Good day, everyone. Welcome to the SolarEdge Call for the Q4 and Full Year Ended December 31, 2020. 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 corporate 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 event calendar page of the SolarEdge Investor website.
I would now like to turn the conference call over to Erica Companion at Sapphire Investor Relations, Investor Relations for SolarEdge. Please go ahead.
Good afternoon. Thank you for joining us to discuss SolarEdge's operating results for the Q4 and full year December 31, 2020, as well as the company's outlook for the Q1 of 2021. With me today are C. V. Landau, Chief Executive Officer and Ronen Fire, Chief Financial Officer.
Siggi will begin with a brief review of the results for the Q4 year ended December 31, 2020. Roni will review the financial results for the Q4 full year followed by the company's outlook for the Q1 of 2021. We will then 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 and the slides published today for a more complete description.
All material contained in the webcast is the sole property and including non GAAP net income and non GAAP net diluted earnings per share, which are not measures prepared in accordance with U. S. GAAP. Conference. The non GAAP measures are presented in this presentation as we believe they provide investors with the means of evaluating and understanding how the company's management team evaluates Company's operating performance.
These non GAAP measures should not be considered in isolation from, as substitutes for or superior to financial measures in prepared in accordance with U. S. GAAP. Listeners who do not have a copy of the quarter ended December 31, 2020 press release or the supplemental material made obtained copies by visiting the Investors section of the company's website. Now, I will turn the call over to Susie.
Thank you, Erica. Good afternoon and thank you all for joining us on our conference call. We are pleased to report that we have concluded the quarter with revenues of $358,000,000 and the year Conference with record revenues of $1,460,000,000 Revenues for the Q4 in our solar business Conference. We're approximately $327,000,000 also above last quarter's solar revenues. Our solar revenues this quarter reflect strength in the U.
S. Residential market, which we had anticipated in our earnings call last quarter. In fact, the quarter over quarter growth in shipments from the residential segment in the U. S. Was in excess of 50%.
We expect this strong growth in our revenues from U. S. Residential products to continue in the Q1 of 2021 as well. We have also experienced very healthy growth in our solar revenues from countries outside of the U. S.
And Europe Conference with record quarterly revenues in Australia, where we finished 2020 with over 30% year over year growth. Our Europe solar revenues was down from Q3, as is the typical seasonal behavior of the European market. However, on an annual basis, we are closing the year with record solar revenue in Europe of $579,000,000 Conference, up from $522,000,000 last year, led by the Netherlands, Germany, Italy and Poland. We are very happy with these results, in particular, in a challenged COVID year. This quarter, We shipped over 1.36 gigawatts of AC mainplate inverters, approximately 4 57 megawatts of which Conference.
Shipments to Europe consisted of 5 94 Megawatts. From a segmental point of view, we shipped this quarter 566 Megawatt of Commercial Products and 7 98 Megawatts of Residential Products. This split represents the strength in residential I discussed earlier Conference and a noticeable reduction in commercial shipments, in line with what we explained in our call last quarter regarding the slower recovery of commercial installations and the higher inventory of commercial products in the channel. In the Q4, we believe commercial installations worldwide We're still impacted by the economic slowdown. However, we did see an increase in the installation rate of our commercial products and a reduction in inventory level this quarter, which we believe indicates that the recovery in the commercial segment is underway.
Overall, this quarter, we shipped 3,600,000 power optimizers and approximately 166,000 inverters. As discussed in our last call, the ramp of production in our Stella-one manufacturing facility in Israel continues. Conference. This together with our manufacturing in Vietnam and Hungary will enable us to supply approximately 85% of our U. S.
Products for our EnergyHub Single Phase Storage Inverter. In the Q4, we shipped to the U. S. Close to 15,000 Energy Hub Inverters, up from approximately 6,500 in Q3. So far, we released the Energy Hub in power levels Between 3.8 to 7.6 kilowatts.
In the coming months, we will release the high power version with inverter offerings of 10 11.4 kilowatts. The high power versions are especially important Conference. As average installation sizes increase with consumers being more aware and interested in more power conference. Our Energy Hub supports today easy charger integration, Conference. Multiple batteries for increased capacity and multi inverter configurations through our backup interface for increased power.
