Well, great. Thanks everybody for coming in bright and early. Very pleased to have Shuki Nir here, the CEO of SolarEdge. I'm Jeff Osborne, the TD Cowen sustainability analyst. Thanks for sticking with us on day two. Shuki, thanks for taking time out of your busy day-
Thank you.
-to join us and being here from Israel. I imagine most in the room are familiar with SolarEdge, but do you, just in 90 seconds, a minute or two, just go over what SolarEdge is about?
Yeah
In terms of the platform you've built, would be helpful, and then we can dig into some questions.
Thank you. Thank you for having me. It's great seeing you here and online. Yeah, SolarEdge, this is our 20th year. The company was founded on understanding power electronics, in general, and DC in particular. Based on that, over the years, it built different products and different solutions that are actually bringing value to the end customers, whether it's the homeowner or C&I. Now we are going to talk about data centers as well, AI data centers in the future. What we're trying to do always is to lead by the innovation, the quality of the technology that we develop, and make it into workable solutions that are actually increasing the ROI on the project or on the solution that we are providing. That would be the 90 seconds.
Perfect. I appreciate it. I definitely want to touch on data centers. Maybe we'll start there, promised to ask quite a few questions on both storage and solar as well, just given the explosion of interest among the buy side in data centers, maybe we'll start there. Maybe at a high level, let's just walk through how the relationship with Infineon's proceeding, and then, I believe the goal is to have alpha and beta units next year. Right now, both yourselves and many peers are sort of in the white paper marketing w aiting for the Nvidia product cycle to play out, then would pull market adoption, but let's start with the Infineon relationship, what the history is there, and how it's progressing?
The history with Infineon is long, maybe since almost the beginning of the company, we've partnered with Infineon. They are very close partners of ours. The silicon carbide and other solutions that they offer is part of our inverters today. When we announced the entry into the AI data center area, we said that we announced it together with Infineon because the silicon carbide that they are making is going to be part of this product. The partnership is progressing well. You mentioned that we are in the white paper marketing area. This is not exactly true about SolarEdge. SolarEdge, about five or six years ago, we started developing Back then, it was aimed at the utility space, solar utility, a solid-state transformer.
For three years, the company invested a lot of money in creating the infrastructure and the labs and everything that is needed. Dozens of engineers had actually worked on it. Until 2024, the company had some difficulties. Because of expense control, we put the project on hold. Last year, when Nvidia released the white paper talking about the expected and very much needed transition to DC infrastructure in the AI data centers, we went, we basically brought this project back to life. This is why we keep talking about the fact that we have all the building blocks already. Now we are putting them together.
We put the team together, brought back actually some people who left SolarEdge because we closed that project, and we have some very talented people who understand DC for the last 20, 25 years, which is an area of expertise that-
Absolutely
-is very much needed. We are now at the stage that we aim at having a working product in our labs this year. We are going to have pilot installations next year. 2028 is when probably that will meet the transition that Nvidia are talking about in terms of their GPU roadmap that will require the transition to the 800 V. That's kind of how we look at it.
That's helpful. Just as a point of intellectual curiosity, when the old team pre 2024, was that at a 1,500 V, which is the solar voltage for utility scale, that then you're sort of dialing back to 800 V? A lot of people would say it's easier to go backwards on voltage-
Yeah
-than it is to go up.
I don't want to say Nothing is easy in these technologies, but moving the solid-state transformer from being the solar product that it was originally planned for into the data center SST, the latter should be less complicated and less complex. There are many learnings that we've had. These things are not working on trial number 1. We had to go and learn, make some changes, make some adjustments over these three years that the development has been in place. Now we feel confident that we have the architecture in place.
This is why we're talking about the 99% efficiency while others are talking about lower efficiency. We feel that there is a lot of work that has to go into it, don't get me wrong. The feedback that we are getting from the ecosystem, from the potential partners, as well as our own feeling, is that we are making good progress.
Got it. Maybe just staying on solid-state transformers, as we commercialize the product, what do you feel the top 3 KPIs will be beyond efficiency? Most people are in the 98% realm. You're in 99% today. I think there's certainly the block size is different for everybody. I think your marketing suggests 2 MW-5 MW.
Yes.
Here on Power, I think, has a white paper out at 4.2 MW. Folks at Enphase are 1.25 MW, combining 342 small devices to get there. As you talk to people-
Yes
-what's the right size if a solid-state transformer to come up behind you and bite you? How big do you expect it to be?
