SolarEdge Technologies, Inc.

Hello and welcome to the SolarEdge conference call for the first quarter ended March 31, 2024. This call is being webcast live on the company's website at www.solaredge.com and the Investors section on the Events 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 expressed written consent of SolarEdge is prohibited. You may listen to a 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 J.B. Lowe, Head of Investor Relations for SolarEdge. Please begin.

Thank you, Chloe, and good afternoon, everyone. Thank you for joining us to discuss SolarEdge's operating results for the first quarter ended March 31st, 2024, as well as the company's outlook for the second quarter of 2024. With me today are Zivi Lando, Chief Executive Officer, and Ronen Fire, Chief Financial Officer. Zivi will begin with a brief review of the results for the first quarter ended March 31st, 2024. Ronen will review the financial results for the first quarter followed by the company's outlook for the second quarter of 2024. 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, the slides posted on our website ahead of this call today, and our filings with the SEC for a more complete description of such risks and uncertainties. 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 because we believe that they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance. Reconciliation of these measures can be found in our earnings release, presentation, and SEC filings. 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 March 31, 2024 press release, or the supplemental material may obtain a copy by visiting the investor relations section of the company's website. And I will now turn the call over to J.B.

Thank you, J.B. Good afternoon, and thank you all for joining us on our conference call. Starting with highlights of our first quarter results, we concluded the quarter with approximately $204 million in revenue. Revenues from our solar business, were approximately $190 million, while revenues from our non-solar businesses were approximately $14 million. This quarter, we shipped 1.1 million power optimizers, 69,000 inverters, and 128 megawatt-hour of batteries. As we have done on previous calls, I will start with the market dynamics we see in the various regions and end markets, our underlying demand in these markets, and the implications on sell-through and inventory cleanup, starting with the U.S. residential segment. As we commented last quarter, we did not expect significant changes in this market, as long as interest rates and electricity prices remain at recent levels. As a result, our first quarter results largely reflect traditional seasonality, with inverter and optimizer sell-through down 19 percent quarter over quarter. However, we have seen continued strength in the uptake of our single-phase battery product in the US market, and sell-through of our battery product was up 26% quarter over quarter. This strength is coming from California, with the accelerating adoption of battery-tied NEM 3.0 systems, as well as Puerto Rico, where customers need full backup capability. Our DC-coupled solution is particularly well-suited for these applications, given the incremental energy that is generated when compared with many alternative products. Moving to U.S. commercial. Sell-through was down 22% from a record fourth quarter, largely due to seasonality. We are encouraged by the trajectory of this market, which is expected to grow this year due, among other reasons, to the continued demand from large enterprise customers who want to standardize their global portfolios on our product. On a year-over-year basis, sell-through of our commercial inverters was up 42% in the U.S. Moving to Europe, the market started the year slowly due to a slightly longer than usual winter and continued digestion of recent regulatory changes. In residential, sell-through in Europe was seasonally down 19% quarter-over-quarter, with inverters and optimizers down 20% and batteries down 13%. In commercial, sell-through was down 2%, reflecting the relative strength of this market and the good position we have based on the same dynamics that I mentioned when discussing the U.S. commercial markets. Touching on some of our major markets in Europe, in Germany, the market started the year more slowly than anticipated, as declining electricity prices have negatively impacted the economics of solar. There is, however, an expectation that market dynamics will improve given the passing of Solar Package 1 by the German Parliament two weeks ago, which will simplify regulatory requirements on new solar installations. Among other measures in the package are increased feed-in tariffs for commercial installations and incremental support for agri-photovoltaic projects which we expect will increase demand for our product specifically, given our strengths in these segments. In the Netherlands, consumer confidence is recovering slowly following the clarifications around net metering in the fourth quarter, while the market remains at relatively depressed levels compared to recent years. We expect the market to continue to recover slowly, and we are focusing on developing solutions, in particular on the software side, that will enable us to gain share in this market. I will expand on some of these initiatives in a moment. In the rest of the world, we have not seen significant changes in market dynamics outside of typical seasonality, and our revenues continue to be largely derived from Thailand, Taiwan, South Africa, Australia, and Israel. The aggregation of these trends and dynamics in particular the slower pace of seasonal pickup in Germany, translated into first quarter sell-through of approximately $440 million, which was slightly below our expectations. The lower level of sell-through resulted in us undershipping demand by approximately $250 million at the lower end of the 250 to 300 million range we anticipated and discussed in our call last quarter. Taking the first quarter into account and assuming the traditional seasonality patterns and market trends as we see them today would bring us at the end of the year to the lower end of the range of underlying business run rate level that we estimated in our previous call for that period. Our expectation for the second quarter is that sell through should be up 15 to 20% versus the first quarter. meaning we expect to undership demand in the second quarter by approximately $250 to $300 million. Moving to products. Last month, we announced the acquisition of Wevo, which provides software solutions for CNI EV charging optimization, management for corporate employee charging, fleet charging, and charging in apartment buildings. The Wevo solution has already been deployed in Europe, Asia, and North America at approximately 1,000 sites, and more than 215,000 charging sessions have been conducted to date on the Wevo platform. Wevo, together with HARC, the energy optimization platform for integrated load control and industrial IoT that we acquired in the second quarter of 2023, augment the SolarEdge CNI energy management platform, and together form SolarEdge One for CNI. In all, SolarEdge One for CNI is an energy management platform that enables PV and asset owners to manage all onsite electrical power and optimizes PV production, storage, EV charging, and loads. This is achieved by consolidating internal and external data to make hundreds of intelligent energy decisions on a real-time basis. To help explain, I'd like to give a real-world example of how SolarEdge One for CNI is being deployed by one real estate company in a way that enables them to benefit from the SolarEdge offering. This real