Hello, and welcome to the SolarEdge Conference Call for the First Quarter Ended March, 31, 2025. This call is being webcast live on the company's website at www.solaredge.com in the Investors section on the Events Calendar page. This call is the sole property and copyright of SolarEdge with all rights reserved in any recording, reproduction or transmission of this call without the expressed written consent of SolarEdge is prohibited. You may listen to a webcast replay of this call by visiting the Event Calendar page of the SolarEdge investor website. I would now like to turn the call over to J.B. Lowe, Head of Investor Relations for SolarEdge. Please begin.

Good morning. Thank you for joining us to discuss SolarEdge’s operating results for the first quarter ended March 31, 2025, as well as the company’s outlook for the second quarter of 2025. With me today are Shuki Nir, Chief Executive Officer and Asaf Alperovitz, Chief Financial Officer. Shuki will begin with a brief review of the results for the first quarter ended March 31, 2025. Asaf will review the financial results for the first quarter, followed by the Company’s outlook for the second quarter of 2025. We will then open the call for questions. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management’s current expectations. We encourage you to review the Safe Harbor statements contained in our earnings press release, the slide presentation posted on our website ahead of this call today and our filings with the SEC for a more complete description of such risks and uncertainties. Please note, during this earnings call we may refer to certain Non-GAAP measures, including Non-GAAP net income and Non-GAAP net diluted earnings per share, which are not measures prepared in accordance with US GAAP. The Non-GAAP measures are being presented because we believe that they provide investors with a means of evaluating and understanding how the Company’s management evaluates the Company’s operating performance. Reconciliation of these measures can be found in our earnings press release, slide presentation, and SEC filings. These Non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with US GAAP. Listeners who do not have a copy of the quarter ended March 31, 2025 press release or the supplemental material, may obtain a copy by visiting the “Investor Relations” section of the Company’s web site. With that, I will turn the call over to Shuki.

Thank you JB. Good morning everyone and thank you for joining us today. Before we dive in, I want to welcome Asaf Alperovitz to the SolarEdge team. Asaf brings deep financial and operational experience, and I’m confident he’ll be an important part of executing our turnaround and reaching our full potential. Now to business. I will start with our progress on the four strategic priorities we set for the year. Then I’ll walk through our approach to mitigating the impact of the recently imposed tariffs. And finally, I’ll share my perspective on the state of the business across our key geographies. Let’s begin with our priorities. Last quarter I outlined the four key priorities that are going to drive the SolarEdge turnaround story and position us for sustained long-term growth. First, strengthening our financials. Second, regaining market share. Third, accelerating innovation. And fourth, ramping up our U.S. manufacturing. I believe that our first quarter results and our second quarter outlook demonstrate meaningful progress across all four priorities. First on financial strength. In Q1, we delivered quarter-over-quarter and year-over-year revenue growth. We expanded our gross margins. We reduced our operating expenses. And we delivered our second straight quarter of positive free cash flow. All that, in the face of a more challenging global environment. We are not done focusing on operational efficiency. Last month, we sold one of our battery manufacturing facilities in Korea to Enovix. And last week, we divested our tracker business, which will reduce our operating expenses without a significant impact to our top-line. Our second priority is recapturing market share. This effort spans geographies, product lines, market segments and customer types. Starting with the U.S. In 2024, Wood MacKenzie recognized SolarEdge, as the number one inverter supplier in the U.S. for rooftop solar installations. We believe this…