In the coming months, we will add generator integration and high backup power models, allowing 7 kilowatt Conference Critical for backup of a typical house load during power outages. The product is designed to handle consumption patterns that we have learned from our installed base of tens of thousands of battery connected inverters. We see the EnergyHub as a differentiated storage system, optimized for energy harvest and Energy Management in grid connected and backup scenarios. To complete the system, the energy hub is connected to a battery in the DC coupled configuration, aim to enable harvesting of all the energy from the modules on the roof. To clarify, typically a system is oversized such that the total power of the modules on the roof or of the individual module copper.
The roof will be limited by the size of the inverter. In our SolarEdge DC Coupled configuration, All the energy generated by the modules will be harvested and either used to tower the required house consumption conference or to charge the battery in parallel, thus extending backup time and increasing system utilization. The EnergyHub inverter can be coupled with a 3rd party battery as we currently offer or our own battery. In that regard, we are on track with the schedule discussed last quarter of initial shipment of our own battery in Q2 Conference and meaningful volumes in Q3. In the commercial segment, we are beginning these days shipments of the new and large Synergy inverter with power rating of up to 120 kilowatts.
In parallel, we began shipments of higher power commercial optimizers conference of up to 1100 watts for a 2 module configuration. This in order to match the trend of high power modules that are becoming available around the world. The higher power modules and optimizers combined with a higher power inverter will reduce the cost per watt for our commercial installers and we expect will increase adoption Similar to what we have seen in 2020, where our annual commercial megawatt shipments were up more than 25% compared to 2019. In addition, we are seeing growing adoption of our designer software workflow solution, which enables installers to easily design complex rooftops On average, every month approximately 70,000 designs are created on the platform Conference by more than 12,000 installer accounts. Moving to our non solar business.
As announced earlier today, SolarEdge E Mobility has been selected as the Tier 1 supplier for full powertrains and batteries for the Fiat e Ducato. For those of you who are not familiar with this vehicle, the Fiat Ducato is recognized by many as the leading light commercial vehicle in Europe and has been produced since 1981. Recently, FCA presented the electric version of the Ducato, And we are proud that SolarEdge Mobility has been selected to supply the full powertrain and batteries for this vehicle in Europe. Conference. Our solution includes inverters, DC to DC converters, batteries, onboard chargers, vehicle control units and Software for Electrical Vehicles.
As I have mentioned in past calls, we have already delivered prototypes for close to 100 e Ducato vehicles that are accumulating mileage throughout Europe today. We believe the experience gained through this project, which has including adapting some of our production lines to automotive quality standards, conference. Well, service in our solar and other businesses well beyond the already exciting news of being part of the e mobility industry. The automotive industry planned its vehicles years before they hit the road. This nomination reflects a long term investment Conference.
And is in line with our growth plans beyond solar that we have laid out in our earnings calls and that formed the basis for our acquisition. Conference. Subject to market acceptance, in 2021, we expect our e mobility business to deliver between $100,000,000 to $120,000,000 of revenue. In our Energy Storage division, Kokam's revenue grew by 25% this year. And for the first time in many years Kokam is profitable.
As a reminder, we completed the Kokam acquisition in October 2018. And this year, we have ramped the existing lithium ion cells and Battery Pack Factory to Full Capacity. This quarter, we also welcomed S. W. Jeong to our team as the General Manager of Kokam.
Mr. Jeong is an industry veteran with more than 2 decades of experience and leadership positions in Samsung Electronics, We are excited to have him on board to lead our energy storage business out of Korea. This quarter, we also began construction of our Selah II factory in Korea. This factory, which is part of Kokam, Conference. Represents another pillar of our growth strategy beyond solar and once completed will manufacture 2 gigawatt hour of lithium ion cells per year.
The factory spreads over 56,000 square meters just outside of Seoul, will be a state of the art manufacturing facility and is expected to start production in the first half of twenty twenty two. This capacity will enable us to supply cells through our own battery storage solutions and for other applications. We ended 2020 with record revenues of $1,460,000,000 Conference slightly above those of last year. Like most, when the pandemic hit, we adjusted both our expenditure and forecast conference. To take into account the impact of the economic slowdown and given the circumstances, we are pleased to have completed the year with revenue slightly above those of last year.
