Gigawatts (AC) of inverters shipped
• Revenues from solar products of $914.3 million
• Non-GAAP gross margin from sale of solar products of 35.4%

“We are happy to report another record revenue quarter and a very strong year in which we continued to take market share,” said Guy Sella, Founder, Chairman and CEO of SolarEdge. “In addition to the growth and strong profitability of our solar business, this quarter we continued to lay the foundations for our non-solar future growth with the acquisition of Kokam, a leading provider of lithium-ion batteries and the post quarter acquisition of a majority holding of S.M.R.E, a provider of innovative integrated powertrain technology and electronics for the e-mobility market. I am confident that these acquisitions, which will initially dilute our margins and EPS, will over time and with our investment, innovation and operational excellence, become a meaningful part of the SolarEdge success.”

Fourth Quarter 2018 Summary

The Company reported record revenues of $263.7 million, up 11% from $236.6 million in the prior quarter and up 39% from $189.3 million year over year.

GAAP gross margin was 30.2%, down from 33.0% in the prior quarter and down from 37.5% year over year.

Non-GAAP gross margin was 30.9%, down from 33.6% in the prior quarter and down from 37.9% year over year.

GAAP operating expenses were $55.3 million, up 26% from $43.9 million in the prior quarter and up 52% from $36.4 million year over year.

Non-GAAP operating expenses were $45.1 million, up 22% from $37.0 million in the prior quarter and up 42% from $31.7 million year over year.

GAAP operating income was $24.4 million, down 28% from $34.0 million in the prior quarter and down 29% from $34.6 million year over year.

Non-GAAP operating income was $36.4 million, down 14% from $42.5 million in the prior quarter and down 9% from $40.0 million year over year.

GAAP net income was $12.9 million, down 72% from $45.6 million in the prior quarter and down 34% from $19.5 million year over year.

Non-GAAP net income was $31.5 million, down 26% from $42.7 million in the prior quarter and down 24% from $41.2 million year over year.

GAAP net diluted earnings per share (“EPS”) was $0.27, down from $0.95 in the prior quarter and down from $0.42 year over year.

Non-GAAP net diluted EPS was $0.63, down from $0.86 in the prior quarter and down from $0.85 year over year.

Cash flow from operating activities was $46.9 million, up from $34.3 million in the prior quarter and up from $45.8 million year over year.

As of December 31, 2018, cash, cash equivalents, restricted cash, bank deposit and marketable securities totaled $392.2 million, compared to $453.2 million on September 30, 2018 following a payment of $101.2 million for the acquisition of Kokam shares.

Full Year 2018 Summary

Total revenues of $937.2 million, up 54% from the prior year.

GAAP gross margin was 34.1%, down from 35.4% in the prior year.

GAAP operating income was $139.9 million, up 54% from $91.1 million in the prior year.

GAAP net income was $128.8 million, up 53% from $84.2 million in the prior year.

Non-GAAP net income was $157.3 million, up 37% from $115.0 million in the prior year.

GAAP net diluted earnings per share (“EPS”) was $2.69, up from $1.85 in the prior year.

Non-GAAP net diluted EPS was $3.17, up from $2.43 in the prior year.

Cash flow from operating activities of $189.1 million, up from $136.7 million in the prior year.

Outlook for the First Quarter 2019

The Company also provides guidance for the first quarter ending March 31, 2019 as follows:

• Revenues to be within the range of $260 million to $270 million
• Gross margins expected to be within the range of 30% to 32%
• Revenues from solar products to be within the range of $245 million to $255 million
• Gross margins from sale of solar products expected to be within the range of 32% to 34%

Conference Call

The Company will host a conference call to discuss these results at 4:30 P.M. ET on Wednesday, February 20, 2019. The call will be available, live, to interested parties by dialing 800-682-0995. For international callers, please dial +1 334-323-0505. The Conference ID number is 3109753. 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, 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, 2017, filed on February 20, 2018, Current Reports on Form 8-K and other reports filed with the SEC. All information set forth in this release is as of February 20, 2019. 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 OPERATIONS(In thousands, except per share data)

