The paragraph is an introduction to SolarEdge's conference call discussing their first-quarter results for 2025 and the outlook for the second quarter. The call is broadcasted live and available as a replay on the SolarEdge website. The introduction includes a disclaimer about the rights to the call, a note about forward-looking statements with associated risks, and mentions the use of Non-GAAP financial measures. It also introduces the key speakers: J.B. Lowe, Shuki Nir (CEO), and Asaf Alperovitz (CFO). The structure of the call involves reviewing past results, future outlook, and a Q&A session.

The paragraph discusses the use of Non-GAAP financial measures by a company, explaining that these measures help investors understand the company's operating performance. The company provides reconciliations of these measures in their earnings press release, slide presentation, and SEC filings. It is noted that Non-GAAP measures should not be used as a substitute for GAAP financial measures. The paragraph then transitions to a conference call where Shuki Nir introduces Asaf Alperovitz as a new team member at SolarEdge and outlines the company's strategic priorities for the year: strengthening financials, regaining market share, accelerating innovation, and ramping up U.S. manufacturing. Shuki highlights progress made in the first quarter, including revenue growth, expanded gross margins, and reduced operating expenses.

The paragraph discusses the company's recent achievements, including maintaining positive free cash flow and optimizing operations by selling a battery manufacturing facility in Korea and divesting its tracker business. The focus is on recapturing market share, starting with the U.S., where SolarEdge has been recognized as the top inverter supplier for rooftop solar installations. The company is benefiting from the shift towards domestically-made products in residential and commercial segments, gaining a competitive edge. There is growing demand for their residential batteries, influenced by policy changes and participation in virtual power plant programs. SolarEdge is positioned as an ideal partner for enterprise customers in the commercial and industrial segment, providing efficient and reliable energy solutions, with a robust pipeline and several agreements already signed.

The paragraph discusses several key developments for SolarEdge. It highlights a new multi-year partnership with a leading logistics real estate company for integrating SolarEdge products globally. In Europe, the company sees promising results from its pricing and promotion strategies, particularly in Germany and the Netherlands, where sales have increased. In the Netherlands, an upgrade campaign focused on battery solutions is expected to drive growth as net metering is phased out. SolarEdge is also prioritizing innovation, with new product offerings and displays at the Intersolar event in Munich, including the Nexis platform, inverter solutions, and the compliant SolarEdge ONE Controller, which meets German regulations, opening opportunities in the German residential market.

The paragraph discusses SolarEdge's launch of a new EV charging solution integrated into their energy optimization platform, highlighting their focus on innovation and differentiation. The company was recognized by VDE Renewables for both their efficiency and safety in technology and their strong cybersecurity measures that align with global standards. SolarEdge is expanding its U.S. manufacturing, having created nearly 2,000 jobs to ramp up production of U.S.-made products, reaching a capacity of 70,000 inverters per quarter. This expansion helps to mitigate the impact of new tariffs, as their manufacturing has already been reshored to the U.S.

The operations team is focusing on optimizing sourcing and the supply chain amid new tariffs—145% on Chinese products and 10% on other imports—that are negatively affecting financial performance. In the short term, gross margins are expected to decrease by 2% in Q2 due to these tariffs, though the impact may grow to 6% in the second half of the year. Efforts are underway to reduce the impact to 2% by Q1 2026 and eliminate it later that year. Tariffs will also affect cash flow, with the company now expecting to break even in free cash flow by 2025. Despite an 18% dip in North American sell-through in Q1 due to seasonality, the fundamentals of the solar and storage market remain strong, driven by rising power prices and increasing battery use.

In the outlined paragraph, the company reports a 6% increase in European sell-through compared to the previous quarter, with distribution partners expected to reach normalized inventory levels by Q2 2025. The company's leadership acknowledges the early stages of a turnaround journey and expresses optimism due to internal energy, innovation, and customer interactions. Asaf Alperovitz, newly introduced, brings extensive accounting, operational, and leadership experience to support the company's plan. Financial results for the first quarter showed total revenues of $219.5 million, with Non-GAAP revenues of $212.1 million when excluding discontinued operations. Revenues from the U.S. comprised 62% of Non-GAAP revenues, while Europe and international markets accounted for 22% and 16%, respectively.

