Major growth but supply chain problems hit SolarEdge profit

Israeli solar energy technology company SolarEdge Technologies (Nasdaq: SEDG) beat analysts’ estimates on revenue in the first quarter of this year, but missed on profit. This is a result of opposing factors: on the one hand, demand for the company’s products rose against the background of the energy crisis in Europe, and sales in the US reached record levels; on the other hand, supply chain difficulties eroded gross profit.

SolarEdge provides systems for monitoring and optimizing solar energy production, and energy storage solutions. In late trading in New York, after the quarterly financials were released, the company’s share price rose 2%. SolarEdge has a market cap of $14.14 billion.

First quarter revenue totaled $655 million, representing 61.6% growth over the corresponding quarter of 2021, and $20 million ahead of the consensus analysts’ estimate. On a GAAP basis, net profit was $33.1 million, up 10.1% in comparison with the corresponding quarter.

As mentioned, supply chain difficulties eroded the company’s profitability, raising the cost of components and of shipping for its products. Movements in the euro-dollar exchange rate also had a negative impact on profit. The gross profit margin in the solar segment was 30.2%, which compares with 32.8% in the previous quarter. The overall gross margin was 27.3%, down from 29.1% in the previous quarter and 34.5% in the corresponding quarter of 2021.

On a non-GAAP basis, SolarEdge posted a net profit $68.8 million, up from $55.5 million in the corresponding quarter. Earnings per share were $1.20, $0.07 below the consensus analysts’ estimate.

Cash flow used in operating activities was $163 million, compared with $89.6 million generated from operating activities in the previous quarter and $24.1 million generated from operating activities in the corresponding quarter last year.

At the end of the first quarter, SolarEdge had cash and cash equivalents of $979 million, net of debt, which compares with $548 at the end of 2021.

During the first quarter, SolarEdge raised $650.5 million net in a share offering at $295 per share. Its share price closed at $255.31 yesterday.

For the second quarter, the company forecasts revenue of $710-740 million, which is more than the analysts’ estimate of $687 million. The non-GAAP gross margin is expected to be 26-29%. Revenue from the solar segment is expected to be $660-690 million, with a gross margin of 28-31%.

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SolarEdge CEO Zvi Lando said, “”We are pleased with our record revenues for the first quarter which represent 62% growth from the first quarter of last year and which are driven by record revenues in the United States and 14 countries in Europe. We continue to demonstrate our operational capabilities by navigating the current supply chain environment to meet strong worldwide demand for our products, and continuing to build long-term manufacturing capacity to support our growing businesses.”

In the conference call following the release of the quarterly financials, Lando said that the company had had record sales in the Netherlands, Italy, Poland, Spain, Switzerland, and the UK. He said that the first quarter was traditionally the weakest in Europe, but that this year the company had experienced substantial growth in demand – 40% in the domestic sector and 52% in the commercial sector, in comparison with the previous quarter. Given the rise in electricity prices in Europe and government support there, SolarEdge sees continuing strong growth momentum on the continent. He mentioned that in order to meet the demand, the company had had to dispatch some of its products by air freight, and, along with the effects of currency fluctuations, this had put pressure on gross profit margins.

Published by Globes, Israel business news – en.globes.co.il – on May 3, 2022.

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