  Three months ended

December 31,

Year ended December 31, 2018   2017 2018   2017 Unaudited     Revenues $ 263,670 $ 189,340 $ 937,237 $ 607,045 Cost of revenues   183,959     118,370     618,001   392,279     Gross profit   79,711     70,970     319,236   214,766     Operating expenses:   Research and development, net 24,710 16,420 82,245 54,966 Sales and marketing 19,210 14,079 68,307 50,032 General and administrative   11,402     5,900     28,829   18,682    

Total operating expenses

  55,322     36,399     179,381   123,680     Operating income   24,389     34,571     139,855   91,086     Other expenses 435 435 Financial expenses (income), net   (288 )   (1,487 )   2,297   (9,158 )   Income before taxes on income 24,242 36,058 137,123 100,244   Taxes on income (tax benefit)   12,093     16,556     9,077   16,072     Net income $ 12,149   $ 19,502   $ 128,046 $ 84,172   Net loss attributable to non-controlling interests   787     -     787   -  

Net income attributable to SolarEdge Technologies Inc.

$ 12,936   $ 19,502   $ 128,833 $ 84,172      

SOLAREDGE TECHNOLOGIES INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)

  December 31, 2018   2017 CURRENT ASSETS: Cash and cash equivalents $ 191,633 $ 163,163 Short-term bank deposits 6,001 - Restricted cash 1,628 1,516 Marketable securities 118,680 77,264 Trade receivables, net 173,579 109,528 Prepaid expenses and other current assets 45,073 42,223 Inventories   141,519     82,992  

Total current assets

  678,113     476,686     LONG-TERM ASSETS: Marketable securities 74,256 103,120

Property, plant and equipment, net

119,329 51,182 Deferred tax assets, net 14,698 8,340 Intangible assets, net 38,504 1,115 Goodwill 34,874 - Other non-current assets   4,698     862  

Total long term assets

  286,359     164,619  

 

Total assets

$ 964,472   $ 641,305     CURRENT LIABILITIES: Trade payables, net $ 107,079 $ 69,488 Employees and payroll accruals 29,053 22,544 Current maturities of bank loans 16,639 - Warranty obligations 28,868 14,785 Deferred revenues 14,351 2,559 Accrued expenses and other current liabilities   29,728     20,378  

Total current liabilities

  225,718     129,754     LONG-TERM LIABILITIES: Bank loans 3,510 - Warranty obligations 92,958 64,026 Deferred revenues 60,670 31,453 Deferred tax liabilities, net 1,499 - Other non-current liabilities   9,391     18,605  

Total long-term liabilities

  168,028     114,084     STOCKHOLDERS’ EQUITY: Share capital 5 4 Additional paid-in capital 371,794 331,902 Accumulated other comprehensive loss (524 ) (611 ) Retained earnings (accumulated deficit)   191,133     66,172  

Total SolarEdge Technologies Inc. stockholders’ equity

  562,408     397,467   Non-controlling interests   8,318     -  

Total stockholders’ equity

  570,726     397,467    

Total liabilities and stockholders’ equity

$ 964,472   $ 641,305      

SOLAREDGE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

  Year ended December 31, 2018   2017  

Cash flows provided by operating activities:

Net income $ 128,046 $ 84,172 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant and equipment 12,441 7,011 Amortization of intangible assets 1,193 144 Amortization of premium and accretion of discount on available-for-sale marketable securities 1,241 2,061 Stock-based compensation 30,618 17,564 Capital loss from disposal of property 445 - Realized loss from sale of available-for-sale marketable securities 137 - Realized gain from cash flow hedge (31 ) (994 ) Changes in assets and liabilities: Inventories (21,194 ) (15,690 ) Prepaid expenses and other assets (2,712 ) (20,943 ) Trade receivables, net (60,514 ) (38,139 ) Deferred tax assets and liabilities, net (7,092 ) (5,455 ) Trade payables, net 31,482 35,455 Employees and payroll accruals 4,583 9,394 Warranty obligations 41,877 20,436 Deferred revenues 37,041 14,106 Accrued expenses, non-current tax liabilities and other liabilities   (8,484 )   27,543     Net cash provided by operating activities   189,077     136,665    