No less important, we were able to deliver these results Conference. While continuing to invest and execute on our solar and non solar growth strategies. And with this, I hand it over to Ronen, who will review our financial results.
Thank you, Tivi, and good afternoon, everyone. This financial review includes a GAAP and non GAAP discussion. Conference. Full reconciliation of the pro form a to GAAP results discussed on this call is available on our website and in the press release issued today. Total revenues for the 4th quarter were $358,100,000 a 6% increase Compressed to $338,100,000 last quarter and a 14% decrease compared to $418,200,000 Conference for the same quarter last year.
Revenues from the sale of solar products were $327,100,000 Conference, a 5% increase compared to $312,500,000 last quarter. U. S. Solar revenues this quarter Conference. $132,300,000 and represented 40.4 percent of our solar revenues.
Solar revenues from Europe were $146,700,000 or 45 percent of our revenues. This quarter, our top 10 solar customers represented 64% of our solar revenues and included more European customers Conference. The last quarter, big customers accounted for more than 10% of our solar revenue. While pricing levels remained stable this quarter, blended ASP per watt for our solar products increased by approximately 12.5% Conference. Compared to last quarter, a direct result of higher revenues from residential products offering and an increased portion of revenues Conference.
In line with what CB explained, inventory levels held by our distributors in the United States We're healthy on the residential side and still higher than desired on the commercial segment. This is in line Conference. With our expectation and this level will return to normal towards the Q2 of 2021. This quarter, revenues from our non solar products were $31,000,000 led by sales of lithium ion batteries by Kokam and increased sales by eMobility. GAAP gross margin for the quarter was 30.8 Conference compared to 32% in the prior quarter and 34.3% in the same quarter last year.
Non GAAP gross margin for the quarter was 32.5% compared to 33.5% in the prior quarter 35.5 percent in the same quarter last year. Non GAAP gross margin for the solar business Conference. Was 36.2% compared to 34.8% in the last quarter, in line with our solar gross margin target of Conference 36 plusminus 1%. This increase in the non GAAP solar margin is a result Conference. This quarter approximately 60% of products shipped into the United States came from our non tariff production.
Stella-one production continued to ramp Conference. According to plan, it is expected to reach full production capacity at the end of the Q2 of 2021. Conference. Until then, the ramp has a negative impact on our gross margin. Non GAAP gross margin for our non solar activity was minus 6.4% compared to positive 16.9% in the previous quarter.
The decrease was mainly a result of an increase in e mobility preproduction expenses related to the e Ducato project. Conference and assembled in our Italian manufacturing facilities. Over the last quarter, we have been building manufacturing capacity in Italy that includes an increase in the number of employees and associated expenses that are charged into the cost of goods sold. And the fact that we have built production capacity that can suffice the projected manufacturing level starting in Q1 2021, Our margins on these projects are currently negative. Once we stabilize the manufacturing at a higher output level, The margin will be at a single digit level based on current anticipated volumes.
Moving to our operating expenses. In total, GAAP operating expenses for the 4th quarter Conference. We're $95,900,000 or 26.8 percent of revenues compared to $77,700,000 or 23 comp. In the prior quarter and to $92,700,000 or 22.2 percent of revenues for the same quarter last year. A major part of the increase this quarter is a result of stock based compensation.
On a non GAAP basis, operating expenses for the 4th quarter were $72,900,000 or 20.4 percent of revenues Conference compared to $63,200,000 or 18.7 percent of revenues in the prior quarter and $63,100,000 or 15.1 percent of revenues for the same quarter last year. Our non GAAP solar operating expenses as Percentage of solar revenues were 18.9% compared to 16.7% last quarter. Our GAAP operating income for the quarter was $14,400,000 compared to $30,400,000 in the previous quarter and 50 point Conference. $5,000,000 compared to $50,000,000 in the previous quarter $85,300,000 for the same period last year. This quarter, non GAAP solar activities resulted in operating profit of $56,500,000 Conference.
