ENPH - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Enphase Energy's Third Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator instructions] Later, we will conduct a question-and-answer session, and instructions will follow at that time.

As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference Ms. Carrabino. Christina ahead. go please Ma'am,

Christina Carrabino

President Financial afternoon and conference of the Belur, us Co-Founder Officer; today's XX, Kothandaraman, for third ended results. results Officer; After for thank Product and a issued to discuss XXXX. you Raghu today, September Enphase Badri call are quarter today's joining Chief closed Enphase Executive its market Enphase and On press Bert Chief on call Good and Energy's Chief Officer. XXXX Garcia, the third release announcing quarter

risks During will market the timing related including and and limited and actual its Enphase results current course of performance, event this these Energy's statements for demand conference of uncertainties, but advantages make call, These management future market products, to of to significant technology financial Enphase the differ and and expectations. involve materially statements forward Energy's could from trends. its forward-looking Enphase looking not statements

today, or see and complete more ended XXXX, a For reconciliations ended non-GAAP the to its cautions place file filed The Relations can for will GAAP certain XXXX which section XX, the which Investor Company measures on posted are used SEC and result please call obligation reliance on expressed the Enphase that and with undue of also basis, or have in any undertakes quarterly Also, Form in is its Form has changes with in as charges. December this to report please discussion for note a which annual noted, statements XX-Q year XX, the on the duty events risk otherwise exclude report earnings non-GAAP you a measures its found financial to forward-looking and on quarter the SEC, of be been fourth new the no of on release XXXX. XX-K the any future September information, uncertainties, these of unless to quarter update be certain Energy not in the statements provided financial measures website. financial of expectations. adjusted Company's forward-looking on

Now, President Officer Kothandaraman, Badri? Badri Executive to I'd and Energy. Enphase of like introduce Chief

Badri Kothandaraman -

us third financial and our thanks joining quarter for discuss XXXX afternoon results. you today to Good

So, good we had a quarter.

second XX, the is XX, We We increase cash transformation were we shipped have or breakeven third of of well. XXXX. and approximately income Our non-GAAP third to almost during XXXX, XX of operating position. very of going quarter microinverters. an revenue the million X% quarter We quarter for XXX our megawatts $XX stabilized reported in the compared XXX,XXX

non-GAAP GAAP XX.X%. margin Our was and gross was margin XX.X% gross

introduction in XX through operating focus on and by reach improvement gross in results financial on position of expansion, management greater later model margin excellence overall our focused and go the pricing improvement track detail lower on optimization, supply target the are our to our XXXX. about into the XX, quarter will Bert call. XX, new fourth product laser further operational chain margin in gross to third resulted financial We're and quarter. OpEx Our

our So, turning to market.

X shipments revenue the The impacted quarter a the shipments was quarter, In Puerto customers in nearly X X% transition as end Rico which X% sequentially. Latin the was our third sequentially result IQ the in revenue the Product revenue fourth We We region, and market, effort. hurricane playing for and the module island AC In diversifies product will Raghu, the Chief quarter electrical for demand a details its at APAC of this continued of India Shipments overall in third in all the We the devastating down technology the on American rebuilds region. up look to sequentially. IQ products. and Officer resulting our the sequentially future products American during and region. will the quarter the sequentially as also our the call infrastructure. forward the increased first XX% completed In XXX% quarter quarter product during Latin later increased up key these U.S. revenue the U.S. inverter regions the be installers shipments a to for manufacturers to to partnerships our role key as was module grow. in to be will in year-over-year. with established distributors, to that and new the central Europe, to provide X%

grow as was The region customer quarter quarter revenue continue base. record to our a unit we for in the third shipments and

believe Moving share will products, goal. our of partners, help focused with remain tackling system drive new We to blocking growth this profitable modules X and existing microinverter IQ thus operational increasing market. the we achieve to on on our and AC and

In three worldwide achieve priorities single to of sustained us with the quarter next profitability, revenue the will six over introduction the gross grow My during solid markets our world-wide in market. months are that skew expect to months. gross margin creating with a out and summary, With the we Europe, of flow, foundation. while IQ and by progress are available introduction XXXX, what we expand product helping improve financial a Latin top penetrate X margin also pleased expansion. Asia further IQ X to overall drive in X allows IQ product first of served to the Pacific new cash be increasing America, past