Cash flows from investing activities:

Business combinations, net of cash acquired (94,735 ) - Purchase of property, plant and equipment (38,608 ) (21,382 ) Purchase of intangible assets - - Investment in short term bank deposits (6,001 ) - Investment in available-for-sale marketable securities (142,627 ) (143,675 ) Proceed from sales and maturities of available-for-sale marketable securities   129,345     80,269     Net cash used in investing activities $ (152,626 ) $ (84,788 )  

Cash flows from financing activities:

Repayment of bank loan (3,786 ) - Proceeds from issuance of shares under stock purchase plan and upon exercise of stock-based awards 10,021 7,240 Change in noncontrolling interests   (14,190 )   -     Net cash provided by financing activities   (7,955 )   7,240     Increase (decrease) in cash, cash equivalents and restricted cash 28,496 59,117 Cash, cash equivalents and restricted cash at the beginning of the period 164,679 105,580 Effect of exchange rate differences on cash, cash equivalents and restricted cash   86     (18 )   Cash, cash equivalents and restricted cash at the end of the period $ 193,261   $ 164,679      

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   12 months ended December 31, 2018   September 30, 2018   December 31, 2017 December 31, 2018   December 31, 2017 Gross profit (GAAP) 79,711 77,982 70,970 319,236 214,766 Stock-based compensation 1,323 1,127 703 4,342 2,251 Cost of product adjustment 398 208 ---- 606 ---- Intangible assets amortization ---- 193 ---- 193 ---- Gross profit (Non-GAAP) 81,432 79,510 71,673 324,377 217,017   Reconciliation of GAAP to Non-GAAP Gross Margin Three months ended 12 months ended December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017 Gross margin (GAAP) 30.2% 33.0% 37.5% 34.1% 35.4% Stock-based compensation 0.5% 0.4% 0.4% 0.4% 0.3% Cost of product adjustment 0.2% 0.1% 0.0% 0.1% 0.0% Intangible assets amortization 0.0% 0.1% 0.0% 0.0% 0.0% Gross margin (Non-GAAP) 30.9% 33.6% 37.9% 34.6% 35.7%   Reconciliation of GAAP to Non-GAAP Operating expenses Three months ended 12 months ended December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017 Operating expenses (GAAP) 55,322 43,945 36,399 179,381 123,680 Stock-based compensation R&D (3,230) (2,988) (1,795) (11,205) (5,703) Stock-based compensation S&M (2,564) (2,250) (1,714) (9,112) (5,387) Stock-based compensation G&A (1,574) (1,585) (1,170) (5,959) (4,224) Intangible assets amortization - R&D (652) (110) ---- (762) ---- Intangible assets amortization - S&M (101) (29) ---- (130) ---- Acquisition related expenses (2,140) ---- ---- (2,140) ---- Operating expenses (Non-GAAP) 45,061 36,983 31,720 150,073 108,366   Reconciliation of GAAP to Non-GAAP Operating income Three months ended 12 months ended December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017 Operating income (GAAP) 24,389 34,037 34,571 139,855 91,086 Cost of product adjustment 398 208 ---- 606 ---- Stock-based compensation 8,691 7,950 5,382 30,618 17,565 Intangible assets amortization 753 332 ---- 1,085 ---- Acquisition related expenses 2,140 ---- ---- 2,140 ---- Operating income (Non-GAAP) 36,371 42,527 39,953 174,304 108,651   Reconciliation of GAAP to Non-GAAP Financial expenses (income), net Three months ended 12 months ended December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017 Financial expenses (income), net (GAAP) (288) 689 (1,487) 2,297 (9,158) Non cash interest (769) (640) ---- (2,489) ---- Intangible assets amortization 528 ---- ---- 528 ---- Financial expenses (income), net (Non-GAAP) (529) 49 (1,487) 336 (9,158)   Reconciliation of GAAP to Non-GAAP Other expenses Three months ended 12 months ended December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017 Other expenses (GAAP) 435 ---- ---- 435 ---- Fixed assets disposal (435) ---- ---- (435) ---- Other expenses (income) (Non-GAAP) ---- ---- ---- ---- ----   Reconciliation of GAAP to Non-GAAP Tax on income (Tax benefit) Three months ended 12 months ended December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017 Tax on income (Tax benefit) (GAAP) 12,093 (12,295) 16,556 9,077 16,072 Deferred tax asset 2,304 1,771 2,392 7,093 5,456 Transition tax of foreign earnings (8,189) 10,305 (18,735) 1,296 (18,735) Tax on income (Tax benefit) (Non-GAAP) 6,208 (219) 213 17,466 2,793  

