SolarEdge Technologies has adjusted its Q3/2023 financial guidance citing substantial unexpected cancellations and pushouts of existing backlogs from European distributors during the 2nd half of the quarter.
After reporting record revenues of $991.1 million in Q2/2023, SolarEdge had been cautious in its Q3 guidance going by high inventory in the US and Europe impacting demand. It had guided for revenues for the quarter to settle between $880 million and $920 million, with non-GAAP gross margin of 28% to 31% and operating income of $115 million and $135 million.
The company's solar business division was to contribute between $850 million and $880 million to total revenues and a gross margin of 30% to 33% (see SolarEdge Reports Record Revenues For Q2/2023).
Now the management expects Q3 revenues, gross margin and operating income to be below the low end of the prior guidance range. Revenues are now guided between $720 million and $730 million and GAAP gross margin within the 19% to 20% range.
Non-GAAP gross margin is likely to fall within 20.1% and 21.1%, whereas GAAP operating loss should be between $9 million and $28 million.
Non-GAAP operating income is guided to be within $12 million and $31 million, down from the previous forecast of $115 million and $135 million.
Further on, it anticipates significantly lower revenues in Q4 as the inventory destocking process continues.
SolarEdge CEO Zvi Lando explained, "We attribute these cancellations and pushouts to higher than expected inventory in the channels and slower than expected installation rates. In particular, installation rates for the third quarter were much slower at the end of the summer and in September where traditionally there is a rise in installation rates."
He added, "The adjusted guidance is unrelated to the tragic events that have unfolded in Israel."
While existing inventories are a cause of concern for the industry, Roth MKM's Philip Shen sees Chinese single-phase inverters as an additional threat in the European Union (EU).
As some of the distributors cancel orders for SolarEdge inverters according to Roth's internal checks, Shen believes SolarEdge may be offering more free shipping or FCA-type pricing than normal, which may make up for the faster revenue recognition. Both SolarEdge and its US-headquartered peer microinverter maker Enphase Energy are discounting prices and extended payment terms for cash-strapped distributors.
At RE+ 2023, SolarEdge reportedly admitted that several EU distributors are resorting to fire sales to clear inventories. It sees the risk of both US and EU distributors going bankrupt in the months ahead, according to Roth
Further details will be clear once SolarEdge holds its Q3/2023 call on November 1, 2023.
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