SolarEdge Technologies, Inc.

Welcome to the SolarEdge conference call for the fourth quarter and full year ended December 31st, 2021. This call is being webcast live on the company's website at www.solaredge.com in the investor section on the event calendar page. This call is the sole property and copyright of SolarEdge. With all rights reserved and any recording, reproduction or transmission of this call without the express written consent of SolarEdge is prohibited. You may listen to webcast replay of this call by visiting the event calendar page of the SolarEdge investor website. I would now like to turn the call over to Ms. Erica Mannion at Sapphire Investor Relations, Investor Relations for SolarEdge. Please go ahead, ma'am.

Good afternoon. Thank you for joining us to discuss SolarEdge's operating results for the fourth quarter and full year ended December 31, 2021, as well as the company's outlook for the first quarter of 2022. With me today are C.V. Lando, Chief Executive Officer, and Ronan Fire, Chief Financial Officer. CV will begin with a brief review of the results for the fourth quarter and full year ended December 31, 2021. Ronan will review the financial results for the fourth quarter and full year, followed by the company's outlook for the first quarter of 2022. We will then open the call for questions. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the safe harbor statements contained in our press release in the slides published today for a more complete description. All material contained in the webcast is the sole property and copyright of SolarEdge Technologies with all rights reserved. Please note this presentation describes certain non-GAAP measures, including non-GAAP net income and non-GAAP net diluted earnings per share, which are not measures prepared in accordance with the U.S. GAAP. The non-GAAP measures are presented in this presentation as we believe that they provide investors the means of evaluating and understanding how the company's management evaluates the company's operating performance. These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U.S. GAAP. Listeners who do not have a copy of the quarter-ended December 31, 2021 press release or the supplemental material may obtain a copy by visiting the investor section of the company's website. Now, I will turn the call over to Stevie.