Thank you Shuki, and good morning everyone. I am very excited to join SolarEdge at such a pivotal time for the company and to support the execution of our turnaround plan. A little bit about myself: I have an extensive accounting and operational background with over two decades of leadership experience with global companies that includes transforming organizations and leading financial strategy. Most pertinent to my new role here at SolarEdge, I have significant experience with global industrial manufacturing organizations, so I am well versed in logistics, supply chain, and operations, and I am excited to apply this experience to help drive operational and financial excellence here at SolarEdge. Turning now to the quarterly results: Total revenues for the first quarter were $219.5 million. Excluding revenues from our discontinued operations at the Kokam Energy Storage division of $7.4 million, our Non-GAAP revenues were $212.1 million. Revenues from the U.S. this quarter amounted to $132.1 million, representing 62% of our Non-GAAP revenues. Revenues from Europe amounted to $47.4 million, representing 22% of our Non-GAAP revenues. International Market revenues amounted to $32.6 million, representing 16% of our Non-GAAP revenues. On a megawatt basis, we shipped 642 megawatt to the United States, 324 megawatt to Europe and 242 megawatts to the international markets, for approximately 1.2 gigawatts of total shipments, which is the highest shipment level we’ve had since the third quarter of 2023. 50% of total megawatt shipments this quarter were commercial & utility products and 50% were residential. ASP per Watt, was [$0.173] (ph), down 17% from Q4. Lower pricing in Europe and a lower optimizer to inverter ratio, drove the quarter-over-quarter decrease. In Q1 we shipped 180 megawatts hour of batteries with the majority shipped to Europe. Our blended ASP per kilowatt hour on all PV attached batteries was $267…

Thank you. [Operator Instructions] And your first question comes from the line of Christine Cho with Barclays. Please go ahead.

Good morning. Storage was quite strong this quarter. Can you just give us an idea of how much commercial storage is growing within this? And then given that some of your peers in the U.S. are going to be, subject to very high Chinese tariffs and your price increases, can you talk about what your strategy is going to be given I don't think that you have some of the same issue. And then if you can also just talk through your new battery rollout, if timing is going to be impacted at all because I do believe that uses lithium cells.

Thank you for your question. So you started with the commercial battery. And as you know, we are not detailing specific numbers about specific products. But overall, as we indicated last quarter, we are pleased with the growth of that category for us and we are seeing increased attach rates for commercial batteries in different countries in the world. As it pertains to the U.S. And I assume that you refer to commercial batteries or to batteries in general, and over there we are also seeing an increase in attach rate of batteries and the new battery that you are referring to if I'm not mistaken is the [Nexis one] (ph), which is on the residential side and over there we expect to start shipping towards the end of the year in the fourth quarter and we believe that the solution we're going to introduce is going to benefit our customers immensely both in terms of PV, as well as the combination of PV and storage, as we develop the battery together with the inverter to be an optimized system.

When you talk about your 4% to 6% impact on gross margins from the tariffs, can you give us an idea of how much of that is from China versus other regions?

So, we the guidance or the estimate that we provided is based on the currently known tariffs of 145% for products coming from China and 10% for products that are coming from other markets. And this is how we base the calculation. So obviously the impact on products and components coming from China is much more -- is much higher than from other countries. At the same time, as we said, our supply chain team is working diligently in order to find alternative sources, as well as to optimize our supply chain based on whether it's coming from China or from other places to provide us with number one the most supply chain friendly sources. But at the same time we are very, very cognizant of the need for quality products. So we are not going to rush and just substitute one component with another because they are cheaper. We're going to actually test them, make sure that the quality is according to our standard and then we are going to roll it out.

Thank you. And your next question comes from the line of Colin Rusch with Oppenheimer. Please go ahead.

Thanks so much, guys. Can you talk a little bit about your pricing strategy as you get into the mid of the year as you think about, some of the dynamics around continuing to flush some of the inventory that's still in the channel and continuing to work towards improved margins. Just want to get a sense of how aggressive you feel like you can be in raising prices and holding existing prices?

Yes. Thank you for your question. So, talking about pricing in general and globally speaking even, what we try to do and what we will continue doing is to price our products and our solutions based on the value that we bring to our customers and based on the competitive advantage or the competitive advantage we have in specific markets. So for example, when VDE appreciates the energy that we generate or the increased energy that we generate, we will take that into account and we'll price it accordingly. And other factors in the market are going to impact our pricing as well. Overall, we feel that our pricing promotion in Europe is actually doing well and the feedback that we received from the channel partners is that these promotions and pricing actions that we took are having the initial positive sign and we will continue monitoring that and adjust as needed.

Thanks. And then the follow-up here is really around the inventory reduction. So you're kind of flat quarter-over-quarter on an inventory basis. What's the right level of inventory that you guys want to be able to carry and how quickly can you get there?