Raghu, to to also customers quality update With I expanded Product Enphase. and with products. on over turn they’ve to customer an the the Chief come our that, value, would will like to service provide continue provide expect Officer from to We our call

Raghu Belur

Thanks, Badri.

system over improving and availability solar, and proposition increased our to few to our that the is deliver past platform and energy, our from value an M-series As our customers, simplifying core uptime quarters commitment series IQ of of storage yielding our we design management to product. enables energy delivers part IQ reliability. self-consumption and value and more transitioned integrated installation

a the that integration worldwide to developed advanced further IQ provides greater further with X about addition, our a IQ of Much due In a new reduced product is we enables are streamlining silicon IQ worldwide that by our and our reducing of meeting IQ achieved also X as result and IQ and unique greater requirements. module its ASIC. defined reducing efficiency, semiconductor X X software for installation AC process, of weight. we the cost ASIC capable installation integration. product. delivers to was IQ architecture. wiring, balance skew, more and logistics. X yet enables again have it's X, With IQ grid simplified size performance a offer simplifying easier of power that Similar while regulatory functions single system achieved higher IQ new time What our lighter is power and will smaller, install to

which plus Solar our AC storage, our strategy. battery is product central includes to product

AC the unique better Our the storage of distributed We of and continue cost come as because how incorporate our to market expand battery business as solution. the believe the features understand to months utilities down grid. continues will improve to over storage to storage worldwide next XX on

our XXXX be about Ensemble. product in called Now expected let to introduced talk our generation IQ on always technology on next based X me

fails tied. of What this technology. One challenges still are solar there is it is system. solar be grid with unaware Most shining, and no of production your means customers this the if biggest the limitation of will solar's that sun grid today's out that is is

Ensemble That solar system the address of have technology during the a have of will the and completely the countries can that system demands this produce mean if Puerto This So, continue by or that you always we our energy and storage weak nations is presence is Enphase capabilities to is address solution. challenges continuously the of that -- invented regardless grids. grid with is and the the is storage technology system's the AC X to on night. it we microinverter can Enphase day day home during means storage grid experienced in like and when will meet the IQ absence fails other limitation that and a sunlight, island at those enhanced there even battery produce energy, Rico, agnostic. grid microinverter sorry, With business. what into The sufficient incorporated or further

IQ X worldwide. addressable market our believe grow also We total will

quarters. there the IQ We'll energy address limited such access and no or energy in India in X.X positioned to over inherent uniquely continue over are on as regions the and with to example, the is challenges update billion other world. people X's progress coming you Africa. For of these IQ X regions to

his the turn Bert over financial results. call I'll for of review to Now our

Bert Garcia

Thanks results XXXX quarter more outlook third fourth quarter. as well provide to the details our our Raghu. as I'll business related for financial

quarter third net XX%, on DC megawatt third of are a I system. in Total otherwise new DC was represented basis. As for microinverter a and megawatts in unless quarter, relatively DC increase revenue of an megawatts am of the microinverters, prior approximately on by XXXX, X% the with reminder, revenue a watt revenue reflecting million, provide X% XXXX financial for going of On the an noted. basis, net that per measures the non-GAAP was ASP's. year-over-year $XX Total stable a total to of unchanged from XXX,XXX IQ year-over-year the which consistent megawatt The sequentially a We were watt reduction shipped XXX shipped decreased broad ASP's. in decrease X% increase directionally quarter approximately X% our in sequentially.

margin to IQ implemented industry-wide offset $XXX,XXX X.X% North all customers IQ X well Envoy was on the transition expense related product. Gateway call. to Non-GAAP revenue in which product the optimization Non-GAAP our these on the result as have in our our our stock-based compared completed will IPs quarter to during prior XXXX a QX to-date improvements margin percent quarter and second million operating our that Non-inverter we nearly The includes QX revenue solution, expert and shortages in and was by gross we $XX.X gross mentioned, XX-battery American we improvement third regions Non-GAAP $XXX,XXX result our of mentioned America negative million quarter that reflects was The margin IQ slightly a Badri sequentially improved as all to storage decreased quarter. third excludes system for as Communications to the gross initiatives. XX.X% QX. the gross As microinverter chain approximately our as the consistent Latin be for transition margin accessories, as of quarter to incurred shipments approximately of fourth X U.S. with from XX.X% a of in results. component supply to compensation. our $XX.X

