ENPH - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen, and welcome to Enphase Energy's Fourth Quarter 2017 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call may be recorded. I'd now like to introduce your host for today's conference, Ms. Christina Carrabino. Ma'am, you may begin.

Christina Carrabino

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

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

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

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

Badri Kothandaraman

thanks for XXXX results. our afternoon had of We and revenue fourth the guidance. discuss quarter the Good us of financial for quarter. a higher-end XXXX reported full million profitable at joining of to We today $XX.X quarter and fourth year

the non-GAAP also was gross guidance. Our margin of quarter the higher-end XX.X% in fourth at

Our non-GAAP operating the million. for return fortifying priority a Company. at by milestone and operations This, sheet. income Enphase foundation My top was build to profitability to the $X.X is solid balance significant financial improving a represents

making financial are our We excellent operating XX-XX-XX towards progress model. target achieving

margin, by to We XX% IQ chain are the increased were transformation quarter and operating XXXX. costs. to XX% income pricing world supply focused our optimization XXXX. introduced XXXX. cross in business costs XX.X% the micro a IQ We spanning XXXX. successfully in we XX.X% major and XX% we and from In achieving gross margin management. QX On goes in first developed transition our X for teams for systematic addition quarter company. short, went X multi-sourcing cultural class strategies on accessories in on of IQ the components reducing executed in functional inverter entire overhead through QX improvement XXXX, XXXX and from came expenses This every all transition, chain sequentially of operating margin targeting In optimization non-GAAP X quarter the we fourth supply laser processes We with

notable North product every primarily difference which skew X, of XXXX, fully to gross leading and We IQ our improvement is IQ a American note regions X. will worldwide X, from that X in important It is transition complete transition to one IQ a was is in further expect This our be to margin. to product. IQ a

in is Another management. pricing improvement is instrumental margin gross that lever

for the disciplined We keeping been flat pricing couple quarters. have in last of

pricing team Senior its dedicated a Executive to have led established importance. We underscore by a a

pricing In segmentation. establishing is through focus them we policies in procedures, and our control, will So and rigorously. XXXX, executing installers which creation transactional XXXX, product for was on efforts management focused on value

combined high interviews, on their to AC In savings which modules inspection via introducing confident QX logistic management. partners. by cost with solution. our supply In they IQ with compared procedures are continued savings to installation chain with when installers conducted financial recent For achieving to our we experience optimization reported we a management with simpler model summary, up discrete XX%, performance XXXX AC of example and and XX% XX-XX-XX time up transition module pricing

a private sheet, equity the cash with exited our balance our accelerate additional market us initiatives. well as investment. grow to we fourth savings closed million turning at quarter cost allow $XX.X recently share liquidity This Now of balance and the as to million $XX will

We call. AR/AP have go Bert cycle. will sharpened the the later focus also on detail inventory to and business our about processes our results financial improving conversion cash in management improve greater into

in increasing and XX% products our and market demand customer served Austria. share U.S. regions our our ramp shipments forward quarter. base. revenue the APAC IQ for customers Germany India India. the grow up sequentially introducing for X% We to in the X. up Netherlands. to In IQ to available revenue Europe, and was XX% an Europe share all We quarter, expect X added Both center product R&D American our sequentially in to turning grow during year-on-year. India Plus starting region, increased transition X look to third are and grew The the IQ for we and maintained IQ X% as In our substantially was by France and Bangalore, and were in is lead in We us continued XXXX. market quarter the to for we market IQ fourth We already fourth Plus fourth business revenue opened quarter these North our X markets. in revenue and certified significantly Now completed in the during entering to our sequentially. the inverter

talent leverage on presence us control business Our worldwide the enormous grow the to maintaining while OpEx. in India enables the available to