Hi. So in terms of inventory, we are consuming inventory, existing balanced inventory mostly within the European continent. In terms of inventory, we are working exclusively with operation team and we wanted to constantly reduce it quarter-by-quarter. I don't think we want to provide the specific guidance or target for that, but it's one of our main priority in terms of reducing the DIO consistently.

Thanks so much guys.

Thank you. And your next question comes from the line of Philip Shen with Roth Capital Partners. Please go ahead. Please go ahead Philip Shen. Your line is open.

Thanks for taking my questions. First one's on pricing. I believe back in November, you guys cut pricing for your distributors. And I think there was a 24% discount, but then there was also a 15% recovery discount. I think that recovery period might be coming to an end. Do you have plans on expanding or extending that recovery period? And then can you elaborate more or just more in general about how you expect your EU ASPs to trend by quarter through the rest of the year? Thanks.

Thank you. So you referred to the price promotion in Europe, just to make sure that everyone is on the same page. And as we indicated together with our distribution partners, we launched a campaign in Europe back in November in which we are trying to actually gain share or regain share in Europe. Part of it is pricing and part of it are other things that we are doing in order to engage more installers with the solar solution and we are showing them the value of the product and our service. As it pertains to pricing, as we said in our prepared remarks, we expect the majority of our distributors to reach normalized levels of inventory at the end of Q2 and we believe that when they are going to reach that level, we will no longer have to provide the incremental pricing adjustment. These are obviously things that are changing from day-to-day, from market-to-market. As I mentioned earlier, our pricing strategy is to be competitive at the market with a price that actually reflects the value that we bring to the customers. So these things can move left and right, but overall when the channel inventory is going to be normalized, we believe that we will be able to reduce the level of support that we give to our distributors.

Great. Okay. Thank you, Shuki. Shifting to the distributors, with the massive drop in value of modules and batteries, do you see a shift of power from the pan-European distributors to more local distributors? What are your thoughts on that dynamic? And how could that impact the way you sell to the European markets? Thanks.

So, actually tomorrow I'm heading to Intersolar in Germany and we are going to meet with many of our customers both distributors and installers and I will be able to ask them that question and get a better answer than what I can provide you now. At the same time, we at SolarEdge, we look at our customers and our channel partners whether they are large or small as important ones, we're trying to address their needs. And whether it will be large distributors that have more share or small distributors that will have more share, we treat them as partners and we are working together with them in order to actually deliver the best products to our installers, right? We are the ones that choose to work with SolarEdge and choose to install our solutions to the end customer.

Thank you. And your next question comes from the line of Mark Strouse with JPMorgan. Please go ahead. Your line is open.

Yes, good morning. Thanks for taking the questions. It's Drew on for Mark. First one, going to go back to pricing here, but maybe think about it in a whole different way. You talked about the gross margin impact net of pricing. Can you just talk about what you're seeing in the market for the market's ability to withstand higher pricing and what that will do to demand? And then also what you're seeing from your competition in the market and how much your price increases are going to compare to others?

Thank you Drew. It's an excellent question. Thank you for that. I assume that you refer to the U.S. market in this specific question. And as we mentioned, the tariffs they came not so long ago and still there is uncertainty in the market about their impact and what will actually happen. And as we mentioned, we are actually manufacturing in the U.S. So from that perspective, the adjustments that we need to make to our cost and to our supply chain are limited to sourcing and optimization of the supply chain. When it comes to pricing, we've made our estimates about where we believe the customers are going to be, what the value that we're going to provide them is, as well as the competitive landscape. But I think that we haven't seen any specific number or any specific figure that I can share with you from our competition.

Okay. Thank you. And then just excuse me, one follow-up. Appreciate the updated full year free cash flow outlook. Can you just talk about how that's impacting your decision to address the convert?

Yes. In terms of the converts, hi, good morning. At this point, our plans are not changed compared to last time, which is to use the cash on our balance sheet to pay down the debt fully. As you've seen the balance sheet for the [Q] (ph), we have enough cash to pay it given our $794 million in cash balance. But as we noted in the past, we're always assessing different options that may be available, but practically again at this point plans are unchanged.

