Welcome to the SolarEdge Fiscal Third Quarter 2016 Conference Call. This call is being Webcast live on the company's website at www.solaredge.com, in the Investors section on the Event Calendar page. This call is the sole property and copyright of SolarEdge with all rights reserved, and any recording, reproduction, or transmission of this call without the express written consent of SolarEdge is prohibited. You may listen to a webcast replay of this call by visiting the Event Calendar page of the SolarEdge investor website. I would now like to turn the call over to Erica Mannion at Sapphire Investor Relations, Investor Relations for SolarEdge.

Good afternoon. Thank you for joining us to discuss SolarEdge's operating results for the fiscal third quarter of 2016 as well as the company's outlook for the fiscal fourth quarter of 2016. With me today are Guy Sella, Founder, Chairman and CEO, and Ronen Faier, Chief Financial Officer. Guy will begin with a brief review of the fiscal third quarter results. Ronen will review the financial results for the fiscal third quarter and then provide the company's outlook for the fiscal fourth quarter of 2016. Then we will open up the call for questions. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statements contained in our press release and the slides published today for a more complete description. All material contained in the webcast is the sole property and copyright of SolarEdge Technologies with all rights reserved. Please note this presentation describes certain non-GAAP measures, including non-GAAP net income and non-GAAP net diluted earnings per share, which are not measures prepared in accordance with the U.S. GAAP. The non-GAAP measures are presented in this presentation as we believe they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance. These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U.S. GAAP. Listeners who do not have a copy of the fiscal third quarter press release or the presentation may obtain one by visiting the company's website under Press Releases in Investor Relations section. Now I will turn the call over to CEO, Guy Sella.

Thank you, Erica. Good afternoon and thank you for joining us on our conference call. I am happy to report that we concluded our fiscal third quarter with strong results. We are reporting record revenues for the quarter of $125.2 million, our gross margin was 32.5%, and we show a record GAAP net income of $20.8 million, a record non-GAAP income of $23.3 million and a non-GAAP diluted earnings per share of $0.51. Our cash flow from operations continued to increase quarter over quarter. Let's look at what has driven these positive results. Once again, our revenues continued to grow and we executed on our business plan in all parameters. We improved our gross margin and profitability while keeping the ASP stable. In the fiscal third quarter of 2016, we shipped 416 megawatts of AC nameplate inverters, approximately 302 megawatts of which was shipped to North America. Overall, we shipped over 1.4 million power optimizers and more than 52,000 inverters. The number of inverters shipped is slightly lower than last quarter which is a reflection of our increase in commercial sales and the growing acceptance of our large scale inverters. Our gross margin came in at 32.5%, higher than anticipated. As Ronen will explain in further detail, these results are mainly due to the excellent operational execution and the fact that the certain parameters which are not under our control were in our favor more than anticipated. We expect that next quarter’s gross margin will return to the growth rates previously planned. As most of you know traditionally in our industry, the quarter ending March 31 is negatively impacted by the seasonal slowdown of winter months. Despite this, our revenues grew this quarter. Nonetheless, we are seeing a general slowdown of residential PV business in the US, reflected by reduced…

Thank you, Guy and good afternoon. Before starting the review of our financial results for the fiscal third quarter of 2016, I would like to mention that while the overview will be on a GAAP basis, in certain cases I will be discussing non-GAAP numbers and measures which exclude the impact of stock based compensation as well as non-GAAP earnings per share. Full reconciliation of the pro-forma GAAP results discussed in this call is available on our website and in the press release issued today. Now let's start with the financial results for this quarter. Total revenues were $125.2 million compared to $124.8 million last quarter, and $86.4 million in the same period last year, representing a slight increase of 0.3% compared to the prior quarter, and an increase of 44.9% for the same period last year. This quarter we shipped products to customers in more than 37 countries. While our mixed ASP per watt slightly increased mainly as a result of changing customer mix, the ASP per product line remained relatively stable this quarter. Gross margins for the fiscal third quarter hit a record of 32.5% compared to 30.9% for the prior quarter and 27.4% for the same period last year. As these gross margins were higher than we anticipated, I would like to emphasize what drove these results. Gross margins are the outcomes of multiple items, some of that are in the company's control, such as ASP, cost reduction in operational expenses. And some are beyond the company's control, such a geographical mix of sales, product mix of sales and exchange rates. This quarter, almost all factors were in our favour, including a relatively stable ASP despite of a competitive environment, timely execution of cost reduction measures and continued efficiencies in our supply chain activities. All of these…

[Operator Instructions] We will take our first question from Paul Coster with JPMorgan.

