ENPH - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Enphase Energy’s Third Quarter 2019 Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Christina Carrabino. Thank you. Please go ahead, ma’am.

Christina Carrabino

Good afternoon and thank you for joining us on today’s conference call to discuss Enphase Energy’s third quarter 2019 results. Badri Chief President Belur, Financial Officer. are Officer; Chief Chief call Branderiz, Eric Officer; today’s Kothandaraman, and Enphase’s Executive Products On and Raghu

the XX, XXXX. press issued for After third today, the its September announcing results a ended quarter closed market release Enphase

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

discussion and quarterly complete filed for Form on the September which is with with of annual of quarter will the uncertainties, in fourth XXXX. on December XXXX, the XX, risks quarter Form XX-K company’s the ended XXXX please the be XX, the more which file a report SEC For on see XX-Q report for the SEC ended year and the

call found measures of Investor provided please earnings reliance the exclude Enphase the section financial statements of reconciliation duty its posted to non-GAAP not a cautions any in charges. forward-looking expressed note on used future of otherwise events any are place information, this no unless its new has Energy financial and also Also Relations website. statements financial which and as can in release undertakes to or adjusted undue non-GAAP basis a expectations. its GAAP update be you to result obligation on today, measures forward-looking certain a been changes in noted The on or measures company have to these

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

Badri Kothandaraman

strong results. financial quarter the quarter was very quarter. to second us $XXX.X We We discuss and good our approximately talk of year-on-year. as quality. differentiated shipped and reported microinverters. from XXXX afternoon today later XXX% thanks our component for We XX% third X.X I joining and revenue customers continue appreciate services Demand detail had supply products, in million up Good third and in about another up quarter our will stabilized our call. million, in the the supply our to

gross million. non-GAAP the $XX.X in quarter and non-GAAP margin XX.X% our Our third operating income was was

XXX due gross expedite Our margin approximately negatively shortages. fees by impacted to basis points to component was related

normal expedite to of I this X a fee them about basis in points to decrease stop to range within hope forward. XXX We going and expect to talking XXXX

The ASIC on some be. on embedded margin margin supply differentiated sustainable color and can that is our provide gross optimizing high it would implementing get our through tariff addressing that our on integration. often cost engineering opportunities like efforts: our We we are margin margins. is how DNA. products me see increase always working additional Ensemble, the how expedite I Let our in go costs, and question improving gross pricing, introducing answer through fees, chain, as eliminating multiple reduction optimizing to gross gross

service million hand in a cash. generated on with to inventory flow our the and Let’s quarter increased exited of of We $XXX talk cash balance customers. operations. million We now third from $X QX about better cash

to a ITC balance QX will expect we higher for significantly ‘XX shipments due harbor XXXX. prepayments safe cash make of with QX We end to in the product

Eric percentage into results our a and the this about approximately XX, at will operating in financial non-GAAP of on all greater QX gross go income, means is XX% XX exited basis. also call. XX. XX% operating We a later margin, XX% What expenses, as revenue detail

us. ease about of talk Let’s now business customers perceive doing how on

in XX% to was score XX% in promoter North net QX QX. America compared Our

wait minute working a of are less the to at call them QX. than end get were minutes Our to we X by and approximately average, on times

We joined our are legacy Upgrade adopters announce pleased more is Enphase approximately that and This Program. microinverters customer to than in program early for have our to America that XX,XXX today, X,XXX North quality commitment of homeowners as our reflects service. of

for product NPS homeowner Our in upgrade this program XXXX. XX% was of legacy QX

Now let’s tariffs. cover

with We increased in IQ X planned QX. as and mentioned family Mexico started Mexico increases a shipping previously as increased due shared that stated, earnings our microinverters manufactured to XXX,XXX improve microinverters short of well Flex section from shipments manufacturing XXX,XXX delivery. in last QX help we the customers. tariffs, We As I mitigate little the on the our QX, with global factory cost capacity to in call. our late expanded the We tariffs approximately the in Flex of XXX

troubles and million great a in half towards shipping our are However, team microinverters is over making approximately the shipping progress QX.

In weekly fact, week. rate XX,XXX now our a run units right is

significant a of American North business QX of from portion by Mexico Our XXXX. plan to the service is

now in shortages, the In past component the volt transistors. quarters, were in we power about Let’s talked capacity discuss few XXX our mainly detail. which

agreement Infineon have component our few As supply. of a our stabilized a and now with result we other suppliers,

roughly we with we coming X.X million million XX% between in expect X.X online, microinverters customers to in X.X Mexico microinverters have supply. addition, demand our QX. Consistent represents our capacity This buffer for with In a revenue and and ship QX. place in million to guidance, between

at in a enough where We have ensure well. a we is and our Enphase there instituted to monthly service available unconstrained on capacity basis review customers X-quarter storage order demand forecasting process

XX% compared and on to QX. and XX% and the international in XX% Moving our respectively, QX U.S. regions, to for mix XX%, was

XXX% in due revenue from U.S. and year-on-year XX% strong the demand new up was customers. existing up and sequentially to quarter third Our

year, the enough As we this customer our the to channel And was over last has year, been stated have for accommodate time demand. inventory our supply tight. first

our in France our remain to run-rate. markets revenue quarter third XX% After with inventory was levels, QX Netherlands in our Europe and channel sequentially for XX% and normalized year-on-year. was QX strong a Europe, down our sales up In revenue us. strong in which returned line

we are are not with making progress However, of we satisfied rest Europe. in the

and during growth Our executive many team initiatives in our was including force identified strategic quarter Europe, the immediately. sales in for of third bolstering rest the Brussels

Our market, a a in for need to is better. growth focus we in strong great, are and growing personally, major the We me, The market area XXXX. have simply Europe will be fit. opportunities a product-market very execute

revenue APAC, third was XX% XX% down year-on-year. quarter In our sequentially and down

reviewed team During the the for Australian also quarter, our business. our plan strategic executive

customer well execute this safe that proposition of AC is that to the I region confident am into by hiring of managers, top-notch our calling we superior to beginning high-quality roof, back going as tail plan are value We and on selling long on sales on bounce XXXX. installers transition experience. and

year-on-year. our In XX% third was and up sequentially up Latin America, XX% quarter revenue

the opportunities and areas targeting excited within growth are are more in Mexico and other We America Latin LatAm about countries.