In the first quarter, total shipments reached approximately 1.2 gigawatts, with 642 megawatts to the U.S., 324 megawatts to Europe, and 242 megawatts to other international markets. The shipments were evenly split between commercial & utility products and residential products. The average selling price per watt decreased due to lower prices in Europe and a different optimizer to inverter ratio. Additionally, 180 megawatt-hours of batteries were shipped, mainly to Europe, with a higher average selling price per kilowatt-hour for attached batteries. Non-GAAP gross margin improved to 7.8% from negative 39.5% in the previous quarter, and operating expenses were lowered to $89.1 million. The company recorded a non-GAAP operating loss of $72.4 million and a net loss of $66.1 million, showing improvement from the previous quarter's losses. As of March 31, 2025, the cash and investments portfolio was approximately $794 million, with $34 million generated from operating activities. Net cash, after accounting for debt, was approximately $113 million.

In the paragraph, the company reports generating $20 million in free cash flow for the quarter, excluding $3.8 million from discontinued operations at the Kokam Energy Storage Division, marking the second consecutive quarter of positive cash flow due to effective working capital management. Accounts Receivable decreased to $133 million from $160 million, and inventory was reduced to $637 million from $646 million, despite increased U.S. production and new product introductions. Approximately $60 million of finished goods were used from existing inventory. For Q2 2025, the company anticipates revenues between $265 million and $285 million, with non-GAAP gross margins in the range of 8% to 12%, including a 2% tariff impact, and operating expenses between $90 million and $95 million. The paragraph concludes with the transition to a Q&A session, with Christine Cho from Barclays asking about the growth of commercial storage.

The paragraph features a discussion primarily about a company's strategy concerning high Chinese tariffs and their impact on pricing. Shuki Nir addresses questions regarding both commercial and residential battery products, indicating satisfaction with growth in battery attachment rates worldwide. He mentions a new residential battery product, expected to ship in the fourth quarter, designed to optimize PV and storage systems. Furthermore, Shuki discusses the impact of tariffs on gross margins, noting a 145% tariff on Chinese products, significantly higher than the 10% tariff from other markets, suggesting a larger financial impact from Chinese imports.

The paragraph discusses the company's efforts to optimize its supply chain by finding alternative sources while ensuring product quality. It emphasizes that they will not compromise on quality for cost savings. Additionally, it addresses pricing strategy, stating that prices are set based on the value and competitive advantage of their products. The company takes into account factors like customer appreciation and market conditions to determine pricing, thus balancing inventory management with improved margins.

The paragraph discusses a company's pricing promotion strategy in Europe and inventory management. The company feels positive about its pricing actions and the feedback from channel partners. They are seeing initial positive signs and plan to continue monitoring and adjusting as needed. Colin Rusch inquires about inventory levels, and Shuki Nir explains that they are working on reducing inventory consistently without providing specific targets. Philip Shen asks about pricing strategies, including a past 24% discount and a 15% recovery discount, and inquiries about future plans for EU average selling prices (ASPs). Shuki Nir clarifies that the company launched a promotional campaign in Europe in November in collaboration with distribution partners to gain or regain market share.

The paragraph discusses SolarEdge's strategy to adjust pricing and engage installers by showcasing the value of their solar products and services. The company anticipates that distributors will normalize their inventory levels by the end of Q2, potentially reducing the need for pricing adjustments. Shuki Nir mentions attending Intersolar in Germany to gather insights from both large and small distributors and installers about shifts in market dynamics, especially with the decrease in value of modules and batteries. SolarEdge values all customer relationships, regardless of distributor size, aiming to collaborate to provide the best products to installers.

The paragraph is part of a conversation during a financial earnings call, where Drew Chamberlain, on behalf of Mark Strouse from JPMorgan, questions the speaker about the impact of pricing changes on demand and competition in the U.S. market, particularly in relation to SolarEdge's operations. Shuki Nir responds, highlighting the uncertainties due to recent tariffs and mentioning that, since they manufacture in the U.S., their supply chain adjustments are primarily focused on sourcing and optimization. He notes that while they have predictions about pricing and value for customers, no specific competitive figures are available. Drew then asks about the impact of their updated full-year free cash flow outlook on decisions regarding convertible notes, and Asaf Alperovitz is set to respond to this inquiry.

The company plans to use its $794 million cash balance to fully pay down its debt, with no changes to these plans at present. They are, however, open to exploring different options in the future. Drew Chamberlain moves on with a question from Corinne Blanchard of Deutsche Bank regarding battery storage. Blanchard asks about the feasibility of securing more ex-China supply and reconsidering the Sella 2 facility for battery production to avoid tariffs. Shuki Nir responds that the company's supply chain team is working on optimizing sourcing while maintaining product quality for U.S. customers. He indicates that Sella 2, which uses NMC technology, is not currently planned for battery cell production.

