Conference Transcript - SEDG 2026-08-13

Speaker 1

Hi, everyone.

Colin Rush, Analyst — Oppenheimer

My name is Colin Rush. I lead the industrial innovation research practice here at Oppenheimer, and we are thrilled to have Malz Singron, the new CFO of SolarEdge, join us today for a fireside chat. So, Malz, you just joined. You know, would love to understand, you know, why you decided to take the role and what you're most excited about and most concerned about as you step into the position.

Speaker 1

Thank you. Thank you, Colin. And, you know, I follow SolarEdge for many, many years. First, as a homeowner that using SolarEdge for a while. So I know SolarEdge very well, first from the product. Second, SolarEdge is a very known Israeli company. I don't think that there is someone in Israel that don't know Soloraj, so when I had the opportunity, when I get the opportunity, it was very interesting, and when I started to have a meeting with Chukki and with the team, I just get the better understanding of the deep technology, the people that we have, the potential of this business for the year to come. The combination of what is happening today with electricity price, with AI exchanges and the need for electricity all over, I think SolarEdge is well positioned and I believe that there are many opportunities ahead of us. And that was, for me, a great timing to join the company for the next phase. And I cannot, actually, if I'm looking on my background and what I did, I cannot think about a better opportunity in terms of, you know, the background and the challenges the company had in the past and where we are today and what the future holds. So from the timing point of view and from my background, it was it was something that make a lot of sense to me.

Colin Rush, Analyst — Oppenheimer

Excellent. So so let's hop in to the company real quick, because there's a lot of detail to get through. Right. And and you guys are in a lot of markets, you know, and effectively in those markets. So can we talk about the key elements in the residential market, both solar and storage, plus the commercial market, where you guys are planning, kind of walk through the key growth drivers, you know, North America, Europe, rest of the world, you know, in those individual market segments and what you're seeing happen, because I know that folks appreciate that level of detail and the granularity that you guys can provide to folks.

Speaker 1

No, thank you. Thank you for that. So let's start with the U.S. I think this is, you know, an important market for us, for rezi and for cni for rezi um as as as you as you know we are u.s made company uh here in the u.s and non-feel we have advantage of being here and and with the current structure um we definitely can benefit from this structure and be very competitive. The combination of the launch of the Nexus that is happening now in the U.S. is also going to help us to gain more and more market here in the U.S. And last but not least is our relationship with EPOs, with distributors, with installer. and SolarEdge is you know here for many many years and there is a very close relationship with all the players in the market so I think we are well positioned to with the combination of all what I've said to gain market in the US in the coming years and I think that you know with the Nexus and that just starting this is something new we translate all our knowledge from the the years into this product a lot of lesson learning and I believe that we have the best product in the market which is going to help us to gain more and more market on the CNI side here in the US also we gain in market we get to 50% on on the rooftop and 60% from the Fortune 100. And part of the reason is because our products are better. We are having ongoing discussion with more and more enterprise and the pipeline is good and increasing. And with the changes that are happening also on the CNI, we're well positioned and we're expecting a good momentum also on the C&I in the U.S. In Europe, there are actually many, many changes that are happening in Netherlands with the net metering. We share the $20 million retrofit in DAH and in Netherlands, but part of it definitely came from Netherlands with the net metering change that expected to happen at the beginning of next year that's going to take place is already increasing the retrofit, and we're expecting this to continue. As you know, in Netherlands, there are not much batteries, and we're expecting to see more and more deals flow in the coming quarters. Germany with the Fed in tariff that's expecting to be at the beginning of next year. We are not sure yet what exactly going to be. Nobody knows exactly, but we're expecting also to see some changes that we believe that will play in our favor with the nexus. And the nexus range is from 5 to 20. And actually, this new market that now we're approaching from 10 to 20 is going to help us to gain more market in Germany with the current situation and with the current change. Nexus is really a plug-and-play when we are thinking about the changes now happening in Germany and there are other changes in Europe but generally speaking again we share the updates about the second quarter and the good quarter that we had in Europe we share the guidance for the third quarter and for the reason for the softness for the third quarter but we believe that if If we're looking ahead, looking on the next quarters and years, we're expecting to see a good momentum on the resi in Europe. CNI, also in Europe, performing very well. We're gaining market in different countries. Also, in Europe, there is a good pipeline and good discussion that we have with potential clients. And also there, we're expecting to gain more and more market. also with the dynamic and the changes that are happening in Europe also from a regulation point of view and the way how this market is developed in the last few years.