estate company has a portfolio of roughly 150 assets, ranging from supermarkets to logistics centers, cold storage facilities, and office buildings. This customer wanted a complete hardware and software solution that will enable them to generate clean and cheap electricity where relevant and optimize energy management, including selling the generated power to tenants and assisting the tenants with their own energy optimization needs. Given the diversity of the asset portfolio, the combined hardware and software configuration will be optimized per site and application. on the basis of the flexibility of our portfolio. In the coming months, we will be deploying PV to approximately 20% of the sites and one for CNI to all sites on the basis of a paid subscription. We believe that the rollout of SolarEdge One for CNI and the additional features that we will deliver in the coming quarters creates differentiation for our solution that will enable us to capture market share and improve profitability including through the ability to sell software services that deliver recurring revenue. On our last earning call, we also announced the first shipment of our commercial outdoor battery solution. This new commercial battery will be a key piece of the hardware solution that is managed and optimized by One for CNI, along with our CNI inverters, EV chargers, and energy meters. We recently began taking orders for our commercial battery in Italy, and we'll be rolling the product out to additional markets across Europe and the rest of the world in the coming quarters. At Intersolar next month, we will be showing an additional commercial DC-coupled storage system optimized for indoor applications, which is a common application in some European markets with shipments planned for early next year. Continuing with CNI, An additional angle to broadening our addressable market in this space is pushing into the multi-dwelling unit or MDU market. The MDU space is a relatively untapped market that is gaining regulatory support in various countries and is taking the first steps on its decarbonization journey. This market will require comprehensive portfolio-level solutions that incorporate PV, batteries, EV chargers, heat pumps, and energy management capabilities. We aim to be a leading provider of hardware and software solutions that will bring the energy transition to these type of buildings where roughly 50% of people in the OECD live. To broaden our exposure to this space, we recently made investments and signed commercial partnerships with two software companies in the MDU space. Ivy Energy based in California and Amperes based in Munich, Germany. Both Ivy and Amperes provide software solutions to help large real estate owners design and implement plans to decarbonize their multi-dwelling portfolios and harvest the benefits of smart renewable energy solutions. Energy management is also an important enabler in the residential space, and we continue to roll out new features for SolarEdge One for residential. Last month, we added a dynamic rate optimization feature, and we have approximately 1,500 users enrolled across the Netherlands and the UK. We will be rolling out this new capability to additional countries, including Belgium, Sweden, Poland, and Germany in the coming months. The dynamic rate capability joins the negative rate optimization tool we added to SolarEdge One for residential last year in the Netherlands. We have 10,000 sites enrolled in negative rate optimization as of today and have mitigated 162 negative rate events since launching the product in the fourth quarter of 2023. We will continue to roll out additional features in the coming months that will help us maintain our technological leadership and gain market share in the residential space. As the reliance on software increases, and given that residential and commercial PV systems are connected directly to the utility grid, cybersecurity is of critical importance. Over the past few quarters, we have increased our investment and activity on cybersecurity capabilities and certifications, and we will continue to ensure that we are at the forefront of this topic in our industry, in particular as regulations are being drafted and implemented in multiple jurisdictions. Let's talk now about new residential products. At Intersolar in a few weeks, we will be displaying our next generation large capacity three phase inverter for the European residential market that is expected to be released early next year. This new 20 kilowatt inverter is optimized for the larger rooftops and system sizes that we are increasingly seeing in the German speaking countries where the increased need for electricity and self consumption is leading consumers to utilize all roof surfaces and increase system sizes. As historically our products have been optimized for larger PV plus storage residential systems, this solution will further enhance our differentiation in this segment. This new inverter is based on silicon carbide power switches to drive better efficiencies and will incorporate improved safety and installability features as well. To complement this next-generation inverter, we are also developing our next-generation residential battery. This battery will be based on a single platform that will unite our single-phase and three-phase platforms into one. We will elaborate more on this and other new products in the pipeline for the residential North American market on our next earning goal. These new products will help drive down cost per watt, and deliver improved installability to our customers, saving them precious time on site. In parallel to the products above, which are to be released in the coming quarters, we continue to ramp and see growing demand for the products we released over the last few quarters. On our tracker product, there are approximately 100 megawatts that have been installed or are in the process of installation. and confirm orders for approximately 60 additional megawatts that are scheduled to be installed this year. On our 330-kilowatt TerraMax inverter, we recently received an order and began installation of a 20-megawatt floating PV project. Moving to operations. In our Austin, Texas facility, we manufactured approximately 250 megawatts of single-phase inverters in the first quarter. and are on target to meet a 500 megawatt manufacturing run rate in the second quarter. Additionally, in the second quarter, we will begin shipment of optimizers and commercial inverters from our second U.S. contract manufacturing facility located in Florida. Also on the operational side, in the North American market, we plan to consolidate our product portfolio around an 11.4 kilowatt made in the U.S. inverter and 650-watt optimizer platform. The initiative will reduce both the number of hardware platforms and the number of SKUs across our North American portfolio. This will result in a more streamlined manufacturing process and improve efficiencies across supply chain, logistics, inventory, management, and services. Following the consolidation to a single platform, all new inverters will come pre-equipped with PCS which means customers can install much more PV while avoiding costly main panel upgrades. In closing, our first quarter results were aligned with our expectation of inventory clearing and typical seasonality. As we enter spring, when installations historically tend to rise, we expect channel inventory to continue to decline and revenues to improve. In parallel, we are focused on a suite of new products that we plan to release in the next several quarters, to position ourselves for the next growth cycle in our industry. I will now hand it over to Onan.