In solar revenue In target commercial with of opportunity for powering a was a that sequentially the clean ambitious the the and Latin the energy. addition, we hurricanes continued last Puerto see growth market, for to fourth result American the strong as in impacting Enphase. India August devastating as Rico its shipments Mexico overall remains September the is growing Enphase down quarter occurred country for market of in a XX%, region. however

in Note X IQ variants, and not compatible XX-cell IQ to X X with on AC now X XX January XXX-watt was for released that products. IQ XX-cell Plus modules. to available XX market modules. that IQ XXX-watt XX-cell fills for three segmented that XX-cell modules X IQ AC IQ the The is Moving modules, and the XXX-watt into gap AC XXXX. IQ makes We us. for XX-cell and

second shipping have to the the started IQ to U.S. rest word We shipping X in start to we and of our expect quarter. customers

are IQ our We We our using shortages the XX-cell strategic announced component America partnership experiencing with working Panasonic addresses industry-wide development a North modules, Microinverter, IQ the through of out the Corporation roll X efficiency issues. high in XX are and modules. AC which recently diligently we of for

modules. with In based on other X several addition, are partners working AC we IQ

market future X IQ creating Ensemble based provides in the increasing opportunities. IQ XXXX grid-agnostic new X always our good on transform by for worldwide, has – us capability While platform by with our technology growth a to

further we System's regardless invented or Battery one you is have have is this What that of if storage still sun capability of address will With the means is the system. solar's presence of failing continuously the is a challenges technology To absence technology Enphase is solar The production the storage out to refer the be that the So completely enhanced a grid-tied. shining, we always incorporated it grid limitation is energy, into our and that is that can Ensemble as that at system is will of there night. is is during provide when biggest solar This day IQ no AC grid and your microinverter on. what solution. X, grid-agnostic.

represents The is power in make X the many the We progress quarter. and plant brain the continue IQ to fourth used IQ on microinverter. ASIC X during of

are is million Ensemble has feasibility TSMC We digital to state-of-the-art at speed technology that the report ASIC of demonstrating and XX-nanometer The high five ASIC signal processing. pleased in is very functional fully made enabling gates the technology.

productize to and we continuing IQ are X to We expect XXXX. introduce in it

progress coming In We the by will quarters. XXXX. X’s IQ in over we are encouraged on our you update summary, overall progress

well. is Our XX-XX-XX going transformation

would We are creating in our margin dedication committed our support and customers, interest to employees thank in continued their for further work and financial to expansion with like sustained and foundation gross for Enphase. shareholders hard and I their XXXX. and partners a profitability solid

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

Bert Garcia

the quarter fourth well our details our results Thanks quarter. first as Badri. year outlook business to provide I’ll XXXX more fiscal for financial as related and

basis As approximately Total microinverters shipments the for megawatts by consistent a the XXXX, and measures non-GAAP XXXX, XX% megawatts representing shipped $XX.X decrease ASPs. X% approximately going X% The in that new was XX% shipped. I'm the in quarter expectations reminder, which fourth unless watt million our decreased of a DC, was megawatts megawatts of sequentially. financial DC of revenue DC the year-over-year increase X% of decrease otherwise represented $XXX.X of quarter with in of million, on in provide Systems. XXXX in microinverters, IQ XXX,XXX sequentially. XXXX X.X quarter noted. revenue fourth XXX for net revenue Total XXX megawatts Total an year-over-year per approximately to million, fourth of our shipped We for a are reductions a were Microinverter of

Gateway were of results. to the X our gross the X quarter quarter, percentage we for storage a includes to third our customers North XX.X% IQ revenue, the completed compared compared was to accessories, mentioned, regions shipments the to for and prior substantially quarter. Badri which American Non-inverter IQ for margin fourth increased AC Communications as these result, all As quarter XXXX during our of fourth transition quarter as solution, product. Battery our XX.X% third and our products Envoy revenue all a Non-GAAP

gross increased our We’re implemented negatively initiatives to-date Microinverter The million because was approximately made related in from margin million supply pricing expenses System our management. product. million North increase increase development and to Non-GAAP pleased impacted of R&D expense $X to to QX IQ sequentially, chain operating shortages. optimization $XX.X industry-wide the in with due with the by reflects expedite we’ve we've X% our the in to our to that improvements our primarily America Gross X expansion. in incurred progress approximately QX, we related transition and IQ $XX margin an fees component of on

fourth This decrease of the our commitment quarter million, income the restructuring cumulative Non-GAAP be we've $XXX,XXX to non-GAAP XXXX. operating of operational compared was a solid is reflecting operating On excluded achieved or towards We're from successful groundwork million, the non-GAAP reduced million of Non-GAAP As charges million, we’ve expense. $X.X the reflective operating extremely basis, $XXX.X in grow business. XXXX, in $X.X believe XX% XXXX and compared expense expense of operating hard we in of efficiencies a we've and million restructuring pleased impact was laid for our compared to non-GAAP and an establishing $X.X fourth financial to and compensation loss for foundation. to that We of profitability. QX. operations quarter work operating XX% XXXX by $XX.X of expense actions XXXX million $X implemented. stock-based