breakeven cumulative compared third million we quarter of with As compared have in restructuring the to of in loss $X essentially compensation QX. restructuring Non-GAAP was fourth basis, income million made implement. the to or we've in operations non-GAAP XX% a expense non-GAAP the of actions operating we've reduced operating ago stock-based million, in of charges extremely achieve reflecting a loss our $X.X of efficiencies progress expense. confidence of million On impact income pleased from We're and on an and excludes by quarter. operational and non-GAAP ability $XX.X operating to $XXX,XXX year the with the increased quarter, profitability XXXX operating expense operating $X.X

in QX $X.XX or a Our net compared non-GAAP $XXX,XXX was a loss per now. $X.X loss resulting loss loss $X.XX of share share to in a of per net of million

second million, year turning total sheet, third shipments. cash in result levels a $XX.X in second QX from the levels quarter the to balance. slight the primarily the million Inventory balance from a the of the quarter and the million the of to timing $XX.X quarter. increased We quarter quarter, $XX.X $XX.X with a Now of were balance for inventory million exited ago decrease compared

We cash the flow expect positive quarter. be in fourth to

our look Now the quarter fourth at for outlook XXXX. let's

fourth of the to range a in built We expect million. for quarter our million $XX of XXXX $XX revenue

Turning negative a the to guidance fees Note compensation non-GAAP approximately margins, be higher impact industry-wide margin we XX.X% expect to expense. gross to that Non-GAAP margin QX margin expedited our of gross GAAP $XXX,XXX of resulting range from gross and XX.X%. excludes within shortages. component stock-based includes of

we be operating to of line not within estimated the of a operating do the of be and significant in QX. we million open million and of an $XX.X to a operating guidance that, $XX of million expense approximately million We profitable restructuring for range to expense range, midpoint expect quarter expense excluding questions. quarter. expect the fourth to the within GAAP non-GAAP $XX $XX.X our to million non-GAAP stock-based $X.X million to At beyond compensation $X.X range expense a basis on additional restructuring be that incur expense. I'll up With income I'll note fourth expect for our

Operator

Hallum. Craig Stine first Our line comes instructions] the [Operator with question of from Eric

Your now line is open.

Eric Stine

questions. are the additional just some end of still Thanks commentary targeting question the the and module partner modules, the maybe starting Maybe everyone. you for with taking or Hi by an early AC just on the returns year?

Badri Kothandaraman

shipping give This units to LG you Presentation, the said modules me We of about Day second let some Badri. on Analyst XX,XXX in module. AC started So, is the AC We XXXX. that shipped to color quarter in LG. we June

of expect in to Our those logistics have as is that on the AC QX product ACM. There early the been X introduced AC It's installation shipment with clear increased know SBI Jinko interviews 'XX. installers shipping announced savings those encouraging. through channels on lot streamlined IQ in well the interviews have a done at shortly. now. July. very IQ neon time start been That you its interviews too module the we but way We in Eagle -- and making module as LG sequentially the if X+ to we've of and say is

announced a in India. module Waaree, also partner We

with ready. are when partners well working other announce as We few will a and we're

Eric Stine

LG Okay. with Jinko is different that that version different or a working Sticking is to replicate so, a with little little with versus different in if scaled-down and or other version Waaree, you're bit version that markets? what something that about? able talk India to partners Is you're of

Badri Kothandaraman

No, down a version. a not or it's different scale

that with a LG well, XX. module cell the same in would in the all cell XX product on Waaree X because and Plus module XX-cell the product is is line will What's difference product module a good XX-cell on is both -- other and is segment primary We as AC partners have a XX the be X it and market Plus blood IQ be really IQ the works India works strategy only being module. and the

Eric Stine

Got it.

Okay. for last Thanks Maybe me. for that question color.

you're LG, Tier Just trends, the Tier feedback to clearly good on things installers. X you but an and early installer X with mentioned update moving getting

thanks So thoughts a lot. just there or any color be would helpful,

Badri Kothandaraman

the being speaking, value, good fast module all production to installed inverter Yeah, install. value and installed matching have there, to done of the logistics between closely power the roadshows continuing and either are reach we has pretty because quantitatively we're a And been feedback the quality very and because on well The is who installs the as value, good matched. as clean it's the well out time the consistent. data installers the as collecting then very

on. to going all on is it right the longtail outreach as of showing the of lot road So, number installers We're now well.

has feedback the good. So, been

Eric Stine

with how months? know just and on And market X Tier thoughts Tier Analyst that share there, refresh update Any trended. I over anything last just maybe be but an you might overall the Day couple the that's share gave X. at

Badri Kothandaraman

early No, to this it's too time. tell at

Eric Stine

you. Thank Okay.

