SOLAREDGE TECHNOLOGIES, INC. Forward-Looking Statements
Statements contained in this Form 10-Q or statements incorporated by reference
from documents we have filed with the
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on forward looking statements. Also, forward-looking statements represent our management's beliefs and assumptions only as of the date of this filing. Important factors that could cause actual results to differ materially from our expectations include:
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the duration, scope and effects of the ongoing COVID-19 pandemic, government and other third party responses to it and the related macroeconomic effects, including to our business and the business of our suppliers and customers;
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future demand for renewable energy including solar energy solutions;
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changes to net metering policies or the reduction, elimination or expiration of government subsidies and economic incentives for ongrid solar energy applications;
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changes in the
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federal, state and local regulations governing the electric utility industry with respect to solar energy;
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the retail price of electricity derived from the utility grid or alternative energy sources;
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interest rates and supply of capital in the global financial markets in general and in the solar market specifically;
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competition, including introductions of power optimizer, inverter and solar photovoltaic ("PV") system monitoring products by our competitors;
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developments in alternative technologies or improvements in distributed solar energy generation;
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historic cyclicality of the solar industry and periodic downturns;
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defects or performance problems in our products;
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our ability to forecast demand for our products accurately and to match production with demand;
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our dependence on ocean transportation to deliver our products in a cost effective manner;
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our dependence upon a small number of outside contract manufacturers and suppliers;
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capacity constraints, delivery schedules, manufacturing yields and costs of our contract manufacturers and availability of components;
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delays, disruptions and quality control problems in manufacturing;
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shortages, delays, price changes or cessation of operations or production affecting our suppliers of key components;
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business practices and regulatory compliance of our raw material suppliers;
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performance of distributors and large installers in selling our products;
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our customers' financial stability, creditworthiness and debt leverage ratio;
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our ability to retain key personnel and attract additional qualified personnel;
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our ability to effectively design, launch, market and sell new generations of our products and services;
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our ability to maintain our brand and to protect and defend our intellectual property;
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our ability to retain, and events affecting, our major customers;
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our ability to manage effectively the growth of our organization and expansion into new markets;
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our ability to integrate acquired businesses;
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fluctuations in global currency exchange rates;
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unrest, terrorism or armed conflict in
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general economic conditions in our domestic and international markets;
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our ability to service our debt; and
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the other factors set forth under "Item 1A. Risk Factors" in "Part II-OTHER INFORMATION" section of this report.
Except as required by law, we assume no obligation to update these forward looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward looking statements, even if new information becomes available in the future.
Overview
We are a leading provider of an optimized inverter solution that has changed the
way power is harvested and managed in a solar photovoltaic, known as PV system.
Our direct current or 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, for improved return on investment, or RoI. Additional benefits
of the DC optimized inverter system include comprehensive and advanced safety
features, improved design flexibility, and improved operating and maintenance,
or O&M with module-level and remote monitoring. The typical
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Since introducing the optimized inverter solution in 2010,
As part of our non-organic growth, we have completed three acquisitions during 2018 and 2019, each of which address our growth in the area of smart energy technology and power optimization.
During the year ended
In the third quarter of 2020 we began commercial shipments to the
We are a leader in the global module-level power electronics ("MLPE") market. As
of
Our revenues for the three months ended
COVID-19 Impact
We continue to monitor the evolving impact of COVID-19 on our operations and
business. Our first priority continues to be protecting and supporting our
employees while maintaining company operations and support of our customers with
as few disruptions as possible. We follow the guidance issued by applicable
local authorities and health officials in each region in which we do business,
including in our headquarters located in
As anticipated, our first quarter revenues of
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Key Operating Metrics
In managing our business and assessing financial performance, we supplement the information provided by the financial statements with other operating metrics. These operating metrics are utilized by our management to evaluate our business, measure our performance, identify trends affecting our business and formulate projections. We use metrics relating to shipments (inverters shipped, power optimizers shipped and megawatts shipped) to evaluate our sales performance and to track market acceptance of our products. We use metrics relating to monitoring (systems monitored) to evaluate market acceptance of our products and usage of our solution.
We provide the "megawatts shipped" metric, which is calculated based on nameplate capacity shipped, to show adoption of our system on a nameplate capacity basis. Nameplate capacity shipped is the maximum rated power output capacity of an inverter and corresponds to our financial results in that higher total capacities shipped are generally associated with higher total revenues. However, revenues increase with each additional unit, not necessarily each additional MW of capacity sold. Accordingly, we also provide the "inverters shipped" and "power optimizers shipped" operating metrics.
Three Months Ended
March 31,
2021 2020
Inverters shipped 181,905 202,009
Power optimizers shipped 3,734,790 5,060,391
Megawatts shipped (1) 1,691 1,850
(1) Calculated based on the aggregate nameplate capacity of inverters shipped
during the applicable period. Nameplate capacity is the maximum rated power
output capacity of an inverter as specified by the manufacturer.
Results of Operations
The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report.
The following table sets forth selected consolidated statements of income data for each of the periods indicated.
