Solaredge Technologies Inc

NASDAQ:SEDG

Earnings Call Transcript 2019-Q1

[Operator]

Please standby. Welcome to the SolarEdge Conference Call for the First Quarter Ended March 31, 2019. This call is being webcast live on the company's website at www.solaredge.com in the Investors section on the Event Calendar page.

This call is the sole property and copyright of SolarEdge with all rights reserved and any recording, reproduction, or transmission of this call without the expressed written consent of SolarEdge is prohibited. You may listen to a webcast replay of this call by visiting the Events Calendar page of the SolarEdge Investor website.

I would now like to turn the call over to Erica Mannion at Sapphire Investor Relations, Investor Relations for SolarEdge.

[Erica Mannion, Sapphire Investor Relations, LLC, IR]

Good afternoon. Thank you for joining us to discuss SolarEdge's operating results for the first quarter ended March 31, 2019, as well as the company's outlook for the second quarter of 2019. With me today are Guy Sella, Founder, Chairman and CEO; and Ronen Faier, Chief Financial Officer.

Guy will begin with a brief review of the results for the first quarter ended March 31, 2019. Ronen will review the financial results for the first quarter, followed by the company's outlook for the second quarter of 2019. Then we will open the call for questions.

Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations.

We encourage you to review the Safe Harbor statements contained in our press release and the slides published today for a more complete description. All material contained in the webcast is a sole property and copyright of solar edge technologies with all rights reserved.

Please note this presentation describes certain non-GAAP measures, including non-GAAP net income and non-GAAP net diluted earnings per share, which are not measures prepared in accordance with U.S. GAAP.

The non-GAAP measures are presented in this presentation, as we believe that they provide investors with the means we're evaluating and understanding how the company's management evaluates the company's operating performance. These non-GAAP measures should not be considered in isolation from, as substitute for or superior to financial measures prepared in accordance with U.S. GAAP.

Listeners who do not have a copy of the quarter ended March 31, 2019 press release or the presentation may obtain a copy by visiting the Investors section of the company's website.

Now, I will turn the call over to CEO, Guy Sella.

[Guy Sella, Founder, Chairman and CEO]

Thank you, Erica. Good afternoon. And thank you all for joining us on our conference call today. We concluded our first quarter with record revenues of approximately $272 million, up 3% from last quarter and an increase of 30% from the same quarter last year. These revenues also include the record quarter in our solar business of approximately $253 million. In the quarter ended March 31, 2019, we shipped 1.1-gigawatt of AC nameplate inverters. Overall, we shipped 3 million power optimizers and 131,000 inverters.

Last quarter, we began to separate the solar and non-solar activities in order to enable a continue understanding of our solar business without the recent acquisitions. Of course, as soon as a single new business area become significant enough, it will be reported separately all in accordance with GAAP principles and regulation.

Given recent implementation of newly enacted accounting principle such as the new leasing accounting standard and the additional accounting effect of the acquisitions such as the amortization of intangible assets, we believe that the presentation and analysis based on non-GAAP measures provide a better understanding of the business and management feeling.

The non-GAAP presentation enables the analysts and investors to have full transparency of our solar business and its continued profitability, as well as seeing the result of the non-solar business.

Along those lines, I'm happy to report that our non-GAAP gross margin increased to 32.8%, up from 30.9% last quarter and our non-GAAP gross margin from solar products increased to 34.3%, up from 32.8% last quarter.

As we discussed last quarter, we are reducing our actual support costs, while continuing to improve customer support services. Mostly, as a result of tighter control support operations and reduced support-related logistics expenses.

We are reporting non-GAAP net diluted earnings per share of $0.64 for the first quarter of 2019. Our non-GAAP net income was approximately $33 million and we generated cash from operations amounting to $56.5 million. Despite our recent acquisitions, our strong cash flow generation enabled us to increase our cash level to approximately $400 million, while taking on the small debt of approximately $24 million from the non-solar acquired businesses.

Moving to the business front, as you can see from our results, our solar business continued to grow at a healthy pace and we see the replication both in our product and geographic mix. Specifically, this quarter sales in the U.S. accounted for 47% of revenues, sales from Europe accounted for 40% of revenues and sales from the rest of the world, primarily Australia accounted for 13% of our revenues.

Overall, we shipped approximately 421-megawatt of products to the United States this quarter. Our product mix reveals further extension of our commercial sales, which comprised 44% of our total megawatt shipped this quarter.