Operator

comes question line Coker next from of Meikle Brad Our with Palmer.

line Your now open. is

Brad Meikle

afternoon. Good guys. Hey

also increased limited to in due revenues is to that the which question and have? achieve impact, and were you XXX-case First do cases shortages has that more quarter think you you were this able component scarce module some them the by made prices the

Raghu Belur

of a recommendation was news. punitive saw, and case any made around we of than there's XXX shipments. the didn't That think everybody that as certainly related in at the see really quarter, impact So, I Brad. were terms been looking No, but preliminary third revenue I concern were looking lot expecting, hey good that's think to everybody said, XXX

part income second was of your shortages. the Although question

Brad Meikle

availability. component by limited we're limited, is revenue If

Badri Kothandaraman

the revenue the gross but Brad, component -- So, by margin was what not limited. shortages, we limited but was

having high-voltage expedite the compared memories in we was fees of a QX why expect feds to expedite resulting we result impacted well. still And as air margin about QX continued expedite noted, we that's fees ships and we from to and incur 'XX present ships. fees those As negatively X.X% by ocean to gross were on 'XX and said, see in QX us

of but in We first qualifying see are supply XXXX. multiple half at the actions, point, putting we processes situation in sources place the improve into to really like situation the some business and persisting as need mitigation this we

Brad Meikle

Yeah, had IQ modules been IQ to more rating but up -- would feds, a market it you? does there have already on how your is the lead like MXXX come really it X, times the or that not a on is what sounds open served of by say high-voltage the much you suitably the power portion down for like market X,

Raghu Belur

Brad, Sure this hey, thanks is Raghu.

black being about nice the of house, is open universal like skew up the as things module One again IQ farm well. a XX-cell the for a X market worldwide it does that the

well. couple a XX-cell that doing are in modules players of there So, as are who

Panasonic market another So, those us a technology point the does lately as XX-cell up IQ X from markets of now know is who also a already but with player entered open well product. product, a is XX-cell the here view. for We there's

Brad Meikle

think market yeah, of a about it's probably residential a is Yeah, third I U.S. quarter right? that of

Raghu Belur

Yeah actually. or little probably order less bit upside

Brad Meikle

time, is enable the thanks more a this companies last X talk this I've are the could And about for Okay. read serving IQ small on question, the are that installations types talked about you the DC limited market? currently a and little well-capitalized of bit is current air-conditioning which light some and refrigeration, in enabling articles about that Africa doing output that by output. half-dozen X-XX have AC

dynamics out any would about hear what you So, see there I market? in love the to more that of

Raghu Belur

also I Africa as India there think and it's well. is

there. are that players. the there to needs Go is market of number be think I problem solved to

think the have we I problem. solved technology

and are and degrees clearly there in working there India, both India a that varying are had the of in there. have on we are go-to-market So number that problem and -- success were Africa companies seeing of

are there. companies time. are making out this at announcements that of So a number They're any yes, not that

Brad Meikle

All you. right. Thank

Operator

Partners. Capital Roth Philip line question next the with Our comes from of Shen

now line is open. Your

Philip Shen

Hey guys. Thanks for the questions.

IQ is here on the one X. First

in X the of do and QX do your how and I be trend to that you 'XX QX starting mix getting go you XXXX? talk IQ mix so release, about to IQ that through you as X what think we out expect there in 'XX expect

Badri Kothandaraman

Just IQ IQ us X color transition took complete. to give X, the to quarters on you some three

the always be a counter We A X the the IQ little X same expect X. you tough predict, lesser. that uses to may as we're know product the time, of Having said as IQ surprises. is IQ planning to X new take a bit transition lot detailed but doing system similar a balanced transition to IQ

X easier transitioning So that bit also, one will is is make transitioning wildlife. than going the thing be customers IQ it to little And a North easier. example American for more to

that done take be in That to might I a to of expect maybe faster So, three couple compared quarters timeframe. world-wide. quarters full

to more but -- we there, come planning. detailed planning we're are So a doing lot

Philip Shen

on X Good. us of if see to remind as we you can and Thanks, margin benefits fully or IQ update X? what transition Badri us from kind IQ should you

