SolarEdge Technologies reported a record revenue of $430 million for Q1, 3% above its reading for the previous quarter and 59% higher than its Q1 2019 revenue level. But the company also said that question marks hang over the next two quarters because of Covid-19.
“We expect that the effects of Covid-19 will impact our business in the United States, and to a lesser extent in Europe, and [this] will result in reduced revenue in the coming two quarters,” said Ronen Faier, SolarEdge’s CFO during yesterday afternoon’s Q1 earnings call.
During Q1, SolarEdge’s solar business revenues were a record $389 million, 5% above Q4’s level and 61% higher than Q1 last year.
GAAP gross margin and GAAP gross margin for the company’s solar business came in at 32.5% and 34.6%, respectively, in Q1. At the end of Q4, GAAP gross margin and GAAP gross margin for the company’s solar business stood at 34.3% and 37.3%.
Despite Covid-19, SolarEdge set revenue records in North America and Australia last quarter, Zvi Lando, CEO of SolarEdge noted.
“By the time the virus impacted the United States and countries in Europe, we were able to adjust rapidly,” he added, noting that the company has large operations in South Korea and Italy, countries that were hit early during the Covid-19 pandemic.
According to Faier, SolarEdge’s plan to open its 2 GW battery factories in South Korea in 2022 remains on track. In Italy, typically a strong market for SolarEdge, installation rates started to stabilize about three weeks ago, but in Q1 installations in Italy fell 47%, Lando added.
Overall, solar revenues from Europe were $122.3 million or 30% of SolarEdge’s revenues in Q1. For Q2, SolarEdge expects total gross margins to be about 30% to 32%, with a higher percentage of revenues from Europe. “Generally, the sentiment in Europe and Australia is more positive than it is in the U.S.,” Lando said.
Even though the U.S. market is showing some signs of stabilizing, the decline in installation rates in April alone was 33%, he said, noting that the pandemic hit the U.S. later than Europe. In March and April, the installation rate for SolarEdge products in the U.S. declined 16% compared with the same period last year, he added.
According to Lando, SolarEdge is preparing for various scenarios as it deals with the evolving impact of Covid-19. Already, it has made expenditure adjustments, and its senior executives voluntarily reduced their base salaries by 20%. He said SolarEdge’s business plan for 2020 also includes adjusting its headcount so that it lines up with “the reduced level of activity in certain regions.”
“Our aim is to be, by the end of Q2, at the run rate of operating expenses that were similar to what we saw in Q3 2019, and this is around $58 to $59 million a quarter of operating expenses,” Faier said.
During Q1, SolarEdge generated a record $107.7 million in cash from operations. “We are happy to be in such a strong cash position with practically no debt,” Faier said. SolarEdge’s balance sheet had $558.7 million in cash, cash equivalents, bank deposits, restricted cash deposits and investments at the end of Q1, up from $467.5 million in Q4.