Reconciliation of GAAP to Non-GAAP Net income attributable to SolarEdge Technologies Inc.

Three months ended 12 months ended December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017

Net income attributable to SolarEdge Technologies Inc. (GAAP)

12,936 45,643 19,502 128,833 84,172 Cost of product adjustment 398 208 ---- 606 ---- Stock-based compensation 8,691 7,950 5,382 30,618 17,565 Intangible assets amortization 225 332 ---- 557 ---- Acquisition related expenses 2,140 ---- ---- 2,140 ---- Non cash interest 769 640 ---- 2,489 ---- Fixed Assets disposal 435 ---- ---- 435 ---- Deferred tax asset (2,304) (1,771) (2,392) (7,093) (5,456) Transition tax of foreign earnings 8,189 (10,305) 18,735 (1,296) 18,735

Net income attributable to SolarEdge Technologies Inc. (Non-GAAP)

31,479 42,697 41,227 157,289 115,016   Reconciliation of GAAP to Non-GAAP Net basic EPS Three months ended 12 months ended December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017 Net basic earnings per share (GAAP) 0.28 1.00 0.45 2.85 1.99 Cost of product adjustment 0.01 0.01 ---- 0.01 ---- Stock-based compensation 0.19 0.17 0.12 0.68 0.42 Intangible assets amortization 0.01 0.01 ---- 0.01 ---- Acquisition related expenses 0.04 ---- ---- 0.05 ---- Non cash interest 0.02 0.02 ---- 0.05 ---- Fixed Assets disposal 0.01 ---- ---- 0.01 ---- Deferred tax asset (0.05) (0.039) (0.05) (0.15) (0.13) Transition tax of foreign earnings 0.18 (0.226) 0.43 (0.03) 0.44 Net basic earnings per share (Non-GAAP) 0.69 0.94 0.95 3.48 2.72   Reconciliation of GAAP to Non-GAAP Net diluted EPS Three months ended 12 months ended December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017 Net diluted earnings per share (GAAP) 0.27 0.95 0.42 2.69 1.85 Cost of product adjustment 0.01 ---- ---- 0.01 ---- Stock-based compensation 0.16 0.13 0.10 0.53 0.30 Intangible assets amortization 0.01 0.01 ---- 0.01 ---- Acquisition related expenses 0.04 ---- ---- 0.04 ---- Non cash interest 0.01 0.01 ---- 0.05 ---- Fixed Assets disposal 0.01 ---- ---- 0.01 ---- Deferred tax asset (0.04) (0.03) (0.05) (0.14) (0.12) Transition tax of foreign earnings 0.16 (0.21) 0.38 (0.03) 0.40 Net diluted earnings per share (Non-GAAP) 0.63 0.86 0.85 3.17 2.43  

Reconciliation of GAAP to Non-GAAP No. of shares used in Net diluted EPS

Three months ended 12 months ended December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017 Number of shares used in computing net diluted earnings per share (GAAP) 47,637,478 48,281,240 46,876,328 47,980,002 45,425,307 Stock-based compensation 2,204,179 1,463,633 1,375,527 1,636,127 1,907,423 Number of shares used in computing net diluted earnings per share (Non-GAAP) 49,841,657 49,744,873 48,251,855 49,616,129 47,332,730

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Investor Contacts

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

Sapphire Investor Relations, LLCErica Mannion or Michael Funari+1 617-542-6180investors@solaredge.com