Great. Thank you.

Thank you. And your next question comes from the line of Corinne Blanchard with Deutsche Bank. Please go ahead. Your line is open.

Hey, good morning. Thanks for taking my question. The first question would be on the storage, and it's a two question. How fast can you secure more ex-China supply? And then could you guys rethink your strategy regarding Sella 2 because you had that facility and it could be like an easy -- relatively easy way to get more battery and not be exposed to as much tariff. And then second question would be on Europe, if you can provide like a European demand in the market update what you're seeing that would be very helpful.

Okay. Thank you. And so starting with your question about batteries. So as we said, we provided what we believe would be the impact of the new imposed tariffs on our gross margin in total. We are not breaking it down into specifics whether it's batteries or other components. And our supply chain team has started actually looking into different ways in order to optimize our supply chain and our sourcing and to find the best possible way and while maintaining the quality of our product that we will be able to deliver quality products to the U.S. -- to our customers in the U. S. As it pertains to Sella 2, as you may recall the technology over there is NMC technology and at this stage we don't think that we are going to use that facility to make battery cells.

Sorry. Just on that one, could you change that line to LFP or would it be [two-time] (ph) consuming and too much CapEx consuming?

It will require a substantial CapEx investment anytime, which at this stage we are focusing on what we can control and on our core. And it's important for us to focus the resources that we have both the people and the funds and to direct them to the core business and to make that business grow and become profitable. Your second question was about Europe, if I'm not mistaken, but could you please repeat the question?

Sure. If you can just provide an update, what you're seeing in Europe, obviously it has been quite challenging in the last several quarters. So just wondering if you see like an improvement in certain market or if the situation has remained unchanged?

Yes. So the market in Europe, as you know, is challenging at this stage and our estimate as well as other people's estimates is that the market is going to decline year-over-year. Obviously Europe consists of different countries and different markets, but as a whole we expect it to decline year-over-year. At the same time, the early indications that we have shown that we've turned the corner in terms of our market share position and we feel and our channel partners are sharing with us as well as the POS, the sales rule that we saw in Q1. These are all good indications that show that we may have turned the corner in terms of market share and start to gain share actually in the market.

Thank you. And your next question comes from the line of Julien Dumoulin-Smith with Jefferies. Please go ahead. Your line is open.

Hey, good morning. This is Hannah Velasquez on for Julien. Thanks for the update. So one quick question and then a follow-up. How are you thinking about the 90 day tariff pause, as it pertains to your maybe longer-term margin impact? I know you talk about improving to two points by 1Q 2026, and then improving further thereafter. But does that assume the 90 day pause on, ex-China tariffs gets extended?

Yes, good morning. As we said, all the numbers that we provided over there are based on the assumption that the incremental tariff on products coming from China is 145% and we have the 10% on products coming from other places. So we did not assume any changes or extended pauses or anything of that sort.

Okay. Thank you. Super clear. And then can you just talk a little bit, about how you're thinking about any potential changes to transferability as it pertains to 45X? I assume no current changes reflected in your guidance, but just an update there in terms of how you're thinking about it. Thank you.

Sure. Good morning. In case we experienced timing issues, which are related to certain limitation on transferability of the IRA 45X tax credits, we believe that we will be able to get a refund through a direct pay mechanism. Considering these credits are backed by the federal authorities, we believe we can fund [Poplar Bridge] (ph) financing for short term amortization if required, if needed.

Thank you.

And your next question comes from the line of Brian Lee with Goldman Sachs. Please go ahead. Your line is open.

Hey, guys. Good morning. Thanks for getting me onto the call. I was a little bit late joining, so I apologize if some of this was covered. But when we look at the implied ASP per watt, it was lower than expected, but I think megawatt volumes shipped in the quarter were much better than expected. So I guess question on that, did you clear out volume through price in the quarter? Or was there just maybe a higher mix of commercial versus expected in the quarter? And then how should we think about price per watt embedded in the 2Q guidance and for rest of the year? Is this kind of the level of $0.17 a watt that's implied or is that going to go back up, go down? Just trying to get a sense of what to read through on the pricing side based on just the reported results for Q1.