We We our a million America harbor continue ITC demand. approximately of harbor product new North QX. of $XX with their customer in customers on for to to safe work to in plan ship some safe ITC

we be safe an expect quarter harbor. for to QX In equally significant addition,

Let’s our now cover new products.

watt up a microinverter latest able the IQ microinverter pair We modules be are announce our pleased for XA, XA targeted availability product high-power XXX the to modules. or Installers will DC. called IQ with monofacial bifacial to to general of

modules. AC to come Let’s

partners a XXX our progress adopted AC from in Panasonic than to few. of our partners Energy module now as SunPower, the make by QX, have ACM during continued to module Enphase and more U.S. this including steady been We mention date. installers with Solaria,

now the America. North like talk first, then would and to Ensemble storage I about the product off-grid product for

the upgrade product. come Let’s to

to product we the ship upgrade order partner to of partner thousand plan. the deliver our shortly to in X, call We requirements the units plan several to to expect QX. enable final We EQ as that our in

of North capacity Storage Encharge supply enabling installation, is modular battery flexibility battery The Let’s battery, streamline enabled focused Encharge solution. by scalability microinverters variants: is The now and two X.X for modularity to hour while and X.X X XX kilowatt internally. The for our hour. available talk X.X, contains X kilowatt-hour in IQ is America. allows be X.X grid-agnostic storage helping about kilowatt Ensemble which kilowatt will which hours a on high ease our chain.

As there been families are in evacuated. have been well Many as as our Sonoma you last Petaluma, few fires in days. have are affected and in their the all aware, of County employees

with have are impacted. whose thoughts been Our those lives

including reality is unfortunate side by these Ensemble an for many lost a from effect The address period prepared conditions. and all these powered platform to Always "Always product keep homeowners not What fires, optimizes and On. us, mean have a power Always a me, are for energy technology On." homes of of As that time. blackouts do generator an resources single these the the by technology storage, be technology of brings ideal to Encharge blackouts. will onto grid usage together Ensemble On? keep solar, that I a our under even home This management extended is

solar, when generator example, source make down, of up, the is For the energy. can lights an the storage usage grid and can the of regarding the is economic to the and Ensemble grid when on it keep decision balance

feedback did to installer-specific roundtables a conference several of from was our to for for The installer little installers provide we we on the released easier approximately content some Encharge in website stores. it to earlier make the Ensemble that. them Utah, At Today, information our we and SPI website. on pre-sell XX enough recent total with held bit a exactly

sites as in installing Ensemble at alpha take well systems we we our a homes. few X.X to in plan Enphase are When We systems, of as testing partners. December process through comprehensive distribution few alpha complete a the on these software employee’s pre-orders

installations focus XX grid-forming major to we on of produce long even or installers. revisions panels, the first as be IQ addresses Xs of need a beta that release We the without blackout further is shipments released on these for the in XXXX differentiated that in and be is the of storage shining. completing It power as expect in the respect. pinpoint advantage nearly XXXX Ensemble After with during IQXPV expect X still will microinverters storage with will IQ installations. real-world after completely a roof from The production the quarter solar product, of sun

our In summary, we year. overall made have we this progress are pleased with

continues grow Our to and base microinverter pretty is healthy. business

component Our stabilized. supply has

We about remain storage market. and focused our the Encharge upcoming product delivering excited are on to

announcement. to I important one more would make like

new during as More Analyst We on hosting to will our as deeper products. Day the next Day December details second week our the weeks. Analyst updates over model, few will well strategic financial on initiatives, an provide be follow of

to for financial his With call will results. Eric? our review that, the of I Eric turn over

Eric Branderiz

provide of results business for fourth I our the quarter more related quarter. Badri. third as will to as Thanks, well outlook our details XXXX financial

non-GAAP otherwise noted. As that to a measures basis a reminder, provide I’m going are financial the unless on

website. in to in measures our We the which earnings provided release be Relations also GAAP have posted found our reconciliations these today financial section Investor of non-GAAP can of

of approximately quarter an microinverters, quarter DC third the approximately We of increase The XXXX was XX% for X. an approximately increased revenue the including XXX% for in revenue of Total of safe $XXX.X increase megawatts million was XXX% megawatts third X.X megawatts harbor in year-over-year. approximately shipped million and XXXX DC the XX% Total sequentially sequentially revenue. from XXX million, $X third shipped increased represented quarter and XXXX, the quarter. IQ year-ago of XX% which of of

quarter QX the XXXX Non-GAAP negatively XXXX second to XX.X% basis of our shortages non-GAAP third impacted points. XX.X% XXX of margin gross gross quarter compared the by for approximately XXXX. margin Component was for

quarter third compared third and of million second for quarter expenses million $XX.X XXXX for quarter were $XX.X $XX of the to operating XXXX. of for million XXXX, the the Non-GAAP

million million and for compensation were quarter third operating third tangible expenses and to for quarter quarter million the XXXX, expenses expenses $XX.X amortization of for of GAAP XXXX quarter for the million $XX second third of XXXX. XXXX expense. operating for GAAP of $XX.X compared the restructuring the of $X.X stock-based assets expenses of $XXX,XXX included $XXX,XXX of acquired

third On reflective in operations year operational for improvement – to for operating quarter. quarter of of and million second leadership. income the the product in from continued income quarter $XX.X XXXX, compared a XXXX was and $XX.X This is our million ago the excellence non-GAAP for million basis, $X our in of decrease

operations from third income $XX.X On quarter of for XXXX. the a basis, million was GAAP