Badri Kothandaraman

So, XX% The the top to We gross to QX you building margin, target into only X and XX, X the the IQ XX XX, IQ we track in and financial important operational that foundation do for available income. are ACM stands XX% and line told operating to as on expand OpEx will Europe platform. served gross help a also in of see margin focused also XX% Pacific improving transition profitability. we and increase we're an told driver leading I more as XX, the on Asia margin regions XX, on help operating are will of so. focused we but market will margin, the and reach we 'XX excellence healthy to you The gross XX and laser by not

expect said, with model doing, with we supply all the reach are our operating is by we QX timeframe that the So, 'XX. we the X which that chain optimizations target of to IQ

Philip Shen

Great. Okay.

XX% blended question line the you to quarter you the decline continue was the decline. expect of do So, that roughly year-on-year, I moving in rate ASP that top to think

that was for think I QX.

XXXX? do So, continue and for for now QX and that do expect seeing you QX to you what what for you are expect

Badri Kothandaraman

for QX number stable come that at I for the quarter. pretty see factors of pricing a later, Well XXXX erosion we to I'll have about a X% but

all going couple a have [Sunny] to an of to which what I environment. is XXXX factors contribute case. pricing January. the in final be don't We is One know in outcome the could So,

influence entry environment, potential I not that. one those pretend of there, that expect two middle pretty could the a the stable And that a similar is pricing If So were to second Huawei in XXXX. XXXX. I

Philip Shen

QX, just Huawei, mentioned 'XX, finally, you that the go And as and as for are the it through to sense Okay. can you do it a we puts you guidance 'XX? profitability thinking you check a that sounds maybe Good. all for know haven’t 'XX I signs non-GAAP profitability, what couple relates with how your provided in but give and for are maintain are but and XXX about takes you

Bert Garcia

it's Hey Bert. Phil,

right, And think to only date the that the to about don't we not out that If we continue profitability did X to we we yield help range for benefits into the the if done to significant right to that's begin provide clearly signal to the topline. midpoint us. help, far, margin You're of is we've restructure expansion work for grow XXXX, non-GAAP quarter. also but going the fourth certainly but transition to guidance you're IQ transition out

does end continue around It's mentioned, process of to in we've the to bear IQ a new XXXX. in markets work here bear XXXX mind, fruit Badri that's open even of more helpful, restructuring so the tail will a up certainly speak. non-event of the but lot in done of couple out a As X

continue we from move to supply to benefit do along broad continue expect focus So, in and help XXXX. our also operational see to profitability margins and chain excellence our and optimization

Philip Shen

on. pass Great. Thanks Bert. it I'll

Operator

Our Edwin next & Mok Needham Company. of question comes from the with line

now Your line is open.

Edwin Mok

Great. question. taking my Thanks for

is that? guidance settled, have you margin XXX this quarter on terms recovering color fourth just takes right in you guidance, see do seems the a like seasonality talk your can First puts in that? or do of XQ little mostly about and you any flattish on is It after and your just the

Badri Kothandaraman

share. holding So, is I think what really seeing you're us guidance in our

is very, in So, what very, reflected very We're seeing being well but of about course you're guidance. on we're is for to one and discipline. disciplined that it, optimizing at our pricing, pricing profitable topline importantly thinking some more

mentioned I am seeing topline takes In guidance. terms from of Brad, I not our not them really that's puts on as and our impact again to factoring any

it is of share factor being disciplined a pricing. really and So, on holding us

Edwin Mok

gross then how shortage happen because can have helpful. impact stop the could a you to right, talk and have out should little guidance this Okay. margin, of That's into given when of do your margin And view much that and excess you stabilize maybe have any about you factored you kind start we this gross being risky?

Badri Kothandaraman

Yes, negative was so you in into then expect X% had and XXXX. start just to and impact anything off level QX. We on set between back in QX seeing somewhere tailing about X% X.X% to it QX

within little So, entirely in we'll early in our start impact our of but not things. that guess tailing a right is off it's that these QX. see control, now to a It's

Edwin Mok

normalize gone quarter. I I'll up on lot guess has of then I a also in those that you think with time? would you the I Okay. cable this going fees you or That's stick and quarter up some helpful. saw Do to Badri. take the as sheet actually fourth balance expect