As mentioned last quarter, we are working in opening an additional manufacturing site in Vietnam, in order to supply product that will not be impacted by U.S. tariffs on Chinese product. This is in addition for manufacturing sites in China and Hungary.

As a reminder, at the beginning of Q1, we announced the acquisition of SMRE, with initial purchase of 56% of the shares of Italian [inaudible] company. Over the course of the quarter and through April 26th, we increased our shareholding as planned to over 98% and the company is now the listed.

The integration of both Kokam and SMRE is well underway and we expect that over the next few years these acquisitions will accelerate the clean energy and e-mobility evolution that we want to lead. Having said that, the main driver for revenue and profitability for now continue to be our solar products.

And with this, I hand the speaker over to Ronen who will review our financial results.

[Ronen Faier, Chief Financial Officer]

Thank you, Guy, and good afternoon, everyone. Before starting the review of our financial results for the first quarter of 2019, I would like to remind listeners that while the overview will be on the GAAP basis, in certain cases, I will be discussing non-GAAP numbers and measures, which exclude the impact of the newly adopted revenue recognition standard, stock-based compensation, one-time asset disposal, one-time transition tax, changes in deferred tax, one-time acquisition-related expenses, intangible assets amortization and cost of product adjustments related to the acquisitions of SMRE, Kokam and the UPS division and finance expenses related to the adoption of the newly enacted leasing accounting standard, as well as non-GAAP earnings per share.

I will conclude this introduction by noting that the effect of the new acquisition closed in the last month on GAAP result is meaningful as a result of amortization of accounting elements identified in the preliminary purchase price allocation studies that we have recently performed.

As our results prior to these acquisitions did not include these elements and since the business results are almost not affected by this amortization, as mentioned by Guy, we believe that non-GAAP analysis provides a better view of the way that management analyzes the results of our operations.

Please also note that the first quarter of financials represent a change in our consolidation perimeter due to the first time inclusion of SMRE results effective January 24, 2019. Full reconciliation of the pro-forma to GAAP results discussed on this call is available on our website and in the press release issued today.

For the first quarter of 2019, total revenues were $279 -- $271.9 million, a 3% increase compared to $263.7 million last quarter and a 30% increase compared to $209.9 million for the same quarter last year.

Revenues from sale of solar products were $253.1 million and were driven by record shipments to Europe and rest of the world. U.S. revenues were similar to the first quarter of 2018 and represented 46.9% of our solar revenues, partially reflecting the industry-wide seasonal slowdown of the first quarter. While Europe and rest of the world revenues represented 39.8% and 13.3%, respectively, and hit an all time record in absolute values.

This quarter our top 10 solar customers represented 62% of our quarterly solar revenues, a decrease from the last quarter, while only one customer continued account for more than 10% of revenues.

Blended ASP decreased this quarter mainly due to currency fluctuations, higher commercial product sales, and higher proportion of non-U.S. denominated revenues. This quarter, revenues from our non-solar product sales were $18.8 million, mostly driven by sales of lithium ion sales and energy storage product and to a lesser extent from UPS products. Revenues from SMRE for the period included in our consolidated reports were slightly under $3 million.

GAAP gross margins for the quarter were 31.7%, compared to 30.2% in the prior quarter and 37.9% in the same quarter last year. Non-GAAP gross margins this quarter was 32.8%, compared to 30.9% in the prior quarter and 38.4% in the same quarter last year.

Non-GAAP gross margins for the solar activities were 34.3%, compared to 32.8% in the last quarter. This increase was primarily attributed to product mix, as well as lower shipment and logistic costs.

Our actual warranty expenses continue to decrease this quarter in comparison to the last quarter in absolute value, while our long-term warranty accrual increased as a result of our calculation method that takes into account past expenses. The net effect on gross margin of these two changes compared to the last quarter was negligible

U.S. customs tariffs negatively impacted our solar business margins this quarter by 65 basis points. Our non-GAAP margin on non-solar activities was 13.1% this quarter, compared to 7.8% in the previous quarter, where the majority of the result is related to higher margins on energy storage systems.

Moving to operating expenses, in total operating expenses for the first quarter were $58.1 million or 21.4% of revenues, compared to $55.3 million or 21% of revenue in the prior quarter and to $38.8 million or 18.5% of revenue for the same quarter last year.

On a non-GAAP basis operating expenses for the first quarter were $48 million or 17.7% of revenues, compared to $45.1 million or 17.1% of revenues in the prior quarter and $32.9 million or 15.7% of revenues for the same quarter last.

