SolarEdge Technologies, Inc.

Stand by, your program is about to begin. Welcome to the SolarEdge conference call for the fourth quarter and full year ended December 31st, 2022. This call is being webcast live on the company's website at www.solaredge.com and the investor section on the event slash 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 a webcast replay of this call by visiting the event slash calendar page of the SolarEdge Investor website. I would now like to turn the call over to Erica Mannion at Sapphire Investor Relations Investor Relations for SolarEdge.

Good afternoon. Thank you for joining us to discuss SolarEdge's operating results for the fourth quarter and full year ended December 31, 2022, as well as the company's outlook for the first quarter of 2023. With me today are Stevie Lando, Chief Executive Officer, and Ronan Thire, Chief Financial Officer. CP will begin with a brief review of the results of the fourth quarter and full year ended December 31, 2022. Ronan will review the financial results for the fourth quarter and full year, followed by the company's outlook for the first quarter of 2023. 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 different materially from management's current expectations. We encourage you to review the Safe Harbor Statements contained in our press release and 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 US GAAP. The non-GAAP measures are presented in this presentation as we believe that they provide investors with a 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 or 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, 2022 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 CV.

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 $890 million and record revenues for the year 2022 of $3.1 billion. I will start with a summary of 2022 and the main themes which shaped the year and how we expect them to impact our business moving forward. Total revenues in 2022 grew 58% over the previous year and 63% in the solar business. Growth in the solar business was across all segments and regions and practically in every country in which we operate. Most notable in year-over-year, we saw significant growth in the United States, Germany, the Netherlands, Italy, the UK, and France. Additionally, in 2022, we saw several new markets reach significant size and generate meaningful revenue, showing significant potential for future growth, including Taiwan and Brazil. A key highlight of 2022 was the growth of our revenues coming from Europe, which grew by 89% year over year. This remarkable growth is a function of the increase in power prices prior to the beginning of the Ukraine-Russia conflict and the accelerated increases ever since, as well as the expansion of our portfolio to include inverters, EV chargers, and batteries addressing the specific European market needs. An additional boost to our annual revenues came from the introduction globally of our own batteries that have been well received by our customers. Note that in the fourth quarter of 2022, 52% of the batteries attached to new PV installations with our inverter systems were of our own battery, and 48% were batteries from other suppliers attached to our inverter systems. This, together with the trend of increased battery attachment rate, are an indication of the healthy potential for continued growth of sales for our batteries. From a segment point of view, we saw significant revenue growth and portfolio expansion in both of our key segments. On the residential side, we launched SolarEdge Home, offering a complete energy management system for the home, including PV, battery backup, EV charging, load control, and a homeowner app to manage them all in one single place. SolarEdge Home is now available in the U.S., Europe, Australia, and Brazil, and combined with our designer software, it provides our customers an end-to-end solution for design, proposal, installation, and commissioning, all working together out of the box. In the commercial segment, our growth this year is attributed to market share gain, expansion into new applications such as floating PV, as well as the successful adoption rate of our commercial portfolio with its safety offering in the fast-growing segment of corporations progressing their ESG programs. Based on the demand we are seeing in our substantial backlog, we expect the momentum in the commercial segment to continue into 2023. On the operational side, we are very pleased with our accomplishments in 2022, which was a very challenging year. In the first half of 2022, we faced COVID-related factory shutdowns and component challenges, in particular in light of the volumes that were needed to support the growth and demand. Despite these challenges, we were able to ramp the Mexico factory and increase our overall inverter and optimizer gigawatt shipments 47% year over year. We believe that the infrastructure and resilience we developed in 2022 will serve us well as demand for our product continues to increase. And now let's turn to the fourth quarter. This quarter, we generated record revenues for the company, led by record revenues from our global solar business, driven from significant quarter-over-quarter growth in the United States. In aggregate, we shipped this quarter a record 3.1 gigawatts of our DC optimized inverter solution and 217 megawatt hour of residential batteries. This quarter, we shipped 6.7 million power optimizers and 315,000 inverters. We also delivered record shipments this quarter to France, the Netherlands, Spain, and Brazil. In these countries in particular and across our global markets in general, growth this quarter came from a higher portion of sales of inverters and optimizers versus batteries and is a result of the strong demand for our products for new solar installations. From a demand and inventory point of view, we continue to see very strong demand from Europe for all products and relatively low inventory levels in the channel. This is validated by our distribution sell-through data for Europe, which was at record levels in November prior to the holiday season for both residential and commercial products. In North America, residential sell-through reports from our distributors for the fourth quarter were seasonally down more so than we have seen in the recent past. Early reports from the start of 2023 are showing an improvement. However, in light of the uncertainties in the market related to NEM 3.0 and the economic environment, we are mindful and cautious of the rate of the recovery. That said, we are confident in the long-term strength of the U.S. residential market and recently strengthened our position in this market by announcing cooperation with two important players in the market, Sanova and Freedom Forever. From a segment point of view, we shipped this quarter 1.6 gigawatts of residential inverters and optimizers, 27% more than the last quarter, and 1.5 gigawatts of commercial product, a 6% increase from last quarter. In discussing the residential segment, I want to elaborate on the opportunities and dynamics coming from the NEM 3.0, the new metering policy in California, which comes into effect in April. Under the new NEM 3.0 tariffs, average export rates dropped by approximately 70% compared to the current policy. But this number is a bit misleading as there are times in the year and specific days where the export rates are actually higher than they were under NEM 2.0. This will make coupling of solar PV with a battery a more attractive proposition for California homeowners especially if the battery is smartly used to import and export power at the right times. We have seen such transitions happen in the past in Europe and countries like the UK, Germany, and Belgium, and while it takes the market time to adjust to