Guy Sella
Thank you, Erica. Good afternoon and thank you all for joining us on our conference call. I’m happy to report that we concluded our second quarter with strong results. We are reporting record revenues for the quarter of $227.1 million, gross margins of 36.1%, GAAP net income of $34.6 million, and a non-GAAP net income of $40.6 million. We also reported cash flow from operations of $43.9 million. Let’s look at what has driven these very positive results.
Our revenues once again reached a record high this quarter as we continue to execute on our business plan. Revenues increased from last quarter by 8% and 67% from the same quarter last year despite a flat market in the United States. Our growth was driven by both the megawatt expansion of our commercial and residential business in the United States and continuously strengthening demand for our products in Europe. The growth of our commercial business of course by nature reduces the blended ASP per watt, but this is within our expectations and our plans.
In the second quarter, we shipped 985 megawatts of AC inverters, approximately 460 megawatts of which were shipped to North America. Overall we shipped 2.7 million power optimizers and 114,000 inverters, yet another record. I want to take this opportunity to highlight some aspects of our business and to address some additional noteworthy metrics. For the third consecutive quarter, we saw growth in our commercial sales comprising today 43.5% of our overall megawatt shipments. Among those projects is a 27-megawatt large ground mounted installation in India, currently under commissioning. We continue to increase our investment in R&D and related expenditures in order to drive down product costs and more important, to introduce new products.
We believe that one of our differentiators is technological innovation which leads the PV market in new developments that have changed the way that power is harvested from the sun. The success of the entire PV industry has been and continues to be driven by innovative technology that makes PV energy more affordable and ubiquitous. Such innovation requires significant financial investment and years of dedication and hard work from skilled R&D engineers. To that end, in the past two months, we filed a lawsuit for patent infringement against Huawei Technologies Corp., Ltd., the Chinese entity, Huawei Technologies Dusseldorf GmbH, the German entity, and WATERKRAFT Solar GmbH, the German distributor for Huawei. The lawsuit was filed in the regional court of Mannheim in Germany, one of the most prominent German patent courts, and asserts unauthorized use of three patented technologies and is intended to protect our significant investment in our innovative DC optimizing inverter technology and our innovative power optimizer technology. The lawsuit was filed initially on one patent, and then as we announced earlier this week, was extended to an additional two patents and seeks monetary damages, an injunction, and the recall of the infringing Huawei inverters and power optimizers from the German market.
The lawsuit is intended to prevent Huawei and its distributor from selling any multi-level inverters and power optimizers that infringe upon SolarEdge PV inverter technology that is protected in the asserted patents in Germany. As we have said for many years now, it is our position that the illegal use of proprietary technology can stifle the solar industry and inhibit investment in furthering technology. While this is not our preferred course of action, we believe that this is necessary evil that is required to ensure the integrity of the entire PV industry, secure a level playing field, and protect SolarEdge’s intellectual property.
On a very different front, on July 1 we announced the closing of the asset purchase agreement with Gamatronic, a company that developed, manufactured and sold UPS universal power supply systems, also known as UPS. The acquisition for approximately $11.2 million gives SolarEdge an entry into adjacent business with intellectual property, brand recognition and product line that we believe will support our plan to expand our technological offering in power electronics to additional areas of business. The integration of Gamatronic includes approximately 100 employees, many of whom have extensive R&D experience and will contribute to our innovations. The Gamatronic UPS business serves as a basis for a new division of SolarEdge. I would like to share a few words about grid services and virtual power plants. This quarter we announced innovations that support the newly growing shared energy economy.
With increasing proliferation of PV and storage around the world, the energy production industry is transitioning from a centralized system to a distributed network in which energy is produced closer to the location it is stored and consumed. This provides PV and storage systems owners with a new revenue stream opportunity by selling their self-produced and stored energy. However, the new complex network of distributed generation requires sophisticated management platforms to provide real-time aggregated control of the demand and supply of energy. Our agreed services now offer aggregated control and data reporting enabling the pooling of PV and storage in the cloud for creation of virtual power plants. This solution will provide utilities with tools to leverage distributed energy generation systems to more efficiency demand. At the same time, energy retailers will enjoy protection from price peaks and PV system owners can increase their revenue from joining this new energy economy.
Also, worth noting is our continuing investment in manufacturing capacity. Together with our growth comes the challenge of on-time delivery of quality product. We continue to focus on improving and automating our manufacturing line so as to enable flexibility of manufacturing locations to accommodate our global sales. Given the current environment in the United States, it would be remiss to end my remarks without addressing the proposed new tariff on specified import products originating from China which sadly are expected to include inverters and optimizers. These tariffs and the possibility of additional tariffs in the future have created unnecessary uncertainty in the industry concerning whether they will cause material increase in the price of solar systems in the United States. As you know, we have third-party manufacturing capabilities in both Romania and Hungary which include automated assembly lines for our power optimizers. Should these tariffs be enforced, we are confident in our ability to extend our power optimizer manufacturing capacity in these locations within 2 quarters in order to meet the full demand in the United States for power optimizers.
Similarly, we anticipate that if needed, moving the vast majority of the inverters demand for the US will take between 2 to 4 quarters, such that overall in the long term, we do not expect that the tariffs will negatively impact the pricing of our products for the United States. So while there may be temporary slight increase in cost of products coming into the United States due to imposed tariffs, we are working proactively to minimize the effect of any such tariffs on importations from China into the US, when it comes to SolarEdge products and SolarEdge customers. We continue to be confident that our continuously increased cash position, which now exceeds $437 million, puts us in a strong position to continue to develop new products and extend our business both geographically and into other areas.
I would like to conclude with a brief look at our bottom line numbers. Our non-GAAP net income was $40.6 million and we generated cash from operations amounting to $43.9 million. Our financial strength positions us well to continue to develop innovative technology and bring value to expanding markets with new products to current and new markets while managing a very effective cost reduction plan. And with this, I hand the speaker over to Ronen, who will review our financial results.
SolarEdge Technologies, Inc. (SEDG) CEO Guy Sella on Q2 2018 Results - Earnings Call Transcript | Seeking Alpha
