SolarEdge Technologies, Inc. (NASDAQ:SEDG) Goldman Sachs 2023 Global Energy and Clean Technology Conference January 5, 2023 9:00 AM ET
Company Participants
Ronen Faier – Chief Financial Officer
Conference Call Participants
Brian Lee – Goldman Sachs
Good morning, everyone. I think we’ll get started here for our next session. It’s my pleasure to host and introduce to my left, CFO of SolarEdge Technologies, Ronen Faier. As many of you probably in the audience know, SolarEdge is a market share leader in solar inverters.
But increasingly over the past several years has expanded its portfolio to include energy storage, as well as EV charging and a few other technologies which we will touch upon here. But I want to thank everyone for joining and definitely thank Ronen for joining us, as well.
It’s New Year. We have to kick off with some views on kind of the outlook, I’d say. So maybe just, Ronen for starters walk us through your view on broader demand trends heading into 2023. Key geos since you are internationally diversified but also key end-markets because clearly you are doing resi but also very successful in C&I and then there is a venture to move more into utility scale, as well.
Ronen Faier
So, first of all, good morning. Thank you very much for joining and thank you for having me. So, I think as we start 2023 in a very, I would say, different to where we started the 2022 and even 2021 and this is where we see very strong demand in all markets in which we operate. And I think that the biggest difference between 2021 and 2022 is that, if at that time it was post-COVID and everyone was little bit insecure because the value of, at least, photovoltaics was already known and the payment periods were relatively elaborated.
2022 changed to, I would call it, scenery quite dramatically with the war in Ukraine and the results of the energy prices and trends that we see worldwide. So, what we see right now is a world that is thriving for photovoltaics for solar and for storage. And we see it actually in almost every region in which we operate which was the case also in 2022.
The biggest interest that we see today is actually coming from Europe. Europe is of course going through the war in Ukraine and energy crisis. Energy prices hiked dramatically over 2022 and you see now measures taken by the European countries such as Germany to actually cap the energy prices on some of the corporations but still the cap is at the very high price compared to what’s used to be before.
And combining this with a relatively lower interest rate, compared to what you see in the United States creates a situation where photovoltaic energy in Europe is very interesting. Payback period of 2.5 to 3 years on a system that will live for 25 years and a lot of government supports, for example starting this week in Germany VAT was eliminated on installation of PV systems which is equivalent to 19% discount on the cost of energy or the cost of the system compared to where it’s used to be.
U.S. is also growing, but a little bit more interesting. The NEM 3.0 is expected to impact this market. We understand that everything that will be, at least certified by the end of April still be grandfather in the old plant, but we do understand that there is going to be a little bit more limitation. I think that we see a demand right now, but we see more signs that this could be something that will slowdown over 2023.
We do not expect to see smaller solar industry, but we expect to see deceleration in the growth of this industry and we also believe a little bit that the IRA that is stabilizing very much the benefits of the ITC for the next few years do not put a lot of pressure for anyone to do something today when interest rates at relatively high and there is a little bit uncertainty.
And when it comes to rest of the world and rest of the world for us as everything that is not Europe and U.S., of course it’s very country-by-country specific but we also continue to see very strong demand in Asia. So it’s Taiwan, that is becoming a very interesting C&I market for us and in general, Japan that is very interesting in the smaller C&I space.
Australia that is interesting and other countries like Thailand, Korea, and Singapore that are interesting. So, all in all, it looks like a very good positive beginning of the year.
Analyst
That’s great. And then you just unpack a few of those moving pieces for you, I guess, big picture, revenue growth for you this year, I think, for guidance you are going to be somewhere in the 50% range year-on-year. I think consensus has 30% for you top-line for 2023. So just at a high level does that seem reasonable, or aggressive? And then as you think about U.S. versus Europe, it sounds like you are more bullish on Europe growth relative to the U.S. but how would you, sort of characterize Europe in the context of that 30% overall growth expectation that’s out there right now?
Ronen Faier
So, I think that the biggest issue that we will continue to face in 2023 and I believe into the beginning of 2024 is actually supply rather than demand. We do see that either component shortages are a little bit of restrictions on our manufacturing capacity will not allow us to deliver all of the demand that we see ahead of us.
And therefore the growth and the 30% is actually the higher end that we guided for the next years in our Analyst Day is something that will mostly be achievable based on the availability of components rather than anything else that we see in a market. So we believe that this is something that is if it can happen and we also believe that if you are looking to the geographies, Europe will take a bigger portion of revenues in the next year.