Colin Rush, Analyst — Oppenheimer

That's super helpful. So there's a lot of shifting parts here, right? And so what I'd love to understand a little bit is, you know, the sales cycle, you know, can be pretty rigorous, particularly on the residential side in terms of the cadence of it. But can you talk a little bit about the win rate that you guys are seeing, as well as any sort of changes on timing, particularly as we've seen some of the adjustments in policy, both in the U.S. and in a couple of these European markets that are starting to merge as keyboard drivers?

Speaker 1

So, yes, the cycle is different. If we're thinking about the sales cycle in the residential, this is relatively short. We are working. We have distributors in Europe and in the U.S. So we are working with them and following carefully the trends and the POC, the point of sale. But the cycle is relatively short and is really based on the demand move. This is on the Resi, on the CNI, the dynamic is different. The deals are more strategic. this is a longer, it's take more time to close this transaction. When we are talking about the SST, you can definitely understand that this cycle is even longer and take more time. The customer are different. and the integration is more deep and this is definitely a longer cycle compared to what we have in the C&I and what we have on Ores.

Colin Rush, Analyst — Oppenheimer

And then, you know, are seeing any real meaningful share shifts, you know, ASP movements in any of these markets? Is there some dislocation? Are you seeing some benefit from some of the changing policies, You know, like the Chinese inverter ban, you know, some of the FCC news that's come out. So we're thinking about both Europe and U.S. in terms of, you know, who's really able to produce the controls for critical infrastructure, you know, in these markets.

Speaker 1

So, you know, the dynamic of the ASP is, you know, is evolving. and part of what we are analyzing carefully is where we have opportunity and where we can keep the premium on the prices and keep our advantage on the other area where we need to be more competitive and to do the adjustment. We're thinking carefully how to manage it, but generally speaking, we are following that carefully. We are keeping our premium in all areas. This is definitely more, when we're talking about the Rezi, the situation in the US is different from Europe. And when we're talking about the CNA, the situation is, the CNA, sorry, the situation is very different here in the US with the competition with the Chinese product. and we're definitely starting to see the shift to SolarEdge. We believe that part of the reason is really the change that is happening with the regulation. And we believe that we will, again, on the long-term, we can translate that also to the ASP. But this is something that we're following carefully and we're trying to make sure that on one hand we're keeping the good momentum and we have the growth drivers that we need and we are generating more and more business. But on the other end, we need to make sure that we're keeping our margin and making sure that the margin is keeping and expanding over time. And this is, of course, depending on the price and how we're managing our price list.

Colin Rush, Analyst — Oppenheimer

Excellent. And, you know, let's shift gears into some of the technology movements here, right? Because you guys have made some significant investments over the last few years on evolving the technology platform, notably with Nexus, right? and the single SKU transition potentially having a very significant impact on flexibility in terms of market as well as margins here. So can you quantify some of the gross margin uplift that you're expecting to see with that Nexus mix?