Hi, good morning and thank you for your question. As it relates to Q1, the explanation is relating to the shipments versus their actual revenue recognized. We had relatively more deferred revenues this quarter than usually than typically due to timing of shipments versus the actual revenue recognition. As it relates to Q2, we don't provide this level of detail. So that's as much as I can say.

And then maybe just on the battery side, I know there's been a lot of questions and focus around that given the tariff situations. I mean, SolarEdge is a little bit unique because you had this Samsung NMC contract. I'm not sure if there's any volume still left, but can you kind of update us on the status of that? Is there something that will go towards satisfying U.S. battery storage demand this year, so you're a little bit less impacted. And then just the strategy going forward, sourcing LFP versus NMC and what suppliers are you planning to work with and from what regions and then maybe what by what time frame, if you could give us some more elaboration on the different pieces around your strategy? Thank you.

Yes. Thank you, Brian. So as we said, we do not break down the impact between the different components and the different products and the different sources and the impact keep in mind it's also net of pricing adjustment. And what we are focused on is to find the best solution. Our supply chain team is working diligently to find either to optimize our supply chain by finding the best sources both in terms of price, as well as in terms of quality. So we don't want to compromise on that obviously. And the impact that we've provided to you based on this the second quarter, the second half and later in 2026 is a combination of all of these things.

Thank you. And your next question comes from the line of Austin Moeller with Canaccord. Please go ahead. Your line is open.

Hi, good morning. I know you've talked about Europe already, but can you provide any details on the clearing of the channel given where electricity rates are throughout Europe?

Yes. Thank you. So as we said, we expect majority of our distribution partners to reach normalized inventory levels by the end of Q2. And it has to do with the underlying demand that exists for solar for the market, as well as the activities, the actions and the promotions that we've put in place in order to gain share within this market. So the combination of these two things are helping us gaining share. In addition to the growth in attach rate of battery, which is also helping us in that regard and the combination of all of these things, obviously, it is impacted by energy prices, but there are other factors that are contributing to the demand as well.

Okay. And just a follow-up, are you seeing substantial demand pull forward in the U.S. relative to what you expected given the risk to the investment tax credit as of January 2026? Or do you think that's being somewhat muted by current interest rates?

Well, thank you for that. We don't really see anything of that sort. Obviously, the uncertainty in the market is there. Our customers -- we are engaging with our customers and if they have any specific needs or any specific deals or transactions that they would like to engage with, we're going to definitely look into that. But as we indicated, we've just signed the multi-year agreement with the leading global real estate enterprise and over there it's something that is going to take several years to actually execute on installing SolarEdge products in all of their facilities. So, while there is some uncertainty in the short term, we believe that the underlying demand is there and the growth in need for electricity is going to continue growing.

Thank you. And your next question comes from the line of Kashy Harrison with Piper Sandler. Please go ahead. Your line is open.

Good morning. Thanks for taking the question and congrats on all the progress during the quarter. So first question for me, what were the Safe Harbor revenues in 1Q? And then as you look into 2Q, is the revenue growth coming from the U.S. or Europe? And I have a follow-up.

Hi, good morning. So in terms of Q1 portion of Safe Harbor, as we already indicated in the past, we don't break this out. In terms of Q2, what we can say is that there is a lower Safe Harbor amount in Q2 compared to Q1.

And is that -- so the 2Q growth is that revenue growth is that coming from the U.S. or is that coming from Europe?

I don't think we can elaborate beyond what I just said. Sorry.

Okay. Fair enough. And just for my follow-up question, if we look at your margins in 2Q, I think they would have been 12% before the impact of the tariffs. If you could theoretically close that gap between your sell in at $275 million and your sell through at $375 million. So in other words, if revenues increase to $375 million, where would you expect the margins to be again before the impact of tariffs?