When we look and when we do our plans for the year, we usually do a bottom up analysis of the markets. We’ve seen markets in Europe that can grow potentially more than a 100% year-over-year, especially around Germany, the German speaking countries and even countries like the UK. So, I am not sure that the U.S., I believe that the analysts’ view that’s going to be about around 15%, maybe a little bit less.
In some European countries we see a potential of a much, much bigger growth and I do believe that you will see this impacting us in two ways. First of all that portion of Europe as a percentage of the overall sales will continue to increase, but also from a mix perspective since Europe is much more C&I inclined in the United States. I think that you will continue to see growth in our C&I business.
Analyst
Fair enough. And then, just on the U.S., you brought up net metering. There is clearly some clarity, but also some moving pieces heading into the New Year with that market. There is, I think an investor perception that you are going to see a big full forward given the April implementation timeline. First question will be, are you seeing that already, or are you anticipating that? And then, maybe again unpack your comments around a slower rest of the year if you will. Is that due to net metering changes? Is that due to a view on the macro with the consumer just sort of where is your, maybe caution if you will on the U.S. market coming from?
Ronen Faier
I am not sure I know where to put my finger on what’s exactly the reason that that we have a little bit of a less, I would say bullish view on the U.S. market right now. Macro is definitely part of it. The fact is that with the U.S. markets heavily financed through loans, interest rates that are going up and electricity prices that have not hiked so much as in other parts of the world. The payback period is longer. And if you add this to uncertainty around possible recession and people that maybe worried about whether they’ll have a job or not, the tendency to go and put a system on your rooftop where you see a, maybe 7.5 to 10 years payback period is doubtful.
And to add to this again, the IRA created the situation because as long as the ITC existed and every year you use to see a declining income tax credit that will come if you are waiting and this is something that maybe drove people to get a little bit of faster decision-making, right now due to the fact that everything is stabilized, there is no reason to hurry.
If you think that interest rates will go down, if you don’t suffer too much from energy prices, and you are a little bit worried there is no catalyst for you to go and invest a little bit more. So, that’s one thing. About the first few quarters of the year, we don’t see anything dramatically different in the demand right now compared to where it was before, simply because it was very high before and it’s very high right now.
I think that the picture is a little bit more complex because even if there is an ability to source a lot of products during the first quarter, the big issue is going to be in U.S. is actually working hands. You do not have enough installation capacity. So, even if we are able to bring all the inverters and optimizers needed to make installations until April and I think that there is also a view that as long as you are permitting the plan before April, maybe you can still extend it a little bit, the problem would be around installations. So we don’t see anything structurally that will make the U.S. demand very, very large in the first quarter compared to where it is right now. I am not sure if I missed anything else on this question.
Analyst
I wanted to just touch on storage. I think a lot of your comments, the geos, the end-markets were related to solar. There is a bit of a plateauing in volume growth we’ve seen across from your peers in the storage side of the business. Can you kind of specifically talk to some of the trends you are expecting on your storage business into the New Year?
Ronen Faier
Sure and I think that maybe a first note, you know, to my answer, solar and storage should be over time related as one thing. When you see that on one hand, utilities are pushing to more net metering based on time of views and a little bit of bigger difference between the rates that they are buying, the rate that they are selling. Storage is becoming much more interesting. The more you see that houses and households are looking for resilience then solar plus storage becomes a one thing.
If you go today to Germany, 80% of the new systems are installed with storage, simply because of the fact that you cannot push electricity into the grid or it’s not very worthwhile to do this and at the same time, people do see a little bit of concerns about whether they’ll have electricity once they turn on the lights.
So I think that over time it should be the same, actually to same answer for everything. The plateau that you see I think is mostly related to our peers that are selling in the U.S. most of their energy storage systems and I think that it’s more related to the U.S. situation rather than anything else. Batteries today in the U.S. are simply too expensive.
Payback period is very long. The battery prices are relatively high because of either lack of supply or because of the fact that by the way raw materials in storage hiked so much over the last few quarters, I would say. And companies are not willing to sell at a very low margins or it’s a loss. And therefore, as long as prices are not going down, we do not see a very clear economic return on these systems.
If you take and compare it against the Europe, in Europe you see today when you put the system with the battery, close to 3.5 years of payback period for the systems plus the battery. In the U.S. again it’s about 7.5 to 10 years. It’s a very expensive installation that unless you are very worried about the resiliency I am not sure that economic benefit is there.