a share compared net loss $XXX,XXX a full was million, a a done per non-GAAP loss months non-GAAP significant solidify non-GAAP million, for work XXXX we've resulting past per compared share, XX of The year the to of QX, underscores loss to per Our year-over-year or share. basis financial in in non-GAAP income to a our footing. On or or of per net of a improvement in $XXX,XXX, net loss loss net $X.XX substantial of $XX.X loss $X.XX $X.XX over $X.XX was XXXX. $XX.X a share,

Inventory the million $XX quarter, quarter. to in year turning the sheet. to Now $XX and million in third quarter was fourth the compared $XX.X balance million for the ago

a February $X.XX private On cash We $XX.X stock, of we of $XX key at mentioned, million, exited common inventory million. cash Badri balance approximately in investment the from X.X the of X, one sold million gross QX a price proceeds of balance. management our slight shares quarter total is share increase equity for initiatives per the management company's with XXXX. a of As

Now first discuss for our of let's the quarter outlook XXXX.

quarter first million the be We expect to to $XX revenue a our million. within for of of $XX XXXX range

of margin Turning higher QX to expedite negative gross a GAAP shortages. to margins, non-GAAP guidance be to margin our that of from expect we and XX%. industry-wide Note gross the within fees includes impact component XX% range resulting

to $XX.X million for $XX.X million, We operating quarter within estimated expect to GAAP expense. stock-based including our non-GAAP to range a of expense million; operating within an a and million $XX.X range first $XX.X be of million of be to expense compensation the $X

up will I for the Now open line questions.

Operator

Instructions] [Operator first Our Craig-Hallum. question from comes you. from Thank Eric Stine

Your open. line is

Eric Stine

with start of I also as to we confirm, did you one rolling in some Maybe be entering, mean, everyone. QX? which the maybe IQ the that just Hi, you're markets should X, first in say out about we Europe think meaningful contributors new And look to you're Asia? and in to

Badri Kothandaraman

this talk IQ that which XXXX, QX of announced out We we're me the IQ rollout. So X X about let is rolling in quarter.

already So we've done America. in North that

the let XXXX. in of rest all remind IQ rollout We word are X. of IQ going And the of the the of benefits you X in quarter second me to

I'm talking IQ When X% microinverter is fifth skew of smaller velocity of Austria, to and is a is in more Europe, about is XX% efficiency moving mean and and It market the And India. if IQ our X served XX% X APAC, operational of when I I'm X product So that it X. you note, the And mean from available value I about and about rest product which single worldwide generation IQ IQ to primarily is talking Europe expands Pacific. power is the providing Asia which world seventh than microinverter, installers. produces improves which generation the Germany lighter so inventory.

IQ changes will that X inherit is compatible XX-cell modules, ACM one and which on IQ IQ benefits. is expansion, margin cake that. X not XX those the gross last is that The XX. So icing Note and to IQ was

IQ Our XXX it efficiency. is comparable and to XX CEC XX-cell has AC watt modules XX.X%

addresses not in portion America market which of IQ in previously was a So to huge the us North available it X.

Eric Stine

kind the is AC I That well. for it's guess I extremely as module Okay, talking helpful. of there and it. guess the got also side about on benefits installation works

the mentioned You positive from feedback installers.

it rather response in curious are of how a sounds it like choosing given that to to playing absorb than is that that on. that pass lot Just the market the tariffs installers in cost

Badri Kothandaraman

Yes.

the module. AC let with So start me

by So by the AC assembly the value absorbing provides module into the the field a factory lot microinverter and integration. of module of

they We the of June from Jinko, started microinverters SolarWorld know and with XXXX. in You ACM started partnerships that to rating we channel October Waaree announced our ACM LG, shipping partners XXXX. in XXXX and

once have also interviews with I installation involved on savings time heavily XX% indicated mean, our and in We to like savings involved, been have along remind with I'd installers. with partners that our ACM on you training XX% logistics. installers and to again up evangelizing

as addresses about when of IQ them working partnership with are already partners we'll ACM, number the Panasonic we module a ready. modules. are announce other We told you and well We which for XX XX-cell

case. the Let come to me XXX now

of while has some tariff our the case XXX ACM, and The on intention only the for sales affects modules. the So tariff created the ACM inadvertently headwinds progress. was