Compared to an operating profit of $56,700,000 last quarter, this number represents 17.3% of our solar revenues and is slightly lower than our 20% to 23% long term operating profit model. Conference. $6,600,000 in the previous quarter, mainly from our e mobility division. Financial income for the quarter for the same period last year. This income is a result of foreign currency changes offset by increased finance expenses Conference was $7,200,000 this quarter compared to a tax expense of $2,400,000 in the prior quarter and $9,200,000 for the same period last year.
Our non GAAP tax expense was $4,600,000 compared to $1,600,000 in the previous quarter $10,400,000 for the same period last year. Our tax rate is positively affected in the last quarters by higher deductible expenses for tax resulting from exercise of employees' stock compensation. GAAP net income for the 4th quarter Conference. $17,700,000 compared to a GAAP net income of $43,800,000 in the previous quarter and $52,800,000 for the same quarter last year. Non GAAP net income was $55,700,000 GAAP net diluted earnings per share was $0.33 for the 4th quarter compared to $0.83 in the previous quarter and $1.03 for the same quarter last year.
Non GAAP net diluted earnings per share was 0.98 compared to $1.21 in the previous quarter and $1.65 in the same quarter last year. Turning now to the balance sheet. As of December 31, 2020, cash, cash equivalents, bank deposits, Restricted bank deposits and investments were $1,200,000,000 Net of debt, cash, cash equivalents, bank deposits, Restricted deposits and investments were $530,200,000 During the Q4 of 2020, We generated $27,000,000 in cash from operations. AR net increased nominally this quarter DSO this quarter in the solar business was 75 days, an increase from 70 days last quarter. As of December 31, 2020, our inventory level net of reserve was at $331,700,000 to an increase in raw material inventory in anticipation of start up production in our eMobility division and to a lesser extent, an increase Conference.
Let's move now to summarize the full year of 2020. Conference. Revenues for the year were $1,460,000,000 a 2.4% increase from $1,430,000,000 Conference in the calendar year 2019. Revenues related to our SolarEdge business were $1,360,000,000 Conference. A 1.5% increase compared to 2019.
GAAP gross margin was 31.6% compared to 33.6% in the prior year. Non GAAP gross margin was 33% compared to 34.9% in the prior year. GAAP net income for 2020 was $140,300,000 a 4.2% decrease compared to 140 $600,000 in the prior year and GAAP diluted EPS of $2.66 Conference compared to $2.90 in the prior year. Non GAAP net income for 2020 was $224,400,000 3.5% decrease compared to $233,200,000 in 20 19 Conference. And the non GAAP diluted earnings per share of $4.11 compared to $4.44 in the prior year.
Non GAAP net income for our solar business was $264,000,000 a 4% increase compared to $254,100,000 in 2019. This year, we generated $222,700,000 in cash from operations. Moving now Conference. Guidance for the Q1 of 2021. We expect revenues in the Q1 to be within the range of 380 Conference.
$5,000,000 to $405,000,000 Revenues from the sale of solar products are expected to be within the range of $360,000,000 $375,000,000 We expect non GAAP gross margin is expected to be within the range of 36% to 38%. I will now turn the call over to the operator
We do ask that you please limit yourself to one question with one follow-up. Again, that will be star one for questions. We'll hear first today from Mark Strouse with JPMorgan.
Yes, good evening. Thank you very much for taking our questions. Good to see the commercial channel inventory reducing. Curious if you can just I think on the last call, you mentioned around 14, 15 weeks. Is kind of Where that stands maybe as of year end or as of today would be even better?
Thank you.
And again, it depends on the difference between Europe and the United States, where in Europe, we see the weeks of inventory Decreasing while in the U. S, they are decreasing to a lower extent. I think that the more interesting part though is the fact that we do start to see more These kind of inventory levels will start dropping a little bit quicker. But in general, we see a small decrease.
Conference. Okay. Okay, thanks. And then
just a quick follow-up. Hearing
from some others in the industry talking about component supply issues, semiconductor supply issues. Any impact On your supply chain and is that reflected in guidance?
So in general, Mark, it's Something that we used to see in the past, these kind of component shortages. And we actually foresaw this Conference coming in the last few months and got ready for this. As you can see reflected in our inventory levels, our inventory is a little bit higher than usual. First of all, Conference due to the Edukato project, but also given the fact that we are holding a relatively large amount of components of critical components of raw materials that we hold in anticipation for these kind of shortages. At least at this point of time, we feel that we can manage through the shortages.
