SolarEdge Technologies Plans to Increase Shipments of Three-Phase Commercial Inverters
2023-08-04
SolarEdge Technologies held its Q2 2023 Earnings Call to discuss the company's operating results for the second quarter and outlook for the third quarter of 2023. One of the key highlights of the meeting was SolarEdge's plan to increase shipments of three-phase commercial inverters during Q3 and Q4.
The solar industry's market outlook varied across different regions. In Europe, installation rates remained high, although growth was slightly more moderate than anticipated due to various factors. However, SolarEdge experienced strong growth in Europe during the second quarter. Distributors in Europe currently grapple with higher-than-optimal inventory levels, but the company sees an opportunity to expand its market share by offering advanced energy management solutions. In the U.S. residential market, higher interest rates and changes in net metering regulations in California have impacted the market.
During the meeting, SolarEdge highlighted several key drivers of its business. Firstly, the company expects increased shipment of three-phase commercial inverters, particularly in Europe. Additionally, the use of optimizers in conjunction with two modules is expected to contribute to better gross margins. Furthermore, air shipment costs are projected to decrease in Q4. The company also emphasized its focus on R&D spending to develop new areas, products, and next-generation solutions. Notably, SolarEdge announced a strategic partnership with Infineon for power semiconductors.
While specific details about the evolving competitive landscape were not provided, SolarEdge emphasized its commitment to differentiation and justifying its pricing based on value relative to competitors. The company expects market dynamics to stabilize in the future, with more activity in cost reduction and reasonable price reductions anticipated. Inventory levels in Europe were deemed reasonable, while in the U.S., they were higher and may take longer to work through. Price reductions may be considered in 2024 when there is a better view of the company's cost management structure and a more stable market condition.
During the meeting, the CFO provided updates on two important Key Performance Indicators (KPIs): the backlog and the EBIT margins. The CFO reported that SolarEdge had already delivered a volume close to the entire previous year, and the backlog for the first half of the year exceeded what had already been delivered. The company expects to achieve around 11 gigawatts of volume for the year, with the potential for even higher numbers based on product availability. However, the CFO noted that the backlog buildup was changing, as distributors and installers no longer felt the need to place orders far in advance due to improved product availability and reduced shipment costs. This indicates that backlogs will become shorter compared to a year ago. The CFO also addressed concerns about the lower EBIT margin.
SolarEdge's outlook for the quarter and year ahead is cautiously optimistic. The company expects Europe and the Rest of the World to remain strong markets, accounting for the majority of their business. They anticipate these regions to recover quickly in terms of orders and normalize patterns. However, there are concerns about larger installers' appetite to maintain inventories and the potential impact of interest rates on loans, which may affect the company's outlook.
The call was attended by several analysts from different firms, demonstrating the interest and attention the financial community has towards SolarEdge Technologies and its performance.