the new reality, we typically experience significant growth in PV plus battery installation rates following such tariff transitions. Our large installed base of PV plus batteries in time of use or self-consumption markets has enabled us to both gain experience managing such use cases as well as develop specific algorithms to maximize the import and export optimization. Additionally, our DC coupled architecture is specifically suitable for such schemes as the system can maximize the amount of energy it stores from the solar panels without clipping PV power due to the AC inverter size, even at 200% DC oversizing. DC coupling also means there is only one AC to DC conversion for energy stored in the battery, as opposed to three conversions in an AC coupled architecture. We estimate that 5% to 7% of stored energy is lost in these power conversions. And when charging and discharging the battery every day, this can amount to up to 10 days of additional power every year from a DC-coupled system like ours. Finally, in self-consumption mode, DC-coupled batteries are simple to install and commission, as they only require one DC connection to the inverter and do not require main panel upgrades. As such, we believe that after a transition period following NEM 0.3 coming to effect, we will see a gradual market recovery and good adoption of our solar PV plus battery solutions in California. Moving to the commercial segment where we are seeing strength across all geographies, including Asia Pacific, Europe, and the United States. Our growth in the commercial segment, as I mentioned earlier, is a product of multiple trends, such as corporate ESG, the push to reduce carbon footprint, floating PV, community solar, carports, and others. An additional segment in which we see increased traction is agro-PV and dual use of land. Most recently, we have seen government initiatives to prioritize and grow this segment in countries such as Italy, Japan, Taiwan, and others. For this application, We are offering a comprehensive solution based on our inverters optimizers and recently released land-adoptable trackers from our subsidiary, SolarGeek. The design flexibility of our solution and the safety features we offer make our portfolio of products attractive for this growing application. Moving from segments to products. As mentioned, this quarter we shipped 217 megawatt hour of residential single and three-phase batteries. This is lower than our battery shipments last quarter, as in some cases we have not yet caught up on inverter volumes of the specific inverters needed for these battery installations. We are focused on ramping the new three-phase backup inverter that we discussed last quarter to address the strong demand for this configuration of inverters plus batteries. Overall, the global attach rate for batteries to our inverters increased this quarter to 11.1% of new residential installations compared to 8.5% of the new installations in the third quarter. The highest attach rates that we see for batteries to our inverters are in Germany, where the attach rate is 61%, Italy with an attach rate of 56%, and the U.K. with an attach rate of 31%. I would like now to address installation times. As adoption of battery systems grows, the need to better manage time of installation is becoming critical for our customers. They require both short time of installation, often aiming to complete the PV plus battery installation in a single day, as well as predictability of installation times to enable them to better plan the time of their electricians and installation crews. We are focusing on the installer experience from system design to physical installation and commissioning. Our designer software enables the installer to design the exact system to meet homeowner needs and then automatically export it to the SolarEdge installation app, which helps guide the physical installation and then commissioning the entire system. Our SolarEdge home network provides wireless communication between the inverter, battery, EV charger, and load controls, eliminating time-consuming installation of communication wires, while our DC-coupled architecture means you can often avoid costly and time-consuming main panel upgrades. Our step-by-step commissioning process enables commissioning a PV-only system in less than 25 minutes, and a complete PV with battery backup system in approximately 45 minutes. We are aiming to reduce the commissioning time by more than 50% in the coming year. Our goal is to enable our customers to consistently install a PV plus battery system in less than one day. Given the increased demand for PV systems worldwide and the fact that the availability of qualified installation crews is becoming a significant bottleneck for growth, We are placing emphasis on installation time and simplicity across all of our product portfolio via product development, training, and automated support applications. In early January, we announced the acquisition of HART Systems. HART is an energy analytics and industrial IoT company based in Leeds in the UK. Their software as a service, SAS suite of products, allows companies to get granular level of energy transparency and then start acting on what they are seeing. It integrates with solar storage, EV charging services, HVAC, factory machinery, building management systems, lighting systems, smart meters, and other assets. HARC is a startup at the point of scale-up and has demonstrated that it can deliver value to different stakeholders of their customers, which includes supermarket chains, industrial processing companies, energy companies, and real estate services. Besides the standalone product, which we intend to roll out to a selected group of customers in 2023, We believe that the HART team can play a great role in adding new and innovative capabilities to our overall commercial offering and support us as we increase our product portfolio in this space. The closing of the transaction is awaiting regulatory approval in the UK, which we expect to receive within the first half of 2023. Moving to our non-solar business. Our Sella 2 factory ramp-up is on schedule, and we are shipping cells from the new factory to our customers. The cell we are shipping, which will also be incorporated into our residential and commercial batteries, is designed and optimized for stationary energy storage application and can reach up to 8,000 cycles, has high energy density, and high power throughput through a wide temperature range. Our e-mobility revenues continue at a steady rate as we continue to supply powertrain units to Stellantis. In parallel, we are engaged in additional electrification opportunities, however, at a lower scale than initially anticipated, which has led to the write-off of intangible assets related to the original acquisition of this division, as will be further detailed by ONAM. Before I hand the call over to Anand, I would like to update on our plans for U.S. manufacturing. We are executing a plan for U.S. domestic manufacturing of inverters and optimizers on the basis of a combination of contract manufacturing and owned facilities. We expect first products to be manufactured in the third quarter of 2023 and are aiming for the majority of the IRA-credited residential and commercial products for the U.S. market to be manufactured domestically by the second half of 2024. Some of the details of this plan are still dependent on the impending clarifications from the Treasury. To summarize my remarks, we are pleased with the growth we have seen in the fourth quarter and the entire year, which are a result of our global presence and multi-segment approach. We believe this approach will serve us well during some of the market transition expected, transitions expected in 2023. And now I will hand it over to Oned.