Three Months Ended
March 31,
2021 2020
(in thousands)
Revenues $ 405,489 $ 431,218
Cost of revenues 265,415 291,210
Gross profit 140,074 140,008
Operating expenses:
Research and development 46,977 36,695
Sales and marketing 26,911 24,253
General and administrative 19,849 16,185
Other operating expenses (income) 2,209 (4,900 )
Total operating expenses 95,946 72,233
Operating income 44,128 67,775
Financial expenses, net 6,097 16,605
Income before taxes on income 38,031 51,170
Taxes on income 7,955 8,922
Net income $ 30,076 $ 42,248
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Comparison of the Three Months Ended
Revenues
Three Months Ended
Three Months Ended March 31,
March 31, 2020 to 2021
2021 2020 Change
(in thousands)
Revenues
Revenues decreased by
The number of power optimizers and inverters recognized as revenues:
Three Months Ended
Three Months Ended March 31,
March 31, 2020 to 2021
2021 2020 Change
Power optimizers 3,789,291 4,796,434 (1,007,143 ) (21.0 )%
Inverters 182,914 197,090 (14,176 ) (7.2 )%
Our blended ASP per watt for solar products shipped decreased by
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Cost of Revenues and Gross Profit
Three Months Ended
Three Months Ended March 31,
March 31, 2020 to 2021
2021 2020 Change
(in thousands)
Cost of revenues
Cost of revenues decreased by
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a decrease in the volume of products sold;
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decreased shipment and logistics costs of
These were partially offset by:
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an increase in warranty expenses and warranty accruals of
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an increase of
Gross profit as a percentage of revenue increased from 32.5% in the three months
ended
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the absence of safe harbor related sales, that were characterized with a lower gross margin in the first quarter of 2020;
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decreased shipment and logistics costs mainly attributed to a decrease in the
portion of products made in
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favorable exchange rates on our sales outside of the Unites States; and
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continued cost reduction efforts.
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These factors were partially offset by:
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an increase in support costs related to our warranty obligations due to an increase in our install base which affects the calculation of such costs as a percentage of our revenues since our install base grew in 2021 while revenues decreased compared to the same quarter in 2020, resulting in a higher rate of warranty expenses to revenues;
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an increase in inventory valuation accruals; and
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lower gross profit from our
Research and Development
Three Months Ended
Three Months Ended March 31,
March 31, 2020 to 2021
2021 2020 Change
(in thousands)
Research and development $ 46,977 $ 36,695 $ 10,282 28.0 %
Research and development costs increased by
•
an increase in personnel-related costs of
•
increased expenses related to consultants and subcontractors in an amount of
These were partially offset by a payment of$2.5 million , received bySolarEdge e-Mobility from a customer in connection with research and development activities. Sales and Marketing Three Months Ended Three Months Ended March 31, March 31, 2020 to 2021 2021 2020 Change (in thousands) Sales and marketing$ 26,911 $ 24,253 $ 2,658 11.0 %
Sales and marketing expenses increased by
This increase was partially offset by a decrease in expenses related to travel
in an amount of
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General and Administrative
Three Months Ended
Three Months Ended March 31,
March 31, 2020 to 2021
2021 2020 Change
(in thousands)
General and administrative $ 19,849 $ 16,185 $ 3,664 22.6 %
General and administrative expenses increased by
•
increased personnel-related costs of
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increased provision of
These were partially offset by a decrease in expenses related to accrual for
doubtful debts in an amount of
Other operating expenses
Three Months Ended
Three Months Ended March 31,
March 31, 2020 to 2021
2021 2020 Change
(In thousands)
Other operating expenses
Other operating expenses was
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a decrease in income in the amount of
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an increase of
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Financial expenses, net
Three Months Ended
Three Months Ended March 31,
March 31, 2020 to 2021
2021 2020 Change
(in thousands)
Financial expenses, net $ 6,097 $ 16,605 $ (10,508 ) (63.3 )%
Financial expenses were
•
a decrease of
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an increase of
Taxes on Income
Three Months Ended
Three Months Ended March 31,
March 31, 2020 to 2021
2021 2020 Change
(in thousands)
Taxes on income $ 7,955 $ 8,922 $ (967 ) (10.8 )%
Taxes on income decreased by
This decrease was partially offset by a decrease of
Net Income
Three Months Ended
Three Months Ended March 31,
March 31, 2020 to 2021
2021 2020 Change
(in thousands)
Net income $ 30,076 $ 42,248 $ (12,172 ) (28.8 )%
As a result of the factors discussed above, net income decreased by
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Liquidity and Capital Resources
The following table shows our cash flow from operating activities, investing activities and financing activities for the stated periods:
Three Months Ended
March 31,
2021 2020
(in thousands)
Net cash provided by operating activities $ 24,083 $ 107,745
Net cash used in investing activities (153,582 ) (19,924 )
Net cash provided by (used in) financing activities (2,062 ) 3,315
Increase (decrease) in cash and cash equivalents
As of
Operating Activities
During the three months ended
During the three months, ended
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Investing Activities
During the three months ended
During the three months ended
Financing Activities
During the three months ended
During the three months ended
Convertible Senior Note
On
Debt Obligations
During 2020, we redeemed all outstanding loans, including the bank loan
obligations acquired as part of the acquisition of Kokam and entered into new
bank loans in an aggregate amount of
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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