Of this non-GAAP increase in operating expenses, $1.6 million were related to the solar activities, the majority of which are related to increasing our R&D headcount. Our non-GAAP solar operating expenses as percent of revenues were 16.6%, with no change compared to the last quarter.

The remaining increase of non-GAAP operating expenses is mainly an inclusion of the operating expenses of SMRE in the amount of $1.5 million in our P&L. Non-GAAP operating expense related to Kokam and to the UPS division was unchanged.

The bottomline result of these GAAP operating – of this is GAAP operating income for the quarter of $28 million, compared to $24.4 million in the previous quarter and $40.8 million for the same quarter last year. Non-GAAP operating income for the quarter was $41.2 million, compared to $36.4 million in the previous quarter and $47.6 million for the same period last year.

Financial expense for the quarter was 2 point – $6.2 million, compared to financial income of $0.3 million in the previous quarter and to financial income of $0.6 million for the same period last year. Of this amount, $5 million of expenses are related to the devaluation of the euro, Korean won and Israeli new shekel against the U.S. dollar, an additional $0.9 million are a result of the adoption of the new lease standard.

This quarter we had a tax expense of $3.9 million, compared to a tax expense of $12.1 million in the prior quarter, which was affected by one-time adjustment to the provisional tax on undistributed earnings and profits resulted from the U.S. Tax Reform and a tax expense of $5.7 million for the same period last year.

GAAP net income for the first quarter was $19 million, compared to GAAP net income of $12.9 million for the previous quarter and $35.7 million for the same quarter last year. Our non-GAAP net income was $32.9 million, compared to a non-GAAP net income of $31.5 million in the previous quarter and $42.5 million for the same quarter last year. The non-solar activities generated a $2.8 million of non-GAAP net loss this quarter, compared to a net loss of $2.6 million in the previous quarter, which did not include SMRE.

GAAP net diluted earnings per share were $0.39 for the first quarter, compared to $0.27 in the previous quarter and $0.75 for the same quarter last year. Non-GAAP net diluted EPS was $0.64 slightly higher compared to the $0.63 of the previous quarter and $0.87 in the same quarter last year. It is important to note that our non-GAAP consolidated EPS was affected this quarter by $0.02 as a result of the SolarEdge shares issued as part of the SMRE acquisition. Non-GAAP net diluted EPS were negatively affected by $0.07 per share as a result of the non-solar activities.

Turning now to the balance sheet. As of March 31, 2019, cash, cash equivalent, restricted cash, short-term bank deposits and investments were $398.7 million, compared to $392.2 million at December 31, 2018. During the first quarter we generated $56.5 million of cash from operation.

Actual cash paid in the first quarter for the purchase of SMRE shares and additional Kokam shared was $43 million net of cash acquired. In addition, this quarter our balance sheet include net debt of $24.3 million related to borrowing taken by Kokam and SMRE for working capital needs and capital expenditures prior to the acquisition.

Our current plans are to maintain this debt until we finalize our capital needs for Kokam relating to the increase of manufacturing capacity and the needs of SMRE in relation to long-term financing leases on building.

AR net increased this quarter reaching $187.5 million, compared to $173.6 million last quarter. DSO this quarter in the solar business was 68 days slight change from 69 days last quarter.

As of March 31, 2019, our inventory level net of reserve was at $150.8 million, compared to $141.5 million in the prior quarter, approximately $39.5 million of this amount relates to non-solar inventory, the majority of which is raw materials held by Kokam.

Moving now to guidance for the second quarter of 2019. We expect revenues to be within the range of $310 million to $320 million. Revenue from the sale of solar products are expected to be within the range of $290 million and $300 million. We expect gross margins to be within the range of 30% to 34%. Gross margin from solar activity is expected to be within the range of 33% to 35%.

I will now turn the call over to the operator to open it up for questions. Operator please?

[Operator]

Thank you. [Operator Instructions] We will take our first question from Maheep Mandloi with Credit Suisse.

[Maheep Mandloi, Credit Suisse]

Hi. Thanks for taking the questions. Can you just talk about the Q2 guidance, what's driving the growth and the sales for the quarter? And also -- can you also just touch upon what you seeing on the ASPs in the market individually for the residential and commercial applications in Q1 and rest of the year? Thanks.