Badri Kothandaraman

expect they are related. do somewhat Yes, and normalize we to

really the to QX. on in the QX of So, impacted line, receivables by relative it was sales linearity

increase there. really that's what So drove the

in the late side reflected it related was AP in It's We in also AP. of inventory. in some to our receipts the that's On increase sequentially inventory had inventory. September actually

of to management see work we've in inventory doing management working the AP and you particular is capital chain and working our that AP thing QX, that really some returns get on other that terms. our AP its the in been in inventory line in The with optimization part of supply our beyond in improvement that's vendors slight and

Edwin Mok

not and of I all One allows for these you markets we penetrate this in different to IQ and or mentioned just grid regions what I notice there, I of on Japan? on the stand to Is markets. world where that you penetrate I think feature you will out that Japan phase Great. question it XQ it new is mentioned had do kind Okay. new you X last mentioned allows some software launched

Raghu Belur

is a So Raghu. this you a yes, architecture power. digital power it's is a such of is The architecture, that box not electronics, piece big know

our So, ASICs. are on both

to requirements So, it do the requirements on based that is you're us connection that's the that the a allows completely to geography profile correct. into device meeting defined configure and software them

Of course, on all talking is on open right fan is is up, the as the said capable IQ focused timing for skew of today Japan does expansion exactly that, not X about being but our to on the roadmap. geographies. virtually now it's and worldwide it we're I plan that We're a configured

to going time. geographies we're over be attacking So, more

Edwin Mok

adoption you are IQ or those X exclusive? accelerate Do ACM see mutual

Raghu Belur

again IQ us. much designed mind It's absolutely, and ACM the very architected strategy No is key is X a in for smaller, it's much lower profile. actually ACM with been because absolutely

So as and does fact accelerate yes, it in ACM accelerate new partners well.

Edwin Mok

Great. That's all I have. Thank you. Appreciate it.

Operator

line from instructions] with Oppenheimer. of next comes Rusch question Our [Operator Colin

Your now is open. line

Colin Rusch

little other if you're quarter-over-quarter, a bit on pricing looks geographies? with is the but regional talk in like Asia, can a basis, pressure the price dynamics about some that Bert, flat in offsetting it you growth

Badri Kothandaraman

like at environment quarter-on-quarter. Regarding pretty stable pricing the pricing see X% said, pricing -- what regarding we about erosion the I

it me what was XXXX, ask was X% to XX%. about If it you for

Colin Rusch

Okay.

across Board So, a of the regardless you're X% seeing regions.

dynamics, some transposition payment support suppliers you guys with terms working better as a Okay. And the and and are line. terms payables the back you get get and opportunities then to go of the balance longer with on into more to capital seeing operational sheet flow, robust cash your

Badri Kothandaraman

only our that of the is naturally AP a last the mentioned something last the improves, are my Colin, You're positive Yeah, -- as more terms little to performance and bit that up some excited financial in reflected recast sequentially cost I driving terms with the caller better relationships with which in just lender. the that's I hitting one also see really important back And way. but of we're capital of comes go to a down. opportunity expect in my with those vendors, about our

Colin Rusch

And sales. are Okay. the here obligations obviously then little question a much really warranty for while the haven’t last they me growing and move really you is for about

of terms the some you reliability seeing risk So, and can sure? the rolling data guys for off you are little in about talk those forward how things of bit that you're a

Badri Kothandaraman

handle can I Raghu I bit areas. to Sure, weigh may piece. both the reliability on a little of ask those

So, take to them order. I would like in reverse

On very piece, performing product current seeing really returns is from our the well. reliability reliability really, very, we're tremendous

the the as our are warranty bear warranty understandably but it. returns and we mind, a build perspective, is So, high low. a is growing in reliability liability right, base result as From very relieving install you're the we are

of netting So, what really seeing you're those things the is two over time.

base, units warranty we installed into down. install again, up and as warranty a ship will the you So obligations settle we liability come will liability that go the growing large more to as base, for the

Raghu Belur

And strategy generation a have of there, to is core is point product integration. from product to product every more in of does there to M-series semiconductor and IQ a a new IQ we Colin X what's chip integration -- and been has in view, what X chip and from more the new our ASIC

reliability comes So, sophisticated field the and connecting. IQ all you have integration we're our got are X.X our better means it. testing components all fewer X.X data gauge million time, And more you fewer More just over the now gets million systems on just back to because from in that from X.X as to know the X. and internally gauge

our So, we very field from high-quality and data get performing. the are systems

informs and quality of of the reliability our product. that All

that and needy having us a are that's nice get we of is semiconductor a Enphase from the coupled strategy with So, the which cycle of the power virtuous core feedback creates you to tonics. all combination just architecture of digital field