We do not see any impact Because in many cases, we became a major portion of those suppliers' capacity or sometimes sales and therefore both them and us have good interest in staying In a very close touch and making sure that we're well coordinated. So at least at this point, we do not see a major effect.
Okay. I'll hop back in queue. Thank you very much.
Thank you.
We'll hear next from Stephen Byrd with Morgan Stanley.
Conference. Thanks for taking my questions. I wanted to first talk about the eMobility business and just Conference. You've had a nice success here. Curious in terms of the opportunity more broadly, I know you've conference.
Dialogue and work with a number of OEMs. What is your sense of the potential to replicate what you've done here to Kind of extend your relationship with the additional OEMs. How do you kind of feel about the opportunity beyond what you've just announced?
So obviously, it's a huge market with a lot of potential. At the same time, Processes take a very long time in this industry and we don't anticipate any quick wins. We're happy with this project. The experience that we gained in this project helped us Improve the product, improve our production capability, gain a lot of experience from all of the mileage that was accumulated, Conference. And we hope to get future fruits out of this learning and investment, but we don't Conference.
And excited for having a foot in the door of this huge opportunity.
That's helpful. And you did provide some prepared comments on sort of the size of the opportunity here with Fiat. Would you mind just Speaking a little bit further to that, to the extent that the relationship continues to work well, Could you just speak a little bit more to sort of volumes? And you talked about the margin situation now. Could you just talk a little bit longer term in terms of your aspirations there?
So as mentioned in the comments, to a large extent, it depends on the acceptance The vehicle now we're optimistic because we know it's a very popular vehicle around here in Europe and we see it Frequently on the road here in Israel as well. The scale that we are is represented In our numbers, it's a scale of 1,000 over the next few years. Conference. But again, it can go in either direction based on market acceptance.
We'll move next to Colin Rusch with Oppenheimer.
Thanks so much, Raj. Can you tell us a little bit more about the trend line on the OpEx side? How are you expecting that on a non GAAP basis to trend over the next
Conference. So first of all, by the way, Collyn, and you mentioned the non GAAP. You need to There is a big difference as you can see and it's growing between the GAAP and non GAAP. A lot of it is related to the stock based compensation given the fact that stock price And therefore, these expenses are representing a bigger portion. But In general, I would start by saying that the way that we would like to see gross margins in a way that allows to be between 20% to 23% of operating profit on a non GAAP basis.
So that means that we are aiming at around 15%, 16% of non GAAP operating expenses coming for the solar business. Now, I think that we need to differentiate here between the solar and the non solar business. In the solar business, The revenues are relatively high. And as long as we're able to maintain growth rates, the numbers of The revenues and the impact is going to be so large that you should see an operational lever where when the numbers are growing, operating expenses as We continue to invest in R and D as much as we can. Today, it's hard to broaden much more or Conference.
As quick as we would like the R and D, simply given the fact that we already have a base of many people. So therefore, to get many people in a short time is an issue. On sales and marketing and G and A, there are economies of scale and therefore, we should expect to see this operating leverage continuing. The issue and the big question is usually around the newer businesses because these are businesses that are in a, I would call it, investment mode. And naturally, we would like to invest there in R and D or market development.
So, for example, in the e mobility space, We definitely want to increase the product selection and we want to go to neurogeneration. In general there, I would assume that you may But when you tie everything together with the solar that is so much bigger than the others, again, you should see that in the overall picture, as a percentage of revenues, Non GAAP operating expenses should decline over time.
Okay. That's helpful, guys. And then in terms of the roll out on the energy storage product and qualification on that. Could you just give us a bit on the timing when you expect to start shipping Significant volumes of that residential product. And then can you tell us a little bit about the incremental development expense to integrate the generator capability into that product.
So in terms of battery readiness, we are in the midst of Building up the manufacturing line is what is leading us to the projection of initial shipments within the 2nd quarter Conference and meaningful volumes in the 3rd quarter. That's the schedule that we communicated last quarter and so far Conference. We are on track with that. In terms of there is no special incremental R and D Related to generator integration. Actually, the hardware is compatible already.
