Israeli solar inverter supplier SolarEdge Technologies, Inc. exited 2020 with 2% annual growth in its revenues of $1.46 billion, however its gross margin declined to 31.6% compared to 33.6% it reported for the year 2019. Its net income of $140.3 million dropped from $146.5 million in the year before (see SolarEdge Earned $52.8 Million Net Income In Q4/2019).
Its Q4/2020 revenues on annual basis dropped 14% to $358.1 million, but in the COVID-19 impacted year, it reported sequential growth of 6% from Q3/2020 (see A Healthy Q3/2020 For SolarEdge Technologies). Its solar business contributed $327 million. This, as the management said, is reflective of the strength of the US residential market and record revenues from outside of Europe and the US led by Australia.
"The return to growth in installations in the US residential market drove our sequential growth and return to the anticipated solar margins," said CEO Zvi Lando. "Despite the global pandemic, we concluded the year with slight growth in revenues, healthy cash generation and are well positioned for 2021 and beyond, having invested significantly in development of new products to be released this year as well as development of our non-solar businesses, with readiness to supply full powertrain kits for the e-Mobility sector in Europe."
Management said the production ramp up of its Sella 1 manufacturing facility in Israel is on schedule. This together with its fabs in Vietnam and Hungary are expected to cover close to 85% of its US products without tariffs by the end of Q1/2021.
Shipment
During Q4/2020, SolarEdge shipped more than 1.36 GW of inverters, of which 594 MW were shipped to Europe, and 457 MW to North America. In terms of segments, the company said it was divided between 556 MW of commercial products and 798 MW of residential products. It contributed to 6.1 GW AC inverters the company shipped in the entire year.
Roth Capital Partners sees the company's non-solar business also growing strong in the nest term as Philip Shen opined, "SEDG's non- solar businesses appear to be reaching an inflection point, and the company could generate ~$235mn in revenue in 2021 from storage and e-Mobility, both at lower margins than solar."
In e-Mobility, SolarEdge has been selected to supply full electrical powertrain units and batteries for the Fiat E-Ducato light commercial vehicle, noted Roth Capital and commented, "We believe the win was due in part to the company's ability to offer a comprehensive solution as a 'one-stop-shop,' including inverters, DC-to-DC converters, batteries, onboard chargers, vehicle control units, and software. We believe other competitors may not offer a similarly comprehensive solution."
Guidance
For Q1/2021, SolarEdge has provided a strong guidance for its revenues to be reported within the range of $385 million to $405 million, comprising revenues from solar products between $360 million to $375 million. Its non-GAAP gross margin is expected to be between 34% to 36%, and for solar products it should be within 36% to 38%. This guidance comes on the back of US residential sales doing well for the company in this quarter and it also expects demand in the commercial segment to recover.
Roth said, "SolarEdge's non-solar businesses appear to be reaching an inflection point, and the company could generate ~$235mn in revenue in 2021 from storage and e-Mobility, both at lower margins than solar."
However, Cowen analysts are cautious in their praise. "We like the SolarEdge story in the mid-term, but see the company stuck in a transitory period where lower margin international sales are strong, the storage product is likely ~6+ months away and the utility scale inverter is also in the wings. We like the setup into 2021; however, we continue to see moderate share losses in U.S. residential to Enphase and Generac with growing share in U.S. commercial and all markets internationally," explained Jeffrey Osborne.