Speaker 1

And how do you expect that mix to cross over into a majority of your battery sales as we see that product enter into the market in a more meaningful way? okay so um first uh we started the the the launch of the nexus uh in germany uh at the beginning of this year we're starting now in the in the us so this is happening so i will give a few you know direction and few efforts that we are running with uh with the margin and first is really the nexus as a single SKU. Nexus is like a Lego. If you think about the product, this is a product that has a lot of benefits for all the chain. If you think about the homeowner, from ROI point of view, from the flexibility of the system. You can have five kilowatts, you can have 20, and you can choose between the range and where you are. The pricing of the Nexus is higher and the margin is higher. So as we'll have more and more Nexus, we're going to expand our margin. a Nexus is also again good for the for the installer if you think about the installer and they are the Nexus is very simple to install you can choose the number of batteries that that you need and at the end of the day the number of installation per day will increase so this is another important and another catalyser why we believe that Nexus will gain more and more market and of course this is good for the tpos um based on analysis that we did in europe uh for the nexus the the benefit or the roi benefit in 15 years is 5000 euro at some point we will show also the same analysis for for the us so also for the tpo and also for the homeowner depend on the structure of the deal this benefit is important and helping them uh when they are calculating the the roi so this is the benefit that we are getting from the nexus that over time nexus should expand our margin I will just say that when we're thinking about margin, more and more business that we are going to generate that is US made going to expand the margin as well so this is not only the nexus also 45X that's going to take more and more place over time will expand our margin. So Nexus is, of course, part of it because this is pure U.S. made, but also other products that are here in the U.S. going to expand our margin. So this is, let's say, category number two. From operational point of view, we have many efforts around operational efficiency. We are having different teams that are working separately in different efforts around service, around warranty, around offshore AI automation. And in all different areas, we believe that we're going to see some benefit in the year to come and to keep and improve our margin. And last, that should expand the margin is really the scale of the business, the growth of the the the the increase of the revenue that will expand the margin inherently we have fixed cost in the cox we have the opex that you you all know this is you know more or less together 170 million dollar 160 million dollar we believe that we can do more with the current structure of the organization, so this is another important piece for the margin expansion over years, so this is more or less my thinking about our margin progress with all the different elements in the coming years.

Colin Rush, Analyst — Oppenheimer

And so with that new product, it seems like there's a couple of opportunities. One, if you have an expanding margins, you can use some of that pricing power, potentially for market share. There's also probably some opportunity for cross-selling on some of the solar elements to this. And so, you know, can you speak to some of the early returns in Germany to your ability to drive some of that share, drive some of the cross-selling that you might be able to do with additional products to help, you know, amplify growth, leveraging some of that technology evolution?

Speaker 1

You know, first, you know, we can talk about Germany, but also about, you know, what we're doing now in the Netherlands. We have install base from, you know, the previous years and part of what we are going to do. And this is actually what we're doing already is running campaigns with the current client and offering them the batteries and maybe actually a new system with the Nexus. The next is open the door for a new discussion, and again, we'll get to the other opportunity in a minute, but first, you know, we can definitely approach our previous clients and do upsell with the current install base. This is one. Second, and as I said before, and I want to emphasize it, and this is super relevant for Germany with the current situation. So far, our system, the average was around 10 kilo. Now, when we are shifting and moving to bigger system with the 15 and to the 20, if you think about the 20, this is actually a small CNI. We actually can definitely not only do upsell, also opening the door in this situation in Germany to a new opportunity. So, again, the position where we are is good. We just need to make sure that we know how to translate the current situation of the market into a new business for SolarEdge.

Colin Rush, Analyst — Oppenheimer

And, you know, thinking about that C&I opportunity, and we'll get to the solid state transformer in a minute, but thinking about the C&I opportunity with, you know, increased power demand kind of broadly across all economies, you know, increased tightness in particular locations. You know, as folks start to use more electricity on a given location, can you talk about that CNI opportunity and how that's evolving for SolarEdge to augment existing power supply on some sites and in some cases add new capacity to those sites in a meaningful way?

