Q1 2020 Earnings Call
Welcome to the solar edge conference call for the first quarter ended March 31st 2020. This call is being webcast five on the company's website at W.W.W. Dot solar edge Dot com any investor section on the event calendar page.
<unk> is the sole property and copyright a seller edge.
All rights reserved and any recording reproduction or transmission in this call without the express written consent of solar edge is prohibited you may listen to a web cast replay of this call I visiting me events calendar page of the solar edge industry website, Oh, it now like to turn the color <unk> at Safire Investor Relations Investor Relations herself.
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Good afternoon. Thank you for joining us discuss aldrich's operating results for the first quarter ended March 31st 2020, as well to companies outlooks for the second quarter of 2020 with Mick Jagger, C.D. Landow, Chief Executive Officer, and raise your daughter Chief Financial Officer.
She didn't won't begin with a brief overview of the results from the first quarter ended March 31st 2020.
We'll review the financial results for the first quarter, followed by the company that was for the second folder with 2020 people then hoping to call for questions. Please note that this call will include put forward looking statements that involve winston uncertainties that could cause actual results you to from the Cheerily for management is current expectations.
Encourage you to review the Safe Harbor statements container press release in the slides publish a date for a more complete description.
All material contained in the web cast so property in copyrighted so right. So we're edge technologies with all rights reserved.
Please no. It's presentation described certain nongaap measures, including Nongaap net income and non <unk> diabetes earnings per share, which are not measures prepared in accordance with you know scouts.
Non got measures are presented in the presentation as we believe that they provide investors with a means of evaluating and understanding helping companies management evaluate to companies operating performance.
No doubt measures should not be considered my salvation from substitutes for for superior to financial measurements prepared in accordance with your best guess.
What's the most who do not have a copy of the quarter ended March 31st 2020, partially where the presentation.
Copy by visiting D. investors sections of the company's website now I will turn the call of the CD.
Oh Dear.
Good afternoon, Atari too old for joining notes on our conference cool.
Diversity or use when circumstances surrounding surrounding because it might be.
I would could be opportunity during the school to go because most of our discussion.
Others surrounding how your money doing business in life is the situation and provide insight into becoming Porter.
Starting however, it was hard like those that works in the score to read.
You concluded the quarter would look good revenues of approximately 300 $430 million.
Even agree to recruit quarter, and I was sort of business other proximate before.
Million dollars.
Overloaded quarter <unk> cover up the margins and 202000 and burden.
Yes, Gordon was in Lawrence our gardens <unk> group.
You could hardly such as the record Porter <unk> in North America.
<unk> commercial shipments I may go on both globally and in North America.
Obviously undercurrents environments.
Grips remarks about the teacher, you're not good luck to focus on barracks, rather than I'll be achievements of the quarter doesn't it.
Because there were two four recall early February.
<unk> concentrated in China.
Concerns in question marks very rebel to you're going to be to supply.
That's a darn you communicated with guns to early emergency or three again.
No significance of lawyers.
And that will be road show weird.
Just.
Since we're in December.
The various regions of the world.
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You do I was little squid and in particular, our largest the region.
<unk> locations like career in Italy.
<unk> on the one hand, Chunked, the company and management, but on the other him.
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Early summer the R.C. with the dynamics, which has noticed it did most of the words.
You learn to implement the early on the tools and proceeded either.
So we're workforce certain.
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Scott Smith by the time devoted to see.
Played some countries in Europe, we were able to adjust rapidly.
In addition, you have insuring that smell her with customers distributors.
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Mmm worked you like bills you conducted more than 340 40, <unk> intended by more than 25000 people.
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I'll just go solo systems remotely and the other topics of interest groups tolerance dollars.
Some were been arguing hope to boot already experts, who feared information needs to reach the knowledge and capability.
Customer breezed was approximately 30000 global installation companies.
On top of the customer to get to that businesses.
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Illegal drugs superior all of our <unk>, our youth centers, such that works healthy food continued with minimal ducks.
Challenges related to the inability to travel into a nursing.
Moves onto the business environments.
In order to assist market dynamics, you're close to tracking religion roots of our product.
Quality recordings.
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Well this is going to be tended to either.
The only part of the system as it is not directly indicative of use solar systems.
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Because the helpful to supersede market the mountains.