Yes, thanks very much for taking my question. Obviously the residential solar market is changing pretty significantly at the moment. The growth rates of the big three are kind of running in a little bit and it looks like some of the business is going to the loan [ph] market or to the regional distributors, can you talk to us about how you’re positioning for that change, is it good thing or a bad thing?

I think that in general from the perspective of a supplier to the food chain, the better -- and the more they verse [ph] the markets will be better for us. So a year ago, we could think that with the circumstances of [indiscernible] we might find ourselves where we have two very very large buyers and therefore they will control the prices and will be under a lot of price pressure. I think that with the diversification in the market and the fact that I would expect under the circumstances that you described that the long-tail will become stronger, I think overall it's good for the market and definitely for equipment providers. So I think that in general it's a very good trend for us.

And one quick follow up. You talked, I think about how you're changing your outsourcing strategy a little bit. I mean, I guess I have taken the view that you're going to be outsourcing aggressively and automating aggressively. But it sounds like at least one part of that strategy has changed a bit. Can you just elaborate a little bit? I may have misunderstood.

So we – the changes are tactics in its nature. We have two big contract manufacturers that we share our business between them, that’s Flextronics, Circuit and Jabil and we’re planning to open another factory in Mexico. We found out that long term our ability to achieve better prices with them in Asia and the fact that we can increase production in one site will enjoy more economy of scale and therefore we decided not to ramp up the Mexico factory, simply because we ended up with the better product price while lending in the US.

So is it just one outsource partner rather than two, or do you mean by that you are taking it in house?

No, no, we stay with two partners. The purpose was to stay with two, but to spread it over three factories, we will stay with two factories. So it’s a very small technical change.

We’ll take our next question from Edwin Mok with Needham & Company.

Hi guys, thanks for taking my question. First, sorry, I missed your commentary about how much your revenue will come from the US market and how much was commercial, I think you mentioned you grew both in US and in international market, maybe give some color – kind of explain where the growth is coming from?

We never give specifics on this. But it didn't change much from last quarter. So around three quarters are coming from the US, a little bit below and the remaining mostly from Europe. So in this, there is no change between the quarters, it’s moved by 1%, 2%, 3% between quarters but the same, more or less the same point.

And then commercial growth that you talked about on the call, I think you mentioned both US and Europe, maybe kind of explain where it's coming from and I thought you've been selling to Europe for a while, what drove the growth there?

So we see growth in both geographies, commercial over resi grow by few percentage and the growth coming mostly from the US specifically in commercial but not feel – but it’s growing in both geographies.

And one question on HD Wave rollout, I think firstly, you guys talked about by third quarter of this year, you will get vast majority of your resi inverter will be moved to HD Wave? Is that still the plan and where are you in terms of cranking those out on production side and how smarter you get adoption for HD Wave so far?

So we are rolling it out slower than expected mainly because of the fact that we need to adopt the production line to it and due to the high demand it takes us longer than expected. I think that in Q3 calendar the majority will still be the current values are selling which is a very attractive great inverter and we keep reducing its price. And we will get to the majority probably a couple quarters later.

I see. Can you charge a premium for HD Wave inverter given the small form factor, and one man installation and some of the other benefits you have with that?

So with a smaller more efficient -- while it will be fully ramped up, it will be easy to produce and will allow us to keep decrease the price while increasing their gross margins. All this with using electrolyte free product – meaning no electronic capacitors at, it's all and that’s supposed to help us increase the length of the warranty of the product.

