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SolarEdge Announces Third Quarter 2017 Financial Results

FREMONT, Calif.--(BUSINESS WIRE)--

SolarEdge Technologies, Inc. (SEDG), a global leader in PV inverters, power optimizers, and module-level monitoring services, today announced its financial results for the third quarter ended September 30, 2017.

Third Quarter 2017 Highlights

  • Revenues for the quarter of $166.6 million
  • GAAP gross margin for the quarter of 34.9%
  • GAAP operating income for the quarter of $25.4 million
  • GAAP net income for the quarter of $28.0 million
  • Non-GAAP net income for the quarter of $31.5 million
  • GAAP net diluted earnings per share for the quarter of $0.61
  • Non-GAAP net diluted earnings per share for the quarter of $0.66
  • Cash flow from operating activities of $33.6 million
  • 676 Megawatts (AC) of inverters shipped for the quarter

“We are happy to report another record quarter, in revenues, profitability and cash flow generation. On the operational side, we shipped more than two million optimizers this quarter, and have now shipped more than 20 million optimizers since initiating sales in 2010,” said Guy Sella, Founder, Chairman and CEO of SolarEdge. “Sales this quarter from outside the United States were 51% of our revenues, resulting from our continued investment in global sales. We continue to generate increasing cash flow from operations which enhances our financial strength and allows us to continue to invest in new products and development of new markets.”

Quarter Ended September 30, 2017 Summary

The Company reported record revenues of $166.6 million, up 22% from the prior quarter and up 30% year over year.

GAAP gross margin reached 34.9%, up from 34.6% in the prior quarter and up from 32.6% year over year.

GAAP operating expenses were $32.7 million, an increase of 17% from the prior quarter and 38% year over year.

GAAP operating income was $25.4 million, up 33% from $19.1 million in the prior quarter and up from $18.2 million year over year.

GAAP net income was $28.0 million, up 24% from $22.5 million in the prior quarter and up from $15.6 million year over year.

Non-GAAP net income was $31.5 million, up 22% from $25.8 million in the prior quarter and up from $20.9 million year over year.

GAAP net diluted earnings per shares (“EPS”) was $0.61, up from $0.50 in the prior quarter and up from $0.35 year over year.

Non-GAAP net diluted EPS was $0.66, up from $0.55 in the prior quarter and up from $0.46 year over year.

As of September 30, 2017, cash, cash equivalents, restricted cash and marketable securities totaled $304.7 million, compared to $274.7 million on June 30, 2017.

Outlook for the Quarter Ending December 31, 2017

The Company also provides guidance for the fourth quarter ending December 31, 2017 as follows:

  • Revenues to be within the range of $175 million to $185 million;
  • Gross margins 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. EST on Wednesday, November 8, 2017. The call will be available, live, to interested parties by dialing 888-298-3457. For international callers, please dial +1 719-325-2199. The Conference ID number is 6325065. 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 provides an intelligent inverter solution that has changed the way power is harvested and managed in solar photovoltaic systems. The SolarEdge DC optimized inverter system maximizes power generation at the individual PV module-level while lowering the cost of energy produced by the solar PV system. Supporting increased PV proliferation, the SolarEdge system consists of power optimizers, inverters, home energy management, storage solutions, and a cloud-based monitoring platform. SolarEdge’s solutions address a broad range of solar market segments, from residential solar installations to commercial and small utility-scale solar installations. SolarEdge is online at http://www.solaredge.us.

The Company has presented certain non-GAAP financial measures in this release. 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.

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 Registration Statement on Form S-1 (including the related prospectus), Annual Report on Form 10-KT for the year ended December 31, 2016, filed on February 21, 2017, Current Reports on Form 8-K and other reports filed with the SEC. All information set forth in this release is as of November 8, 2017. 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 Nine months ended
September 30, September 30,
2017

2016

2017 2016
Unaudited Unaudited
Revenues $ 166,552 $ 128,484 $ 417,705 $ 378,441
Cost of revenues 108,498 86,609 273,909 256,719
Gross profit 58,054 41,875 143,796 121,722
Operating expenses:
Research and development, net 14,363 9,935 38,546 27,876
Sales and marketing 13,217 10,036 35,953 27,792
General and administrative 5,078 3,664 12,782 10,191

