SolarEdge Technologies (SEDG) reported another impressive quarter, with solid growth across all geographies and products, gross margin expansion and operating leverage.
The company reported:
Revenues of $209.9 million, up 11% Q/Q and up 82% Y/Y.
GAAP gross margin of 37.9%, up 40 bps Q/Q and 430 bps Y/Y.
GAAP operating income of $40.8 million, with operating margin expansion of 116 bps Q/Q and 901 bps Y/Y, to 19.4%.
For Q2, SolarEdge guided to 65% YoY revenue growth and gross margins within the usual target range of 36% to 38%.
Moreover, the company announced an asset purchase agreement with Gamatronic Electronic Industries Ltd, an Israeli company that develops, manufactures, and sells Uninterruptible Power Supply (UPS) electrical devices that provide emergency power to appliances when the input power source fails.
It is very telling that since the start of the year, SolarEdge has started to describe itself as “a global leader in smart energy” rather than “a global leader in PV inverters, power optimizers, and module-level monitoring services”, its traditional bread-and-butter business. In the press release announcing the purchase agreement, SolarEdge used the “smart energy” language again.
On what follows, we analyze Gamatronic financials, comment on the acquisition and other recent company moves to diversify away from the solar inverter business, and update on our views on valuation and market prices.
As a reminder: SolarEdge is a core holding of the IW Portfolio since August 2015. In February 2018, we presented the long case to the investment community. The stock has appreciated more than 30% in the 3 months since.
Before proceeding, we invite investors to familiarize themselves with our long thesis, available here, since will be later updating on valuation concepts and models introduced then.
Gamatronic UPS product line (source: FOX MIS Temple University)
Gamatronic Electronic Industries, another step towards “smart energy”
Based in the Har HaHotzvim Industrial Area of Jerusalem, Gamatronic was established in 1970 and began trading on the Tel Aviv stock exchange in 1994, under ticker GAMT.
Today, the company sells its products in the United States, China, Europe, South Africa, and Latin America, but seems to have spread its sales channels too thinly, with operating expenses exceeding gross profit in each of the last two years.