I think that the size or the number that matters here is not whether it's 2 MW , 4 MW , or 5 MW . The idea is to start from 34.5 kV, the AC. This is the AC, the medium voltage that is coming from the grid. You hear about different people that are having 10 kV or 15 kV. Based on what we understand, at least, this is not meeting what the expectation is. The expectation is to go in one step from 34.5 kV down to 800 V DC, and it's complicated. It does require innovation, technology understanding, and execution. The first thing that I believe people want You mentioned efficiency, so the efficiency is also related with the fact that it will be one step from 34.5 and down to-
Yours is one step.
One step.
Peers are multiple steps, and that adds a degradation.
I don't want to comment about peers, but what we are doing is that we have one step.
That gives you the confidence to be at 99-
Exactly
-versus others maybe are theoretically at something less.
That, as well as other innovations that we have.
Got it.
Yes, absolutely. That's number one. The second thing that is in discussions with the ecosystem that is important for them is actually the scale. We are talking about next year we are going to have some pilot installations. That by itself is going to require some manufacturing capabilities. If you go to 2028 and beyond, you're talking about the need to scale up manufacturing, the need to actually take it to the hundreds of megawatts, if not gigawatts of manufacturing. This is something that the hyperscalers or the neo clouds, they're looking at it as it's table stakes, right? If you can't deliver on that, don't even show up. That's the second thing.
The third thing, which is very important for everybody in the ecosystem, is to see that you have partnerships across the entire powertrain. It's not a standalone product, it's actually part of a solution. As a data center builder, you want to make sure that everything is working together, playing together in order to benefit.
That's construction at the front end. What about power electronics distribution? Do you need to interoperate or have some-
The product that we are developing is starting from, on one end is the connection to the medium voltage. You have the SST, so it's doing the transformation from the 34.5 V to 800 V, and then you have a PDU, a power distribution unit. Part of the change that is going to happen, as an example, is data centers today, they are using UPS that is connected to the AC bus. If you change to DC, you need to change the UPS infrastructure. We are developing the DC UPS of the future, if you will.
Whether you're a customer or a horizontal player in the market, you want to make sure that everything is talking to each other and you have a complete solution and not something that is just, somebody developed something in isolation, they bring it into the table, and then it doesn't interact or doesn't connect efficiently with the rest of the power electronics infrastructure in the data center.
Got it. Do you have any preliminary steps around go to market, or the testing that you're doing and discussions, or are those all with your own sales force directly today?
The good news here is the number of players, it's not huge. We are used to go after 10,000 installers in the solar industry. Here, you're talking about several dozens of potential customers, and the leaders are probably less than 20 people or less than 20 companies. We've engaged with most of them in discussions, and the discussions today are very technical. It's not about go to market, pricing, quantities, et cetera. It's about the technology. From their perspective, they want to make sure that the solution they choose and pick is something that is reliable. I didn't mention reliability earlier, but obviously this is table stakes, right? Reliable, does what it promises to do, and delivers on time. At this stage, we are discussing with them. They are trying to understand the competitive advantage that we have.
The go to market from then on, we don't look at it as something that is too complicated. You and I, we talked about it before. One way is to go directly to the neo clouds and the hyperscalers. The other one is maybe through some collaboration with the power electronics providers of today. We know that they are trying to develop their own solutions. For them, it would make sense also if there is a better solution than what they are developing to try to collaborate. We are talking to everybody. We don't have any exclusive go to market strategy that we're going to exclude any other thing.
Last question from myself. Then I'll open the audience for data center related questions. Then I definitely want to pivot to solar in the last 15 minutes or so. As I think you folks are aiming to have an Analyst Day later in the year, as investors try to size the market, my understanding, and correct me if I'm wrong, is that not only if, for argument's sake, we say there's a gigawatt data center that is moving to solid state, then there's an element of reliability that you need five nines. I had to ask the Google machine what five nines is, I think it's 5.26 minutes a year is what the 0.0001 downtime is.
Yeah.
Expectations are obviously very high at five nines. Is there an element of 20% overbill just from a reliability perspective or 10%?
Yes.
Yep, I assume. The gigawatt is really 1.2, 1.1 something higher.
Yeah.