Speaker 1

So, again, if you think of any business, this is, you know, as I'm here as CFO, there are CFO all over. And when they are looking on their bill at the end of the month and they are looking on the electricity bill, they definitely, you know, trying to find a way to optimize and to reduce the cost, the OPEX cost. and so part of what you see this is really you know enterprise companies names that we all know that understand the potential of their rooftop this is where we are focused and this is our market here in the US and also in Europe there are still a lot of empty building and companies with a potential of having and using their rooftop to first do investment that the ROI is sometimes is better than the business that they are running they can on the one hand save return have return relatively quickly but second they can save a lot of money on a on a monthly basis part of them are a public company that definitely want to improve their result over time so one i would said reason is really the economics and the and the saving the second is really the independency as you know not only here in the U.S., also in other places in the world. There is some challenge to make sure that electricity is really running and there is a 24-7 solution. A company that needs a backup needs to have a 24-7 electricity. This is critical. This is essential for the business to survive. They can have a solar system with a battery. This is part of what we're doing now also in Europe with the batteries. And they can have, first, what you said before, better ROI and better economics, but also they have a backup. And in case of something is happening, they have independency and they can have electricity. Last is really, you know, also the trend that is happening. We are U.S.-made, and we definitely can help them to have the benefit from the FIOC, from the 48E point of view. And this is another layer that when you think about the investment, there is a benefit here that you can definitely enjoy. And this is part of what we see.

Colin Rush, Analyst — Oppenheimer

Okay. And then just shifting gears into the solid-state transformers a little bit, you know, you're targeting a fully integrated unit capable of, you know, 34.5 kV to, you know, 800 volt DC ready for, you know, customer testing by year end. Can you offer a bit more color on what's happening over the next three to four months to get there? Obviously, this is a very big opportunity that I think a lot of folks are paying attention to, and there's a lot of claims out there. And then I think investors are really trying to understand what's real and what's not real, and how to think about how that shifts over the next period of time as we get ready for an 800-volt solution.

Speaker 1

But if you could talk us through the next three to four months for SolarEdge as you pursue that opportunity to start. okay so um i i believe that the sst is one of the most interesting opportunity we have part of what we have is something that is is uh within storage for many years and um as we said in the past the the product was on the shelf we developed this product a few years ago and important to say that this announcement for nvidia was right on time from from from solar point of view this is what we're doing for years optimization the inverter the optimizer and the batteries as well also if you think about and we will talk about us in the on the investor day even more but we are we are optimizing this is exactly what we are doing and all these changes that nvidia is doing is about optimization not related to storage first you know what nvidia did and what they are doing this is in my view in our view is a mass change for the data center for them in order to create more and more tokens they need to change the the way how they are operating today if they will keep and be dependent only on the electricity and they will keep and look for more and more electricity this is not the solution what nvidia did is this is the solution And this was with the 800 DC, help them to generate much more tokens. With our solution, we are helping them to have 99% efficiency. This is unique. Any percent that you are getting is additional tokens and more from economics point of view. It's worth a lot. And this is something that's important to mention. So the product fit is there. we are this is was here for many years we are doing the adjustment that we need and according to the what we already communicate we're expecting to see the prototype at the year end so 2026 we will have the the the the prototype as we shared also this product is already there and we did few demos already with a few potential clients and they're very impressed and the feedback that we are getting are good, and we believe that our the current stage of SolarEdge is definitely, if we're looking on the other competitors or other players in the market, we are in a very good position, so this is where we are now, we're expecting 2027 to be a year of a POC and we're expecting to see a few POC next year 2020 year sorry, 2028 will be the first year of the commercial products. We'll start to see the revenue, and of course, more to come in 2029. We are very optimistic about this opportunity. As I said, we're going to share more information during the investor day. This is definitely one of the topic that we're going to cover. Mayer, SolarEdge co-founder are going to take you through the product and the process that we have made. and to share and to give more clarity on where we are.

Colin Rush, Analyst — Oppenheimer

Okay. And then can you talk about the maturity of the customer conversations? You know, we'll wait to really bug you about the technology until that investor day, which is just a few weeks away here. But in terms of the maturity of the customer conversations and their potential to impact some of the technology development, you know, can you talk about, you know, the breadth of the conversations, the depth of those conversations, and how that feedback is getting, is informing some of the R&D effort that you guys are working through right now.

