As the world is increasingly concerned about climate change and its impacts on the environment, solar energy is providing one of the best options to combat growing energy usage. Solar energy has the least negative impact on the environment compared to any other energy source. It does not produce greenhouse gases and does not pollute the water. Users also benefit from lower bills as energy rates across the globe are soaring.
SolarEdge Technologies is an Israeli company making the transition to solar possible by developing and selling solar inverters for photovoltaic (PV) arrays, energy generation monitoring software, battery energy storage products, as well as other related products and services to residential, commercial, and industrial customers around the world.
Established in 2006, SolarEdge developed the DC-optimized inverter technology that changed the way power is harvested and managed in PV systems. This intelligent inverter solution maximizes power generation while lowering the cost of energy produced by the PV system, for improved returns on investment. Since beginning commercial shipments in 2010, SolarEdge has shipped over 31.6 gigawatts of its inverter systems and its products have been installed in over 2.6 million monitored PV systems in 133 countries globally.
Now focusing on several strategic pillars for growth including building its market share, and expanding to new segments, applications, and geographies, SolarEdge’s mission is to become the leading provider of inverter solutions across all PV market segments
Background
For decades, solar energy was considered an energy source that had the potential to help save the planet, yet it remained stagnant. Yet when five friends with electrical engineering and R&D experience identified what was holding solar back, they set out to solve the challenge. SolarEdge began in 2006 when Guy Sella, Lior Handelsman, Yoav Galin, Meir Adest, and Amir Fishelov developed an inverter and power optimizer solution that changed the way power is harvested and managed in solar energy systems.
The company started mass production of its products by contract manufacturer Flex at the end of 2009. Within a few years, SolarEdge had become an award-winning inverter company that was ranked among the global top 10. In less than ten years after its founding, the company went public on the Nasdaq.
It has continued to invest heavily in R&D leading to the launch of several breakthrough technologies and innovations, including a partnership on Tesla’s Powerwall home energy storage battery and acquisitions of major stakes in several complementing technologies. These companies include Kokam, a South Korean provider of lithium-ion battery cells, batteries, and energy storage solutions, and SMRE, an Italian EV/Powertrain manufacturer. While in 2019, it announced the acquisition of Gamatronic, an uninterrupted power supply (UPS) manufacturer, establishing its Critical Power division.
Now a leader in the global module-level power electronics market, SolarEdge has shipped almost 90 million power optimizers, 3.7 million inverters, and 16k residential batteries across millions of installations, many of which include not only hardware but are monitored through the company’s cloud-based monitoring platform.
Leadership
SolarEdge is led by chief executive officer, Zvi Lando, who initially joined the company in 2009 as the vice president of Global Sales. With a demonstrated track record in sales and execution, Lando was appointed to the role after founder Guy Sella took a leave of absence for health issues. He previously spent 16 years at the $75 billion engineering giant, Applied Materials, where he held several operational and leadership positions, including the company’s solar business group.
Customer
As SolarEdge continues to advance smart energy solutions, the company addresses a broad range of energy market segments through a diversified product offering to residential, commercial, and large-scale PV customers. It provides energy storage and backup solutions, along with EV charging, home energy management, grid services, virtual power plants, batteries, and UPS solutions.
The company operates through five segments including Solar, Energy Storage, e-Mobility, Critical Power, and Automation Machines. These businesses provide inverters, power optimizers, communication devices, and smart energy management solutions, as well as a cloud-based monitoring platform that collects and processes information from installations.
SolarEdge sells its products to the providers of solar PV systems, solar installers and distributors, electrical equipment wholesalers, and PV module manufacturers, as well as engineering, procurement, and construction firms. As a result, it also offers pre-sales support, ongoing training, technical support, and after-installation services.
A significant portion of SolarEdge revenues comes from key solar distributors, electrical equipment wholesalers, and large installers in the U.S. and worldwide. In 2021, two of its customers, Consolidated Electrical Distributors and Sunrun, together represented 31% of the company’s revenues. While none of its other customers accounted for more than ten percent of remaining revenues.
Thematic
SolarEdge’s proprietary inverter architecture has been critical in building the company’s differentiated leadership position. Many solar photovoltaic systems use a central inverter, where the panels are connected in a series. These systems suffer from a major drawback where production is limited by the output of the lowest-performing panel. As a result, performance can be impacted by shading and weather conditions.