So therefore, this is the reason that we see a plateau in U.S. Hours last quarter actually was a record quarter. We shipped 321 megawatt hour in Q3 and this is mostly coming from Europe. It’s more than 75% of our battery sales happened outside of the United States in Q3 at least.
Analyst
So, you talked earlier about the outlook for demand is bullish, but you still have a bit of a supply issue. On batteries, it seems like that maybe less of the case because you got to sell it to ramping and you added a new supplier utility. So, 321 megawatt hours a quarter, I think your capacity moving through this year will be much about that, I think 500 megawatt hours plus. So, do you anticipate, irrespective of all of the comments you made around batteries too expensive. Your supply there will allow you to continue to grow even if there is maybe a plateauing that you are seeing elsewhere in the market as such in the U.S.?
Ronen Faier
So, I believe that yes, and again it’s mostly related to our business in Europe that you still have a very high attachment rate of batteries which we have not yet exhausted the abilities to grow. So yes, we see an ability to grow. I also believe that we will start to see battery prices moderating and starting to go down, especially once we’ll have a seller to allowing us to reduce also the cost of our battery cells. Yes, we are very bullish about batteries and their ability to grow.
Analyst
Great. I am going to shift gears a little bit to the supply side. Obviously, that was a big issue for a lot of the industry last year, but especially for you guys. Where are still seeing the constraints? I know you’ve talked about specific shift to components and maybe even a timeline for when you think that might get back to a normal, if you will.
Ronen Faier
So in general, there is no major change in the last few quarters. And the fact is that the biggest supply constraints that we see today are related to power semiconductors, it’s capacitors and MOSFETs. And here most of the players in the industry are building fabs and until these fabs are built, we will not see major change in the supply pattern. The reason is that these are mostly components that are going either to EVs where we do not see softer demand there.
Maybe by the way, when people think about recession, they believe that less cars will be acquired but actually the portion of EVs out of cars is increasing. So therefore we do not see any softness there and when we talk to our suppliers they do not see any softness there. And since this is the case, we will have to continue and wait for fabs to come online and start to release new units.
This will start to happen at the second quarter of 2023 and will prolong into the beginning of 2024 where we believe that we will see enough capacity in the markets. What is improving is, on the other hand, the I would call it timing of supplies, sometimes because of COVID there is especially last year, because of some of the disruptions that we saw in China, even if you go to the entire amount of chips that you were supposed to get them, if you got them at the very last day of the quarter instead of throughout the quarter, you were not able to manufacture.
So I think that while we do not see tectonic shift in the amount of components that are there, I think that we start to see a little bit more stabilization in the ability to project when they are going to come and the fact that you will be able to operate your manufacturing lines in an organized manner.
Brian Lee
Is there any way to, I guess, quantify that? I mean we could keep tabs on new fabs that are coming up and getting online, but I think industry-wide lead times are pretty closely followed. Historically, I think normal lead times will be 8 to 10 weeks as they’ve been out as far as double that 16-plus weeks. So where are we today? Where do you think that trend line can go to reasonably over the next few quarters?
Ronen Faier
So I think that you need to make – to separate here between resi and C&I. On resi, I think that this 13 to 16 weeks is still in place. And I think that it’s slightly improving, but not dramatically, mostly around the fact that ocean freight is becoming a little bit more stable and the routes are becoming less long than they used to be few quarters ago.
In C&I, there is still relatively high lead times and this is actually related to the availability of components and availability of supply. We take orders today for Q4 2023 and it’s not that some of our customers would not like to get products tomorrow morning, simply this is the time that we can actually commit to deliver these products to them.
So here, I can tell you that in some cases, you can see even 4 to 6 months of lead time on C&I, especially on the larger systems. And again, this is something that will moderate, but I believe, towards the end of the year and not much before.
Brian Lee
You mentioned freight, freight has been in focus, particularly as it relates to your margins. So it seems like Q3 was the first quarter in a long time where you got a little bit of relief. But how much more relief is there? What’s a reasonable sort of margin recapture that can happen and over what time frame when it comes to the freight side?
Ronen Faier
So, when we ended Q3, the kind of – or actually ended Q2 and then updated in Q3, we said it from the end of Q2 2022 to the end of Q2 2023, there is about a 600 basis points of margin improvement that can come from a combination of freight and actually tariffs that we pay on goods that we brought from China.