You need solid state. I think there's been an explosion of interest.
as we move to more on-site generation, whether it's gas turbines, reciprocating engines, or fuel cells, just the power quality is pretty crappy coming out of those. There's a lot of discussion of putting batteries sort of between either the grid or on-site generation and the building, those would all need solid-state transformers as well, right?
Yes. You're taking it two, three steps forward, which is great. We're exploring these opportunities as well. We're in discussions with different participants in the market.
Right now you're stick grid-tied.
At this stage, the focus of the team is to provide SST that the data centers, it's going to be a must, right? The next gen of the GPUs has to be supported by the 800 V DC. That's what Nvidia are saying. The focus of the data centers as well as ours, is to make sure that they have a working, very efficient solution available for them. Reliability, we're testing different levels of redundancy within our SST. By the way, the product, some people think about product as something like that. It's a 20 ft container, right?
It's a large product. Our infrastructure is that these are 30 cells that when combined together, they are five megawatt. Inside the container, we are going to put some redundancy as well. I believe that what you said is right. I believe that the data center owners or builders are going to put some additional redundancy on top of that.
Okay.
We're expecting all of these things to happen. At this stage, next year we are going to start working with 20, 30 MW installations. We're going to have much more data in order to be able -
Prove [crosstalk]
-to comply with the five nines or the seven nines. Some people are talking about seven nines, actually.
Okay. Perfect. Any questions from the audience on data center oriented activity? Otherwise, we'll pivot to solar. Cool. All right. Maybe just 30,000 ft and we'll drill down. What are you hearing from your channel partners as it relates to the voice of the customer in solar? Both maybe compare and contrast Europe versus the U.S.-
Okay
-around interest in the category-
Yes.
-both residential and commercial.
I think that overall, globally by the way, everybody understands that electricity prices will continue to go up, and solar is probably the most affordable and the best solution for that. The underlying demand and the need for additional solar solutions, especially now when it comes with storage, so it's a solution. It's not just solar. We are going to produce more energy from the sun. Actually, we can now store it, use it later, time shifting and optimizing the rates here is something that is very, very interesting for companies as well as individuals. We continue to see a lot of interest and business. Talking about the interest is one level. The other level is obviously the actual demand.
What we've seen in Europe, we talked about it starting in March, it came close to home, I would say for the Europeans, that electricity prices are about to go up. Some dependency or independency of the grid or energy. We are seeing an uptick in Europe that is beyond or above the seasonal uptick that we've seen. That continued into April, and from our initial checks, it continued also in May. On the European side, both on resi and C&I, we're seeing this uptick. In U.S., we talked about it before, the C&I market is doing well. We are very well positioned in that market, and we are seeing good progress over there.
On the resi side, due to the lack of clarity around PFE and FEOC, slowness in the investments into the TPOs and the elimination of 25D, so that market has contracted, as you know very well.
Do you think we're at the bottom? When it recovers is a debate.
I feel that what we are seeing now is a slower level of investment or a lower level of investment in the TPOs. The bottom will be determined by when the level of investments in the TPO is going to go up.
Right.
That will be the catalyst for additional installations and this certain demand. We'll see what we expected to see this year, that yes, cash and loan is going to go down.
Sure.
The rest of the business, there is a lot of liability around this business today.
Just a follow-up on that is, while the investment is lower, your visibility into the multiple years ahead because of safe harboring, I imagine-
Yeah
-is better than in the past, like two, three years ago pre-Trump.
Yeah.
You probably would be scratching your head saying, "We have no idea when this is going to recover," but at least you have an alignment with the channel and partners. Is that the right way to think about that?
Yeah. We've over the last several quarters, and actually continuing now until July 3rd, we've engaged in multiple safe harbor deals, both with the TPOs as well as on the C&I side. What these safe harbor deals are going to provide us and the customers is better visibility, to your point, into future revenue or future demand, into a more aligned manufacturing and production planning. From our perspective, it's all goodness. When exactly they are going to start pulling the safe harbor deals is depending upon customer preference.
Got it.
Which is good.
Can we just pivot to the SolarEdge Nexus product launch? I think you started in Germany and then broader Europe, and then I saw on LinkedIn this morning that there's now training sessions in America.
Yes
to ramp that up with the channel. How do we think about where we are in that journey, the single SKU transition, all of those should have a pretty profound impact-
Absolutely
-on margins and cleaning up the channel around.