So tariff on with getting microinverter the on portion are working that. and the the we actually we ACM USTR of diligently exclusion on working are

Eric Stine

be? long process Okay. any I one – here. Is that thoughts there how Display mean, that on by could

Badri Kothandaraman

going Well, the our allowed submit we are within to time. response

think are to allowed after going XX is days XX days, I – submit We response take actually the And probably time will another XX in days. they that the

Raghu Belur

so… Government process

Badri Kothandaraman

it's be so not process, government available. a is It Yes. going to

Eric Stine

lot. a thanks Okay,

Badri Kothandaraman

Yes.

Operator

Thank you.

Cowen Our next and Jeff Osborne Company. from question from comes

Your line is open.

Jeff Osborne

of you’ve wondering in congratulations shortage and others Hey, just space. A there talked what of as is think And good last? long have you impact IGBT expansion. that results then how about talked talked afternoon, two will think quantify on component I about MOSFET guys, it the margin. on guidance you to part do gross I touch the impacting anyway about part and one margin the Is if the you could question; was that is? that

Raghu Belur

Yes.

experienced as significant give voltage on well. give on memories. So shortages components and of mainly you history high We on little throughout color were shortages, some FETs let me XXXX. you These the shortages bit I'll component components a

QX QX negatively the XXXX fees we In due was pressure impacted to see continued expedite QX same to and X% margin gross in components. XXXX. Our on X% by XXXX

into fact, we us this is management team. it throughout And shortage XXXX. will even a as a persist early component think for top In XXXX priority and

in We with more supply three our changing hustle And flexible, framework alternate layout. are and basically it’s medium-term, always short-term tackle the make the horizon create look like In long-term, working which our on to options, a creating viable design liquidity agreements improved is blocking In our the given long-term partners. sources, this. at even provision, hell tackling.

impact same expect incorporated to in answer in gross the And our XXXX. X% QX So that we to question, X% to I your guidance. margin of

Jeff Osborne

Yes. in think going about say, to I XXXX it shortage you in just knew was I the I spring started. the mean,

in that's factored the we XX-XX-XX discount assume by points? should that I plan So or few a

Raghu Belur

No, you into should factored not is already It discount our that. XX-XX-XX.

Jeff Osborne

on And study Is just OpEx on? that to Wanted the does that. the you half the going Okay. then throughout talk second McKinsey about of still cadence double the year? evolves? progresses And how can check

Bert Garcia

is in The QX It was study XXXX. finished of done. McKinsey

let little So give on me of our you a OpEx. bit color

million from OpEx to We XXXX. our have in million reduced $XX significantly $X.XX XXXX in

adequate operating a a little to it current get India, in of which model revenue. do XX% capacity. to long-term be would mind, Our we’re have that OpEx and at – not to I want also bit we mean, compromise. we with the going certain to investments – X is target make expect on have established our of in R&D and I platform to IQ where the IQ the With we a X have absolute center It at model. consistent XX% like that And XX% the high. XX-XX-XX on we is OpEx

Jeff Osborne

had. Perfect. Thank that’s you, all I

Bert Garcia

thank Okay, you.

Operator

you. Thank

Meikle Brad from AMPAC. comes question from next Our

open. is line Your

Brad Meikle

bit And market talk how little do just how X map? that you share see growing? view things Can Hi, – with that end you in the along IQ does a you’re And are on trending do IQ also the how Thanks. X road with the customers? XXXX? doing? gents, going the about with how How your market your you

Badri Kothandaraman

Right. IQ X. produces X like than is I lighter it smaller, XX% what said, IQ It power. XX% more

extremely is It’s the worldwide single SKU. So and country intrinsic value. it is provides every And single there SKU a profile. software a hardware important

a configurable architecture. software it's So

increases will Pacific. IQ X be terms of in in therefore so efficiency, Europe managing Asia And market product operational and terms velocity IQ served in X fantastic. available of inventor ours

new in and and as Germany, go India. well to We are going markets – as after Austria, mainly

told world the I rest generation As sixth but the the of you, the fifth generation the generation. seventh moving is not from till

an inherit So intrinsic gross America, to it's IQ QX consistent on. focused are long our previously we X will was of IQ now a talked And about And now tail not expanding so XXX the mean, you the XXXX it's our XX, XX% X which Getting available to on that IQ talk we can expansion North most by achieving margin. us, about in for of with about lot based And to priority and focus of these XX-XX-XX, of market general, is megawatts profit margin about will end strategy XX, – IQ ACM with in talked we available. gross us. ACM benefits. see address which performance the I top high