During the cold didn't <unk> interrupted monkeys March and April <unk>.
By 50% compared to the same period last year.
Already from Europe on a good country basis.
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<unk> declined by 47%.
The last.
Weeks or wherever the installation.
Have started to rise again.
There's another guns you know, we all can work with computer.
<unk> when compared to March April of last year.
The most positive <unk> from Germany.
Plucking solutions during this period, we're up 42% compared to the same period in 2000 nineties.
This is the result of the lower corporate 19 is dark in Germany.
Marketshare game related to our into 2000 feet elusive between free.
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In the U.S. during the same period.
<unk> declined by 16% compared to March and April 2019.
<unk> dark this corpus 19, because they get is going to Europe.
<unk> alone were 33 person.
And the number of deletions <unk> no no food for the last two weeks.
Additionally, aren't <unk> services in solar to monitor their inventory levels.
There you want you swallow keep themselves and their markets.
Generally dispensing into Europe industry.
Is more positive than back and did you.
However, they they're very significantly from countries it's untrue.
Oh and for those.
Yeah it'd be difficult at this point, so I guess, it's quite a few trends.
Residential and commercial.
However.
You believe that I would go to prison and diverse <unk> <unk> segments positions wrote to minimize the impact of depending on our business.
But it really be an impact on business.
It's like you did that with certain quarter gardens.
While it is difficult to to see how long you don't do it will last.
We are preparing for various scenarios, including the propensity lower third quarter.
Corporations that a good therapy, Sweepingly overspending and management operations, Oh, let me get spend the two adjustment.
All of our variable expenses.
In addition to the one oh with senior executives voluntarily reduced there'd be salaries by 20%.
Yeah, <unk> thought it was strong balance sheets will be used to continue.
And even accelerate the streets you just plug it let me share it with your worries and fears there were unrealistic.
This month, you are beginning to shift in North America.
H.B. wave based.
Huggenberger <unk> storage is backup also read compatible with already batteries and the basis for our computer Lucerne, which would be a couple of your own batteries scheduled for release towards the end of the year.
Later in the corridor.
We will start shipping got where new commercially overdone.
Safety features and all your energy density.
Well as long as <unk> dedicated pro were optimizing with higher salaries density and better economics.
Oh, that's a long tomorrow.
Do you does.
<unk> commercial and utility applications.
I'm. The Nonsolar parents are we see a line business that out of course I'm in career, it's doing.
<unk> well utilizing we're in <unk>.
Spare engines for a bit to get what factor we are on the way as plants.
In the mobility business qualification by a two year one automotive manufacturers.
I work for let people power to institution.
Well you did the increased numbers get units to celebrate validation process.
In summary, we are pleased with the results of the first order and while we especially challenging period in the near future you're confident that the course tracing <unk> acknowledging an institution capability.
Combined with our expensive product roadmap.
Enable us to come out of this <unk>.
And with this I handed over to one then who do I was unusually goods.
Thank you <unk> in good afternoon, everyone is always labor given blue <unk> discussion.
<unk> results Disgustingly cool because they look good on our website.
<unk> you should do that.
In addition to put biting explanation color around aren't treat one number I would provide as much as possible insight.
Financially, but where it seems a bit covered 19 that'd be when our business.
Lake There'd be efforts to provide this insight.
No.
You all have seen over the last.
Last few months circumstances surrounding would probably 19 couldn't change rapidly.
Outside of our controller and so my <unk>. These cool ease of course based on what you're seeing in prison.
It's sort of the first school if the results.
Total revenue, it's worked $431.2 million three per cent increase compared to $482 billion last quarter.
59% increase <unk> $271.9 billion for the same quarter last year.
Liberty from the feel of sort of products work 400, $746 million compared to $389 billion less work is worth driven by glow in the United States and the rest of the work.
U.S. server revenues groovy quarter to $246 million.
Presented 60.3% or solar with.
<unk> included they've hardly that'd be oh $54.1 million.
Slightly higher number then to be aware he really plays.
<unk> <unk> <unk> <unk> <unk> hardwood shipment to avoid read they could be possible border closures.
Sooner revenues from Europe.
Well, you $2.3 million or 30% of our revenues.
