- SolarEdge’s Q3/2023 business was impacted by high inventory level in the distributor channels
- It expects the inventory to take 2 or 3 quarters to clear up and has offered significantly reduced guidance for Q4/2023
- Due to reduced demand, it has discontinued manufacturing in Mexico and has reduced capacity in China
SolarEdge Technologies has delivered its Q3/2023 financials in line with its revised forecast, saying the results reflect a slow market environment leading to high inventory of its products in distribution channels, especially in Europe. However, the management said that the magnitude of the dynamics ‘grew much greater’ than anticipated.
The company had lowered its quarterly guidance, pointing to unexpected project cancellations and pushouts of existing backlogs from distributors in Europe in October 2023 (see Israeli PV Inverter Maker Adjusts Q3/2023 Guidance).
Additionally, expecting reduced demand environment to persist, SolarEdge has discontinued manufacturing of its products in Mexico and reduced capacity in China.
Q3/2023 business
Its revenues of $725.3 million fell within the guided range, reflecting 27% sequential and 13% annual decline.
High product inventory in the distribution channels led to solar segment revenues going down by 29% QoQ and 14% YoY to $676.4 million.
GAAP gross margin dropped from 32% in Q2/2023 and 26.5% in Q3/2022 to 19.7% while GAAP net loss was $61.2 million and GAAP operating loss $16.7 million.
SolarEdge shipped 274,000 inverters and 3.3 million power optimizers during the reporting quarter, along with 121 MWh of residential batteries.
Markets
Due to high inventory in Europe, sell-through of its products went down by 22% sequentially, whereas in the US residential market it dropped by 13%. Its US commercial market sell-through was up 8% which, the management believes, is primarily due to the availability of low-priced modules helping held-up projects move forward.
Guidance
Expecting another 2 or 3 quarters for the inventory to clear up gradually, the management has offered a cautious forecast for Q4/2023.
It has forecast total revenues to fall within the $300 million to $350 million range. The solar segment’s contribution will be anywhere between $275 million and $320 million, while generating a gross margin of 7% to 10%.
Meanwhile, SolarEdge is ramping up manufacturing capacity in the US where it expects to ship 12,000 energy hub inverters in Q4, ramping to a run rate of 50,000 units/quarter. A 2nd site in the US is targeted to begin producing commercial inverters and optimizers by Q2/2024.
The manufacturer said it plans to ramp up the production of its 330 kW inverter for community solar and agrivoltaic applications for global deliveries in 2024.