So clearly in terms of the levers on the gross margin, the biggest driver is higher revenue leverage given our fixed cost position in infrastructure and the higher the revenue, the better utilization of fixed cost and the higher the marginality. Just to talk about couple of two relevant I think major levers that would be the new products coming in later this year with better cost structure and higher margins. And as long as we continue as we indicated to ramp up the U.S. production, which is the most economically attractive location to manufacture considering the IRA credits, we will see an increase in the margin and marginality.

Thank you. And your next question comes from the line of Ameet Thakkar with BMO Capital Markets. Please go ahead. Your line is open.

Good morning. I just have a couple of quick housekeeping questions, and thanks for the time. The $100 million kind of increase in prepaid expenses and other assets on the cash flow statement and then I assume kind of $52 million decline in deferred revenues and customer advances. Is that Safe Harbor and kind of a 45X tax credit sale related? And if so, can you kind of just kind of clarify which line items have which? Thanks.

Yes. These line items refer largely to the 45X credits and to the deferred revenue -- deferred revenue mostly declined due to the shipments of our safe harbor transaction which we announced in Q4. And you pointed rightly to the relevant balance sheet items. Thank you.

Thank you. And your next question comes from the line of Jordan Levy with Truist. Please go ahead. Your line is open.

Hi, team. It's Henry on for Jordan here. Thanks for squeezing me in. Just quick one for me, noting this is still a small part of the business, but it looks like the utility segment also had a nice quarter relative to last year. I'm just curious on your thoughts around that market this year and your ability to compete there. Thank you.

Yes. Thank you for that. Yes. It's as we said before, SolarEdge technology is actually optimizing the production, the power production of a given set of modules and it excels in conditions that are not ideal. So initially utility was something or the utility space was something that we did not participate in. However, last year we introduced a product that is addressing what we refer to as optimized utility. There are several types of utility type projects that require the optimization and the advantages that SolarEdge brings to the table. So we figured that we can actually not only compete in this space, but actually add value and demand or gain the share that we deserve in that segment of the market. And we're actually seeing traction to that, which you can see in the increased revenue of that segment.

Thank you. And your next question And your next question comes from the line of Vikram Bagri with Citi. Please go ahead. Your line is open. Please go ahead, Vikram. Your line is open.

Good morning, everyone. I apologize I joined a little late in case you've already answered these questions. I wanted to ask a few housekeeping questions. First on OpEx, good progress there. I believe your current plan is to have OpEx run rate of non-GAAP OpEx run rate of $80 million to $90 million, is that still the plan? Has that target moved at all in last few months? Secondly, I think you mentioned breakeven free cash flow this year. Does that mean second quarter will be somewhat breakeven too in case you've disclosed what the second quarter free cash flow target is? And then finally, you've highlighted majority of distributors will have normalized inventory by the end of second quarter. What does it mean in terms of selling matching sell through? Should we expect third quarter revenues to be [normalized revenue] (ph) level or should we see some inventory reduction noise in third quarter as well? Thank you.

Hi, good morning and thank you for the three questions. So in terms of OpEx, I think as you noted and we previously communicated, we have a target OpEx level by the year-end of $85 million to $90 million range. I think Shuki mentioned before that we will continue to focus on our core business, which could result in additional cost savings. And we are reviewing and that's part of my job. Any particular every avenue for efficiency improvement measures and it's something again that I'll be proactively driving. In terms of the second question on the cash flow, so as you may know we are not providing any particular quarterly free cash flow guidance as it depends on timing of cash flow which may shift between quarters. We are saying, we did say however that we will be approximately breakeven for the year and that of course includes the incremental tariff impact. As it pertains to the third question, the inventory levels in Q3, I said before that we are very focused on reducing our [DIO] (ph) and inventory levels and consuming the balance sheet inventory in the European continent. But I guess and that's as much as we can say for Q3 inventory.

Thank you. And this concludes the question-and-answer session. I will now turn the program back to Shuki for closing remarks.

Thank you. Thank you everyone for joining us this morning. As we mentioned, we are pleased with the progress that we've made and we are focused on what we can control in this environment and I look forward to continue updating you on our progress with the turnaround story of SolarEdge. Thank you and have a great day.

Thank you. This does conclude today's presentation. Thank you for your participation. You may disconnect at any time.