[Guy Sella, Founder, Chairman and CEO]

So, I follow the first part of the question, I'm not sure about the second, I will answer the first part and then just remind me what exactly was the part -- second part of the question. This is Guy.

[Maheep Mandloi, Credit Suisse]

Yeah.

[Guy Sella, Founder, Chairman and CEO]

So we're expecting the non-solar to stay quite flat between Q2 and 3, and the majority of increasing demand on Q2 is coming from Europe. In general, the market, Q2 is the strongest quarter in Europe, Q3 is almost as strong, but a weaker due to the [inaudible]. While in the U.S. usually the second part of year, H2 is stronger. So we would expect that the majority of the increase will be coming from a Europe and we would assume that during the second part of the year we will see even higher growth coming from the U.S. And now what was the question about ASP, if you can help me to?

[Maheep Mandloi, Credit Suisse]

Yeah. Sure. I just wanted to understand directionally, how about the ASPs and you just mentioned commercial applications when you spoke about the blended average being down because of high commercial mix, but -- and those individual segments how were the ASPs in the quarter and what your expectations for the year and then how did it follow-up after that?

[Guy Sella, Founder, Chairman and CEO]

So, basically, I think, three questions at once. I will try to answer them in a way that we will explain what we are doing and what we see. So ASP of commercial, as you know, is lower than ASP of residential. It’s hard to give the average depends on the exact type of the commercial, the type of optimizer, et cetera, but it reflects more or less the differences in the market. So it can be 50% to 60% in average, depends what you measure, very hard to measure.

The gross margin on both products is pretty similar, between residential and commercial. So we don't see any negative affect by growing our commercial business. Looking forward in ASP that's complex this year, originally without the changes in fee – in the taxation from the U.S. and without the week on Sunday, I would expect that we will see slight a decrease in ASP in Q3 and Q4, saying that, with the week and we say unexpected future taxes, I think that we have no clue about what will be the ASP and I will be very happy to learn from analysts like you what you think, because we do not know.

[Maheep Mandloi, Credit Suisse]

I just go by what you say. But another thanks. That’s really helpful color. And just last question from me and then I will pass along. Given the volume growth in Q1 and Q2, where do you see your – what are your thought on market share in the U.S. markets. Do you think that’s growing, flattish or how do you think about that? Thanks.

[Guy Sella, Founder, Chairman and CEO]

Again, here we think that our market share is growing, but that’s a very unindependent analyses that we do based on the – on reviewing the many accounts of the Tier 1, Tier 2, an average long-tail that we have. The right numbers or the most accurate numbers are coming as you know from Greentech Media and those probably will be available by the end of May. So I would expect that we grow – beating our market share, but I think it's hard to -- from our position we have limited view, it’s hard to come with a conclude answer.

[Maheep Mandloi, Credit Suisse]

Got it. Thanks for taking the questions and congratulations on the quarter.

[Ronen Faier, Chief Financial Officer]

Thank you, Maheep.

[Operator]

We will take our next question from Colin Rusch with Oppenheimer & Co.

[Colin Rusch, Oppenheimer & Co.]

Thanks so much. Guy, just thinking about this market share dynamic, there you are talking about, what other technologies are you taking share from, clearly, it seems like you had cost points where you could be taking significant share from inverters at this point and then I have a couple of follow ups after this?

[Guy Sella, Founder, Chairman and CEO]

I don’t think we have good enough view of such question. It’s – I think that we see some large centralized inverter companies going down with their market share. I don't think we see any newcomers such as new Chinese taking any market share and I think [inaudible] is doing good. So I really don't -- and I don't think the differences in market share are in huge percentage, so I really don't think I have any accurate feeling on this question, sorry.

[Colin Rusch, Oppenheimer & Co.]

Okay. That’s okay. We will take it offline with a little more nuanced. And then just in terms of energy storage attach rates and what you are seeing in terms of orders at this point, particularly as folks understand your acquisition of Kokam. What can you tell us about that, specifically related to the U.S. and then certainly in Europe?

[Guy Sella, Founder, Chairman and CEO]

So we don't have yet -- SolarEdge batteries as you know, those are planned for the end of year beginning of next year. So there is no yet impact of the acquisition of Kokam, regarding our own offering in storage products.

Saying that we are today supporting high-voltage batteries of LG and in quite big percentage when Tesla is selling their victory we are connected on the PV side, so it’s a AC coupling structure.