That is generated from outside the United States are you what $39.7 million record number representing 97% word sooner rather use these quarter moon significantly from <unk> corporate.
On the megawatts D.C.'s. These quarter, we delivered 926 megawatts to the United States 641 to go wants to do and 200, and we make a lot to the rest of the world.
Eventually product represented 56% of our megawatt sheep and commercial system worked 44%.
Before third part <unk> customers represented 62% over a quarter do sooner rather than a decrease from the <unk> and one distributor accounted for more than 10 per cent of revenues.
[noise] limited speaker walks decreased quarter by approximately 4.3% compared to the last quarter <unk> neat and evaluation of you really know swigging dollar against the U.S. dollars.
<unk> revenues from our Nonsolar product worth 23.6 meetings, daughter, mostly related to the sailor produced their mind batteries.
<unk> fourth quarter, 32.5% compared to 34.3% either <unk> quarter in 31.7%.
Corporate last year.
<unk> bordered 33.6% compared to 35, 45% be prior quirk.
2.8% seemed to think well through last year.
<unk>.
35% compared to 37.8% in the last quarter.
Last quarter art sewer margin benefited approximately 300 basis points due to one time effects related to the implementation of cost reduction measures to are worth your pool.
It's one time bin it'd be the <unk>. The gross margin slightly agree that the result of Lord and Pizza Big <unk>, It's representing 200 and.
Way to sports be schools are.
These low word <unk> airstrips in our movie attributed to the increase capacity to rebuild the last corporates.
The lower than expected <unk>, <unk>, <unk> <unk>, but it changed that product in customer mix as Holy the labor rates pages to <unk>, who continued to work on arby's <unk> and the subsequent looked down down in February.
Already March.
<unk> to be much lower <unk>.
No one got gross margin for new similar activities with 9% compared to 4.9 per cent seemed to preview scooter.
Creep was that result was strong margie from defend over at least in your mind batteries or sit by Lord margin.
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Moving to our operating expenses equals Oh pretty expensive for the first quarter worth 72 points to meet his daughters, or 16.8% of revenue compared to 92.7% or 22.2% of revenue prior quarter, and too picky $8.1 million or.
1.4% revenue for the same cool certain last year.
<unk> Oh, great inexpensive for the first court, there were $66.3 million or 15.4% revenues compared to 63.1% or P.C., 0.1% revenue.
Prior quarter, and $48 million or 7.7 per cent of ready for that same quarter last year.
<unk> solar operating expenses percentage of solar revenues were 13.5% dirty 13.8% last quarter.
These schools are God it breaking expensive include good and non recurring income.
1.9, we didn't daughter was collected from the major sending stayed core group could come in diversification of course definitely men over the pre acquisition click.
That's part of our we actually had to be a quick slow done. This we're already seeing from coffee G.N.C. dimension.
Reviewed cursing the arguments blend for 2000 is when you and implemented served in cost cutting measures, including a reduction in executive management base salary general hog on the recruitment.
And freeze on Saturday increases, which were planned for April.
In addition, we're eliminating workforce redundancy in the jumping or a head cold and to get used to live a little activity.
Certain region.
Renegotiate the other expenses, such a rental agreements and consulting services.
Some of these adjustments are people going into effect will beat see you are operating expenses for <unk>.
Art Gallery income for the cool dirt with 67.8 to $11 compared to $50.5 million the previous quicker.
<unk> $8 million for the same period last year.
<unk> income for the quarter 78.6 medium daughters, compared to 85 points, we need a daughter from the previous quarter and $41.2 million for the same period last year.
Quarter known solar activity resulted in <unk> lost 93, needn't, daughter, compared to an Oh, great team lost $8 million in the previous quarter, driven by Oh, breaking the law says U.P.S. machinery, you will be defeated easier it <unk> <unk> <unk>.
[noise] financial expensive.
<unk> 16.6 meetings daughters, compared to financial income over $11.1 million in the previous score and if I didn't feel expense $6.2 billion for the state period last year.
Degrees as a result of foreign currency changes, resulting mostly from I didn't realize exchanges fluctuations.
Accounting treatment intercompany balances and into a company logo provided for D., a clean dishes in Korea you couldn't.
<unk> I realize intercompany exchange rate extensive <unk> with 20 before said.