It's a matter of The roadmap for software version releases that causes the fact that
Conference. And from ROTH Capital Partners, we'll hear next from Philip Shen.
Conference. Hey, guys. Thanks for taking my questions. As a follow-up on the storage question there, in the past, you guys have talked about targeting 2 gigawatt hour run rate for the storage business exiting 2021, So possibly in Q4. Is that reasonable at all to assume?
Was that a little bit more likely in 2020 2 as a target or run rate.
Actually, Phil, here I think that there is a little bit of Conference. Maybe miss not good enough explanation on our side. In general, the 2 gigawatt factory that we're building will be end of construction will happen at the end of 2021. At this point, we will have a factory With all the equipment and capacity needed to manufacture 2 gigawatt hour a year. But from that point of time, We will need a few months to start ramping up the activities in the facilities in the new factory.
And this is Time thing that takes a little bit more time. So while the capacity, the build capacity of 2 gigawatt will be there at the end of 2021, only In the first half of twenty twenty two, we will be able to ramp up the production with all the 3 shifts
and all the processes to get to this
kind of a run
rate. Conference. Okay. Thanks, Mohan. So as a follow-up there, You guys talked about revenues from e mobility of $100,000,000 to $120,000,000 What do you think storage conference.
And perhaps a mix by quarter will be helpful as well. Thanks.
So in general here, again, the main question is going to be, of course, timing, which currently looks on track. Conference. But as noted before, we believe that anything between $100,000,000 to $150,000,000 this year is a number that we're aiming for.
Okay, great. Thanks, Renee. I'll pass it on.
We'll hear next from Jed Dorsheimer with Canaccord Genuity.
Hi, thanks for taking my Conference. Congrats on another solid quarter. A quick question, I guess, just on the HD wave and on the solar products, the inverter specifically. Where are you in the process in terms of the conversion from silicon to wideband gap? Conference.
And then I have a follow-up to that.
So in the current version as well as the energy hub, we are using still using standard silicon conference for these generations. For newer generations, we're looking at different alternatives, obviously.
Got it. I mean, I'm just looking at the analog device spec sheet here that lists you guys and talking about a 50% to 60 It would seem like reduction of the passives and in particular copper Would seem like a great hedge in terms of that shift. What's keeping you back from making that transition? Conference.
So obviously, we'll not get into too much detail, but those type of considerations are part of our thought process Conference. Our next generation products, but it's not something that is feasible to be implemented in short cycles Conference. So we're looking at these types of alternatives for our next generation products that are a year or 2 years away Conference. And looking to find the best combination from cost and performance, but to get over the current cycle of shortages. Our actions, as Anen described, are more traditional in terms of building up Components inventory securing supply and building up a healthy level of finished goods inventory.
Conference from Goldman Sachs. We'll hear next from Brian Lee.
Hey, guys. Thanks for taking the questions. I had 2 on margins. Just maybe first on the solar margins. It looks like you mentioned the mix in resi, North American strength, they're Conference.
So I know in the past you've given us some high level color around geo trends and the cadence. So In terms of solar margin, should we start to see a bit of normalization in 2Q, maybe gross margins leveling off moving through the year? I'm just trying to get a sense of This is kind of the high watermark for solar margins in Q1 given the robust outlook here, if you think there is actually upside from those levels moving through the year.
So as you mentioned, the margins are normalized or getting back to the levels that we used to talk about before about 36 Conference. Give or take 1%. And this is basically a result of several things. The first one is the fact that we start to see the United States being back a more meaningful portion of our revenues of the Solar Revenues. As we mentioned before, actually at the end of Q2, what we saw is that when the pandemic started and the U.
S. Conference. We're able to grow substantially in Europe that in a way that on one hand did not impact the revenues maybe as much as it would hit unless we were so active in Europe. But at the same time, the higher competition and intensity in Europe Prescribed much lower gross margins and at that time, by the way, we have noted About 500 basis point difference between the U. S.
And Europe in this regard. Over time, two things happened. The first thing is that The euro got a little bit stronger compared to the U. S. Dollar.