We have no intent to reduce the offering of storage in the future but adding our own high-voltage battery and in addition to that we are planning to announce and having the market later this year beginning of next year a three-phase on grid storage for the European market that can work with 48-volt battery. So although we are increasing our storage offering in 2.5 dimensions and I believe it will help us to sell many more storage product.

[Colin Rusch, Oppenheimer & Co.]

Okay. Thanks, guys.

[Operator]

We will take our next question from Philip Shen with ROTH Capital Partners. Mr. Shen, your line is now open.

[Philip Shen, ROTH Capital Partners]

Okay. Great. Just want to make sure the line is okay. Thanks for taking the questions. So as a follow-up on the tariffs topic, Guy and Ronen, philosophically, let's say, the tariff goes to 25%, would you expect to pass on all of that to your customers or I think in the first tranche of 10% -- the first tariff is 10% that was expectations and that would happen not only for you, but also for I believe your peer. But now that if we go from 10% to 25%, would you want to do the same thing or do you think you might absorb some of that as well yourself?

[Guy Sella, Founder, Chairman and CEO]

Different from some leaders, we take decisions based on fact and we cannot tweet our answers. So that’s a Sunday tweet by Ms. Frampton before having a real date, real impact, real [inaudible] code that we can put on the sale and really calculate impact on gross margin, I think, it will be in responsible from my side to try to give you an answer.

[Philip Shen, ROTH Capital Partners]

Okay. Fair enough, Guy. And then as it relates to our Vietnam, you mentioned that, in your prepared remarks, can you share with us who your contract manufacturer is, in addition to the timeline of when that facility could be wrapped up and would -- and do you expect to fill a fully serve all of U.S. demand from Vietnam and does it also include both inverter capability, as well as optimizer capability? Thank you.

[Guy Sella, Founder, Chairman and CEO]

So CME debut Vietnam. We are in the process of building the lines now and we supposed to start producing end of June, beginning of July, and of course, we will produce both optimizers and inverters.

Regarding the full capacity, that's again something it's hard to predict especially the future, so it depends on how fast we would ramp up and how fast the demand from the U.S. will come. We do have additional line in Hungry and which we can double in case we need relatively in a fast way. So we have enough tools but to be able to predict the total demand from the U.S. for any quarter in the future, of course, is not something I can do.

[Philip Shen, ROTH Capital Partners]

Okay. Great. And then just a couple of more housekeeping type questions. Can you talk about the -- why the optimizer units were down in the quarter, while inverters were up, was it simply an inventory or channel situation? And then, I think, you guys mentioned that international revenues were 53% of overall revenues in the quarter. Can you talk about how you expect that mix to trend as we go through the year? Thank you.

[Guy Sella, Founder, Chairman and CEO]

So regarding optimizers, it’s a split an inventory channel hands between Q4 and Q1, so we don't see any new phenomena in the market. So I would expect that many people have higher inventory of optimizers in compared to inverters, saying that the inventory level in Europe are almost zero and in the U.S. in average the inventory are not a high as well.

The second question was about the trend in the future of the ratio between inverters and optimizers, it is correct?

[Philip Shen, ROTH Capital Partners]

No. Between U.S. and international – the international mix?

[Guy Sella, Founder, Chairman and CEO]

U.S. and international, so as mentioned, I think, again, based on the behavior, but I feel maybe, Ronen can answer as well. But I feel that in Q2 it supposed to be similar or little bit even higher demand from Europe and then it will be change to the other direction in Q3 and 4, since usually the U.S. is stronger in H2 and we see very positive signs in the U.S. market since the beginning of the year.

[Philip Shen, ROTH Capital Partners]

Okay. Great. Thank you, Guy. I will pass it on.

[Guy Sella, Founder, Chairman and CEO]

Thank you.

[Ronen Faier, Chief Financial Officer]

Thank you.

[Operator]

[Operator Instructions] We will take our next question from Joseph Osha with JMP Securities.

[Hilary Cauley, JMP Securities]

Hi. This is actually Hilary on for Joe. I just kind of I get back to the non-solar, I know you said, you are expecting it could be relative flat next quarter. But I was just wondering if you could speak to what that revenue ramp might look like over the next several quarters and longer term what you kind of see a target or optimal split between solar and non-solar? Thank you.

[Guy Sella, Founder, Chairman and CEO]

That’s even harder than to predict the future. So as mentioned last call we believe that we built a very strong multi-pillar company, which will have UPS and storage as sales and other ESS product, as well as the mobility and one or two more segments that we will develop.