The paragraph is a discussion on business focus and market conditions between Shuki Nir and Corinne Blanchard. Shuki Nir mentions that shifting to LFP (likely referring to a type of battery technology) would require significant capital expenditure (CapEx), which the company is not pursuing, as they are focusing on their core business for growth and profitability. In response to Blanchard's question about the European market, Nir acknowledges that the European market is challenging and expected to decline year-over-year. However, he notes positive indicators that suggest the company has improved its market share. The conversation then shifts to a new speaker, Hannah Velasquez, asking for insights on the impact of a 90-day tariff pause on long-term margins.

In this discussion, Shuki Nir clarifies that their projections for improving to two points by the first quarter of 2026 do not assume any changes to the ex-China tariffs, which currently stand at 145% for Chinese products and 10% for products from elsewhere. Hannah Velasquez then inquires about potential changes to the transferability of the IRA 45X tax credits. Asaf Alperovitz explains that if there are timing issues with these credits, they plan to use a direct pay mechanism to secure a refund. This would allow them to fund short-term financing if necessary. Brian Lee from Goldman Sachs questions the pricing strategy, noting that the average selling price (ASP) per watt was lower than expected despite higher megawatt shipments. He asks whether this was due to price reductions or a different product mix, and seeks guidance on future pricing.

In the paragraph, Shuki Nir addresses questions about SolarEdge's financial results and strategies moving forward. For Q1, the company had more deferred revenues due to shipment timing affecting revenue recognition, but specific details for Q2 are not disclosed. In response to Brian Lee's inquiries about battery supply and strategy, Nir indicates that although SolarEdge does not break down impacts by components or suppliers, they are actively working to optimize their supply chain. This involves seeking the best sources that offer quality and competitive pricing, particularly in the context of U.S. battery storage demand and the existing contract with Samsung NMC.

The paragraph is a transcript from a Q&A session during a conference call. Austin Moeller from Canaccord asks about the impact of electricity rates in Europe and the demand for solar energy. Shuki Nir responds, explaining that they expect their distribution partners to normalize inventory levels by the end of the second quarter due to underlying demand for solar energy and their promotional activities. These efforts are helping them gain market share, alongside growing battery attach rates. Although energy prices impact demand, other factors also play a role. Moeller also inquires about potential demand increases in the U.S. due to the investment tax credit risk by January 2026. Asaf Alperovitz replies that they haven't seen a significant impact from this, despite market uncertainties and current interest rates.

The paragraph discusses a multi-year agreement SolarEdge has signed with a leading global real estate company, which will involve installing their products across all the company's facilities over several years. Despite short-term uncertainties, they believe demand and the need for electricity will continue to grow. During a Q&A session, Kashy Harrison from Piper Sandler inquires about factors affecting SolarEdge's revenues and margins, particularly concerning Safe Harbor revenues in Q1 and Q2 and whether revenue growth is originating from the U.S. or Europe. Asaf Alperovitz from SolarEdge responds by noting the company's policy not to disclose certain revenue details and highlights that higher revenue leverage due to fixed costs would improve margins.

The paragraph features a Q&A session during a conference call. Ameet Thakkar from BMO Capital Markets asks about financial changes in the company's cash flow statement related to a $100 million increase in prepaid expenses and a $52 million decrease in deferred revenues and customer advances, questioning if these are related to Safe Harbor and 45X tax credits. Asaf Alperovitz confirms that these are indeed related to 45X credits, with deferred revenue declining due to Safe Harbor transaction shipments announced in Q4. In a following question, Henry Roberts, standing in for Jordan Levy from Truist, inquires about the company's performance in the utility segment. Shuki Nir responds, noting that SolarEdge technology excels in optimizing power production under less than ideal conditions.

The paragraph discusses SolarEdge's entry into the utility market with a product focused on "optimized utility," which has started to gain traction and increase revenue in that segment. Vikram Bagri from Citi asked several questions regarding SolarEdge's operational expenses (OpEx), free cash flow, and inventory levels. Specifically, he inquired if the OpEx target remains at $80 to $90 million, if the company expects breakeven free cash flow in the second quarter, and whether third-quarter revenues will stabilize after distributors normalize their inventories by the end of the second quarter. Asaf Alperovitz responded that the OpEx target by year-end is $85 to $90 million.

The paragraph outlines the company's focus on its core business and efforts to achieve cost savings and efficiency improvements, with a proactive approach being taken by the speaker. Free cash flow guidance is not provided on a quarterly basis due to timing variability, but the company aims to break even for the year despite tariff impacts. Inventory levels in Q3 are being managed with an aim to reduce days inventory outstanding (DIO) and balance sheet inventory in Europe. The CEO, Shuki Nir, expresses satisfaction with the company's progress and commits to updating stakeholders on the ongoing turnaround efforts. The presentation concludes with a thank you to participants.

This summary was generated with AI and may contain some inaccuracies.