In Q3, we have basically took about 140 basis points of this 600 basis points and we said at that time, and we still continue to say that we believe that we can take all of this remaining 460 basis points until the end of Q2 although it will not happen immediately, but we’ll be more inclined into Q2 of 2023 and the main reason, by the way, is that in Q1, there is Chinese New Year that is still limiting the amount of manufacturing that we can do and therefore, we need to expedite shipments.
But the trend is positive. First of all, our manufacturing capacity is growing all the time. Mexico is ramping as we planned. We are increasing capacity now in Sella 1 in Israel and in some of our other factories, the other factories are very much stable, the one in Hungary, the one in Vietnam are much more stable than they used to be. Even in China, the situation is relatively okay despite of the COVID issues that happened there.
It’s relatively okay. And in general, we see that once we have more capacity, we can move much more to ocean freight and to that end, the ocean freight costs are going down not to where they used to be at the beginning of 2021, but they are getting closer to them. And this is why we see this as a kind of a moderated trend.
In addition to this, again, since we have Mexico growing, we have Sella 1 growing, that means that we bring much less products from China to the United States. So the portion of tariffs is going down. So we believe that this trend is on track.
Brian Lee
Okay. Because of a lot of those inflationary issues, which seem to be reversing a little bit, you had multiple price increases last year. Are we through that cycle? Do you anticipate any more price increases this year? Or do you have to, at this point, maybe even consider reducing prices now that some of your input costs are coming on? What’s sort of the pricing outlook here?
Ronen Faier
So first of all, it’s very geographic dependent one. We are implementing price increases in Europe these days, as well, because of the various dynamics that we see there. In other areas, we simply look at a competitive environment and of our expected return on the sales of our product, whether we need to adjust prices.
We hiked prices last year. This was an industry, and you remember it well that we used to talk all the time about7.5% to 10% of annual ASP erosion. In the last three years – or sorry, up until 2022, it stopped for about two years. In 2022 prices went up. I don’t think that the potential of increasing prices is very big right now.
But at the same time, I do not also expect to see major price erosions over the next year or so. So I believe that we’re relatively stable with a little bit of an up notch in Europe, at least in Q1.
Brian Lee
Sounds like the manufacturing footprint, you’re expanding a little bit. Mexico is going well, which you’ve articulated since the beginning of early last year. Now this new wrinkle with the inflation Reduction Act, where are you in that process? It sounds like strategically, you’re in the mindset of building something for both optimizers and inverters in the U.S., maybe just level set us as to where you are in that whole planning process of the time line?
Ronen Faier
Sure. So the first thing is, by the way, is that we’re still waiting for the treasury notes about how to interpret this legislation. In general, we believe that operationally, we should make optimizers and inverters in the same place. It makes much more sense and here, again, the clarification of whether we will be allowed for the $0.11 or $0.065, we believe that we can meet the $0.11 criteria.
This will be part of our decision whether we make optimizers here in the U.S. or not, because still making it – making optimizers without this legislation outside of the United States is going to be a little bit cheaper. So in general, we would like to do everything here, but we wait for the clarification.
The way that we look at it is that we look at two routes that can be either separate or combined. The first one is a contract manufacturer, which is supposed to be a relatively quick win, meaning to go to one of our CMs to build the line there. That means that we can have products if this happens at the later part of 2023.
I am not sure that it’s going to be all the products that will be needed in the United States. We are also looking at setting our own factory, a Sella 3 factory in a way here in the United States and this is something that we’re still investigating because one of the things that we do see and I must say that I’ve been spending some weeks on the road here in the U.S. for looking for manufacturing sites is that the art of making electronic manufacturing in the U.S. is a little bit long gone art here in the United States.
And we go to places that used to see electronics manufacturing a few years ago to North Carolina and Tennessee and Texas. In some of these places – in some of these places, you don’t see electronics made anymore. And when you go to a contract manufacturer, it seems that they have the knowledge, they have the ability, but actually you find that they also have difficulties in finding the right personnel in order to do this manufacturing in the U.S.
In some of the cases, they have lost themselves the ability to do it and returning this art to the U.S. is something that will take a while. And this is why I am not sure that the full CM solution is the right one because contract manufacturers by definition would like to hedge all of their costs. And that means that you’re taking the risk instead of them, you pay a lot of the CapEx and cost instead of them, and then you let them benefit from the fact that they simply operate the factory for you.
So we need to analyze how it works. Both things will work and we’ll have to evaluate. But in any case, I believe that once the interpretation will be out, we’ll be able to announce what is the route that we intend to take.
Brian Lee
And do you have an expectation as to when you’ll get better clarity from treasury?