I see, okay. Last question I have on the guidance. I think you cited, some of the weakness in US resi market and also I guess shift of mix, right, because your mix will increase, so some impacts on gross margin for the quarter -- for the June quarter on a relative sequential basis. Kind of talk about your long term target of 32% to 37% range, right, you were there in the first quarter. You expect to come in – back a little bit in the June quarter. How do you kind of think about that? Is it still something that when you wait for HD Wave to be fully ramped, or when do you think we can get to that, any color on that?

If you look at your notes from the road show you will probably find that, we increased our gross margin faster than expected. And we still believe that in the long term model numbers will stay as we presented them during the road show. We are not expecting to reach lower numbers and maybe we'll reach these numbers a little bit earlier than expected. We just wanted to mention that the big step-up in this quarter gross margin came -- the majority of course from an excellent operational execution. But we enjoyed this one time of the fact that parameters that are not in our control worked in our favor. So you shouldn't expect that every quarter all parameters that’s not in our control will keep -- work in our favor. It should average with time.

Yes, I understand that, but do you need to [indiscernible] to be fully ramped up for you to get to that range on a normalized situation?

Of course, we gave this number for long term. So yes we will reach full HD before we reach these high numbers of gross margin, that's for sure.

We will take our next question from Jed Dorsheimer with Canaccord Genuity.

The first question I guess, just on the storage opportunity and product, I'm not sure how well appreciated it is in terms of the competitive differentiation of your product and the number of times that you need to convert back compared to your competitors, and what those -- that translates into in terms of I guess lower losses if you will. So I was wondering if you could just articulate that value proposition. And then as a follow up, should we be expecting a similar type cost curve reduction where you've gone through now four generations of pop-downs on the solar side. Should we be expecting a similar type ramp as and – again over time as storage ramps, but same type of trajectory in that business as well?

So the storage that we have is different than anybody else have, we're the only one currently that I'm aware of that, have a DC decoupling storage system, meaning the battery is connected to the high voltage DC bus before the inverter input. That basically saved you the need for a conversion where other competitors are doing DC to AC, then AC to DC in order to charge the battery and then in order to use the energy stored in the battery, you need to do again DC to AC. So we don't need this double conversion. So we charge the battery directly from the DC bus before we convert it to AC and then we convert the energy stored in the battery only one time to AC. So in general you probably gain 2%, 3% to 4%, 5% of the efficiency overall. I think that it’s not only that, but it's also the fact that you can save in compared to most other solutions in the market, you save the full box of inverter a charger because most other people, if they want to give you a solution which is an on grid, and off-grid, so back up in grid tied solution, you will need to take two separate inverters in our solution, it’s all based with a software ability with one piece of hardware. So I think that we have a clear advantage over any other solution that I'm aware of in the market.

I was going to say just with respect to that value proposition. If we look at the inverter products, you’ve had -- your cost advantage is about what, 70% compared to your -- or 60% compared to your nearest competitor. Would you say it's a similar type advantage given the fact that you can stay with single conversion versus the double conversion on the storage side?

I think that if you compare a full on grid and back-up system the difference in cost will be very significant. I'm not sure, I didn't calculate as much as you and I'm not sure that it’s 60% or 705 but it’s a very significant difference in cost. And as to your question about the road map for cost reduction, I'm not sure I understood the question in full. But as with any product we start with the fastest, best product we can into the market. And like any -- I guess like any other hardware company, once you have a product, you already have the ideas of how to make the next product better. And the one after it will probably be better and that’s I think a natural technology evolution. And we are very -- we're great believers in the fact that whatever we do today we can do much better in the next product and I think that we’ve proved that with any generation of products, we can do it better and can reduce its cost. So I think that nothing should be different with the storage product.

I guess just to clarify, I was asking from a timeline perspective. If we look at the timeline from your gen 1 to your gen 4 EPIC [ph] on the solar side and the cost downs that we've seen is a function of that generation product development. Should we see -- that's been about what, five years, six years -- five years I think. So should we expect a similar type timeframe or do you see that as being accelerated on the solar side?

What you gave is the roadmap of that optimizer and inverters, basically we went through three generations in more or less six years. So every couple years we should expect -- you should expect a new generation of products and I believe that with the storage product that should be the case. It’s basically inverter technology, and not an optimizer technology. So I think the ratio of big improvement -- every couple years.