for the XXXX of ago million, quarter On in earnings the for basis, for year $XX.X to income resulted the per of quarter $XX.X earnings the a $X.XX second million the basic compared earnings of of This third $X.XX million quarter XXXX share per quarter. $X.X net non-GAAP XXXX, per was to of per for basic and and share of $X.XX earnings diluted quarter compared for third $X.XX XXXX. share diluted share of of second and

million $X.XX of the XXXX GAAP XXXX of for net for was $X.XX of the earnings million share for XXXX. of of XXXX, and per to to earnings diluted the quarter basic income second of $X.XX for of resulted earnings and quarter loss $X.XX second diluted compared third third the and $XX.X third share the This $X.X of XXXX. of basic a per million compared for $XX.X share of quarter per per earnings in share quarter quarter

that to report milestone of four of and are happy GAAP achieved we cash important We the consecutive generation profitability. quarters financial

to continue the that allowance we our the reasonable possibility profitability, release near assets is deferred we valuation a in future disclosed As against as in XX-Q. our maintain there tax may

cash XX Now turning sheet. XX compared then target internal the cash of balance the the at to $XXX,XXX $XXX increase in ago end the from total at at of of hand management our XX, better of to of flow customers XXXX. cash days, to million million exited inventory $XX.X XXXX, intended We a remain quarter XXXX. key in hand third end $XX.X We on XXXX of and third management million the second The initiatives. from $X ended Inventory million days XX, XX was cash as the in XXXX, the flows for for quarter to QX linearity at increasing Inventory days inventory We of the quarter days up of our quarter of below in as $XXX XXXX. in one was to down XXXX demand. of continues of service compared of balance million, free on generated improve million adjusted and September days shipping of operations $XX.X year the our QX and from quarter. XX end to and September QX second with significantly XXXX

$X.X XXXX, mainly for Mexico to was supply expenditure and million in Capital up ramp China. QX our capacity

significantly due safe Badri to XXXX shipment a ITC prepayments with we for QX harbor end to mentioned, product XXXX. cash expect in balance QX As the higher

of Now let’s our discuss outlook XXXX. fourth for quarter the

for quarter of be customer. revenue within range $XX We shipments a including our fourth safe to million, of harbor ITC for approximately to new expect $XXX million the XXXX a of to $XXX million

Turning margin expect a estimated And expenses, $X to for range XX% gross within operating a and GAAP we stock-based we to to to million GAAP expect acquisition-related within to of non-GAAP a $XX.X range XX%. our of margins, compensation million restructuring be total expenses million, and including $XX.X approximately be of amortization.

be $XX.X $XX.X to to million. expenses within operating non-GAAP of expect We a range million

the line for that, questions. With now I open will

Operator

Instructions] Our question Shen Philip is Capital [Operator first from from ROTH Partners.

is Your line now open.

Philip Shen

Hi, everyone. Thanks for the questions.

market? a for have do did In in Harbor terms QX sold customer, broader single degree a you the of that the for $XX U.S. you your customer, had could much guidance and you served customer prioritize not what Safe single how volume into of you to the million need think

Badri Kothandaraman

on Well, our we gave clear you view capacity. a

a guidance So basically, which is our in to capacity QX X.X of this have million and quarter, microinverters X.X ‘XX, reflects shipments we of X.X million basically microinverters. of

are we environment. back over problems to are capacity and our basically limited So demand

Philip Shen

similar Badri, of is you QX, that mentioned Harbor, And a Safe think you for expect correct? level I Great.

Badri Kothandaraman

right. exactly That’s

Philip Shen

for the as the Is it for same – or it do other expect to same be you it Is customer customers well? for okay?

Badri Kothandaraman

time, All I this that provide know that color. am At it the I be equivalent be the to you same. amount. unable It will will is

Philip Shen

you storage can Got expect you meaningful you great. I product a know see there, it to us to ramp And comment – when do relates hitting you it, when gave then volumes? as storage, the on really

Badri Kothandaraman

which the install mean That what information to to a high-quality, of our going ensure pre-orders have help functioning we this give Eric, is our we them is a and in preorders. myself, specific Once taking take I begin I lot few We of and is said we plan well at it a released Look, like website pre-sell product. our to are we personally Raghu that systems basically homes installed installers – December. will afternoon. then

to we be often We ramps will good will in Ramps are are uncertain, the production a release we but often going difficult. – XXXX first and of quarter to difficult shipping predict. very start prepared ramp, are for the

ramped QX, would by be would we but half, reasonably well. the expect I I have say as significant should fully, second So to

Philip Shen

me, you in about the QX, comment I And to might direction you you could Okay, can one to talk that but on into QX relative be visibility QX for don’t and great. can last see you the know guidance have you seasonality expect one officially, what overall the have of QX?

Badri Kothandaraman

the expect to to see industry with It’s give too early we seasonality typical QX. but in on associated numbers specific guidance, the you

Philip Shen

Okay, I great. pass Thanks, Badri. it on. will

Operator

Thank you.

Our next Meikle Trading. from Brad question Williams is from

now is line Your open.

Brad Meikle

question. thanks your Hi, for

in X And Northern billion well for would did are speak I without or to a last capacity of in got Thank the couple constrained guys days, be how we being if XXX,XXX you much you you. you As think will sale battery be California Could follow-up. have had a you your ramp households. not been I X.X to that in power able revenues. have right? think the will supply, and million homes I terms aware, shipments $X sources on you

Badri Kothandaraman

right. follow-up, A

So question of here huge a we there Northern and able be be handle California. the batteries capacity ramp to in is is the the going demand to on will considering

have we basically We So with them. supply on have is good with is battery that partnerships capacity the answer public. announced yes, the AXXX

Chinese-based battery agreements We also supplier other supplier, announced. with signed have one not that battery a we

expect stages promised are them number. qualification we them, nice on them and to However, also capacity of early Both the in have we come with well into XXXX. that

aligned it hesitate bring in one. with not supplier, bring third we a think if to our we would need to will well I be So And ramp.