Ronen Faier
I believe that it’s either end of this month or beginning of February that’s our expectation.
Brian Lee
And it seems sort of like a nomenclature issue, right? They use the language of micro inverter specifically, would it be as simple as just labeling your optimizer as a micro inverter. I mean the name inverter, I don’t think is patented. It’s just sort of the functionality that’s implied in that, but the optimizer does sort of have similar functionality, because there is a discussion point out there that it’s very unlikely that they’ll change language in the bill. They are just going to provide interpretation?
Ronen Faier
Sure. So first of all, in the bill itself, there is a definition of what is a micro inverter. And the micro inverter is basically a device that has MLPE capabilities, module level power electronics that is fitting into a certain voltage range and into various operational methods, we meet this definition without the name micro inverter, and this is why we believe that we should be eligible to get this kind of legislation.
It’s not that you just said micro inverters without explaining what is it. We are looking actually for a clarification of whether we fall into this definition. Changing the name, we are a little bit attached to this optimized because this is the nature of technology.
And I’m not sure that by just calling something a micro inverter will make it a micro inverter, but actually have the capabilities there. But I think that we work a lot with Sella 3 here, and I believe that it’s for the best interest of the U.S. market actually to label our products also as eligible for the$0.11, and we’ll see what happens.
The only thing that will need it will be change the name. We don’t have a lot of religion related to it, I just think that it will look a little bit ridiculous, but.
Brian Lee
Fair enough. Last question on this, and I’ll move on. The – if you were to move forward with kind of that second route you mentioned Sella 3, what would be the time frame on that?
Ronen Faier
So that’s – it could be either end of 2023 or beginning of 2024, but it’s usually not for – it’s for start of production or not necessarily to have it fully ramped up because to have your own facility, by the way, just as to have a manufacturer facility will require a lot of labor to be trained. And usually, when you ramp up a factory, and I see it now in Sella 2 you start from one shift, then you seed the next shift and then the next shift comes and you seed the third shift that needs to come.
So it’s nothing that grows very rapidly. So I believe that start of production can be ramp up or full ramp up will take at least another year. And this is why, again, looking at a combined route of CM and own manufacturing, which are not necessarily contradicting each other is something that can work.
Brian Lee
So in all this commentary, it does sound like some of your costs are improving supply chain, while not out of the woods quite yet. You’re starting to see a little bit of improvement there as well and then pricing is stable. It doesn’t sound like we’re going to see meaningful erosion, if any, this year. So, when we put all of that into the context of your gross margins, that’s been a key focus for investors over the past year.
Do you feel comfortable in getting back to that sort of 30% to 32% consolidated margin target you put out in previous Analyst Days? And is that more of a first half event, a second half event? Any kind of framework you can provide there?
Ronen Faier
So first of all, yes, we feel comfortable. And I think that with the exception of the exchange rate of the euro that can change a little bit, but now it works back in our favor in the sense, plus the price increases that we have implemented, we believe that we should exit the quarter of 2023 with the target margins – gross margins that we’ve — this day and by the way, we should exit the year with the operating profit margin that we set as a long-term target in the Analyst Day.
I think our impact will be in 2023 is the mix, especially going to be the mix of batteries within the overall product mix and the mix of C&I. These are two products that have usually higher unit cost and lower gross margin. So it does, in a sense, dilute the gross margins, but actually have a positive an increasing impact on the operating profit margin, which is at least the area that we’re looking.
We’re looking at how much money we’re counting in the stairs, so to say, after we do our business and I think that we can be there. We feel comfortable.
Brian Lee
Can you talk specifically about the battery margins? I know you had that framework supply agreement with STI. You’ve added a new supplier, I think, out of China and then you’ve got Sella 2 coming online here in2023. Where are you with respect to battery margins in the context of your targets and then how quickly can Sella 2 change that?
Ronen Faier
Sure. So first of all, our targets were 25%. In Q2, we said that we were at about 15% and we said that in Q3 it increased towards the 25%, but was not yet there. We view the 25% gross margin as a target and something that is achievable, but not just because of the fact that we have better supply or having Sella 2.
I believe that when it comes to batteries, we are sitting somewhere on the curve of the elasticity of demand to the price.
And we truly believe that by being able to reduce reduced battery prices, we can sell and move more volumes that will, in turn, increase our operating profit. And this is why the 25% target is there. I think that it will remain there because whatever we will be able to achieve more in gross margin terms, especially after having sell and some of the new supply.