Thank you, Erica. Good afternoon and thank you all for joining us on our conference call today. We are pleased to report that we have concluded the quarter with record revenues of $552 million and record revenues for the year 2021 of just below $2 billion. During 2021, we released and began to ramp several new products like our energy bank residential battery and higher power optimizers and inverters in our residential and commercial offerings. In recent months, we are experiencing a surge in demand for these products, which we attribute to the positive reception of the technology in parallel to market growth spurred by electrical power prices increasing globally, and the increased government and corporate focus on sustainability and use of renewable energy. We are excited about this rapidly growing opportunity and are intending to do everything needed to capitalize on it. However, in the current challenging operational and supply chain environment, expanding infrastructure and ramping production to meet this higher demand level is putting temporary pressure on our gross margins. In the call today, we will provide detail on all of these factors. I would like to start with a summary of 2021 and the main themes which shaped the year and how we expect them to impact our business moving forward. Total revenues in 2021 grew 35% over the previous year and 32% in the solar business. Growth in the solar business was across all segments and regions and practically in every country in which we operate. The larger year-over-year growth of significant size markets was in Italy, Germany, Taiwan, France, Poland, and Israel. While we usually focus our comments on North America and Europe, which grew substantially this year, 29% and 36% respectively, I want to shed some light on the long-term growth opportunities in Southeast Asia and the Middle East. In these markets, we grew in 2021 by more than 43%, representing not only market share gains, but also the high growth rate of these markets, which is expected to continue. In these countries, the market consists primarily of commercial installations, and our momentum here is indicative of our overall momentum in commercial, which I'll be discussing later. Other noteworthy dynamics of 2021 include significant increase of battery attach rates in residential installations, which increased by more than 50%, most of which were third-party batteries sold by our partners, DC couple to our inverters, as our residential battery ramp was slower than we originally planned. Also in residential, we are seeing growth of the average installation size and momentum in our sales of self-consumption devices such as EV chargers and smart water heaters as consumers seek to optimize their home energy consumption and reduce their dependency on higher-priced energy coming from the grid. In the area of grid services, we are now active in programs in 13 states across the United States, in all states in Australia, and in some European countries. Also in 2021, we saw 70% increase in use of our designer software, which enables full system design, including advanced features such as shade analysis, battery usage and consumption optimization, bill of materials generation, financial analysis, and automated creation of the offers to the end customer. More than 1.1 million unique site designs were performed by installers on this platform last year. Overall, we are pleased with the growth we have seen in 2021 and the progress made with our strategic initiatives. Now turning to the fourth quarter results. As mentioned, revenues for the fourth quarter were a record $552 million, driven by North America, where revenue grew quarter over quarter by 37% due to higher battery sales, increased residential inverter sales, in particular of the higher priced energy hub inverter and the growth of sales to the commercial segments. Moving to our global residential business where we continue to see strong demand, healthy inventory in our channels, increasing sellout by our distributors and a strong backlog of orders. In fact, we already have firm orders for delivery in 2022 of a megawatt volume that represents 60% of our megawatt residential shipments in the entire year of 2021, not including batteries. In commercial, we are seeing a real shift in market momentum driven by a few factors. The rising electricity prices across Europe and other regions, as well as the trend of corporations wishing to progress their ESG programs and offset their carbon emissions. together with a stable and favorable regulatory environment in many countries, such as Germany, where the new government has announced aggressive growth plans for PV, lay the ground for an increase of demand in markets where SolarEdge already has a solid local presence and strong brand awareness. At the same time, we are seeing increased acceptance of our commercial product offering released last year, which includes the Synergy 120 kilowatt inverter, and high power optimizers supporting the high power bifacial modules now commonly used in commercial installations. Combined, these market and product dynamics are driving the record demand for our commercial solutions, where our current megawatt firm order for delivery in 2022 are 143% of all commercial megawatts we shipped in 2021. While the increased backlog is partially related to longer lead times, the amount of planned projects and the increase in design wins, including for ground mount projects, demonstrates what we believe to be a true inflection point in the commercial market. Ramping production to meet this demand in the current supply chain and logistic environment is having an impact on our top and bottom line. As we prioritize expedited shipments, in order to meet customer schedules, at times at the expense of our gross margin. We expect this situation to last until the middle of the year as we adjust our infrastructure and ramp manufacturing capacity to this new level of demand. Moving to product updates. In the residential segment, we released last quarter the 10 and 11.6 kilowatt energy hub inverter with 10 kilowatt backup power and a new three-phase EV charger to join the single-phase charger we have been shipping for a couple of years. We are seeing strong demand for the EV charging portfolio, driven by the growing adoption of electric vehicles, in particular in Europe. Our Energy Bank residential battery has now been installed in 11 countries. We are receiving positive customer feedback, in particular related to the ease of installation with the new EnergyNet wireless communication technology incorporated in our residential offering. Our battery manufacturing ramp has been slower than anticipated due to delayed supply of several components used in our DC to DC and BMS boards. For most of these components, we have already qualified additional sources and we are working closely with suppliers to assure timely and consistent supply for the remainder of the year. In the fourth quarter, we shipped 42.5 megawatt hour of batteries versus the 70 megawatt hour planned. We plan to close this gap already in Q1 of 2022, reaching a production run rate of 300 energy bank batteries per day by end of the quarter, as we discussed in the last quarter's call. In Q1, we plan to shift between 100 to 120 megawatt hour of residential batteries. In the commercial and industrial segment, we continue to test our 330 kilowatt large scale inverter in sites in Israel and Europe. We are on track for ramp later this year, further strengthening our offering for ground mount installations. We will provide more detail on our ground mount offering as well as other new products and services in our analyst day scheduled for March 29th. Moving to operational infrastructure and progress in that area. In Q1, we will begin to ship residential inverters and optimizers for the North American market from our new contract manufacturing facility in Mexico. We expect to be able to deliver practically all of the U.S. residential demand from the Mexico factory by the end of the year. This will have a favorable effect on shipping costs, tariffs, working capital management, and timely meeting the U.S. demand and lead times. The commercial product manufacturing capacity will be expanded in two phases to meet the new growing level of demand, which I detailed earlier. We are increasing manufacturing capabilities in Vietnam for delivery of products to all regions, and that will be followed by additional manufacturing growth in Mexico to supply commercial products to the U.S. market. The surge in demand is creating manufacturing capacity challenges and pressure across the supply chains. where we need our suppliers to allocate component quantities well above those supplied in previous years. We are working closely with our key suppliers who are supporting us in our mutual growth as they too see the value in this long-term opportunity. Moving to our non-solar businesses. 2021 was a record revenue year for our non-solar businesses, totaling $176 million. coming mostly from our energy storage and e-mobility divisions. Our energy storage division concluded the year with record revenues and was profitable for a second year in a row. Cellar 2 construction for the manufacturing of our own lithium ion cells continues per plan and is expected to begin production ramp in the second quarter of 2022. In the e-mobility division, We experienced some slowdown early in Q4 of 2021 due to our customers' temporary halt in production, which resumed to normal levels by the end of the fourth quarter. We expect normal levels of delivery in the first quarter and through the year. In our critical power division, we started first shipments of our three-phase UPS offering, which was designed and productized in-house since the acquisition. We will elaborate more about these segments in our analyst meeting in March. To summarize, we are facing an accelerated growth opportunity in a challenging operational environment. As we have proven in the past, I am confident that our global team will excel in execution, ensuring our customers have the benefit of our technology when and where they need it. And with this, I will turn the call over to Ones.