<unk> <unk> 8.9 meet in daughters, these quarter compared to $9.2 million <unk>, it's $3.9 million for the same period last year.
<unk>, what's 12.5, we didn't daughter compared to $10.4 million depleted scooter and 4.9 needed for the same period loss.
[noise] government income for the first 430 $42.2 million compared to the Gulf net income.
$8 million previous quarter and $90 million for the same corporate last year, our logo mid income.
The 0.7 eating daughter compared to a non-GAAP net income 87.4 million dollar the previous quarter, It's 32.9 million for the sake with her last year.
<unk> they looted earnings per share with 81 stands for the first schools are compared to one daughter, if we've been in the previous court in 39 cents for same quarter last year.
<unk> U.P.S. was 95 cents <unk>, one dollar and 65 cents in the previous quarter and fixed before you could think what's her last year.
Solar business generate good 23 cents <unk>, they moved that earnings per share a little.
Dirty no through the balance sheet.
<unk> 30, <unk> <unk> restricted cash.
Investment, where 558.7 billion dollar compared to $467.5 million December 31st 2000 feet.
During the first quarter of 2020, we generated a record 107.7, the media's his daughter <unk>.
We are happy to be in such a strong catch position with practically little bit during these guns.
<unk> <unk> quarter, reaching $235.7 million compared to $298 last quarter get totally score hurt you disorder business with 52 days a degree point 65 days last quarter.
Maturity unlikely financial situation in the market in our global operations Air in Quebec shows are a major focus for us.
Over the last few we've we've closely review R.A.R. data fit into financial stability of our customers.
In some cases, we are <unk> examining providing longer creditors to customers in order to support them in this period.
We wouldn't continued to examine the credit worthiness and strength of our customers are even more cautiously these days.
They wouldn't carefully considered to adjust critical locations.
As of March 30, 30020 are either.
Method reserve were.
198.6 medium daughter compared to 170.8 P. then ended prior quarter. Most of these concrete is related to for raw material OVARA factory accumulative, even if you'd be patient of components work because in supply chain destruction from 19.
These raw materials would be used for many affecting the next quarter's.
Decently, approximately 38.2, leading daughter, <unk> <unk> <unk> inventory the majority of wheat, it's raw materials he'll be cool.
If you'd explain <unk> good the effect of Kobe, maintaining interest our business in the United States into a lesser extent euro and will result in reduced revenue.
I mean two quarters.
Size and scale of operation adjusting our manufacturing an inventory levels T.V. news level may take one to two quarters.
Moving melted the guidance for the second quarter <unk>.
Before outlining our guidance I would like to remind me that <unk> <unk> <unk> unprecedented and that makes it difficult to produce with confidence its impact on the company's business for the next quarter and for the rest of each year I didn't work.
<unk> <unk> <unk> <unk> <unk> on our businesses it used to be.
You know to port burning coal.
<unk> told you that approximately 70 per cent of our shoot two 2020 ordered we're already received.
Seems dead, we have of course, we see a detail orders. However, we have also receive regret sport <unk> and or consolidation of orders.
<unk> <unk> is large enough to exceed the guidance we have provided at our manufacturing capacity an inventory will facilitate the delivery of those orders <unk>.
We expect ready for the second quarter of 2000, it's waiting to be done within the range of 305 median.
Hundred and $35 million revenue from that salable solar products are expected to be with either one or $285 million and $310 million.
We expect gross margin to be within the range of 30% to 32%.
<unk> from solar activity is expected to be within the range of 32, 34% <unk>, let's see a higher percentage of revenue from Europe with our correct to I would lower margins.
I would melt turned to call the operator to open it up for question operator peak.
Yeah.
Ask a question.
By pressing star one on your telephone keypad. We also asked that you present yourself why question in one fell off question again start when at this time.
Okay to Mark Strauss of taking Morgan your line is okay.
Oh, sorry, <unk>, thanks, very much for for checking of questions for sure that <unk>, if I could just start with with the guidance revenue Ranger is wider than usual not surprising.
Getting everything that's going on but can you just kind of talk about the.
What needs to happen to comment at the high into that range versus what might happen at the at the low and.
So in general and as I mentioned, we are.
Today on a <unk> a sufficient to some food and basically cover the entire range that we have provide however during the last a few weeks we have seen requests for either we certainly didn't cancellations into the same time, we're also seeing.
