SolarEdge Technologies, Inc.

Hello and welcome to the SolarEdge conference call for the second quarter ended June 30th, 2024. This call is being webcast live on the company's website at www.solaredge in the investor 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, Jess. Good afternoon, everyone. Thank you for joining us to discuss SolarEdge's operating results for the second quarter ended June 30th, 2024, as well as the company's outlook for the third quarter of 2024. With me today are Zivi Lando, Chief Executive Officer, and Ronen Feier, Chief Financial Officer. Zivi will begin with a brief review of the results for the second quarter ended June 30th, 2024. Ronen will then review the financial results for the second quarter, followed by the company's outlook for the third 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 U.S. 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 June 30, 2024 press release or the supplemental material may obtain a copy by visiting the Investor Relations section of the company's website. I will now turn the call over to Zevi.

Thank you, Jamie. Good afternoon, and thank you all for joining us on our conference call. Starting with highlights of our second quarter results, we concluded the quarter with approximately $265 million in revenue. Revenues from our solar business were approximately $241 million, while revenues from our non-solar businesses were approximately $24 million. This quarter, we shipped 2 million power optimizers, 66,000 inverters, and 128 megawatt hours of batteries. Our sell-through for the quarter was approximately $520 million, up 18% from the first quarter, meaning we undershipped demand by approximately $275 million, in line with our expectations. Before we dive into the regional breakdown, I'd like to address the recent moves we have made to strengthen the company and our business, and our key focus areas as we navigate this volatile time in the solar market. We are focusing on three areas. The first is supporting the business of our customers and growing our share through their satisfaction and success. Over the last year, we have made significant improvements to customer service and product quality and to the customer experience through ease of installation of our products. We are already seeing positive momentum in sell-through data resulting from these efforts. Second is execution of our product roadmap, which is aimed to improve our share and profitability in segments we serve, and build a position in new segments by pushing the envelope of hardware and software technology advancements in the energy generation, storage, and management space. We are seeing gradual growth in revenue generated from new products released over the last 12 months, including our ground-mount 330-kilowatt inverter system, trackers, and commercial storage. We are also excited and focused on the next generation of products that we will release within the next 12 months, including inverters, optimizers, and batteries for the U.S. and European residential markets. Third is ensuring financial stability and sizing the company infrastructure such that we are in a healthy position for further growth post-channel inventory clearing when our revenue is aligned with our true business run rate. Wonen will touch on this in his remarks. And now to the details of our second quarter results. Starting with the U.S. residential segment. Generally, market reports suggest that installations were relatively flat in the second quarter. while our sell-through of inverters and optimizers in the U.S. residential space grew 32% quarter over quarter, and our battery sell-through rose 55% quarter over quarter. We attribute this growth to the general trend in the market towards TPOs and large installers, where we traditionally have a strong position, and the growing recognition in the market of the benefits of our DC-coupled backup storage system in particular during extended outage periods as have been experienced recently in several events across the country. We are seeing strength in particular in California and Puerto Rico where installations of our batteries were up substantially in the second quarter. We are focused on maintaining our momentum in the U.S. residential market through the shift towards domestic content products as we are shipping domestic content residential inverters and optimizers now and expect to begin shipping domestic content batteries in the beginning of 2025. Moving to U.S. commercial. Sell-through was up 18% quarter over quarter from a seasonally low first quarter and up 13% year over year. We remain encouraged by the potential of the U.S. CNI market as large enterprise customers are increasingly interested in standardizing their global portfolio on our solution due to our panel-level monitoring, enhanced safety features, cutting-edge cybersecurity capabilities, and highly sophisticated energy management systems. Added to this is the very strong interest we are seeing for domestic content commercial products that we expect to begin shipping before the end of this year. Moving to Europe. The residential market continued to be slow in Q2 and, in fact, declined in the Netherlands for the third straight quarter. For SolarEdge, our residential sell-through in Europe in the second quarter was up 10% quarter over quarter, with inverters and optimizers up 6% and batteries up 20%. In commercial, sell-through was down 3%. In general, the European CNI market has been relatively flat over the last three quarters, and there is not an expectation for acceleration in the second half of the year in most countries. In the Italian market, however, a special incentive plan equivalent to the residential eco-bonus program, which significantly boosted the Italian residential market in recent years, is in final stages of regulatory approval. Between our strong market share in the Italian CNI market and our recently released commercial battery, We are in a position to benefit from this program, which will likely include a commercial storage component. Until that time, however, the inventory consumption of our commercial products in the European channels will likely remain sluggish. In the international markets region, revenue in the second quarter was $56 million, up 43% quarter over quarter. We are making nice strides in the Thailand market where we posted record quarterly revenues in the second quarter. The momentum here is related to what we discussed above as enterprise customers standardized their global supply chain infrastructure