SolarEdge Technologies, Inc.

Welcome to the SolarEdge conference call for the quarter ended June 30th, 2025. 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 go ahead.

Good morning, and thank you for joining us to discuss SolarEdge's operating results for the second quarter ended June 30, 2025, as well as the company's outlook for the third quarter of 2025. With me today are Shuki Neer, Chief Executive Officer, and Asaf Alperovitch, Chief Financial Officer. Shuki will begin with a brief review of the results of the second quarter and its June 30th, 2025. Asaf will review the financial results for the second quarter, followed by the company's outlook for the third quarter of 2025. 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 earnings press release and our filings with the SEC for a more complete description of such risks and uncertainties. Please note, during this earnings call, we may refer to certain non-GAAP measures, which are not measures prepared in accordance with U.S. GAAP. The non-GAAP measures are being presented 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 press release 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 30th, 2025 press release may obtain a copy by visiting the investor relations section of the company's website. And with that, I'll turn the call over to Shuki.

Thank you, JB. Good morning, everyone. And thank you for joining us. I'm pleased to share with you today the progress we've made across all four pillars of our turnaround journey. But first, let me review the recent changes to regulatory and tariff policies that removed some uncertainties hanging over the industry. The recently enacted One Big Beautiful Bill Act redefined solar and storage markets in several key ways, and I'd like to share with you how we intend to maximize the opportunities and navigate the challenges in this environment. First, and most importantly for SolarEdge, The bill validates our multi-year strategy of onshoring manufacturing to the US by preserving the 45X advanced manufacturing credit for the next seven years. With the improved visibility this law provides, we intend to manufacture in the US and to ship US-made SolarEdge products both domestically and across the globe for years to come. Second, US customers have a built-in incentive to prefer products that are made in the US, especially if they comply with FEOC requirements and meet domestic content thresholds. This aligns with our US manufacturing and supply chain strategy, which we believe positions us well to support such customers. Third, the extension of storage tax credits will support the trend of increasing battery adoption. This expands our TAM and requires just the kind of sophisticated energy management algorithms that we have refined for years by using the vast amount of data source from our large installed base. Lastly, in the residential space, demand is expected to decline in 2026 with the elimination of the 25D credit, a decline that is expected to be partially offset by a shift to TPO as the 48E credit continues through 2027. We believe we are well positioned to benefit from this shift, given our strong position and product fit with TPO. Let's talk about tariffs. Since we last spoke, tariff rates on different countries have changed, and we have continued our efforts to optimize our supply chain for prevailing tariffs and domestic content levels. When added together, The gross margin headwind in the second half is expected to decline to approximately 2% from the previous expectation of 4% to 6%. Additionally, we now expect free cash flow to be positive for the full year 2025. We still believe that we will fully offset the tariff headwind in 2026 net of pricing adjustments. Switching to the progress across our key priorities. Q2 results and Q3 outlook both show that we are firmly moving in the right direction on all four priorities. And I'm proud of how our team has executed despite the challenging global environment. First on financial strength. In Q2, we delivered quarter over quarter and year over year top line growth and margin expansion for the second straight quarter. The midpoint of our Q3 guidance follows the same trajectory. At the same time, we have kept our expenses in check and have focused on our core business. Our second priority is recapturing market share. In US Resi, we have seen a continued shift to the TPO model, which we expect will significantly accelerate in 2026. In recent years, we have built an infrastructure that supports our TPO partners, so we believe we are well prepared to capitalize on this market dynamic. We believe we have met and plan to continue to make efforts to meet requirements for both domestic content and FIOC, which allow them to maximize 48E credits and headers. And we believe that our products are very well suited to support the scale, performance, and integration needs of the unique TPO business model. In the U.S. CNI segment, we believe that the growing importance of domestic content and increasing field restrictions offer us a compelling opportunity to gain share. For example, last week we announced a multi-year agreement with Solar Landscape, to deploy SolarEdge equipment on more than 500 CNI rooftops across the country. In addition, we signed a multi-frame agreement with a leading US retailer that will see SolarEdge products integrated across its locations nationwide. These new agreements underscore the value we bring to enterprises and build on the recent momentum we've had with these customer sets. Turning to Europe. Last week I met with our regional leadership team in Europe and visited with key customers. The positive momentum that we discussed on our last earnings call and experience at InterSolar has continued. Our pricing and promotion campaigns have shown signs of success and our improved go-to-market strategy is strengthening our partnerships with installers and distributors. As a result, the majority of our distribution partners reached normalized inventory levels at the end of Q2 2025, as we had anticipated. And importantly, we have seen initial market share gains in Europe in the second quarter. That said, our share in Europe is still below what SolarEdge commanded in the past and is well below what I think we can and should be. But with our energized team, our leading edge and expanding software and service solutions, and our next generation platform coming soon, I believe we have a very good opportunity to grow our business in Europe even further in the quarters ahead. Turning to our third priority, accelerating innovation. Our Nexus platform remains on track for initial volume by the end of the year. We already have several operating units in our facilities, And next month at RE+, we will have a hands-on experience for installers to demonstrate how flexible and easy Nexus is to install, connecting inverters and batteries with a simple click. On commercial storage, we had a record sales quarter, and we expect growth to continue. While still in the early days, we expect commercial storage to follow the same trend of accelerating adoption that we witnessed in the residential storage space. Moreover, we believe that our commercial storage offering, combined with our software capabilities, position us well as CNI customers increasingly transition to solutions that combine PV, storage, and energy management software. Speaking of software, we have seen increased traction with our Wevo EV charging software solution. In the US, Wevo was selected by PG&E to manage its nearly 4,000 EV chargers. Wevo Software is also enabling the largest public charging station in New York State, located in Queens, and backed by a Con-Ed program. Additionally, as we announced this week, we have entered into a strategic partnership with the Scheffler Group, one of the world's leading manufacturers for the automotive industry. Under the partnership, Wevo will manage the thousands of charge points that Scheffler intends to deploy at its facilities around the world. Scheffler has been a SolarEdge PV customer for years, and this agreement highlights the additional software and service capabilities that we can add to our value stack for enterprise customers. Our fourth key priority is ramping up our US manufacturing. In Q2, we continue to build out and optimize our US manufacturing footprint. which now includes residential inverters in Texas, optimizers and commercial inverters in Florida, and batteries in Utah. We are also planning to ramp up production towards the end of the year in order to support exports of competitive products to our European and international customers. To summarize, we believe we are in a much better position today than we were a quarter ago. A layer of uncertainty has been removed from our business. and we have continued making good progress on all four pillars of our turnaround journey. While we are encouraged by the progress this quarter, we know there is still plenty of work ahead. We see significant room to improve execution and even more opportunity to grow and build a healthier, more profitable business for the long term. With that, I will turn it over to Asaf.