Total operating expenses

32,658 23,635 87,281 65,859
Operating income 25,396 18,240 56,515 55,863
Financial income, net 2,666 390 7,671 1,892
Income before taxes on income 28,062 18,630 64,186 57,755
Taxes on income (tax benefit) 91 3,014 (484 ) 4,067
Net income $ 27,971 $ 15,616 $ 64,670 $ 53,688
SOLAREDGE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
2017 2016
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 149,448 $ 104,683
Restricted cash 1,400 897
Marketable Securities 81,488 74,465
Trade receivables, net 91,694 71,041
Prepaid expenses and other accounts receivable 38,201 21,347
Inventories 62,356 67,363

Total current assets

424,587 339,796
LONG-TERM ASSETS:
Marketable securities 72,351 44,262
Property, equipment and intangible assets, net 45,714 37,381
Prepaid expenses and lease deposits 732 489
Deferred tax assets, net 5,822 2,815

Total long term assets

124,619 84,947

Total assets

$ 549,206 $ 424,743
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables, net $ 42,700 $ 34,001
Employees and payroll accruals 17,640 13,018
Warranty obligations 12,942 13,616
Deferred revenues 2,743 1,202
Accrued expenses and other accounts payable 16,407 8,648

Total current liabilities

92,432 70,485
LONG-TERM LIABILITIES:
Warranty obligations 58,625 44,759
Deferred revenues 26,858 18,660
Lease incentive obligation 1,838 2,061

Total long-term liabilities

87,321 65,480
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS’ EQUITY:
Common stock 4 4
Additional paid-in capital 323,076 307,098
Accumulated other comprehensive loss (297 ) (324 )
Retained earnings (accumulated deficit) 46,670 (18,000 )

Total stockholders’ equity

369,453 288,778

Total liabilities and stockholders’ equity

$ 549,206 $ 424,743
SOLAREDGE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine months ended
September 30,
2017 2016
Unaudited

Cash flows provided by operating activities:

Net income $ 64,670 $ 53,688
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, equipment and intangible assets 4,932 3,468
Amortization of premiums on available-for-sale marketable securities 1,310 829
Stock-based compensation 12,183 8,132
Deferred tax assets, net (3,063 ) 2,327
Realized losses on Cash Flow Hedges - 2
Changes in assets and liabilities:
Inventories 5,005 19,216
Prepaid expenses and other accounts receivable (17,360 ) 8,214
Trade receivables, net (20,168 ) (38,105 )
Trade payables, net 8,667 (21,699 )
Employees and payroll accruals 4,509 (916 )
Warranty obligations 13,192 15,514
Deferred revenues 9,699 5,069
Accrued expenses and other accounts payable 7,537 2,192
Lease incentive obligation (223 ) (185 )
Net cash provided by operating activities 90,890 57,746

Cash flows used in investing activities:

Purchase of property and equipment (13,203 ) (13,869 )
Decrease (increase) in restricted cash (503 ) 2,471
Decrease (increase) in short and long-term lease deposits (60 ) 37
Investment in available-for-sale marketable securities (82,469 ) (85,579 )
Maturities of available-for-sale marketable securities 46,513 21,654
Net cash used in investing activities $ (49,722 ) $ (75,286 )

Cash flows from financing activities:

Issuance costs related to initial public offering $ - $ (194 )
Proceeds from issuance of shares upon exercise of options 3,795 1,774
Net cash provided by financing activities 3,795 1,580
Increase (decrease) in cash and cash equivalents 44,963 (15,960 )
Cash and cash equivalents at the beginning of the period 104,683 106,150
Effect of exchange rate differences on cash and cash equivalents (198 ) (176 )
Cash and cash equivalents at the end of the period $ 149,448 $ 90,014
SOLAREDGE TECHNOLOGIES INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except gross profit and per share data)
(Unaudited)
Reconciliation of Non-GAAP Financial Measures
Reconciliation of GAAP to Non-GAAP Gross Profit
Three months ended Nine months ended
September 30, 2017 June 30, 2017 September 30,2016 September 30, 2017 September 30,2016
Gross profit (GAAP) 58,054 47,066 41,875 143,796 121,722
Stock-based compensation 538 517 385 1,548 941
Gross profit (Non-GAAP) 58,592 47,583 42,260 145,344 122,663
Reconciliation of GAAP to Non-GAAP Gross Margin
Three months ended Nine months ended
September 30, 2017 June 30, 2017 September 30,2016 September 30, 2017 September 30,2016
Gross margin (GAAP) 34.9 % 34.6 % 32.6 % 34.4 % 32.2 %
Stock-based compensation 0.3 % 0.4 % 0.3 % 0.4 % 0.2 %
Gross margin (Non-GAAP) 35.2 % 35.0 % 32.9 % 34.8 % 32.4 %
Reconciliation of GAAP to Non-GAAP Operating expenses
Three months ended Nine months ended
September 30, 2017 June 30, 2017 September 30,2016 September 30, 2017 September 30,2016
Operating expenses (GAAP) 32,658 27,951 23,635 87,281 65,859
Stock-based compensation R&D 1,423 1,280 927 3,908 2,398
Stock-based compensation S&M 1,439 1,204 849 3,673 2,421
Stock-based compensation G&A 1,137 1,033 939 3,054 2,371
Operating expenses (Non-GAAP) 28,659 24,434 20,920 76,646 58,668
Reconciliation of GAAP to Non-GAAP Operating income
Three months ended Nine months ended
September 30, 2017 June 30, 2017 September 30,2016 September 30, 2017 September 30,2016
Operating income (GAAP) 25,396 19,115 18,240 56,515 55,863
Stock-based compensation 4,537 4,034 3,100 12,183 8,132
Operating income (Non-GAAP) 29,933 23,149 21,340 68,698 63,995
Reconciliation of GAAP to Non-GAAP Tax on income (Tax benefit)
Three months ended Nine months ended
September 30, 2017 June 30, 2017 September 30,2016 September 30, 2017 September 30,2016
Tax on income (Tax benefit) (GAAP) 91 186 3,014 (484 ) 4,067
Deferred tax asset (realized) 959 773 (2,179 ) 3,064 (2,326 )
Tax on income (Tax benefit) (Non-GAAP) 1,050 959 835 2,580 1,741
Reconciliation of GAAP to Non-GAAP Net income
Three months ended Nine months ended
September 30, 2017 June 30, 2017 September 30,2016 September 30, 2017 September 30,2016
Net income (GAAP) 27,971 22,524 15,616 64,670 53,688
Stock-based compensation 4,537 4,034 3,100 12,183 8,132
Deferred tax realized (asset) (959 ) (773 ) 2,179 (3,064 ) 2,326
Net income (Non-GAAP) 31,549 25,785 20,895 73,789 64,146
Reconciliation of GAAP to Non-GAAP Net basic EPS
Three months ended Nine months ended
September 30, 2017 June 30, 2017 September 30,2016 September 30, 2017 September 30,2016
Net basic earnings per share (GAAP) 0.66 0.54 0.38 1.55 1.32
Stock-based compensation 0.11 0.10 0.08 0.29 0.20
Deferred tax realized (asset) (0.03 ) (0.02 ) 0.05 (0.08 ) 0.06
Net basic earnings per share (Non-GAAP) 0.74 0.62 0.51 1.76 1.58
Reconciliation of GAAP to Non-GAAP Net diluted EPS
Three months ended Nine months ended
September 30, 2017 June 30, 2017 September 30,2016 September 30, 2017 September 30,2016
Net diluted earnings per share (GAAP) 0.61 0.50 0.35 1.44 1.21
Stock-based compensation 0.07 0.06 0.06 0.19 0.14
Deferred tax realized (asset) (0.02 ) (0.01 ) 0.05 (0.06 ) 0.05
Net diluted earnings per share (Non-GAAP) 0.66 0.55 0.46 1.57 1.40
Reconciliation of GAAP to Non-GAAP No. of shares used in Net diluted EPS
Three months ended Nine months ended
September 30, 2017 June 30, 2017 September 30,2016 September 30, 2017 September 30,2016
Number of shares used in computing net diluted earnings per share (GAAP) 46,131,556 44,831,590 43,995,227 44,937,527 44,348,461
Stock-based compensation 1,535,258 2,228,246 1,742,211 2,084,722 1,343,651
Number of shares used in computing net diluted earnings per share (Non-GAAP) 47,666,814 47,059,836 45,737,438 47,022,249 45,692,112

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