Thank you thank customers that are either struggling or we are afraid that they will plug into the stadium terms and it's such a even if we have orders that were old with your receipt older people already these are orders book with a it'd be fine be Liberty date, we're looking at every.
Order, we talked to every customer and we make sure that look what we were providing whatever words already ordered but actually we made sure that we're not providing customers would <unk> either read or it could say tie. This we're providing ready to customer that we are a little bit afraid that we would not be able to collect it.
The orders, our Dear Ducks situations <unk> I think every day in almost every week you see the restrictions or can you need to restrictions and indeed skates, we almost as usual decided to take the more I would call. It cautious approach when geigy and given the range that we feel that we can.
Okay. So helpful and then kind of related to that just.
Your sense given your conversations with your customers regarding channel inventory, yeah kind of maybe if you can talk about.
You know what that looks like maybe in in late February early March versus what that looks like today and then it kind of trends that you're seeing with so through for those distributors.
So of course, you know excuse me mention <unk> very much difference between countries the country Continental, Pennsylvania, even customer customers. So I'm not sure did they can generalize you know my entire answer to all of the customer that you'd see and talk to <unk>.
They did in general, we usually see 60% to 90% or 90 days off keeping Tory levels would be enlarged visitors, usually it's more distributor or visiting us more remotes, because they're working copy them either.
And usually be wasted their measures <unk> 90, or at 60 days, it's based on the forecast the date seat in front of then and would they expect to them. So I consider this only known wouldn't need delivered the product I would say that maybe the inventory levels or the absolute value <unk> very.
Similar towards we usually see within the customer look very much more on the builder volume dined it'd be neat couldn't see all these inventory may change and again very much very <unk> Europe, you will see almost the healer. David why are you going to you with <unk> right now with some of.
The sheltering plates there restriction some of the distributors have much by your the usual days would be it'd be it's already been the usually carrots.
Okay, what you're calling rush from Oppenheimer, you're lying is okay.
Thanks, So much counts no we're going to get in some instances syntax on we have times <unk> updated in terms of where you're at in terms of general who times.
A particular items that are are extended a little bit restaurant portfolio.
Tour. So delete time is first of all these only the last few quarters, we'd so we decided to extend being as that should be you know the business grew much faster than our D.V.D. too many sector and she teaches why we also had the substantial air <unk>.
Do you think of the quarter. If these kids too or at least times are almost similar as they were before and I in some cases, even close to 10 weeks, mostly related to the fact that we decided to avoid <unk> and we're she can both of our product C.G. recently I <unk>.
<unk> 82 blue.
Around six weeks so can be signed once we are able to replenish inventory of the desired liberal you'd be ocean break in all of the territory each locally.
I think so much and I don't with the kind of personal that with the battery tractor can speak to you know what level. We should anticipate this year as a total number and then I've been availability or any delays or parts of that profit that we're going to delay at this point you have given the belt.
<unk>.
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The the line are <unk> are really good.
<unk> more <unk>.
The <unk>.
The the Korean battery factory and your your Bill that occupies you there or you know what to expect to total crap that says.
Equipment procurement issues that you're looking at right now and then after any sponsors away that project you know given the people who goes by sells about.
<unk> <unk>, we're very happy that actually D.C. continued as it's scheduled spikes. So the the fact that Korea with one of the first sentence with affected by coded like being these bought a.
Scheduled them could get in the usual the blessings to have.
Factory that we'll be able to start getting factory.
Meaning of 2000 inflated to.
The costs associated with the beeps, a product at project piece about $95 million there'd be a including the land that we actually Jeff bought out right. After the quarterly acquired the land the <unk> the machinery.
And all of these so expensive equipment would be <unk> blows over the next 18 months.
We do believe that right now based on the schedule, we don't see <unk> easy that you know continued work that you need to do when it comes to negotiate turns on on machinery and seen some of the machinery, it's coming from outside of Korea or.
Court depended on good if you could travel because she's going to have the commission comedy need but at least at the point, where we aren't today.
The delays to needs to be good what effect, we'd be getting through a deliver in 2022.
<unk>.
From credits.
Yeah.