We’ll take our next question from Colin Rusch with Oppenheimer.

Hi, this is Stephanie [ph] on for Colin Rusch. Just two quick questions for us. Which geographies surprised you most for the upside in the quarter?

I think that in general nothing really surprised us, too much. Basically when we plan a quarter and given the fact that we provide hardware, we usually have a relatively build-up of backlog when we enter the quarter. Then we usually expect what’s coming. I think that what we saw was in line of our expectations where -- Europe where the winter is much more influential, was a little bit weaker while the US was stronger. This was also the case in the first quarter of calendar ’15 and there was no difference here as well.

And then just one more, are you seeing anything new to the market now that SMA is invested in Tigo?

So far it's very short time since they announced this investment. So we don't see anything new in the market. And knowing these two competitors very well for many many years, SMA is still the biggest inverter market. When we started to sell inverters, we were like number 200. And they were number one with 48% market share worldwide. Today, we are number two, or three and they have like 16% market share, so I think we are very well equipped to compete with SMA. Tigo started in parallel to us in 2011. They probably were at the same size, and I think just today or in 2014 were a little bit stronger in sales. They probably were tenth of our size, I think that we equipped to compete with them as well. I think that, it’s a very big market and we're not expecting not to have a strong competition. So I am sure that it will force us to become even better and faster in what we do and in our cost reduction and I think that it will – it’s a very healthy situation.

We'll go next to Michael Morosi with Avondale Partners.

Hey guys. Matt here for Michael; thanks for the question. You just mentioned some exposure to a company who recently filed for bankruptcy, and I was wondering if you could talk a little bit more about your exposure there. And if you anticipate any impacts on ’16 guidance.

So all in all, all of the financial impact related to this company is already fully represented in our financial. There are no further expectations of any effect. The only thing could be, I would say, a positive effect given the fact that this customer as well as our other customers AR is insured. And one customer filed for Chapter 11, we go in to the insurance company. But other than these there are no more expectations or any impact. Now in any case, just to mention what the effect was -- the effect was unrecognition of revenues that were sold to this customer, and at the same time we completely wrote-off all of the inventory that was associated with these recognized revenues and therefore nothing to expect there.

And then on a more high level, could you just talk about the rapid shut off legislation and kind of what that means for the long term penetration of MLPE? There's been some progress recently in the Northeast and just one and where can you get some future wins in this?

So the rapid shutdown is expected to be adopted by all states by latest January 2017. Of course in any -- and every state that will adopt this, our competitiveness will increase due to the simple fact that if you are not using MLPE, you will need to install the classical string inverter and install additional system with additional box connected to every string and additional centralized AC to DC controllers. So I think that we clearly see that in every state that adopt rapid shutdown we take bigger and bigger market share. So I think it’s a 100% in our favor and I think that's part of the growth we're seeing in the US.

We'll take our next question from Brian Lee with Goldman Sachs.

Hey guys, thanks for taking the question. I hopped on a bit late, so apologize if some of these have already been asked. Maybe I'll start off with one that is very real time and as point out on a separate call here. But can you guys give us some sense of where you're seeing traction to mitigate or make up for the slower growth at your largest customer? And then what the general outlook is for you to be able to continue to diversify that exposure and if you have a percentage number, would love to hear what the percentage that this quarter you saw from your top customers?

Hi Brian, so the total business of the five biggest partners is more or less stable between the quarters but in between them there is a change. So SolarCity, for example, went below 10%, that’s first time after many many quarters. Saying that we see the increase of distribution is growing and that that’s a very good signal for us. Because there's a lot of effort and for a few quarters that we’re doing, in order to increase our share in the long tail. So I think that today we have a very good share in the next 15 big customers. So after the big five, we have another 15 or 20 that -- we have definitely a very big market share within their account. And we focus more and more on the long tail which of course we unfortunately cannot present to each of these installers on one on one. And therefore we need to get stronger and stronger with the distribution channels and that's happening. Actually the biggest customer for Q1 was actually a distributor. So I think the trend and effort and the strategy we put in evolving the sales in the US is actually successful so far and I think that is part of how can we manage to keep flat revenues on the core to the customer is like 20% lower than Q4 for most players in the US.