Colin Rusch

in Great. much hop Thanks, guys. so queue. I'll back

Operator

Raymond line [Operator James. of our comes with Pavel next instructions] the question from Molchanov

is line Your open. now

Pavel Molchanov

question Thanks guys. for taking the

not relationship your have the how Given partners a manufacturing few Would as Chinese coming other tariff ends a that do the currently. up assets depending anything in decision change on Jinko U.S. out? companies in and

Badri Kothandaraman

No. We significant know there. don't our yet, the as concerned on it We the change. details that expectation module. change it's don't all is expect the won't any with but tariffs Again,

think is ACM a a ACM at risk skew. coupled North one is that worldwide the also the that It's about it's America skew inure we the IQX worldwide with Second, we simply lower going think also is as fact And a and product and alone. manageable. just

Pavel Molchanov

about I Okay. percentage increase it remaining made correctly. and battery guys as sales a that more time, quarter-over-quarter Will percentage of be increasing? comment revenue And theory become there non-inverter should particularly stable the that earlier was over heard in meaningful if you

Badri Kothandaraman

ACV It's it mix should, part right. as increasing of portion that's you're of non-inverter mix a right very larger larger and our an become revenue and It a be of that intuitive. portion would

Pavel Molchanov

All it. I right. That's for me. appreciate

Operator

line Bank. [Operator next Deutsche from with Vishal instructions] question Our Shah of comes

is line open. Your now

Vishal Shah

my taking for Thanks hi. Yeah question.

near-term pricing you to the Huawei your of competitive initial you are business. with feedback what customer a on is rolling couple 'XX. when be conversations pricing and then are is in from stable and next customers? Thank products the mentioned in seeing pricing out Just the its the questions kind half of you. And field product in environment you're What's that hearing going the suggesting mentioned quarter the seasonality on second in from you the of the environment, the or your

Badri Kothandaraman

pricing it's the at per X% about stable, think about I environment, quarter. environment pretty erosion has As been

the the said For Huawei I like the to are XXXX final have as at factors well out. of [Sun outcome is Eva, about we so two Sun again. Coming year yet what XX%. case to there potential In not Eva] X% been entry. entire as

case even you you yet that be we But pricing. understand In about by is and see Huawei, we color after their is product mean let some think So, is once pricing way on we'll What what based value-based able our what value doing can to better. announced, we the pricing do that happens. the react me of by give management, pricing. don't

alternative, take offer to next value competition what the think best product alternative. the about does best we which our compared we next offered by and is So, then

in streamlined some is is the ECM is and ascribe you saving, the it you. customers quality, we it it installation example, we'll time power For enhanced with logistics, it that say here improved share to value production. we of that Then look tell is is value that

at to margin quarter our improve every and a It with it's one and that it is gross QX this which we see look customers do at item some it's and should transactional us of key what pricing, literally do model we lot go better literally there customers doesn’t cases the the and So, this and hundreds then is discussion lines like of -- we do we value, in our process, every but means case, XX, getting event. by that. pricing 'XX. are cases reach a We're to our an XX of that not on management XX, of is operating for transactional

Vishal Shah

helpful. That's

outlook, this on be quarter, will the suggest you concerning a seen follow-up first next the be of a Just dynamics. or quarter would next think some different you do XXX quarter year year will the normal slowdown have first seasonality as

you? thank So,

Bert Garcia

Vishal quarter, necessarily going but are as not beyond we by likely reason no it. you that seasonality is believe patterns guide to are there hold be impacted going to don't and know to normal the So, current

Vishal Shah

Thank you. Bert. Thanks

Operator

[Operator Badri am closing turn time. at showing Kothandaraman no questions would instructions] for I any like the back remarks. further this to in I to queue call

Badri Kothandaraman

us our on with We're today. XX target you to in XX, thank pleased Yeah, XX, joining We the speaking call again our progress look you towards our with extremely third forward model. next for quarter quarter. operating

Operator

Ladies and in This and thank program conference. Everyone, may concludes day. today's you have for disconnect your great the you gentlemen, a participation

Enphase Energy (ENPH) 7 Nov 172017 Q3 Earnings call transcript