on our equipment in order to meet safety standards and in many cases to address various scope one and scope two emission requirements for corporate ESG ratings. We are continuing to make progress on clearing the channels and expect channel inventory in the U.S. to be largely normalized by the end of the third quarter. In Europe, the clearing process will likely extend into the early part of 2025 due to the above-mentioned slower recovery and changing inventory holding behavior of distributors in the European markets who are targeting lower levels of days on hand compared to past practices. During this period, as the channel clears inventory, our revenue will continue to track below the underlying demand for our products. Moving to products, and to expand on the second focus area I discussed in the start of my remarks, our product roadmap. At InterSolar in Munich in June, we announced the global rollout of SolarEdge One for CNI, our software-based energy optimization platform for commercial and industrial applications. SolarEdge One for CNI is a key piece of our strategy to capture market share and margin as systems and requirements become more complex and require sophisticated energy management software and enhanced cybersecurity protection. We have already started to sell recurring software services and will be adding additional features in the quarters ahead. SolarEdge One for CNI is based on a combination of organic capabilities developed by SolarEdge as well as the integration of technical and go-to-market assets we added through the acquisition of Hark and Wevo. Let's talk a bit about cybersecurity. In recent months, a growing share of customers, especially in the CNI segment, have made cybersecurity a go-no-go factor in their procurement decisions. While this has long been common in sensitive installations like military bases or government buildings, It is becoming the new norm for all types of customers, from universities to gas stations. We have built significant expertise in this area, which is becoming a real differentiator. At the same time, several countries have already started putting more comprehensive cybersecurity regulations in place for critical grid infrastructure. We have many meaningful dialogues with regulatory bodies as these new rules are drafted. and we expect to be in a position to quickly comply with any new regulation as a result, which should further set us apart from the competition. In fact, we invite any of those that are attending REplus next month in California to join the workshop we are leading on cybersecurity for solar systems to learn more about this critical topic. Also at Intersolar, we unveiled our next-generation three-phase residential energy solution for European markets that will be available next year, comprised of our next generation three phase inverter and next generation battery. This new inverter will significantly reduce cost per watts and is designed to fully optimize backup attached solar systems on larger rooftops that we are increasingly seeing in the German speaking countries. This inverter will also be simpler to install, significantly reducing installation times and costs. In the second quarter, we made first shipments of our commercial outdoor batteries to Europe. This is a market that we think has the potential to follow a similar growth trajectory seen in the residential storage space in recent years. Our offering will expand with an indoor commercial storage battery that will be released in 2025. At REplus next month, we will be displaying our next-generation single-phase residential system for the North American market that is expected to be released in the second half of 2025. This new system will include an inverter, battery, backup interface, and meter collar. The inverter will be based on silicon carbide switching elements and advanced power topology to deliver enhanced system level efficiency, greater backup power, and safety features above and beyond our current offering. The new inverter will also come pre-equipped with PCS, which means customers can install much more PV while avoiding costly main panel upgrades. Also at ARRI+, we will be showcasing our next generation battery. This new battery will be a US-made, DC-coupled, LFP-based modular and scalable solution from 4.4 to 44 kilowatt hour that will bring our expertise in module level optimization to the battery module level. We expect it will also represent a significant improvement in our cost structure relative to our current single-phase offering. Our tracker product also continues to gain momentum. There are now approximately 175 megawatts that have been installed or are in the process of installation and confirmed orders for approximately 30 additional megawatts that are scheduled to be installed this year. Moving to operations. In our Austin, Texas facility, we manufactured approximately 450 megawatts of single-phase inverters in the second quarter. And as we announced last month, we achieved our target run rate of 500 megawatts during Q2. We also announced the shipment of the first 20,000 of our domestically produced optimizers in the second quarter from our second U.S. contract manufacturing facility in Florida. We believe that the inverters and optimizers we manufacture in the United States, when paired with U.S.-made racking equipment that is available in the market, allow our TPO customers to use elective safe harbor to qualify for the 10% domestic content ITC adder today. We are also on track to have domestic content commercial product available by the end of the year. As mentioned above, we also expect to begin shipping domestically produced batteries in the first quarter of 2025, which is expected to enable solar plus storage TPO installations to access the bonus credit as well. These IRA designated products are an exciting opportunity for the solar and storage market as more installers are able to access the various incentives. To conclude my remarks, we have taken steps to return to profitability and cash flow stabilization post-channel inventory clearing at a quarterly revenue level of $500 million, which our underlying business represents already today. The actions we are taking in the areas of market share gains and product roadmap should enable us to surpass $550 million in quarterly revenue in a post-inventory clearing environment which we expect will be in the second quarter of 2025, and set the stage for additional growth with more products and continued technological innovation. I will now hand it over to Onan.