Speaker 1

So, of course, you know, because this is really a deep tech product, there is a discussion in all different levels with the clients. This is really not about, the door should be opened definitely with business development and with salespeople, but quickly you're moving to a tech discussion. So we have first the tech discussion, making sure that our product is fit their need and that they will convince that what we are doing is exactly what they are looking for. But again, with a different discussion, with a different player, we understand that the product is the product that they are looking for. This is one. The commercial side, and again, more to come. We're definitely getting also to a commercial discussion with different structure. Again, the definition of RFI or RFP, I'm not getting into that, but generally we are in the commercial stage in some cases, and definitely there is a discussion about the commercial as well. So this is not only a product discussion or a proof of concept, this is also a commercial discussion, making sure that we understand how this structure is going to work and how exactly it's going to be. um so this is more or less where we are and again uh we'll show more we'll share more color on that also uh later and the beginning of next month in the investor day okay and and we'll be able to address the the partnership with infineon and what's happening uh at that at that point um okay so let's shift gears into uh channel management you know this has been uh you know a point that

Colin Rush, Analyst — Oppenheimer

SolarEdge has been very active with the channel, you know, to positive and negative impacts, depending on where you're at in the cycle.

Speaker 1

You know, can you just give us a current status on where distributor and installer inventories stand versus normalized weeks by region and how the Nexus, you know, product really helps rationalize some of that from a working capital on a go-forward basis? so first you know we're managing the channel inventory carefully this is something that i'm personally also involved in you know making making sure that we're keeping the right level normalized level as organization solo ig story is is known and we we want to make sure that the Current level makes sense and you know in the u.s. And also in Europe. We're doing it specifically With you know the distributor making sure that the level makes sense based on the Installation pacing So again nothing nothing different here As we said part of what we are We are doing is is is making sure that we are looking on the full cycle of the cell from SolarEdge to the distributor to the installer to the homeowner so we can see the full cycle and not only a point of the line that sometimes mislead. So we're making sure that from end-to-end, we're managing it properly and making sure that we are not getting into areas that are not right. This is one. About the Nexus, so as we said, We started the launch of the Nexus in Europe and now in the U.S. This is a transition. We are now moving from the legacy product to the new product. Part of what we are making sure as part of this process that the level of inventory of the legacy product is right, aligned with the needs during the ramp-up. And this is really a process that we're managing together with the distributor, making sure that the level of the inventory is right and there is a replacement of the legacy product with the new product. And this is something that we're managing over time. The Nexus is going to launch in different states in the U.S. and also in different countries in Europe over time. We're expecting to have as planned beginning of 2027 or end of Q1 2027, almost the full launch. But this is very much a process and not something that's happening in one day. Okay.

Colin Rush, Analyst — Oppenheimer

And then, you know, I guess thinking about the competitive landscape here, you know, in regionalization, we talked a little bit about it earlier, but, you know, with some of the impact on the policy shifts, you know, I'm curious about how you're seeing the competitive landscape evolve. And, you know, certainly in some markets, it looks a little bit more like a duopoly, you know, and in other markets, it's a bit more of a free-for-all. How do you guys think about that landscape evolving and simplifying here as we get into, I think, a more mature industry that has more regional impact or more regional rules that limit the volume of competition? And can you see some real opportunities for ASP increases, or does this, you know, remain a very highly competitive space where pricing and value monetization really matter?