Brad Meikle

XX-cell and price Could is us to shipping a you today that sense be? performance So their SolarBridge differences how characteristics may XX solution for give modules. the for does SunPower the the what IQ compared

Raghu Belur

this is Raghu. Brad, Hi,

XX.X%. ASIC the drives we silicon X.X Obviously IQ gate the we in or a million the think also AC more our yield, and it's but a efficiency as has and IQ we efficient, wise SolarBridge has are product XX% of on IQ X.X through compared as IQ and from XX the of driving – cost the participation well. course I well. pretty know efficiency ASIC integration, down as are same to it's went actually and things a the affectively drives I you improvement drives million the believe energy X That’s performance it X efficiency on the even substantial also a XX.X% to gate ASIC a reliability CEC as new much such SunPower X,

very So about are we I thing course can to of this and it that price our is say driving on way. on can’t about talk talk complex a cost

Brad Meikle

that Germany. the that of new guess quickly I And India think these you – and some ramp geographies thanks. Excellent, IPX how do could like in

Badri Kothandaraman

Well, a in the talk have of about what America bit said, transition. so the little quarter X first let in timing IQ XXXX I me Like the already. we X IQ of introduced North

is IQ shipping So as speak. X we

the reliability for introduce quarter. careful IQ in because expect And we ramping the first. quality X rest We stands world of to new second are products in and very to Enphase our

do in the ramp of So IQ and the release next X we entire rest a then that to why is make months. testing we the fashion, transition of of sure we want X rest a will a IQ word beta the controlled up the is for the in the chain lot complex of in which supply And six product world.

supply the did design we making four I additional months. are to and issues we talk next sources those constraints expect by qualifying mitigating the in six those and to mitigate about the While flexible constraints,

So that's on the basically the transition. color

Brad Meikle

of My the rate you. on last question is the Thank growth market.

the growing most year doing sector. They're been the regional who your I or for across Can are SolarCity that customers you at increases has installers in think been that obviously be a terms your look decline characterize rapidly customers you the so. to in If than last you're the what larger year have nationwide thanks. likely sized and of seeing TPO from taking small seen medium for share this better

Badri Kothandaraman

way the think bit I'll actually share a let color you me North that. market little we we market are on elaborate on We share, in North America. America. of share give believe holding in about probably And

is solid build a top priority Our to foundation. financial

market at profitability on consistent any focused growing are cost. share We than

business walking margin very caloried consciously are away businesses. from is low empty We that

performance use long-term IQ are for of which I actually IQ are products markets. mean are products the X tail Our for based such And XX, ACM our ideal long high long ideal we value tailed high as quality. introducing who ease installers

tail ideal a that. that gross markets expect grow the we So, our for long to in we significantly and we have expansion products And significant expect the margin. to be

Operator

Thank you.

next Our comes Roth Partners. from Shen question Capital Philip from

line is Your open.

Philip Shen

Hi the work execution. steady on guys, good

that roll give sense the to First to finer what on be mix a possible you when X IQ X products Historically, with prior the a it and a us could so just you XXX% mix of think might question, all by forth. generations guys look out, release, be a product do example. And QX quarter. of on see for Badri, is IQ point the what done in quarters we QX, things of put possibly along, like the have would by Thanks. way

Badri Kothandaraman

then some just transition, I'll uses the So I'll full quarters IQ took America. X about you complete. X us the to X the platform X three IQ The North as to four X accessories IQ transition you transition on get same color for IQ The talk so picture. give IQ it

rest platform three the It take think us curve world. new will X of in the rest X approximately of quarters. IQ brand in for learning IQ the a the huge We combination transition is is world. therefore four the to However the

complete of we have America said XXXX. X, Like, by We quarter. North expect quarter fourth to started what transition I in the shipping IQ in this already the

of the confident by in XX-XX-XX XXXX. XXXX in We expect introduce QX of and our of it meeting are rest QX we word to of