[noise] Hi, <unk> question. It just some cost controls <unk> can you talk about when we put c. benefit gross margins it doesn't cure jewel or the second half.
Yeah.
[noise]. So it goes in Portland, Oregon, <unk>, you know look at the club control is also related to the operating expenses.
Just to give argued themselves. So I'll start would be I'll start maybe with the operating expenses and down into the market are 18 to be by the end of cute at the run bring all operating expenses that would sooner.
Excuse me 2019 in D.C. around a 58 $9 million a quarter of operating expenses and again since we're implementing these were already in the beginning with me or multiple people won't be realizing cute to some of it will come into the would it.
I was to be it's margin because he could be that we need there are hardly.
Because not only be are dependent on what we g., but also dependent on the revenues weeks and the customer make so did just rapid mix Orient the customer needs for example in the quarter all 2020 <unk>.
<unk> and gross margins in Europe are lower than gross margins in the United States. So despite the fact that we already cut costs are not close to you sold in our operation.
<unk> they cost related to maybe manufacturing components and shipments defensive worked really bring substantially higher volumes into Europe, <unk>, we lower margin wouldn't take away a little bit. These.
And this is what you see actually in the guy that that <unk>.
So all the normally on the Olympics, we will go back to about three and when it comes to gross margins it'd be a magnitude upsetting to each and every 33 will determine work with the numbers.
Thank you for clarification, just one does smallpox keeping up another question so on the <unk> revenues.
You said you might have something an imprint unfortunately as far above and the last question that I'll just buy consist from the other part after lunch that you've touched upon the battery product, but they talk about the smart <unk> M.B. <unk>. Thank you.
I'll talk about the first of all about the the first part of the question in T.V., let's see we will unfair the second.
Mmm.
<unk> ordered sport in second quarter are approximately $17 million. These are important to say that these are not just of course dentals their hardware orders, but also commercials, but only knows it's around $70 million no with regard to products that C.D.V.D.
Insurance.
On Sunday lives eventually battery.
Well as long as go for the second half initial treatment.
Schedule with that we're we're approaching that say that certification that takes place in multiple places around the world Oh, So there's still some.
Question, Mark how much we can be moved to do to shoot people and batteries around the world. So that's the only this factor on a new thing.
The second half of.
Smart.
He deliver today so the it's not too huge both of the business, but but we are delivering every quarter.
Embedded smart modules of sort of words, Optimizers I'm already today and and it's like to this to ramp while it's still a small portion of the business.
Optimize is I'm not sure in particular to work you are referring to as I mentioned, we I mean optimize their that these the hype that were optimizers, specifically for round mountains dimensions, especially.
Some of the community solar market than the U.S., that's optimize your wouldn't begin to shoot in the next to a few weeks or before the end of this quarter on the standard residential and commercial optimized use their own enhancements and and improvements <unk>.
Continuously.
So there's no.
I'm using a wrench and that is that is intended in the next two months.
[laughter] annex I'll have to fill up send from Ross capital Your line that's okay.
Hi, everyone. Thanks for question you know looking John Q2 was wondering what kind of visibility you have to enter Q3, you know how much for example of Q3 maybe book.
How do you expect potentially margins to try and I I know you don't you know providing official guidance, but if you can provide you know any color that that'd be great.
So you know that's really again Ah see <unk>. The you know problematic to to to give me of course is much more.
<unk>, we'd go through all of our customers constantly see that assigns a in Egypt in every country and <unk> I'm very closely with all of our customers and beer inventory levels, but I think it up again.
Question here is not just.
Actually wasn't going to happen to be installation rate itself during the second quarter in their poor or do you need that you had been in or.
<unk>, great open and good few ability to <unk>, we problematic right now because I think that neither us nor do the customer little how much a beer even.
<unk>.
<unk> that it could be with you know when it comes to be a margins themselves again. These little come mostly due to the fact that wouldn't be the the mix between it'd be a geographical a shipment that we wouldn't be we can do you need to cost reduction on the code side or the continuous basis.
Of course that you mentioned before you mentioned, we are working all the time to do with and actually do Steinberg in some cases, where even accelerate do go but of course, you know with U.C.B. <unk> <unk> <unk> <unk> effect, a a large you <unk>, so I wouldn't say that I.
Don't think that we can say anything substantial right now about a good quarter itself can be level, but I can't that'll get you are fully very closely and we're in.
