SolarEdge Q3 results drop off due to “slow market environment” in Europe

SolarEdge blamed a “slow market environment” for its falling revenues in Q3. Image: SolarEdge

Israel-headquartered solar inverter supplier SolarEdge has posted a downturn in Q3 financial results, which it attributed to a “slow market environment, in particular in Europe”.

The results were forecast in the company’s preliminary Q3 results, where it predicted Q3 revenue to be 20% lower than the original consensus, in the range of US$720-730 million. Announced Q3 revenues were down 27% sequentially to US$725.3 million, and 13% down year-on-year.

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The company reported similar declines across its financial results. GAAP gross margin was down 32% to 19.7%, and net loss dropped to US$31 million from US$157 million in Q2.

Operating loss, due to substantial unexpected cancellations and pushouts of existing backlog from European distributors during the second part of Q3 2023, was $16.7 million. This was in line with preliminary estimates within the range of US$9-28 million.

In the press release for this earnings call, which took place yesterday (1 November), CEO Zvi Lando said: “The results for the third quarter fell short of our prior expectations and are reflecting a slow market environment, which has resulted in high inventory of our products in the distribution channels, in particular in Europe.

“While channel inventory clearing is expected to continue in coming quarters, we are optimistic about the future of the solar PV industry and are confident that our leading technology, global presence and broad product offering will enable us to continue to be a leader in this market.”

Inventory clearing has been a concern for much of the solar industry in Europe of late, and market slowing in the last year has led to overstocking for many companies in the PV industry. Our interview with Solar Module Super League (SMSL) member JA Solar explored this in greater detail.

In SolarEdge’s earnings call, Lando added: “During the second half of 2022 our industry went through an unprecedented surge in demand … indicators in the beginning of 2023 were that demand would continue to increase this year, in particular in Europe. This led to a significant backlog for our products.

“However, market demand began to slow in Q3 and distributors began to experience financial challenges. As a result, we received a large amount of requests to cancel or push out orders.”

He continued: “The infrastructure we build to support the anticipated sale growth [from earlier in 2023] has created a burden that is putting pressure on our margins in the near term.”

Q4 results are forecast to be lower still. Revenues are expected to be within the range of US$300 million to US$350 million, with gross margin expected to fall to around 5-8%.

At the time of the preliminary results, Lando clarified that the adjusted guidance was “unrelated to the tragic events that have unfolded in Israel”.

“While there has been some impact on daily routines at our headquarters, our offices and facilities are open worldwide, including in Israel, and we are manufacturing and providing customer support without interruption.”

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