Speaker 1

So, you know, here in the U.S., the situation is very different. On Resi, the competitors are very known. We believe that, you know, with the nexus, we can definitely improve our position and to gain more market. The current OASI structure competition will remain, and we need to make sure, as we are doing with the nexus, that we are gaining market. But this is, you know, the way to have better prices and to make sure that we are doing it with the nexus. About C&I in the U.S., again, with the current structure that we are gaining market, there are players that are slowly moving down and we are moving and gaining more and more market. Of course, part of the translation of moving up with the market is also at some point translating this into prices and to where this is advantage, but again, we are not there yet. It's important for us to gain market and to make sure that we have more and more sharing here in the U.S. New York, the situation is different. The regulation is different and the competition is more with the Chinese companies. Still, we believe that we bring something different to the table from the ROI point of view, from safety, from the benefit that the system is giving you with what we have discussed before about the nexus with the flexibility of the system. So in Europe, this is really about the product and about our ability to differentiate ourselves to have premium, but to make sure that with the premium that we are taking, we're giving additional value to our customer. So this is a combination of many things that are happening on the Resi already, as we discussed before with Germany, Netherlands, and also other countries. On the CNI, also here, I believe that, you know, there is a trend, there is a shift. And again, also here we are trying to make sure that we are getting more and more market share with the current structure of the price. We want to make sure that we are leading and gaining market before we are improving or changing the prices to improve margin.

Colin Rush, Analyst — Oppenheimer

And I guess that is a nice segue into some of the financials, right? And so, you know, I know you're early in the tenure. You're going to have this analyst day here shortly. But what can you tell us about, you know, kind of target gross margins? The company historically had targeted mid to high 30% gross margins across the platform. That's adjusted as we work through some of the changes in the market. But, you know, how are you thinking about, you know, sizing of the organization, you know, gross margin trajectory and potential incremental operating margins as you return to a more consistent growth pattern?

Speaker 1

So the margin, you know, evolved over the last two years. We moved from one digit to double digit, and we are today around the 25% margin. That was with things that we did as a company in all different aspects, as I shared before. and so we're doing we're doing well and you know i think this this process is already important and and and the milestone that we need to recognize second quarter that was the first quarter that we were we were profitable and this is this is part of part of this is really with the margin expansion over time we'll keep and and manage our margin in making sure that we are moving to a normal level and historically storage margin was higher than where we are today and we believe that we are going to improve our margin quarter after quarter or year after year but it will take time this is not something that we will see in a one quarter but definitely the efforts are there the structure is is is easier and we're expecting to see an expansion of margin over time i don't want to get into a number because we want to make sure that we are keeping and moving and improving but again i prefer to as we are guiding you know the only one quarter, I don't want to share a number that at the end will be kind of a guide. Our commitment is that this business will be profitable. Our commitment is that we are going to expand the margin over time. This is the message that I think is important.

Colin Rush, Analyst — Oppenheimer

Excellent. Just a final one as we run up against the end of time here. It's really around balance sheet optimization. Coming in with fresh eyes on the balance sheet, Where are you seeing opportunities to optimize cash use, lean up the balance sheet, and what would you like that to look like on a stable basis going forward?

Speaker 1

The balance sheet is separate, let's say, between a few pieces, but the most important one that I am now focusing on is really managing the working capital in a few aspects. First is really the AR and the collection and carefully manage the credit limits that we are giving to clients, the payment terms, the coverage that we have. We want to make sure that the AR that we have is collectible and that we will collect what we are having as revenue. and so this is this is one important area and one important focus the second one is really the the relationship with our vendors we are trying to also here making sure that we are optimizing our vendor relationship and and the way are we are working with them in a way that from working capital point of view we managing properly if you think about solar edge from the day that we have the raw material in our warehouse still we are having the revenue it's take time as we can manage this

Colin Rush, Analyst — Oppenheimer

part this time this time frame we are improving our position and of course the inventory level which is super important and should be aligned with the footprint and our expectation and our focus awesome well listen I think we need to leave it there for time Oz thanks so much for joining us congratulations on the new role look forward to seeing you in a few weeks and and look forward to getting to know you better as we go forward here. Thanks, everyone, for joining us. Thank you.

Speaker 1

Thank you.

Colin Rush, Analyst — Oppenheimer

Please reach out if you have any questions.