Philip Shen

there's since XXX in the already IQ that margin from converts quantify you earlier to benefit world X meaningful Great some be. can of so they're coming margin couple Gen as then times what benefit me and rest Fiber the the possibly and that mentioned fashion a might you

Badri Kothandaraman

Yes, margin I gross am in going to talk general. about

X supply are we levers focused the well the pricing On value prepared based about management, margin. And cost in but have accessories. on reducing then pricing will significant we offering XXXX, a we as supply and that management, heavily said chain optimization, control. what the our revenue as come three transition. be In like The and So micro the like accessories products portion on transactional I only reducing from XX optimization, IQ On also are IQ does on X XXXX and not chain overhead. our of IQ high gross on focused ACM. note focused remarks inverter

So it's to important there. control us cost for

overhead, and in tackling terms In of clearer terms benefit in all terms which of it is The of the expansion. logistics SAM X IQ reduction, which one those. transition, looking of variance, aspects obviously our are in expansion in IQ terms XX is are is at gross only margin we BOM but warranty last not has thing

So these three changing work and of is XXXX. we get not are It to we in bottom Pricing chain line on the IQ X, by just cost. combination which pricing the will transition supply is about optimization X way IQ we things, XX-XX-XX Management QX and

Philip Shen

last me. one Great, here one for

you $X.XX the look are if there. think I QX the in and if my company numbers QX blended at numbers right blended ASP from was about $X.XX

there. discussions price perhaps the been actually MSRP to raising perhaps of but customers of reducing out you've degree pricing increase some and had been our able necessarily have there with some that have actually you been out not the So some rebates

that XX% historically, now. erosion we So a not see we're clearly year-on-year, in price situation X% to

be but and might should we ahead. we you should know I is rise you your strategy core expect, expect ASPs the management just and How discipline expect part ahead, a curve kind other pricing to to as it do you as going of or continue at way. do of fact you In just a look mentioned flat

Badri Kothandaraman

Right that's a question. good

compared QX. as Our sequentially of and a up mix mix revenue to inverter sales. our was percentage revenue non-inverter non-inverter includes of But a

that's box when revenue defined basically Combiner that, which non-inverter your I and is accessories Our Envoy, battery. the AC

draw those a careful doing conclusion. you But numbers in to very is looking clear. we So what at to got be are

empty from away walking are We calorie businesses.

as a We are company. focused on profitability,

XXXX. We will QX achieve XX-XX-XX of by

XXXX. modeled reduction said for believe our strategy X% quarters. a And maintain the couple every having I that, what's in pricing last XXXX? have in quarter So We of we flat

like what plan which differentiator like modeled IQ we've creating X, us. IQ our our XX-XX-XX focused we like value XXXX, said ACM, operating enormous an IQ products X And and XX So takes financials, on I like is all cetera that's in all based will come what for et account are which that. into

our that's So focus.

Philip Shen

it and helpful. color That detail is Great. pass I’ll very on.

Operator

Thank you.

Our Colin Oppenheimer. next question Rusch comes from from

open. is line Your

Colin Rusch

Thanks TV so mitigate Can high you talk sort sets. doing about bit increases. of much sourcing that and little you're talked mitigation materials demand sort of any voltage those specifically price to any the guys, you silicone a carbide for around about

Raghu Belur

this a Raghu. yes is So,

product. on Badri about use as actually memory industry voltage carbide As shortage diodes of mentioned IP this We do components the well. sets generation silicon and in wide high not the

Colin Rusch

about Ever the so and of XXXX. little you then the that’s the go supporting AC as through how that's and hook-on dynamics pricing and price module balance talk bit can a offering your you dynamics

Badri Kothandaraman

Right.

pricing offer And So share of module logistics. the to of talk for in make the with we modules, up I so savings far the up to takes value. when AC levers value installers. installers the as that this benefits clear some to XX% in to basically our account discuss value well. partners this – sure And with we we that therefore, it with into so about AC you installation the installers. the in indicated installers, interviews XX% And in time, clear basically savings interviews that And these terms are

Colin Rusch

guys. thanks Okay, I'll it offline rest take the of

Operator

Needham & Instructions] you. Edwin next comes Thank from Mok [Operator Company. Our from question

Your line is open.