Now saying that and as mentioned before, we do not know yet to give good analyses of how fast we can ramp each of the businesses, simply because we still building them. As you know, we bought the UPS for something in the area of $11 million, $12 million and we are working on the Kokam side on establishing a completely new and much more advanced capacity and production capability and with SMRE it’s a – it’s in the heart of the automotive industry.

So before we will see the first one or two major deals it will be very hard to give any estimation as you ask. So, all in all, I think, that we will have a clearer picture of how fast we control the UPS after we will completely adapt their product start to produce them in our line, et cetera, something which I would expect to happen in Q1 2020. We will have I think better view on Kokam somewhere between Q4 this year, may be a bit later. And then regarding SMRE, I think, it's even hard to predict when should we see enough horizon, but it can happened in one to three quarters from now.

[Hilary Cauley, JMP Securities]

Okay. Great. Thank you.

[Guy Sella, Founder, Chairman and CEO]

Thank you.

[Ronen Faier, Chief Financial Officer]

Thank you.

[Operator]

And our next question comes from Jeff Osborne with Cowen & Company.

[Jeff Osborne, Cowen & Company]

Yeah. Good afternoon, guys. Just a couple on my end. I think on the last call we had talked about getting to a 36% plus solar gross margin range, which was your prior guidance at some point in time, I think in Q3 is what you had indicated. Is that still the trajectory, I know you guided for improvement in Q2, I just want to get a sense of what you're seeing for the second half with the moving parts of warranty and pricing?

[Guy Sella, Founder, Chairman and CEO]

So, again, it’s now, without analyzing Mr. Trump, I think, that as mentioned before, we believe as, I think, we said last time, three to four quarters and I think we still feel comfortable with this estimation.

[Jeff Osborne, Cowen & Company]

Got it. And then, Guy, is there any conversations that you are having around safe harboring of either optimizers or inverters, is that something that possibly can manifest itself between now and April of next year?

[Guy Sella, Founder, Chairman and CEO]

Of course, we still need to learn exactly the regulation. I think they are a little bit different from the regulation of the last safe harbor. I think it was in 2013, I am not sure, don't catch me on the year. We're learning it. But, yes, with a nice potential, of course, it will impact if at all somewhere between Q4 and Q1 next year.

[Jeff Osborne, Cowen & Company]

Got it. And then you highlighted, Ronen, on the debt and keeping that with Kokam and SMRE. Can you just talk about what your plans are for capacity expansion, two-part question, I guess, one, remind us what capacity is today, and two, where you're going and how much it will cost, is that something that you can give some guidance on CapEx in particular for the year?

[Guy Sella, Founder, Chairman and CEO]

So, not yet, so capacity today at Kokam, we have 150-megawatt to 200- megawatt depend blend and the majority are high -- very high ended sales with up to 11,000 cycles that go to specific very high end markets and that was the reason why we have acquired company because of the really peso capabilities and chemistries and long-term and amount of cycles and so on.

Regarding capacity and price of CapEx, we are working and we will have – we are working intensively on three – on checking three generations of options of expanded – extension. One is like me to and then if we will go with this direction then you probably know the CapEx related to any additional want to go out to capacity we would like to add. The chances will go with me to in production as you know us are not very high.

We are checking another two options, one is based on different approach and one is based on almost majority of self-development machines and once -- I think it will take us three months, four months and we will know what we do we will share the capacity and more or less the schedule and the expected CapEx investment.

[Ronen Faier, Chief Financial Officer]

And Jeff just to add to these, as we said all long, we do expect that once we make the decision we would try to make the -- to take the majority of the financing from Korean banks in Korea itself in order not to utilize monies coming from the United States into Korea and not to create any kind of, I would call it, tax accidents.

[Jeff Osborne, Cowen & Company]

Make sense. I appreciate it. Thank you.

[Ronen Faier, Chief Financial Officer]

Thank you.

[Operator]

And concludes today’s question-and-answer session, I’d like to turn the conference back to Guy Sella for any additional or closing remarks.

[Guy Sella, Founder, Chairman and CEO]

Thank you. In summary this quarter we continued our expected growth and execution in all fronts. The solar business continued to generate increased demand for our products and we continue to supply the market with top-notch innovative technology, while also investing resources in new product that will address the clean energy and e-mobility evolution. Thank you all for joining us on today’s call. All the best.

[Operator]

And that does conclude today’s conference and thank you for your participation. You may now disconnect.