Brad Meikle

inventory you level color have tell been us around weeks growing feel weeks speculation your you and been the a customers add the many inventory channel. has some that, has and many like the stuffing in the I to whether The have? please? follow-up distributors how stuffing of and you channel? Okay. your have If had whether whether there was you Can direct you can been How lot channel

Badri Kothandaraman

Right.

So been our let the have some there. meet me unable four give to last we background quarters, customers’ demand. In

limited. quarter, We prior we every have And every supply been to entering booked. quarter, fully were

there was question inventory. we were that no building So

will QX keep where didn’t able demand. first supply with enough up is have out. the hand supply. to was them We We quarter

corporation. how the called we X, look basically is Tier which doing the top the which their that is well means is at let distributor channel I the in have what at week is distribution well that where to Now which for business customers, revenue come the look do me channel Tier management particularly. as ship at watch to And Sell-through distributor. do is order is review the bottoms up, week. we the X to installers process, every sell whose every have management. as we what a down is we managers look Basically, have sell-through we every the essentially, as installers, inventory. to both end job We

We do so they bottoms generate a sales Tier sales also sell-through All demand, of X distributors up, speeds lot tier can that is the installers. those have folks. regardless X product the they to the

And have that distributor the previous in for channel. if strict we into enough a do is where formulas limits, we have shipment a find we does not So both. combination limit week, have we a consciously place then we of which sell-through

But by is a computer. our and control. art, an soon a not channel – management by be is it computer, we well run longer it science, run is it a So it is yet no under will

Brad Meikle

on weeks many many How you weeks average? on can how say average,

Badri Kothandaraman

inventory. of the We the have talked weeks weeks do of we Historically, about about inventory. talk not not

a give guideline to will have I the the the is you have in Brad. to That’s However, in XX inventory that we can channel. talked of I about you, X tell best weeks practice good past

Brad Meikle

on Thank you job Great very the much. quarter.

Badri Kothandaraman

you. Thank

Operator

Thank you.

Strouse next JPMorgan. question Our from is from Mark

line open. Your is now

Mark Strouse

Good afternoon. questions. very much Thank Yes. taking you for our

any, have had you quarter? at you from environment, or SPI have if saw installers can conversations Just anything that over either any the in competitive the you changes distributors or curious that you last with observed any if comment your on

Badri Kothandaraman

– announcements. lot a competitors there of several with SPI have been that mean I Yes, emerged

closely are same. watching the strategy our is everyone. We But

continue the focus record a we can and told provide. broken I’m here. you watch we to we While is do competition, I’ve like what on value And always

QX we So architecture. innovation, software-defined have basically, quality platform. increasing IQ base X comes come Even was of X have experience. It IQ And a product we customer let’s IQ with a it ‘XX. We architecture, software-defined and same product X progressively IQ start the X. with was X, introduced still XX, things: to innovation, IQ with generations X+ XA though IQ of IQ in power

we very introduce version even an higher coming will And months. soon in soon, powered more the

to has margin the increasing more to product with able basically leverage the we So important. more the AC the power hardware increase and I power were The the same is mix. AC platform, AC power gross

extremely important. So it’s

is on Ensemble So Ensemble what not called having a elegant the is the when about grid when such in on sun the on that deal IQ research biggest is shining. is microinverters that available an done. is can is of the talked down, function, can Ensemble, have roof I It Ensemble. point meaning have yet unique I function X IQ X, kind seen on fundamental – product. the the product technology Ensemble based

unique that differentiated respect. we and So in are

management said, grid. an manages microinverter manages, the technology than it even more Ensemble it storage, what is Energy second like the manages and energy is that generators It’s solar, the manage it technology. manage can technology. The management the I can

have So start The the except optimize anything very the and grid, consumption. is I progressing, solar, solar you inputs I don’t have grid If I then it to grid. easy. if the have if consumption

optimize Then grid. storage, grid the generated storage starting generator, – to I get no cells solar it little have I storage If So I have and out consumption. of gets solar, complex. a if fewer have to a have the I and

energy homes were that’s have happening always about. that. the So blackouts. always of what you earlier. right, It are sources during a can the wish Ensemble regardless grid, all now. I do what of And our these exactly regardless products on we their are is can But if little people keep managed technology can on, right just bit

focus bottom product line, XXX annually, We of need back quality. And X come target, DPPM our need million XXX is innovation. the not shipped – We that our DPPM, course, which So enough. not is to of XXX product our microinverter on innovation This XXX do. parts integration, action business a us. easy cause which is And with very is defective million. firmware to ASIC is That’s processes, per upgrade. over-the-air methodologies, root tight corrective is

these this in of All of quality level. kind required to of order And achieve are course, customer experience.

Next is customer experience.

experience being satisfied is that. on team, in we answer which customer less. that’s rings, or down even the am further. So pride I minutes ourselves, when is the X able How answer I phone what to we tell And my get with phone not it about

have I all and of time. a minute question to that then so our got product We on of differentiating up times with innovation, are the your little wait And call get X when together aspects. the there. QX I customer sub drink, bit I hope eventually, focus experience. pick We These answered quality,

Mark Strouse

Yes, that’s out it of product, there million fair if kind million not is you quarter-over-quarter. do lastly, by of this harboring go that, really then so strip or that way from you revenue to very at the to just of helpful, a Badri. guidance boil QX revenue that look or out geography provided back way or relatively geography? I suggests a and and quarter-over-quarter looking the strip flattish $XX down the had for $X at for quarter, safe just And you Can flattish if kind to is to any And earlier, the revenue? commentary that particular your then

Badri Kothandaraman

Your observations are right.

we puts are But lot for base takes the of basically business, one business. last supply base limited been thing, realize the four that the On quarters. there in a and have

to great. the never demand. up that able I I’m already performance The is question, Europe the to on of So not demand. having quarter not said have Europe. we we caught But that, this on actually first your answer you, been the is with Europe, happy catch told up And

Although the very have said Europe. making a year. are market nice I XX% happy rest the of to am in is we compared Europe. we We for not I a the lot XX% biggest improved market is But in progress last if year-on-year. growing am with Netherlands us. Netherlands right,

make doing over well to share there. have growing, progress – in of but are mean, have is we still We I France. in is we majority are France Germany. France also we yet

Belgium. yet forward have Market in all countries, to Belgium those other look is Hungary, quite to We progress progress make We share places. in making in European low. in Eastern

we work have yes, So to do.