Second question was just -- if I remember correctly from last quarter, when you just look at the blended ASP trend, it was in the low to mid teens year on year. But I think there was a mix issue, and you also had costs come down correspondingly .So from a margin perspective you have been pretty well. Just wondering, can you talk to what’s embedded in the margin guidance for fiscal Q4? I would have thought it’d be maybe a bit better than your guidance given the revenue level is growing here. I don't know if there is a mix issue. And if you can maybe comment what you're seeing in the MLPE space from some of your peers who continue to be pretty aggressive, if you're seeing more impact from that on your pricing as well?

So, first of all, Brian, as you mentioned the ASP -- in general, ASP on a product basis was pretty stable this quarter and actually on an ASP per watt we increased a little bit. But I think that most of the reason for this is divided by two. First of all, the first quarter is usually characterized with lower sales to Europe, and sales in Europe are usually at a lower margin, maybe because of the competition from many inverter companies that are European based. So these are their home markets and they sell at lower prices. In some cases, this is the fact that the euro exchange rate is still lower compared to where it was like two years ago. And therefore the overall margin there is a little bit lower. So the fact that the US was higher than the regular drove the gross margins up. In addition to this, we manage -- and as you mentioned there is a competitive environment outside, we've managed through our sales to keep the ASP relatively flat. And what we do see for the next quarter is in line of our previously guided 7.5% to 10% ASP erosion throughout the year. We will do part of the cost reductions and price reductions in the second quarter as we planned them in the beginning. At the same time Europe will become bigger, usually Q3 and Q2 calendar are very strong in Europe. So this will drive the gross margin down as well. And as you also know, and I think that it's also reflected in our projections so far, we try to be very responsible in the way that we guide, because just as like this quarter, some of the issues that were beyond our control worked in our favour, sometimes they work on the other side. So I think this is the main drivers of the guidance or gross margin guidance at least for the next quarter.

That's very helpful and if I could just squeeze two more in and then I will jump back in the queue, on batteries. First one would be, Tesla, they cited 2500 shipments of Powerwalls in Q1. Can you give us a sense of how much share you have currently on that shipment sales and of the ones that shipped in Q1, are you recognizing revenue in your fiscal Q3 or is it in your fiscal Q4 guide, and if so, how much is embedded in the guidance? And then I'll ask my follow up after the answer.

So I think that practically from what Tesla shipped in Q1, I guess 100% came with our inverters. I'm not aware of any inverter currently working with the Powerwall. I think SMA will have a product soon and probably front-use in Q3 as well. But currently I think we are the only inverter shipped with the Tesla Powerwall. As for revenue recognition, we recognized -- we have two solutions on-grid and off-grid. So the on-grid, which we shipped earlier is already recognized this quarter. The off-grid not yet. Because of the same policy that I just mentioned before. We’re not recognizing revenue in the first three months on a new product.

Thank you. So just as a follow up to that, so the majority of the 2500 shipments that had Tesla in their Q1, you would see in your fiscal 4Q, is that – am I understanding that correctly?

I don't know if the majority or not -- I don't know how many -- what percentage went with on-grid and off-grid. I don't think we can give you a good ratio of the two.

One more thing just to mention, Brian, is the fact that in most cases we're not selling the Tesla variant, in some cases even if they sell a system, if the system is not yet installed or sold to the sub-distributor -- and they have not yet bought the system from us. So in some cases there might be some, I would call, differences, at least in the short term between what they deliver and what we deliver, simply because of timing.

Last one from me, and I will pass it on. We know that LG CAN [ph], second gen residential battery for grid storage, that’s going to be debut in a few months and that your storage product is now qualified. Are there more OEMs you’d expect to get qualified within the next few quarters, and how do you expect pricing and margins on those relationships compared to those of the one with Tesla?

So we didn't finish any integration with another battery at this point other than the Powerwall. And we didn't announce another partnership. But we do work with other integrations. It’s not yet proven and not yet ready to sell. So once we will finish integration we will go into the product announcement stage. We're not yet there.