Edwin Mok

question. taking for thanks my guys, Hi

to come ACM on ACM do So X IQ talked that the sale exiting this has it way been think just and you a products like have side year. percentage about a is see coming there will just since from much sounds how that right volume of target already XXX first each we follow-up, you about ACM a with on ships your

Bert Garcia

Hi Edwin, its Burt.

our noted this with we the has as our but we're excitement I upside category product out for partners we're point mentioned Panasonic, equal are discretely there volumes not ACM very recent think at tremendous that making as some and about and So breaking in of excited announcement this a is with progress is promise. we've that tremendous

again to as continue talk you So, this about point, this color At out. much we're guys as it develops, breaking possible. not and we'll give as

Edwin Mok

you if it that is up, help quarter Is can growth for combiner driving the your then quarter, was buying this you product way maybe about just think of what and And in box your that are you have by more fair. happen quarter. that's battery – this to Okay, us what explaining was sales went or growth, sales do still non-inverter non-inverter right. part the

as I the are do guys and seeing kind just to can the of market What been little helpful bit in and progress adoption think a has you you change maybe that… what battery. think tied

Badri Kothandaraman

an seeing sales, comes compared are we the Australia. Yes, to uptick seeing previous in quarter-on-quarter Europe we uptick from well as ACB are as both quarter. the And

the accessories, develop storage we we it. solar bit a well portion regarding more Yes, as as strategy on correct. central little ship committed as to IQ the And to plus combiner boxes X extremely yes, in that's our on remain QX we XXXX. is and With other of voice

Edwin Mok

$XX question, Okay, OpEx, XX-XX-XX this right. guidance OpEx would I million, sure, on range, would a thinking I said XX% be hit revenue are your correctly. OpEx now. helpful. to ticking XX-XX-XX the last $XX how model your your If have being to in I quarter we that number the to then like is that great. XX-XX-XX kind as just right, you understand of that model, And That’s I OpEx up at want look make If about that push little your right. bit million

Badri Kothandaraman

at that’s way we're if course Yes, is definitely think could that kind it, our of if confident be that’s to get going you thing up, the way. are one you most simple bottom of certainly Again, yes, and I it the pick just that the look absolutely important providing probably do focused next to to I line, think we that we on. what committed is beyond ability in haven’t XX-XX-XX, to into back math, I guidance quarter. But so mean aren’t you

Edwin Mok

I you. Thank Okay, all great. That’s have.

Operator

you. Thank

from comes Molchanov from Pavel question Raymond James. next Our

is open. Your line

Pavel Molchanov

half taking question, you tariff imported into for exemption that for get physically it of the U.S. be attached like of you tariff. a on the an might alluded to Thanks to by covered administratively issue the I’m is product that that a how module otherwise the now? would AC is I curious a seems just bit mechanically, mean, module the imported an just

Raghu Belur

is Raghu. this Hi,

you give color some So that. let me on

by natural the and is very the the it field standalone the provides into that because clearly factory. evolution So to ACM value the assembly absorbing technological of all the microinverter

and to being the has what the ad was Now the you tend go But scope outside valorem to of XXX. ACM the should by the back inverters modules affected ruling. certain XXX limited inadvertently case XXX be if to was it

this However, created example. the micro our cost of technology inverter ACM increasing in only situation unintentionally as has government an course of the the so by XX%, case, incentivizes an string

was the intent terms right. bad is government of and that very and for of was, advancement what doing clearly innovation backwards the that of technology step not in the So

days given go do submit exclusion USTR behind news for the what's the process it. and process going they've And details for that detailed time here some XX next exclusion and we're published given good explanation a and all to and around a the to a do the us days. us So they reasoning turn has is for XX it to of exclusion in is now it questionnaire. And have via

this place, how unlikely case, tariff we We a path. values would also if patrol, exclusion memory taxing it then to granted, component. take back and how an issue the process had the Then right here our or days alternate an module. separating the out appropriate exclusion In customs the that DC is would established devices similar the the precedents it. two value the they looked There's event for at and such the not and be how tariffing have mechanics the about of in can you actually border they think some

micro detachable of features So the module. from key one is is of our solution ACM the that

So the the DC what U.S. to that importing microinverter this the into means module be the can module connected after

but will the will a bit the this the little of while less be cost it increase XX% than tariff. So much

Pavel Molchanov

interesting. Okay,

suppose. I B plan that's So

Raghu Belur

Yes.