Absolutely. Look, Nexus, I am so excited about it that I can talk about it for the next hour, but I will try to be concise. It is the platform that SolarEdge has launched that is addressing today's residential market, and I will explain. The market has moved from PV only to PV plus storage, and it is coupled with the fact that the grid is becoming very dynamic. In Europe, you have dynamic rating every 15 minutes. Here in different states in the U.S., it starts to change as well. What we are seeing is the need, from a homeowner perspective, to get a system that does not only produce more power from a given set of panels, which SolarEdge has done for the last two decades, but actually that uses Artificial Intelligence to optimize when to import, when to export, when to activate some loads, and so forth.
That's one piece that Nexis is bringing to the table. The other piece, and we talked about it, is it's very installer friendly. When you combine these two, and we had the launch event back in March in Germany, the excitement from the installers was something that we didn't really expect to see that level of excitement. What we have is the entire Q2 supply that we have for Europe is already booked. We continue to have bookings for Q3. We are ramping up now the manufacturing. As for the U.S. market, we have pilot installations in the U.S. already. Our guidance to ourselves was we prefer reliability and quality over time to market.
We've had dozens of installations here in the U.S. in order to make sure that the installation process is working well, the commissioning, as well as the actual production and activation of the systems. We are going to start rolling out Nexis in the U.S. in the next quarter, we're going to do it together. The market here is slightly different, as you know, with the TPOs and the different customers, we're going to roll it out based on customer preferences and together with them.
Can you just touch on, at a high level, the financial ramifications of single SKU and Nexis relative to the contract manufacturing footprint?
Yeah, absolutely.
It should be pretty accretive.
Yeah
giving more legs to grow.
There are two things that Nexus brings to the table from a cost structure perspective. The first one is the fact that it's made in the U.S. All of our Nexus inverters and optimizers are going to be made in the U.S., which obviously is entitled to the 45X credits that give us a lower net cost. Nexus itself, apples to apples, compared to our previous platform, is lower cost. We have better cost by definition, and then the multiplier is the fact that it's going to be made in the U.S.
The third point around Nexis is we believe that the value that we bring to the homeowners is significantly better and higher than what we brought in the past and what other people are bringing now, which we believe will give us a little bit more pricing power as well, which also contributes to margin, as you know. Between all of these three things, we're excited about Nexis, about the value that we're bringing to customers, and the margin impact as well.
Do you think by next spring, 2027, the full transition will be done for Nexis in-
Yes
-terms of that ramp?
Yes.
I assume it takes three or four quarters.
The goal is to do it as quickly as we can while maintaining reliability and quality.
Okay.
The plan is by the end of Q1 to finish the transition.
Perfect. Can we just switch gears back to Europe? There's been some headlines with Italy having an auction that banned Chinese inverters. There's been some stories in Der Spiegel in Germany around hacking and concerns around Chinese inverters, and I think even the EU for recently i n early May, for EU-funded programs, banned Chinese inverters. We've got Intersolar coming up in a few weeks. What are you hearing from either policy country level d iscussing banning Chinese inverters? That would be a big deal.
The only thing that was actually decided is the directive that you mentioned, that the projects that are funded by European banks, the European bank cannot use a Chinese inverter.
Mostly funded by the governments of the country-
Exactly
-not the EU.
That's a very small fraction of the market, and people have to realize that. Now, the European political system, the way that it works is there is some stuff that is done at the European level, and then it's up for the countries to decide. I think that it's a question that each country will have to determine to themselves. On one hand, inverters coming from China are the majority of the inverters in Europe today, so they rely on them. On the other hand, they have some concerns. The sentiment in Europe has some concerns around it. I think that whichever decision they're going to make, we're going to continue. We believe that we can gain share in Europe, by the way, regardless of that. I think that the Nexus that we talked about-
Right
-from a financial perspective also will help us gain share in Europe regardless of the things that you're mentioning.
It's good to hear. Maybe just touching on the battery side of the business, you had the very expensive Samsung cell contract in the past. You're moving to LFP. Is that transition done? As we move to Nexis instead of the clickable snap, I forget your marketing jargon, but i t's a much faster installation time.
Yes.
For those in the audience, they do a great YouTube series called "Night Shift where literally some guys will sit around-
[crosstalk] invite you
-drink beer, and talk solar.
Not just bored, if you're interested in-
If you're in.
-good customer experience. Nexis was designed actually in collaboration with many installers. We call it the click, click, right? You come in, you put one module, then you can add additional modules on top of it, which is fantastic. Yes, Nexis is using LFP across the board, which means that on our single-phase batteries, that so far we've used NMC cells. We're going to move to LFP, by doing that, our entire portfolio is going to be LFP.