[Operator Instructions] We’ll go next to Philip Shen with Roth Capital Partners.

I have been jumping between calls so apologies if this has been asked. But just want to clarify the customer concentration. I think you mentioned that SolarCity is less than 10% of your overall mix. And then could you talk about, of the remaining four customers, what percentage of the total mix do they represent overall? Or perhaps you can talk about the top five in general. How much do they represent? Is that 50%, less than that, et cetera? Thank you.

We never give the precise numbers mainly because it’s influenced by many parameters but it's less than 50%. And indeed, SolarCity, as I mentioned before, is that for the first time after a quite long period, is below 10%.

And then that's great news given the challenges that they're experiencing. And in some of the work that we've done, it seems like the commercial segment is becoming a meaningful source of strength for you. Can you quantify the mix that you might see of commercial in your fiscal Q4 guidance and then how you expect the mix of commercial and residential to shift as we go through the rest of the calendar year?

So again, also we're not giving the exact numbers but it is increasing every quarter by a few percentage. It’s not yet got two-thirds of our total business, but it’s in the right direction. As I think previously our goal is to reach 2017 – to finish 2017 where 50% of the business coming from commercial and 50% is coming from residential. And I think it's doable. So I think we are on the long term goals, we will reach these numbers.

And in terms of – through some of the other discussions we've had with folks out there, it seems like the HD Wave rollout might take a little bit longer than expected. I think originally you were expecting maybe 80% to 90% of your inverter sales to be gen 3 as of calendar Q3. So what is the update on that score and can you provide a little more color as to the reason for the delays and what the potential impact on margins might be?

So as mentioned before, I guess that we are a little bit slow on this rollout and I would expect that if we were expecting the majority to be from the inverter in Q3, I think that will be two quarters later. The reasons are simple, we mainly, in one hand, didn't want to stop the cost production on the older products and we need them for storage, because it will take a little bit longer until we will adopt the new inverter for storage purposes. So we had to keep enough resources on keep improving and reducing the cost of the current generation. And that came a little bit on the favor of rolling out the new inverter, that, plus the fact that we need to adopt the production line and we don't want to reach the total capacity and to take even a slight risk of being again in a situation that we need to airship a inverter, as we have been doing five, six quarters ago. And the total of the two elements caused us to slow down a little bit to ramp up and to be a little bit more careful indeed. But nothing is in another levels. So we feel very comfortable that we can meet all of our cost reduction targets with the current plan we have. So I think we will keep increasing gross margin as was originally planned with the current blend between the current inverters and the new one which is, as mentioned before, a little bit different than what we had thought few quarters ago.

We'll take our next question from Jeff Osborne with Cowen & Company.

Good evening. Just following up on that question, so it sounds like the HD Wave was going to be made in Mexico, you’re not proceeding with that factory. Are you installing a new line currently in China to make the dedicated HD Wave from the start or can you just -- I guess I'm looking for a bit more detail on the reason for the delay?

The plan was to ramp up all the projects in Mexico. We’re just ending up with the economy of scale in China and in Europe, we found out that we’re ending up with more expensive inverters coming in Mexico than from China and it wouldn't make anything positive to our growth. But we're planning to put all products a full mirroring. So we keep this full mirroring and we'll just have in the two factories we currently have. We'll adopt line by line to produce instead of the current inverters, the new inverters. And that's why it takes a little bit longer than expected but we weren't ever planning to do in Mexico only from the new inverter. This wasn't the plan.

And then just given that you're not going to be recording revenue for the first three months of HD Wave. How do you think about that ramping up, are you going to disclose what the avoided revenue was? Is that an issue that we need to consider for the September quarter? I know you're not giving formal guidance but just as we look at forward models.

No, I think that we will -- I believe that we won’t have impact on the long term model as well as on the revenues, I think that we do the blend early enough and slow enough, so I think that it won’t affect the model you have.

And the last question I had, Guy, was just on the optimizer, robotics and automation, I think you have one line in Hungary. Can you just talk about what improvement you're seeing on the cost side there, and then also how we should think about you phasing that into the other lines that you have?

