SolarEdge’s Q4/2021 Financial Results

• SolarEdge reported growing its annual GAAP revenues in Q4/2021 by 54% and by 34.6% in 2021
• Business grew in all its markets, and it improved prospects in Southeast Asia and the Middle East
• Current challenging operational and supply chain environment while ramping production among other reasons is putting pressure on its gross margins which it expects to last until the mid of 2022
• SolarEdge plans to report Q1/2022 revenues within the range of $615 million to $645 million, with solar bringing in between $575 million to $595 million

Israel headquartered solar inverter supplier SolarEdge Technologies, Inc achieved record revenues of $551.9 million in Q4/2021, reflecting an annual increase of 54% and contributing to the 34.6% YoY growth in 2021 revenues of $1.96 billion.

The solar segment continues to lead its business with 32% annual growth in the vertical in 2021. While growth was noticed across all segments and regions for the solar business, SolarEdge pointed out significant growth in the markets of Italy, Germany, France, Poland, Israel and the region of Taiwan.

Its business in North America grew 29% from previous year and in Europe it went up by 36%. The Israeli company is also gaining market share in Southeast Asia and the Middle East where the growth curve was over 43% led mainly by commercial installations.

GAAP net income of $41 million for Q4/2021 declined 23% sequentially, but increased 132% from $17.7 million in Q4/2020 (see SolarEdge Releases Q3/2021 Financial Results). On annual basis however, it grew its net income by 21% to $169.2 million (see SolarEdge 2020 Revenues Up, Net Income Down).

Despite the overall strong quarter, the management admitted to experiencing 'temporary pressure' on the gross margins citing current challenging operational and supply chain environment, expanding infrastructure and ramping production to meet the growing demand for inverters and optimizers. GAAP gross margin for Q4/2021 was 29.1% (Q4/2020: 30.8%), and for 2021 it was 32.0% (2020: 31.6%).

"Ramping production to meet this demand in the current supply chain and logistics environment is having an impact on our top and bottom line as we prioritize expedited shipments in order to meet customer schedules, at times at the expense of our gross margin," said CEO Zvi Lando. "We expect this situation to last until the middle of the year as we adjust our infrastructure and ramp manufacturing capacity to this new level of demand."

For 2022, the company says it has firm orders for delivery of a MW volume that represents 60% of its residential shipments in 2021, excluding batteries. For the commercial segment, that's growing for a variety of reasons including high electricity prices – its current MW firm order for delivery is 143% of all commercial MWs it shipped in 2021.

SolarEdge has started shipping residential inverters and optimizers from its Mexican contract manufacturing facility to the US, which Cowen's analyst Jeffrey Osborne opined should alleviate volume constraints and also help it lower shipping costs and tariffs, while improving lead times in the US, cutting it down from 6 to 8 weeks, now to 7 to 10 days.

Guidance

For Q1/2022, SolarEdge has guided for revenues within the range of $615 million to $645 million, with solar segment bringing in between $575 million to $595 million. Non-GAAP gross margin for the quarter will be anywhere between 28% to 30%, and that for the solar segment will be within 30% to 32%.