Mark Strouse

Very helpful. very you much. Thank

Operator

Thank you.

question is Eric Our next from Stine Craig-Hallum. from

is line now open. Your

Eric Stine

Hi, everyone.

Just like want sounds and capacity bit, know it you back be to little come a constrained storage to still won’t I it’s early.

XXXX? really attach You you are it’s thoughts channel, think could whether on where But running are early on rates those. the with as just based get be into the units things you out rolling in conversations with any whether or early when it’s

Badri Kothandaraman

of suppliers rate our already. kind our well as competitors an as provided have mean, I attach

about in we rate Sunrun talks California So be expect basically, true. attach and XX% to that

we only base. it’s We have blackouts for also, not also accelerating the to And that us, addition, expect that. be an in installed

in over X homes, million as maybe XX% safe storage. homes. And million these look our all you base some of installed They’ve customers. – installed is is for in X over Of are Northern America. North our If been Ensemble loyal today, and time at waiting base, for is

to So addition there, a be the from too of from in demand lot demand generated there’s going to blackouts.

attach, Texas has got come Rico California nice nice soon. going Other got countries Of come are Massachusetts attach. a soon. coming. yes, is a going a it yes. to is Hawaii attach. is to nice course, Puerto got has –

So we’re going to start seeing an option.

Eric Stine

would And I of that homeowners the right? installed Okay. Is that base mean, that that installed just storage? majority those talking IQ to And about use is for required platform. then be base. when is the what

Badri Kothandaraman

are and of Enphase latest will basically technology. to is MXXX is not there it shop the to to communication, It technology customers the yes, that significant so – is greatest they storage, product. a We answer, to Ensemble. superior have quite IQ gives the be clear for for power reduction, Yes, platform, that a majority. our MXXX and Right. want them – the do comparable one-stop that portion But the yes. actually Technology compared one-stop solar a shop upgrade

Eric Stine

one recent I IQ announcement, it an launch. market. me, the entry last that’s the kind Maybe C&I Okay. into XA seems of just for mean, me the like to

on it Just the just and be thoughts that’s way? curious, Is installers should view helpful. what Any of your they go that that based market something parts we would on after? that

Badri Kothandaraman

with, to – big as target really continues market XA for increase. the So residential mean, the to power begin was the a I

installers at C&I However, on I’m – of That’s in will Having really what business using keep that, the sure towards targeted as looking some really optimistically be of mind. the well. the residential. markets, we we expect our some we XA said our

Eric Stine

thanks. Okay,

Badri Kothandaraman

Thank you.

Operator

Thank you.

Jeff Our next Cowen question Company. Osborne is from & from

now is line Your open.

Jeff Osborne

I just question flattish to wanted and it different revenue the afternoon. Mark’s way. back asking a about circle good Hey to

quarter Can you next quarters your As think you pipeline Clearly, capacity X you exiting for six of that surge capacity just the of constrained. million look X.X units methodology. sense us give your where at forecasting where a you will of highlighted year? be the your you had that

or capacity Mexico become constrained? capacity about do line the get more or how to Now And up, satisfied more the QX, it’s is trying with think catch just safe to to you Customers then time as for China? that. you’ve great. which sense you of in able And you a have been will I’m we do add in harbor surge process be whether

Badri Kothandaraman

executive constrained never we an decided team, be Right. I we that capacity. by as mean, will

abnormally XX% then Having flat. a and exclude thinking. demand, we have capacity, QX said note business, on is demand, QX happen. can look plenty QX search at our that, not there you brand-new available that if the unconstrained X yes, And that a so capacity enough that that meet we safe can quarter our spikes basically in say demand meaning And of that harbor the you of came harbor, safe base customer – are basis. or from But search XX%, that almost we that’s before. was business So

of we also, big that it drive forward, about. all a Ensemble deal. expect so adoption. That’s And what that’s major QX in, kicks once in are going And customer ‘XX we to

Ensemble. for prepared So we getting are

to can capacity, need million – if in of X-quarter for on X if add go it in XXXX. to forecast build to that. It that, to us units more will need need to kind my And capacity. us will X X be of shows we find to I a from I anywhere order QX for go not problem question that to do example, Your I months I take

Jeff Osborne

way But that could summer, to you paying got in surge Is at do nameplate was there think a over Flex you’ve $X if about a you the million next it, even Badri I’m if time the meantime, right, right right? of X.X%. though hearing easily

Badri Kothandaraman

million today, of told said, quarters capacity units. units, As couple what back. million clearly, our X.X I of I X like is you a

we that it increased We we about are around I increased because hovering buffer. a demand, talked it to Now have X.X. for and

X to is changes we that are we not going be is predicated going going So process. The why will forecasting million get me process demand it’s do be obviously, in It to capacity a to my be to problem me always have no to by units, that. tells for which vacuum. forecasting demand,

Jeff Osborne

for that, One financial the given and to it Good hear. us that how Eric. being financial to about Can reference I I happens at remind assume reversal? you made tax we just two modeling would have the valuation is, possibly rate out, it. be that reversed, of impact called some should point. you questions thinking Got allowance, you of just

Eric Branderiz

Yes.