Pavel Molchanov

the your the sales when that matter small mix the for assumptions your talk margin of it the really profitability XX-XX-XX target, Regarding doesn't battery structure so way? that either battery, it you including make about does just what or is in

Raghu Belur

small sales, uptick our in sales Well, although mix. the are of still ACB percentage we an a it is seeing

now IQ And cost we sales. come I configuration. our platform have on Battery like will said it working percentage a in structure are great that what out are low is it working XXXX, We a will X. And will the for a but of IQ new AC have as X

Pavel Molchanov

it Appreciate understood. guys. Okay,

Operator

you. Thank

question Vishal next from Shah from Deutsche comes Our Bank.

open. Your line is

Vishal Shah

margin profile question. of thanks in the of your the my versus for first also U.S. of your international And the taking Hi, U.S. the the you markets? what shipments Can shipments in first to about market? half be talk year, will the quarter the percentage or

Badri Kothandaraman

Yes, so hey, [indiscernible].

margin the rest are world slightly – our related than U.S. in products speaking, configuration broadly its products, are of very, the those really less perhaps shipments just though So our reach small shipments very of to and products.

of mix. So there, the to versus it's U.S. again not rest the still about XX/XX. respect significant world, differences with

Vishal Shah

first you to be still expect half? shipments U.S. So the in XX%

Badri Kothandaraman

That's right.

Vishal Shah

signs of the showing on some you XXX or industry until the get Is not really? case post any ruling clarity the slowdown ACM

Badri Kothandaraman

seeing So to XXX much on not U.S. we're related the impact case. trade Reg

that work As again all not respect bit little very, Raghu to respect this seeing ACM and point. a working uncertainty. no, mentioned, to you through respect we're mentioned, impact at XXX but that relieve of product. with exclusion to With a quickly as at there uncertainty to is with the we're to to big that very But

Vishal Shah

were of And your ACM? from what shipments QX percentage

Badri Kothandaraman

had that not mentioned as out We're breaking before. I

Vishal Shah

can you think how the percentage profile far Okay. when be separate margin the going of I to as business. revenues, the like, non-inverter do meaningful And if to of mix? enough we part And about it's say then of for as that think a the report should you

Badri Kothandaraman

enough in prepared have we're question, out we're mix. start at this I'm me. What do terms your or its percentage was of sure So not when to good point. going going we That's question, think to remind to when breaking we're Vishal, a data first of

Vishal Shah

mean inverters, better your margin of similar it that profile margin the is or What is margin? business relative I to

Badri Kothandaraman

Vishal, between the to we're Yes, the and inverter margin differential not out break again, non-inverter. sorry prepared

Vishal Shah

final this of of Okay. going through we should XX-XX-XX that model, some how positive year the to be mean profile cash inflation the going you And think quarter are question, time? I cash rest about or for take single one business. approach flow was every as you to the the

Badri Kothandaraman

several over improving, last noticed been investment. recent even So holding cash aside if our quarters, you've the the $XX million has

get reducing not we the sense a in that the has talk process, to XXXX, a every in not year been said We've through will improving improving we fruit think restructure And terms that into certainly event as in we've XXXX follows And I burn and of been We to we well. profitability a the continues flow again will cash of believe cash continue XXXX. that we the only company sustainably but about an process that Our quarter. it Again terms into XXXX. bear as yield will benefits we've done will be consistently well. and cash sequentially profitable. that in continue pretty where lot work of I see as think

Vishal Shah

Good. Thank you.

Badri Kothandaraman

Yes, you bet.

Operator

to Kothandaraman our lines. to am I I remarks. no And closing back like Instructions] turn [Operator any you. the Thank for further over phone questions showing now Badri conference from would

Badri Kothandaraman

So today. us joining thank you for

of We foundation. next solid XXXX position speaking couple XXXX. again of creating fourth hard the XX-XX-XX model cash to financial QX in with in profitable in look And and have and very a forward our We achieve pleased we be quarter you stabilized our to months. the to are are working

Operator

the today's Everyone may you you in conclude conference. day. and disconnect. for program, thank have participating does a wonderful Ladies gentlemen, This all

Enphase Energy (ENPH) 27 Feb 182017 Q4 Earnings call transcript