And also, by the way, again, because of the fact that you do see prices of materials getting moderated overtime, I believe that we will try to push this down as also maybe a little bit of ASP declines on battery alone in order to push more units into the market. So 25% is the target.
Brian Lee
Okay. And then, I waited until close to the end of the presentation to ask about FX, even though FX has been sort of the #1 question for two straight quarters. It was a headwind in 2022. It seems like near term, it’s sort of turning into a potential tailwind. Remind us, you had guided 4Q under the assumption of 0.98 and now we’re sitting at 105, 106.
So, how much does each point again matter to the gross margins? And does this kind of puts you in a position where now that it’s a tailwind, you’re almost in a position to sort of beat margin expectations?
Ronen Faier
So, given where we are on the fourth quarter, I’ll be very careful in my answer here. But in general, the two things that we need to take into account is the fact that when we guided it was already in the middle of the quarter, and at that time, still the $0.90, $0.98 prevailed. So in a sense, it is sometimes not just where we are ending the quarter with what the exchange rate is actually what prevailed during the time that we shipped our product. And again, at least half of the quarter was at $0.98.
We said that at the end of Q3, we said that in Q4, the impact of every – again, even every cent will be around 40 basis points and mix both of Europe and C&I. And again, this has had – had you had the exchange rates changing in the very first day of the quarter.
So, in general, yes, it was less restrictive than it used to be before. We cannot enjoy all of the benefits, but we do enjoy some of it right now. And also and this is something that will head into more into 2023 and less related to 2022 is the fact that we have implemented price increases on mostly on new orders all over Q3, Q4 and now in Q1.
So basically, we will also enjoy these ones throughout the year. So I think that this is something that adds to our confidence that we can meet the previously guided gross margins that we have said in the Analyst Day that at that time, by the way, it was $114 when we gave this projection. It was $114 per euro.
Brian Lee
And then, maybe just to wrap up the discussion here, because we’re running up on time. I wanted to give you a chance to talk about some of the newer products. So utility-scale inverter. Is that something that’s sort of newer in the portfolio?
You’ve already had a little bit of traction, but maybe can you speak to whether you see any inflections in 2023, the markets that matter for you when it comes to that product opportunity? And then you also announced just this week some new M&A around the IoT side of the business. Maybe speak to that a little bit as well.
Ronen Faier
Sure. So first of all, from inverter point of view, yes, our 330-kilowatt inverter that we have been testing for the last 1.5 years will be commercially available in 2023 and it’s something that’s supposed to start pushing us into the small utility.
We will not do the 500 megawatts field it will be most likely to the smaller, I would say, up to 100-megawatt field. But this is a product that we do expect to see some traction and we already see a lot of utility installations that we do with our smaller products. So we feel very comfortable with this.
And I add to this, the fact that today, again, not only we come with the utility inverter, we come with the offering of our own trackers through the SolarGik acquisition that we did last year and through storage capabilities.
So definitely, utility becomes very interesting. We start to see floating C&I and floating utility systems. We’ve just commissioned another one of those recently, which is a huge one, and we see it as something that will very much advance us.
As for the acquisition, I think that, that’s part of what we’ve been saying for a period of time that everyone talks about energy transition and we say that we want to be an energy transition or energy technology company, and this is exactly hits the acquisition of our Hark that we’re still waiting for some of the regulatory approvals to conclude it will allow us to go into C&I facilities and not only to generate electricity using PV, but actually look at the consumption in a very easy manner to get connected to the legacy energy management systems of C&I facilities to analyze them, to give a very clear visibility to the owners about what is the energy that is used, where is it going, what elements can be improved.
And just by the way, testing the Hark system on our Sella 1 factory, we saw very nice amount of energy savings that we can do in a relatively new factory. And this is something that very much increases our C&I capabilities because not only now we can come with a solar system on the rooftop to increase the green production and also decrease costs.
We can give a lot of insight about what is happening inside of the facility and how energy is being consumed and how can it be better utilized in order to better plan for the future? What is the PV needs, what are the storage needs and how this can play into a situation where you see utilities changing rates throughout the day and to make sure that we’re also increasing the efficiency of these. So it is – if everyone talks about energy transformation, this is part of what we take as energy transformation capability.
Brian Lee
Okay. That’s great. I think on that note, we’ll wrap up this first session. I want to thank Ronen for joining us.
Ronen Faier
Thank you and happy New Year for everyone.
Brian Lee
Thanks for being us with the next session, as well. Thank you.
Ronen Faier
Thank you very much.
Question-And-Answer Session
End of Q&A
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