We will more one. on that provide clarity

in be have the a which will because likely QX, GAAP-only we’re large the the I As reversal will for for part provide can then be the release we on use else a Remember, would rate. Day can corporate of as tax Analyst no And into going right? on treatment, Analyst of we allowance, have rate, guidance the probably early of credit be now sheet terms the back big in until that tax a So to P&L. more bit Day, as but And the balance numbers right? and it’s books, us you

Jeff Osborne

visibility end was had XX%. you the you would get guidance you of And just the at you just that it. end have, I the of what Got of look range last range? the given as XX% the Can to versus high talk about, then to low question

Badri Kothandaraman

for point room et And – have have in historically, X we any talked general, percentage mean a about lot issues we a given of that I give range. the ourselves cetera. in quarter, we execution happen

more short-term But what’s margin. yes, fluctuations. long-term gross it’s of So exciting the is view basically,

and So no. it, XX% everybody XX% is is it. The is not me, keeps asking the answer

only, of We have not the cost, where accessories, world-class is on a system, lot a of we microinverters, what do. opportunities That’s focus combiners, cable, cost, system for us improving to batteries, microinverter improve gross our everything. margin. week, cost run Every meaning we

there, focus We pricing on meaning optimization. the a also again, run pricing, is

products and ASIC situation So Ensemble addressing optimizing why over execution year, eliminating margin gross said, fees doing. pricing, supply margins. been through That’s steadily all cost, the last seeing doing component like introducing on like we’re are multiple have These integration. the expedite continuously initiatives, climbing gross XA, I you’re as IQ something reductions tariff the cost what stabilizes, we

Jeff Osborne

Thanks all for Certainly, it detail. has been appreciate it. I the impressive.

Badri Kothandaraman

Yes.

Operator

you. Thank

is Our question Oppenheimer. Rusch next from Colin from

open. now is line Your

Colin Rusch

Thank you so much.

technology that at kind year? Ensemble that one was development? on. cadence here, about you you’re you through can that the talk you updates working that year, and Can about you of throughout as were pieces development you about next improvements we the the knew to firmware go With preparedness guys expected you of last ramp the your as as the go where then talk think the testing for in remaining And

Badri Kothandaraman

Right.

before. yes, not So about I’ve something talk about I’ll talked

is we combiner Enpower, do. testing sector. that there testing. multiple Encharge, One called inside called on levels products boards unit that we the the unit all use like So the of the testing are box That’s

need controllers, product the I certain product management all test external [de-cell] to test make the product which testing – the if battery the themselves, sure called microinverters, And is to I stimulus. responding is properly, battery stimulus, the and using battery stimulus. need the that’s the is are battery other unit testing, to right called means together as The working which I them testing, of

the testing. So We tests. covered product the unit we covered

is most testing. is important, which actually the third, system The

by mean or need to house, need I grid. the And need have I me have my a do use solar. What to switch. a have solar system? need means it and which the my Enpower to to in I A system cloud. have I I the battery. you have to how simulator I need the communication equipment is for would

real to life. They of like are to in have being you normal have consumed. All living them loads will your be how be your home with

loads. So we have with of simulate to kinds all

We do have off grid grid to simulation. on,

– have testing basic is I testing. we said, what graduated is product the the So to first testing, which that’s component from which

testing doing It install what testing. System are we means we at house. said the be could Raghu’s units Now like system – could house. be it I my house, Eric’s

all covered. the makes the at need done, all which ship we But have the grid, beta that finish grid-agnostic. right XX% In us. then in to which we you software XX the of fact, on to on the ambassadors testing, already life, that from I even hardware preorders real-life helps installations sure system confidence our That for once to are they real that installations, start we software about, We taking you And installers need because our done. receive loops. told properly, and point. is already generator the a installed manage them who will basically well is system in all you are from us. these, That we signed product hardware we these do why will is And moves which working then about to be Ensemble what resources, storage, is be unique is use to after to is finish primarily focused start we about alpha which that once up installations. make now. that already beat And have cases that of the solar, have XX% They

will be many installs, products. be doing betas. these doing These we are And we will be so installs. real installing – We XX will

will feedback from getting We them. be of all

if will determine we we we And are product or to to not. have maybe do. And course-correct then course-corrections minor We there the production. will will release

have to changes. those all we or an system are all picture need Ensemble have if have me. software same so you release I’m should the able something I to which we be home, to working you coming now. That’s in And seamlessly. you does know of have you at guys together experience, exactly – never thing upgrade. means you quality giving if it’s software over-the-air And as which – the customer and will all be to just the – upgrade event be the called course, So right we latest to able should make not full the those

that that and right taking now, basically it’s be December, are done by confident start we is would So going that but early on we will pre-orders.

Colin Rusch

up being of terms the us as ends you systems geographies? you the the designed aren’t into there? hoped. mean had just to where your And Can the Is points it what getting cycle? What certainly, going understand product? just productive sales the with design folks. product it challenges? Is are on Perfect. important for those very sticking for a mentioned efforts then are? talk of in as geographies, it availability I Help base-level you about Is design what’s familiarity

Badri Kothandaraman

simple. issue. focus pretty it’s Colin, It’s a

North America, the best-in-class need staffing the by attention. paid we salespeople paid basically, way same not have we America the with to And thing. North to We do attention in

world-class. are products Our

The to the products have need market. is growing just Our market. execute. market fit great a We for a

Colin Rusch

Thanks, Okay. guys.

Operator

Thank you.

Our is question Jeffrey from next from Tuohy Campbell Brothers.

Your line is now open.

Jeffrey Campbell

My with of ITC? Congratulations sales ‘XX. the they this quarter XXXX lower the that activity first regard deduction? somehow the Safe pegged to on identified question actually Harbor XX% is in the receiving ITC to quarter. is Are Or the you’ve that’s first

Badri Kothandaraman

are They going receive XX%. to the

Jeffrey Campbell

second this as you to solution? And great. primarily do envision my is IQ the back XA, question an ACM Okay,

Badri Kothandaraman

as AC discrete cater both can Not really, it well as modules. no, to

Jeffrey Campbell

That’s you. Q - Okay, excellent. for me. it Thank

Badri Kothandaraman

Thank you.