This is something that, of course, helps our Conference. Margins in the sense that we still manufacture in dollars and therefore we collect more dollars on every euro sale that we're doing. And the second one is that once we're starting to sell in the United States where the competition is a little bit lower on residential due to the Rapid shutdown regulations, then we were able to charge higher revenues than to increase the margin. And there is another issue that happened in the Q4 and this is the fact that in general, Commercial solar that is characterized with lower gross margins compared to residential was again lower compared to the previous quarter. So this is the main change that happened.
Looking forward, as already described in our guidance, we Conference. We expected the non GAAP gross margin to be at 36% to 38%. So, the midpoint is already at the higher range of our long term target. And we expect this to continue to happen. We continue to do cost reduction all the time.
The pricing environment is relatively
stable, both in the United States and in Europe. And
we are continuing all the the production that comes to the United States. And compared to 60% of shipments of non Chinese products in Q4, About 85% of these products that will come to the U. S. In Q1 will be already for non tariff. So this is something that definitely Drive us to the higher range and the higher levels that we guided.
There is one phenomena though that we need to Conference. Mentioned and this is actually for the later part of the year. While we assume that we will see the normalization in the solar margins in Q1 and Q2, Actually, in Q3, once batteries are starting to get bigger volumes and starting to have more effect on our margins and here In the past, we discussed approximately 25% expected margins on batteries. We expect that the overall Once batteries will come, we will basically provide guidance and a little bit about how to model and how to expect gross margins to be related to the volume of batteries of the overall revenues.
Okay. I appreciate that color. And maybe a good segue into the second question I had just on Ronan, you mentioned batteries, but Emobility, if you do the $100,000,000 of revenue this year, is that all back half weighted in terms of time frame. And then on the margins, I know eMobility has some upfront costs here. They're negative today.
But What's the target for margins to go positive in e mobility timeframe wise? And ultimately, are you At the 25% or 30%, I think target you've talked about in the past, do you get there in the back half of this year if
So I'll start answering 1 by 1. And if I missed anything, please, Brian, let me know. In general, we expect volumes will initiate this quarter. And we believe that they will stabilize around Q2 or beginning of Q2 towards the end of the year. So I would assume that The majority of the revenues will come between Q2 to Q4.
And that means that at that point in Q2, We already expect to see positive gross margin on this product. However, I think that we need to differentiate between the longer term Conference. Margins that we expect on e mobility and the margins on this project. And the 2 key differentiators is, first of all, the fact that In e mobility, unlike in solar, it's very hard to do cost reduction once the product is defined. Nevertheless, if it was launched or not, Because in the e mobility space, once you have defined a product and you basically validated the product with manufacturer.
You cannot change any component and that, of course, reduces dramatically your ability to either make changes in the product for reduction or even to negotiate with your suppliers because they know that they're already designed into the product. In the case of this Edukato project, it's a project that we inherited from the acquisition of SMRE. Therefore, there is not a lot that we can do in this specific product to reduce cost, and we expect to see Single digit margins starting in Q2 and they will not be very high. Once we will see Two things happening. First of all, if indeed the market acceptance is going to be good for this product, then we will see higher volumes and then we will be able to Spread the fixed costs that we already have here over a larger amount of units and this of course will increase the gross margin.
And second, we will be able, maybe over time when we'll have more projects to go and reduce cost of products if we're using them or components I mean, other products as well because then we have more leverage with the suppliers. But in any case, I do not expect it to happen Not in 2021 and not in the volumes that we're discussing right now. Lastly, lastly, 30% Conference. I do not believe that this is a number that can be achieved in the near future in e mobility. If you look today at comparable companies in the e mobility space, you see best Conference.
Margins being at about 18% and these are very technological and very good companies. It will take us the time to get to that level of expertise. Even if the margin is lower, it's very high because every unit is very expensive. So I hope that it answered all of the components. If not, let
me know what I missed.
We'll move next to Maheep Mandloi with Credit Suisse.
Hey, thanks for taking the questions. This is building upon Brian's question there on eMobility. Could you just talk about the nature of this agreement with the Fiat group in terms of exclusivity and any trials or any pilots going on for the other electric products. And in addition to that, just wanted to understand the operating margin for this business. I presume that given it's more B2B nature, the OpEx should be much lower Percentage of sales compared to that for the solar industry, some color on that also would be helpful.
Thanks.
