SolarEdge Technologies, Inc. Q1 FY2025 earnings call

• Four strategic priorities: strengthening financials, regaining market share, accelerating innovation, ramping up U.S. manufacturing. Demonstrated progress across all priorities in Q1 and outlook for Q2. • Mitigating tariff impact: U.S. manufacturing positions SolarEdge well, but tariffs will impact gross margins in 2025, with efforts to diversify supply chain. • Region performance: North America sell-through down 18% QoQ due to seasonality, but solar and storage fundamentals still supported. Europe sell-through up 6% QoQ, expect distribution partners to reach normalized inventory by end of Q2 2025.

Total revenues for the first quarter were $219.5 million. Excluding revenues from discontinued operations at the Kokam Energy Storage division of $7.4 million, Non-GAAP revenues were $212.1 million. Revenues from the U.S. amounted to $132.1 million, representing 62% of Non-GAAP revenues. Revenues from Europe were $47.4 million, representing 22% of Non-GAAP revenues. International Market revenues were $32.6 million, representing 16% of Non-GAAP revenues. On a megawatt basis, 1.2 gigawatts of total shipments were made, with 50% commercial & utility products and 50% residential. In Q1, 180 megawatt hours of batteries were shipped, mostly to Europe, with a blended ASP per kilowatt hour on all PV attached batteries of $267 in Q1, up from $262 in Q4.

• Second quarter revenue guidance: $265 million to $285 million. • Non-GAAP gross margin guidance: 8% to 12%, including approximately 2 percentage points of new tariff impact. • Non-GAAP operating expenses guidance: $90 million to $95 million. • Full year free cash flow expected to be approximately breakeven due to newly introduced higher tariffs.

• Tariffs impact: Incremental tariffs on products from China and other countries will negatively impact gross margins, with expected 2% impact in Q2 2025, 4%-6% in second half of 2025, and efforts to mitigate to 2% by Q1 2026. • Policy changes: Uncertainty in U.S. market due to potential policy changes. • Supply chain uncertainties: Need to diversify supply chain while maintaining product quality.

Q: Storage was quite strong this quarter. Can you just give us an idea of how much commercial storage is growing within this? And then given that some of your peers in the U.S. are going to be, subject to very high Chinese tariffs and your price increases, can you talk about what your strategy is going to be given I don't think that you have some of the same issue. And then if you can also just talk through your new battery rollout, if timing is going to be impacted at all because I do believe that uses lithium cells.

A: Thank you for your question. So you started with the commercial battery. And as you know, we are not detailing specific numbers about specific products. But overall, as we indicated last quarter, we are pleased with the growth of that category for us and we are seeing increased attach rates for commercial batteries in different countries in the world. As it pertains to the U.S. And I assume that you refer to commercial batteries or to batteries in general, and over there we are also seeing an increase in attach rate of batteries and the new battery that you are referring to if I'm not mistaken is the [Nexis one] (ph), which is on the residential side and over there we expect to start shipping towards the end of the year in the fourth quarter and we believe that the solution we're going to introduce is going to benefit our customers immensely both in terms of PV, as well as the combination of PV and storage, as we develop the battery together with the inverter to be an optimized system.

Q: When you talk about your 4% to 6% impact on gross margins from the tariffs, can you give us an idea of how much of that is from China versus other regions?

A: So, we the guidance or the estimate that we provided is based on the currently known tariffs of 145% for products coming from China and 10% for products that are coming from other markets. And this is how we base the calculation. So obviously the impact on products and components coming from China is much more -- is much higher than from other countries. At the same time, as we said, our supply chain team is working diligently in order to find alternative sources, as well as to optimize our supply chain based on whether it's coming from China or from other places to provide us with number one the most supply chain friendly sources. But at the same time we are very, very cognizant of the need for quality products. So we are not going to rush and just substitute one component with another because they are cheaper. We're going to actually test them, make sure that the quality is according to our standard and then we are going to roll it out.