Operator

Thank you.

next H.C. Dayal Amit from Our from is question Wainwright.

is open. now line Your

Amit Dayal

the how over out etcetera? to and you for reaching complete questions. Are with attack started? we of this effort taking is folks? installed plan you are you base, million of already Thank testing, until that my Badri, to waiting this What just respect here these some has

Badri Kothandaraman

will We provide...

Amit Dayal

uptake, storage sorry. Related to the

Badri Kothandaraman

Right.

that power. basically with they app That app. to will We some have. of color Enlighten mobile is we more a million that gateway story. provide the That through or here Day, the view homes communicate is during – all is but their The a their XXX,XXX Analyst us providing the their short homes,

already these upgrade all to years that XX then upgrades, installers. legacy making we are installations for our want strategy willingly, well like XX,XXX we nearly or the as right So introduce a beta do homeowners and to about the the as X or IQ replace can that, bought right, both where product our years said introduce contact they programs very are time, program them sure is Enphase to who all experience, homeowners Ensemble which customer is by online Having homeowners they successful product have upgrade, X. ago

a be we those. when And then will when do ready, are beta on we only we have similar finished the we’ll installations. start it But program. So will

Amit Dayal

your Understood. how And into Ensemble to and we then of think for X, with the should and market coming the Enphase good share opportunity now play, take a that etcetera, about addressable market? IQ

Badri Kothandaraman

$XX,XXX will a Like than straightforward about what are storage And as home. other home. batteries, only do nascent. storage, have significant There right? is states pure even California attach microinverters, as Hawaii still like on storage. Still it. With is for who I a rate dollars with roughly today, told – really not for the XX%, The you, and right, the the That’s proposition states we think way $X,XXX of value that California. do ramped couple it us, about is is we to the if a more meaning means

of there fair are for going $XX,XXX should getting to And start is through. That’s with what It’s And be to peace of needs mind. going becoming storage our today. happen microinverters proposition simply home, And blackouts. to we then a example, basically, For we get mainstream. a that soon. very share value come

Amit Dayal

by capacity this just your on And expedite one last laid and for results? the your out, gone expectations XQ comments you’ve mean, given that sort it. me, one shipment I ‘XX of expedite fee, fee Got is

Badri Kothandaraman

to said points basis going really to I’m I talking so needs And hope stop fall be within it. I we XXXX, about said. I really X from about what hope that I to XXX gone. talking it’s That’s it it. to going be not

Amit Dayal

all that’s I Yes, appreciate it. have. I

Badri Kothandaraman

you. Thank

Operator

Credit Maheep Mandloi from next is from question Suisse. Our

Your line is now open.

Maheep Mandloi

upon Most if in just Hi, can I Suisse. been for speeding in seems am answered, Maheep But but about Thanks focus maybe expand more rates? me we and as Mandloi questions going operating from expense. or you markets European my less think have of touch the It in Crédit that increase in you forward QX. your especially Ensemble should how flattish XXXX, attachment

Badri Kothandaraman

it we I continue control, to we plan that is under to range. think, Yes. course, in guidance I keep in look definitely what like at And about And this what XX% Ensemble, grow of expectation like OpEx of keep mean I need it said. in QX for today, OpEx sales, to our is this reported – at range, and that. of if is are midpoint we OpEx, XX.X% if our is with vectors will you OpEx. the overall we QX, we the or our of But around something

on it yes, OpEx, right. that’s So yes,

Maheep Mandloi

Got being there to question Is connect with that? about even reached that which could generators. And with collaborating kind out something able they or you probably you look to of me, it. forward for you one generators last to out earlier have ensemble for any spoke

Raghu Belur

cell, fuel storage. also in controllable. resource, loads DG, about about if think If type load So than broader duration yes, of look context matter, generation at – we and resources We that really it are at this about a look right, We for like We – think even fuel, any etcetera, much Raghu. because is specific right? think solar. you you fossil

together a seamless it’s a what I can and call, manner. very in comprehensive, resources the very these them manage bring of master all that So platform

not to clean of – and course, are want green. we we be So

storage our and on extremely solar so And is focus vital.

as know. also We grid, manage the you

a have we solution, complete line. bottom So

we if will particular for function have the day, the important that we always that because And so Ensemble, will very are obviously, a a in beyond end order wants that that in is is do platform to that home the on to ensure we there’s come resource we providing on the homeowner. and the of manner that effective it most to at – manage

Eric Branderiz

growth clarification that about XX.X% guiding of baseline Badri make the new to the a a that are right? we want continue making. on is to mean continue need in about a QX, particular will OpEx, QX. R&D That’s midpoint guiding OpEx and we mentioned I doesn’t that the in XXXX, Asia for that a for fact the of Maheep, element dynamics to about that investments Pacific. experience that Europe that we on be Think Think

as new model original benchmark, So than revisit the one here, much make have target going just for OpEx, sure that, part right? that But to XX-XX-XX. to is we on right? of outcomes that is financial setting the we Analyst I Obviously, we’re the still model, thinking that want benchmark the our Day, don’t and better the

Maheep Mandloi

Thanks it. the my for for to And thanks questions. Analyst Got Day. more Look taking color. details forward on

Operator

you. Thank

Our question Molchanov. is Pavel from next

Our Meikle next Williams from Brad Trading. question is from

Your line open. is now

Brad Meikle

I had a quick follow-up.