Okay. Margin should be better as that transition plays out.
That's part of the cost advantage that we talked about earlier, right?
Okay.
Nexis is a better cost structure. That's a significant portion of it.
Okay. It's not just the solar piece. Are these FEOC compliant cells that will be coming into the U.S. for next year?
Our battery, the way that it's done is not about the cells themselves, it's about the product that we are making. We are making the product in the U.S.-
Right.
-FEOC compliant. It's domestic content compliant.
Got it.
It's everything that our customers need.
Speaking of FEOC, can we just touch on the C&I business? I think the number one player in the market, Chint, depending on the day, I think can be 20%, 40% d epending on the quarter. What's your expectation of share gains in commercial?
You know it, but others might not. In the C&I segment in the U.S., there are three leaders, SolarEdge, Chint, and SMA. SMA is a German company. The other two companies, they don't have domestic content, and one of them is considered a FEOC company as well. The value to the customers that we bring, being non-FEOC compliant and domestic content compliant, is the 40% tax benefit that they can have. What we are seeing is a structural shift of the market share towards SolarEdge. We've gained share in the last two or three quarters, and we believe that we will continue gaining share, partially because of what I've just mentioned, and partially we see that as part of the safe harbor deals that we're signing.
I was going to say, it seems to be interesting, if you read between the lines in your marketing message around safe harboring, you've done a lot of webinars with Novogradac and racking companies for C&I, but less for residential. I guess the TPOs know how to do Safe Harboring, and you don't need to bring awareness. Is maybe something overlooked by investors is the visibility that's shaping up with C&I through Safe Harbor? Has everybody really focused on-
I don't know whether it's overlooked or not, but we've invested a lot of time and effort and expertise in order to structure a physical work test offering to the C&I customers, which is a different market, to your point, than-
Right.
-what the TPOs need. We actually see that this offering is attractive to them, and we are seeing good volumes.
Perfect. Speaking of safe harboring, your rival, Enphase, was here yesterday, and they had a release out maybe a month ago talking about the cumulative value of physical work tests. safe harboring, I think, was around $800 million or something, give or take. Have you disclosed that number? Is that something that you would consider doing as you-
We haven't disclosed the exact numbers, mainly because we are still working on it. Rather focus on the customers.
July 3rd midnight, we should expect a press release.
July 3rd midnight. Yes. Depends on which time zone. Suffice to say that we're very pleased with the engagement that we've had with customers, both on the C&I side as well as on the resi side, and we feel comfortable with our position.
Perfect. We've got two minutes left. Anything from the audience? Otherwise, I had two questions on my end. We'll do rapid fire. You've had a Herculean effort around improving margins and generating cash, but I think a big chunk of that was the $85 million- $90 million of OpEx. Target. Do you see, with the market and solar rebounding with the SST opportunity, are we at a floor from OpEx, or is there still efficiencies to be gained- as we think about next year? I am not trying to do a Philip Shen and get guidance for next year. A bipartisan question.
No, you know that we don't guide beyond this quarter, right? I think that the way that we look at expenses, both on the OpEx as well as on the COGS, by the way, we had a concentrated effort on making sure that on one hand, we reduce our cost, but on the other hand, that we become a more efficient company. The example you gave earlier about SKU, that will help us save additional cost in the future because we have less SKUs to manage, less SKUs to develop, less SKUs to ship. We are still actively trying to improve our operational efficiency, and I believe that there is some room to go with that. We have some headwind with the Israeli currency versus the U.S. that does add several million dollars to our OpEx.
Got it. Maybe in the last 30 seconds, what do you feel is the biggest misperception about SolarEdge among investors? Certainly, you've had a nice run in the stock in the past two weeks. Any misperceptions as you've been out there meeting with.
I wouldn't call it a misperception. I would just say that the way that we look at SolarEdge is we've been through a rough period of time. 2025, we used it to stabilize the company, to put together all the infrastructure that is needed for profitable growth. This quarter, the midpoint of our guidance is getting there, and we will get there in the future. I think that we have a very, very solid solar and storage business that we can build on for the next several years. On top of that, we are going to add the exciting SST opportunity. I'm excited about what's coming.
Perfect. Well, thanks for taking time out of your busy day to hop on.
Thank you. Thank you very much.