With our customers to understand where their businesses.
Great. Thanks, you know I believe you may have advocated for Q. wind up there must be given week.
Doesn't mix, but I think the U.S. mixed went up and you are typically has a higher S.P. and greater concentration in brazee.
So can you provide a little bit more Colorado why the S.P.N.Q. on was weaker and to what degree you know may have just been impacted by some competitive dynamics.
Might be experiencing.
So I think it because it was not actually related to watch T.V. competitive environment, mostly due to the 650 Q1 safe Harbor deliveries, where it may be due to the fact that again and even expedited that we were very much concerned about closures bordered by the end of the quarter.
Therefore, we decided that we expedite whatever we <unk> the very quick delivery signs of the safe Harbor measure your debt, meaning the higher portion of our <unk> games.
Larger a customer's going again that you love your customers get a larger discounts we'd get work prenegotiated been known for a long time. So here is really more of the mix, each who rather than anything to changing pricey.
Environment during this border.
[laughter] next okay.
Far from counting company, you're lying is okay.
Good afternoon.
<unk>.
Run out was wonder if you get a walk us through the the the gross margins. It's been asked a couple of times, but you know more specifically to the guidance of you know solar going from 35 to at the midpoint 33, I think he called added 215 basis point Hadwin for air shipments I would assume that that goes to zero. So it looks like there's about you know.
Midpoint, Oh, what over 400 basis points is it safe assumption to say that the Europe. Generically speaking is is always foreigner basis points lower margins or is it mics are using price in Europe to try to gain share I just that magnitude was a little bit higher than I was thinking.
Yeah. So so here here in the the main effectively Europe, and and I <unk>. The specific numbers as we mentioned several times in the past you know when we started or when you start to to actually price products in Europe in the United States. The prices were about the same.
The exchange rate of the euro.
Dollar words, approximately $120 per year old they weren't talking about the much lower rate and actually over the last 12 months. It knows the you will evaluate that by 2.8% against the U.S. daughter, I can <unk>.
<unk> deep friends and.
In the average the difference between Europe and the U.S. in gross margin is about 450 450 basis points now before third main affected you see.
That there is a substantial ship you hope you you put it shouldn't be much stronger in the second quarter and the third quarter and these are moving into Europe is of course <unk>. It's gross margin dog. In addition to these also you'll you see some time.
Installations that are more heavier towards the commercial product into commercial product and especially the larger a product within the commercial upwards for that you have also the gross margin usually Lord indoors eventually you with a market than the beaches.
You see that disease entirety coming from mix you to do your graphics and I would call a sentimental shift.
Just maybe to fall off of that like for like a system 10, K.L.I. residential system in California versus Germany is that also 450 basis points difference.
Approximately of going again varying from customers, who customer because customers never lived with variations in there you're fighting, but the general idea.
And next Okay brand me from Goldman Sachs Your line and helping.
You guys think for taking the questions hope everyone has a string safe and healthy I guess question on just the guidance roll and then you mentioned April <unk> mentioned April was down 33% and the U.S., but that stabilizing at those levels.
Thank you mentioned Q3 could be you know for later in the call I might have a starter I misinterpreted, but are you are you actually expecting keeps me to be worse than cute too and then.
That what what sort of data are you looking at to consider two to the the bottom here.
Oh, so maybe I'll clarify your what exactly what the data we were looking guys. We're looking at the races installations of new system.
Every day immune systems every day.
Continued actually even in every state and we compare that to the races installation of new systems a year ago.
I mentioned that a wild in Europe and across the World During March and April actually more solar and systems already so this year.
So last year during the same period.
The United States during April.
33% less installations of when new systems compared to April 2019.
Varies significantly by stays actually Texas.
More than a year ago.
Yeah. It is a is down by a bit more compared to a year ago. When you look at this at every every single steak that'd be giving us an indication on the general level of business and and when we think inventories at the distributors don't run down and they wouldn't begin to I.
<unk> <unk> requesting to push out or cancel orders and that's what we're basically our two two guidance on.
<unk>, it's very limited, especially in what relates to the United States generally in several markets around the world several markets around the world, There's a sentiment of business as usual.
And and we just have to wait and see if that carries out the two oh excuse me as well in the U.S.