So the line is running very smoothly and very nicely in general. It has the potential to reduce a big portion of the labor that can impact up to 10% of the cost of the optimizer. We didn't -- we need fixed automatic line, currently we have one, five others supposed to be ready sometime in Q3 and hopefully installed still during 2016. So I think that most of the real impact of a fully automatic line from a financial perspective will occur during next year. But again saying all this, everything that we have in the model is supported by the cost reduction plans that we’re currently having and we feel very comfortable with keeping increasing our gross margin and profitability along the lines that we previously gave you.

We’ll take our next question from Carter Driscoll with FBR.

Thanks for squeezing me in. Just qualitatively going back to the slowing in the US resi market, obviously, your biggest customer now become smaller ones, if we think long term maybe a little near term disruptive. But could you talk about maybe some of the regulatory changes we're seeing in state level versus maybe the increasing penetration leading to maybe in the elongation period in terms of closing residential customers, and versus the discussion you have obviously with the customer base, is that elongating, is it getting more challenging from a financing perspective, or feel for qualification, just trying to get a sense of the slowdown in resi, how long is it going to last, whether it’s the penetration issue versus the regulatory one?

I feel that we have a good -- relatively good view but I'm not sure that we are the experts .I think that people like SolarCity and that actually focusing on selling it, will have a better view in compared to us. But from what we see, in one hand, the fact that ICC was lengthened for a very long period, to some people in the market, from a rush environment to, we have time, we can do it this year, next year, the year after. So it in a way makes the markets much more normal. I think that on the other hand, the fact that states will adopt rapid shutdown will increase our market share. So I think that all in all, I think we will see, from our small angle or small perspective, we will see the increase in 2016 a little bit slower than what was expected before the changes at ICC. But they think that while the ICC is slowing the market, the fact that more and more states are adopting the rapid shutdown increase our market share. All in all, I think we will see a very nice growth in North America resi market.

And maybe switching gears on the storage side, you talked about qualifying other battery OEM. Will that potentially change your geographic focus, or that has will continue largely in the US and Australia? You talked about some of the other geographies, maybe with Tesla and then with potential other battery OEMs that you're going to integrate with?

Sorry. Can you, one more time -- it was a little bit broken, I'm not sure –

Yes. I was just trying to get a sense of moving beyond Tesla at some point as your battery partner, whether that will expand your geographic focus, maybe timing of when you think you might be able to probably discuss another partner, and then maybe just very high level from the geographies outside the US, do you see some of the uptick, obviously you talked about this in the past, maybe just a couple other geographies that you think you might see some penetration in the near term?

So I think that as described in the past, the main geography so far for on-grid is the Europe, mainly Germany because of specific subsidy. They're subsidizing 25% -- direct subsidy of 25% of the extra or the direct cost of the storage part of the solar system. So Germany is the biggest market today for storage. Australia, I've mentioned before, is a very strong market. US, we start to see a very nice demand, and South Africa is probably the fourth country due to unstable grid. So these are the main four end markets we see. We do see a very big potential in many other countries such as India and some other remote areas but I think this will come to a massive only when the prices of the batteries will reach a price of the low $200 per kilowatt hour. So I think the fact that we will have other suppliers will not change the geography. It will just simply give the customer the ability to choose from more than one option.

And then just maybe last one to sneak in. Is it possible that your commercial percentage of sales to eclipse resi, say by the end of this fiscal calendar ’17?

I think we plan that it will be 50:50, as commercial is growing worldwide very nicely and we are growing very very nicely in commercial and we are becoming more and more competitive with any -- every larger inverter we are. introducing. So I think it is definitely growing. I wouldn't expect it to be more than 50% in 2017. I would expect it to be more than 50% beyond ’17 but for ’17 I think we will end up where it should be around 50:50. I don't think it will grow faster than that. End of Q&A

That concludes today’s question and answer session. At this time, I will turn the conference back to Mr. Guy Sella for any additional or closing remarks.

In summary, our fiscal third quarter results show continued successful execution of our business strategy with strong revenues, consistent growth in profitability and accelerated cash generation. Thank you for joining us on today's call.

This does conclude today's conference. Thank you for your participation. You may now disconnect.