I the this traded three historically hasn’t they harboring that only publicly installers, clients, are been. X the year. think So of safe the really one And ones them are and largest

are you third the has telling Enphase? client one us become a So that of

Badri Kothandaraman

going it. about not to talk I’m Brad,

Brad Meikle

peak Harbor I Is your that may Safe in feeling business revenue Well, some the you through read still growing you’re it QX. Harbor is was or quarter the that that a was for to this guys? reporting Okay. flat guess the the non-Safe way

Badri Kothandaraman

are answered Ensemble. excited I from I mean been very what we should have clear the is about way

the The a going is storage. home about rate us. $X,XXX $XX,XXX excited Storage going us from to increase. adoption a home. accelerate attach for takes of is the storage. California to has got potential very are We blackouts, massive to a It of storage And only

the QX we to with – coming in So product be of are going out and ‘XX.

very our and are So we about very are excited we excited there, growth.

The We’re storage the going on to produce still when going the power when – is will is be going you’re down, with grid sun have to the to which immediately IQXPV. shining. follow up is IQ roof, X the IQXPV

a So that’s massively differentiated product.

So is is the next leg. another The leg. storage IQXPV yes,

have of lot growth. for legs So a we really

Eric Branderiz

So the that key created the the a data think prior right? trends about lot quarter And trend, look distribution, at activity we point. not the is, the well, I is And quarter are ultimately QX, right? And the all we harbor taking you dynamics this of of a interesting safe right? right? about channel as in think observation X that’s to If mean into a logical it as to monitor point make data that the out very seen growing, doesn’t right? a POS midpoint, right? higher, point-of-sale trying the we’ve well, numbers just probably may and as that out may out carving I So want quarter, be it number you is

Brad Meikle

Thanks in QX in sold think a you’re you of would SunPower and – Mexico, of Eric. How you cost of margins, that is if gross do of some sounds through I to U.S. basically business you are some product like it your So your you’re goods have guess But Eric? margins about point. on reduction that how previously? XX% above higher, if pass going non most out that already and your at customers –

Eric Branderiz

Yes.

can reduction, more how But So we definitely, target as elements to script, the XX, in way, we all cost tariff, ceiling the of are don’t on new So right? you the margins. So well that So Badri our basically products, how remarks. tied is that or margins any cautious than the differentiated new In always fulfill midpoint we remember, checkpoints the the have we managing the that way we at are of pricing, these see that. adequate a value numbers to closely in right? domestic supply part non-SunPower we look it’s early ability as very mentioned to the right? we anything see potential think introducing We read don’t demand, of right? way terms as are that prepared better right? other We about on be a Badri mentioned can execute see XX%,

of execute So we long to competitive have as accretion all into margin, the materialize. those we the pricing, as things our long ability secure, can as future and dynamics the of as

Brad Meikle

you. Thank

Operator

you. Thank

Molchanov Our Raymond next question from is James. Pavel from

now is open. line Your

Pavel Molchanov

Two Thanks quick landscape. my question. if ones, about may, competitive I for the taking

on SPI. at are of comment launched products own the incorporating whether specifically your guys its product of some microinverters module LG Can selling on micros and you LG’s you to already directly? still touched announcement a You

Badri Kothandaraman

very on. specific are about like And comes want clear comment core we to won’t how focused about differentiation when just think to any competitor we a broad we that. our Pavel, Ensemble. That’s be about we technology very it what

For us, solution. entire it the is

be to shop, one-stop a have You warranty. one

most very plug-and-play the have solution solution have have solution well. that’s you a and solution, marketplace resilient have in You the out to simple to scalable a as

a we it as entire but single little So little the think or about a solution. single really widget device not

line. just not we’re it’s a – to think it. just bottom That’s going about way I So direction, the think in different

Pavel Molchanov

Understood. And positive module impact, also vis-à-vis you being touch revived a your product? negative, any or can on month? the of that tariff business, bifacial Does as have AC last particularly on

Badri Kothandaraman

Yes.

higher better. pricing of So a problem leverage And family products as well for actually, product the same in more optimize same products get beneficial to leverage differentiated you power, the platform can we us it’s – general, when goes that using because exact the up, develop higher get we power and power to develop the the it’s products. same a as

So the of in one way to is general, higher is And power. get higher bifacial power good. course,

a power concerned, importantly, noise product, the it’s IQ the XA which excited IQ the is been and There’s leverages pay tariffs targets We been are completely been those which are But modules, software-defined. on Now as bifacial It’s out. about far it base peripheral to it attention basis. more in. X on really pretty as higher we that. around platform,

Pavel Molchanov

Thank you it. guys. much very Got

Badri Kothandaraman

Thank you.

Operator

from Campbell Brothers. question from next Jeffrey Tuohy is Our

Your line is open. now

Jeffrey Campbell

a new you Hi, clarity. thanks a solar referencing get Ensemble referenced home or prior to And that The installations rate penetration of follow-up. mandate? all home taking is my know something the go-forward attach solar that asking we California, wanted it a for this little under the else? California has XX% new I high for to just rate SunPower is I am solar mandate because

Badri Kothandaraman

Right.

an all, referring First it. attach the Ensemble earnings their were actually is me to let of This competitors call. referred rate. what basically not customers’ in We to correct

this So information. public is

an and attach are XX% they companies installed existing in base, So that of is said have rate seeing XXXX. that to their

the that And going So to not it’s new the cetera. there. I with answer do it, mandate, got is nothing to do but influence et know home

attach now the what rate However, have is seen. they right

Jeffrey Campbell

Okay.

party, upside? at they’re that say so the we seeing least So is XX% attach there to The as rate. third new could could solar based on a that be not

Badri Kothandaraman

Sure.

Jeffrey Campbell

Appreciate you. it. Thank Right.

Operator

this to further At Kothandaraman Badri time, I’m closing you. Thank call no over turn showing I questions. like remarks. for would back to the

Badri Kothandaraman

support with Enphase. speaking today to We December. your us again continued for of during you Thank look our for forward joining and Analyst you in Alright. Day

Operator

Ladies today’s call. and gentlemen, participating. this concludes Thank conference you for

You may now disconnect.

Enphase Energy (ENPH) 30 Oct 192019 Q3 Earnings call transcript