Oh, it seems very volatile.
<unk> down significantly compared to a year ago and it's it's in in our minds very early to predict what's happening to three.
Okay.
Yeah shifting here's a little bit here I think I'm in a safe Harbor.
Split here just a question around.
Yeah. The $75 million you guys had originally guided for I think last quarter around and you had said it evenly split between Q. on and cute to roughly speaking I know you pulled some forward into Q1 here, but it seems like if you had a cold that 17 million or so from cute to you would've come in about $10 million below the revenue.
New guidance range for the quarter, just wondering what what drove that dynamic was it all production issues at the end of the quarter or where there are other issues because I I would assume that you know given you you gave the guidance in late February you had volume demand you know pretty much locked up for the quarters. So just wondering where that footage might have occurred and if you're recapturing that.
Volume and cute too or if that's some of the.
Scheduling flash cancellations, you're saying.
Well actually it's neither the situation wasn't again he's under fair now how the end of March loop in China.
At the end of March it was almost impossible for sheep anything outside of China, <unk>, Yes, Dear Airlines <unk> entirely stopped flying into China, and reading D. I mean, one case I can't even tell you that chartered any tire main to fly products from China.
United States. So these kids you know, it's actually decided that he wants to <unk>. The revenue guideline guidance actually it was offended we decided to pray <unk> safe harbor shipment over a non safe harbor shipment in order to make sure that we are and we seem to be a delivery.
Kinds of those a safe harbor shipments that needs to be around no later than April. So <unk> approximately the same we seem to all of the capacity that we could have and we could send outside of China before the end of March and in these <unk>.
And kept capacity, we have decided to play worked I safe Harbor shipments.
And again, if you'd like to ask a question. Please press star followed by the number one and your telephone keypad next I'll go to my best friend in my company, you're lying or something.
Hey, guys. Thanks for taking the questions here and that's all judge by Mrs. On juggling between a couple of difficult Tonight I just want to come back to some of the supply chain constraints you guys. So and I I was trying to figure out can you give us more color.
With respect to.
Constraints or as we stand today, and whether or not the constraints. If one till bottlenecks or pets. You are you looking to help your your distributors build up the appropriate level inventory in the current demand environment to help.
Help reduce your expenses on the on air for children.
So just just to clarify so we need to do any manufacturer several sites, we manufacture in China in Vietnam.
And in Hungary, actually we we don't see any supply constraints right now and we are able to deliver on all the order if we we see.
Doing is instead of the air should be here Ocean shipping a product and building a inventory.
Gradually but we are currently able to supply all demand and we're we're looking at the inventory levels of distributors are very closely and making sure that that no one has and <unk> parts to demand.
Okay. Thank you for for helping me out with that and then the the follow up I have you.
For the cost cutting measures because it taking.
Can you help us better understand how much this is <unk>.
Temporary just because they have to imagine once once things start to recover you guys will be going back in the two growth boat from your current.
The current Runrate, so just trying to get a gauge how quickly. These expenses may come back on his as demand starts to recover.
Yeah.
So so you know being that trends of a a cyclical movements coming out that the semiconductor industry.
Look into precise events I say a short term.
Down then and it's not being sure for how long did little will let me look after the I.B.M.R. and d., the temporary and easy to recover when the business recover then explicitly activities that are directly related to the.
The level of the operation and and typically not any type of a critical okay.
Skills that would be difficult to good supplements so.
Yeah I'm in the operation.
Entirely identified those type of.
Opportunities and those are the those are the cost cutting measures that we implemented and.
When the business who covers.
Two a recovery that that could be quickly.
Yeah I got this time I'll try the call back to see me whenever closing remarks.
Thanks.
[noise] [noise]. Thank you.
Income or yeah, I think it's appropriate.
To point to point out that we have entered its pandemic not only as a strong company, but then the strong and industry.
Mark the energy and solar in particular has proven excellent investments for home in business owners.
I believe that the demand for so much sold or in a climate in world, We're back up and independence isn't going to get importance.
Well.
You can rent proven not only for storage, that's where our competitors in college.
As soon as soon as mature and <unk>.
Extremely challenging period.
Thank you for joining us on the call today.
Oh, that's complete our class I can't think your finger participation you may now disconnect.
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