So, Maheep, I'll try to answer and again if I missed the second question, please clarify. So, the dynamic Conference. For that project, we don't necessarily no one commits that we are the sole supplier and we don't necessarily know. But typically, Conference. In the industry, it's a supplier definitely for a product of this complexity per project.
That's to the first question. The second question, as I said earlier, we've been Commenting about this opportunity and the fact that it is coming close in the last couple of quarters and we're Conference. Confident enough to be more clear about it in this call. So at this point, we are not On the verge of any additional project, definitely not a project at this scale within Conference. So there won't be quick wins and quick ramps in multiple projects, at least not in 2021
here. Got it. Thanks. And Just wanted to understand the operating leverage in this business in terms of sorry, one second. Yes, just wanted to understand the operating leverage, how much operating expenses you Conference.
So
Conference. We described a bit the content of what we are delivering and the theme is consistent with what we would discuss practically in every other product that we are delivering in other segments as well. Inverters, DC to AC inverters, DC to DC converters, batteries, lithium ion, etcetera. So there's definitely and on the manufacturing line. So there is a significant technology leverage and a fair amount of operational leverage that is using our expertise and infrastructure for these new businesses.
It's Not only in mobility, it's also what we are doing in the area of clinical power and UPSs and of course, Lithium Ion and Kokam is a common thread, although the batteries that are being used today in our e mobility project are not Conference. Coming from Kokam, as Ronen mentioned, those were inherited already in the design when we acquired SMRE
conference.
We'll hear next from Moses Sutton with Barclays.
Hi, thanks for taking my questions. Conference call. On the storage product launch, once you get certified, once that's complete, how much available capacity will you have in megawatt hours in 3Q, 4Q
The truth is that unfortunately, we won't have the capacity for the demand that we are seeing. Conference. Practically from all regions, there is very strong pull for Our battery also from North America, also in Europe and also in Australia. We are comfortable that we will have capacity to Conference. The numbers that Ronen mentioned earlier to in the answer to Phil on the potential projected revenue Conference in the Q2 and maybe some upside to go beyond that.
But like I say, I wish we had capacity for all of the demand. That will probably come in a better way in 2022 when We have our own factory.
That's helpful. And this may be a bit obtuse of me, but how are you gauging the demand To say that you're, you don't have enough for it. Is it based on the inverter product? Because no one's had the product yet. So I'm just wondering how you're Sort of getting the sense of the an expectation on what the demand will be for the product once available.
1st, a combination of we talked to many customers. They ask about the battery. They ask about the Conference. And as I mentioned also in the prepared remarks, At the end of the day, we have a huge installed base of storage systems Conference. So we are very familiar with the installers that are installing the systems and with the preferences Conference.
And with the needs in terms of the consumer needs, in the different modes of outages and maximizing self consumption and time of use application. So we are Anywhere between comfortable to confident that the battery and the system design are meeting the needs of our inverter installers and that they will want to adopt our
We'll hear now from Marshall Carver with Heikkinen Energy Advisors.
Yes. And thank you for taking my question. I just have a quick one. You mentioned having some e mobility sales this quarter, but the majority would be in 2Q and 3Q, 4Q. In your $385,000,000 to $405,000,000 1Q guidance, how much do you think could come from eMobility?
Just trying to get a feel for is that So at this point, we bucket in the non solar revenue into one number, which is $25,000,000 to 30 $30,000,000 and we don't list out any individual components of the non solar business. Conference. When the revenue from eMobility is sizable enough to warrant it, we will be breaking it out Conference. Okay. And the $100,000,000 plus this year from eMobility would be Incremental to the $100,000,000 to $150,000,000
of non solar.
Yes. Basically, the numbers that we have for the eMobility are incremental to the battery storage numbers that we have today.
And at this time, I'd like to turn things back to management for any closing remarks.
Thank you.
In summary, we concluded a challenging yet positive year on all fronts. All of this while continuing to invest and laying the ground for future growth and expansion into adjacent markets, the fruit of which we are already beginning to see. We're looking forward to 2021, which we expect will be a year of growth, new product releases and development of our solar and non solar businesses. Thank you for joining us on our call today and stay safe.
And that does conclude today's conference. Again, thank you all for joining us.