SolarEdge addresses this problem with power optimizers, small devices placed behind each individual solar panel, before feeding the energy to a central inverter. Power optimizers also allow panel-level monitoring of energy production, instead of total or string-level data provided by traditional central inverters. The solution ultimately maximizes power generation while lowering the cost of energy produced by the solar PV system.
This technology has become more important than ever as electricity prices have increased significantly in a trend that is expected to continue, while oil and gas prices also rise. Energy independence is also a growing priority for many countries as the need for more intelligent, decentralized and digitalized energy networks grows. Individual homeowners are also looking to rely less on shared grids to avoid planned utility outages and extreme weather events, in addition to lowering power bills.
SolarEdge is benefiting from this tectonic shift in the energy market that is further boosted by exponential growth in worldwide usage of electricity and a transition from centralized, fossil fuel-based energy to clean, distributed, renewable energy.
SolarEdge’s plans for growth are focused on expanding its served market through new segments and applications. The company’s portfolio of products continues to grow, particularly in the Commercial segment as corporations seek to improve their green credentials and are driven to meet sustainability goals. Products are being designed for industrial rooftops, public buildings, and carports along with innovative floating solutions and applications for farms and agriculture.
Geographic expansion is also a major priority, as SolarEdge continues to build its capabilities across the globe. Most recently, a new office was opened in São Paulo, scaling the company’s operations in Brazil. In South Korea, a new certification has opened the market for a commercial inverter. Likewise in Japan, the first residential installation of its JET-certified inverter was complete in March. While in Australia, the company has now reached a total of 100,000 sites installed and also launched the SolarEdge Home battery in March.
Financials
Since going public in 2015, SolarEdge has been on a rapid trajectory of strong growth, culminating in record revenues of almost $2 billion in 2021, up 34.6% year-over-year from 2020. The trend is continuing in 2022 with the company again reporting record revenues of $655.1 million, up 19% on the prior period and up 62% from the first quarter of 2021.
While variable product and operating expenses are also increasing, adjusted net income has also grown, coming in at $87.2 million for the quarter, up close to 20% on both the prior period and year. Furthermore, with almost $1 billion in cash and equivalents on the balance sheet, SolarEdge is well placed to continue to maintain its investment in R&D and global expansion.
Looking ahead, SolarEdge expects its momentum to continue and is forecasting total revenue for the second quarter to be within the range of $710 million to $740 million. While consensus estimates have total revenue for the full 2022 year exceeding $3 billion, for year-over-year growth of over 55%. Earnings per share estimates are also expected to grow significantly, increasing by 40% to $6.76, up from $4.81 in 2021.
Risks/Competition
Escalating trade tensions between the United States and China have led to increased tariffs and trade restrictions, including tariffs applicable to some of SolarEdge’s products. Yet, to mitigate the negative effect of increased tariffs, the company already began increasing its manufacturing capabilities at its Vietnam manufacturing facility in 2019. It also reached full manufacturing capacity in its facility in Israel, Sella 1, and is planning to start volume manufacturing in Mexico during the second half of 2022.
The markets for SolarEdge’s products are competitive, with several major global players across the company’s various business segments. In the inverter space, SolarEdge competes principally with products from traditional inverter manufacturers, such as SMA Solar Technology AG, ABB Ltd, and Huawei Technologies, as well as from other low-cost Asian manufacturers. In the North American residential market, there are also microinverter manufacturers such as Enphase Energy. In markets for energy storage products, global cell and battery manufacturers include major names like LG Energy Solutions, Samsung, and Panasonic. While residential lithium-ion battery products compete with solutions from Tesla, LG Energy, and Enphase Energy. Finally, UPS products compete with offerings from global providers such as Schneider Electric, Eaton, and Vertiv.
While new entrants to the market continue to present themselves, SolarEdge believes that its DC-optimized inverter system offers significant technology and cost advantages that reflect a differentiation over traditional systems and microinverter technologies.
Conclusion
SolarEdge’s financial strength and stability, combined with its cutting-edge technology, have made it a preferred partner for industry-leading installers, integrators, and other energy market participants. With a strong team in place, coupled with solid market growth forecasted in all PV segments, the company appears well-placed to leverage its differentiated architecture and take advantage of the enormous industry tailwinds to continue delivering strong year-over-year growth.
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Last updated: February 21, 2022
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Changes to These Terms and Conditions =====================================
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