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Enphase Energy Reports Financial Results for the Second Quarter of 2018

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PETALUMA, Calif., July 31, 2018 (GLOBE NEWSWIRE) -- Enphase Energy, Inc. (NASDAQ:ENPH), a global energy technology company and the world's leading supplier of solar microinverters, announced today financial results for the second quarter of 2018, which included the summary below from its President and CEO, Badri Kothandaraman. Highlights for the quarter included:

  • Revenue of $75.9 million, including a $2.0 million milestone payment from a partner on IQ 8
  • IQ 7 shipments at 22% of all microinverters
  • GAAP gross margin of 29.9%; non-GAAP gross margin of 30.5%
  • GAAP operating loss of $0.6 million; non-GAAP operating income of $4.1 million
  • GAAP EPS of $(0.04); non-GAAP EPS of $0.02
  • Ending cash balance of $58.5 million

Revenue and earnings for the second quarter are given below, compared with those of the prior quarter and the year ago quarter:

(In thousands, except per share data)

  GAAP
  Non-GAAP
  Q2 2018
  Q1 2018
  Q2 2017
  Q2 2018
  Q1 2018
  Q2 2017
Revenue $75,896   $69,972   $74,704   $75,896   $69,972   $74,704
Gross margin   29.9%     26.2%     18.1%     30.5%     26.5%     18.4%
Operating income (loss) $(558)   $(2,475)   $(9,247)   $4,133   $861   $(4,017)
Net income (loss) $(3,738)   $(5,128)   $(12,093)   $1,550   $(1,255)   $(6,632)
Basic EPS $(0.04)   $(0.06)   $(0.14)   $0.02   $(0.01)   $(0.08)

Our second quarter revenue was $75.9 million, an increase of 8% sequentially from $70.0 million, and an increase of 2% year-over-year. We shipped 203 megawatts DC, or 675,000 microinverters. Our non-GAAP gross margin was 30.5%, an increase of 400 basis points from 26.5% in the prior quarter. The increase was primarily due to pricing management, supply chain optimization, transition to IQ 7, and the IQ 8 milestone payment. Our non-GAAP operating expenses were $19.0 million, an increase of 7% compared to the prior quarter. We are very pleased to report non-GAAP operating income of $4.1 million, our third consecutive quarter of non-GAAP operating income. Non-GAAP net income was $1.6 million, which resulted in basic non-GAAP earnings per share of $0.02.

We exited the quarter with $58.5 million in cash. Inventory was $17.5 million in the second quarter, at the lowest point since 2014, compared to $18.5 million in the first quarter and $20.8 million in the second quarter of 2017.

In summary, we are pleased with our continued progress towards our 30-20-10 target operating model, which we expect to achieve in the fourth quarter of 2018.

BUSINESS HIGHLIGHTS

+ Enphase announced a definitive agreement to acquire SunPower's microinverter business for $25 million in cash and 7.5 million shares of Enphase common stock. Enphase will become the exclusive microinverter supplier for SunPower's residential business in the U.S. Enphase's IQ 7XS microinverter offers 97.5% CEC efficiency and was designed specifically for SunPower's X Series 96-cell PV modules with peak AC output power of 320W and a Maximum Power Point (MPP) tracking range of 53-64V. We are on track to close at the end of the third quarter of 2018 subject to product qualification and other closing conditions under the definitive asset purchase agreement.

+ Enphase announced it started shipping its IQ 7X microinverters to solar distributors in the U.S. The Enphase IQ 7X Micro™ is the highest power and highest efficiency variant of the seventh-generation IQ family of microinverters. The Enphase IQ 7X Micro is ideal for integration into AC Modules (ACMs).

+ Enphase announced the introduction of IQ 7 in Europe during the second quarter at the Intersolar Europe tradeshow. This introduction represented Enphase's entry into the German and Austrian solar markets, while expanding its presence in other solar markets such as France, Benelux, UK, and Switzerland.

 + Enphase introduced IQ 7 in Australia and New Zealand during the second quarter. IQ 7 microinverters offer state-of-the-art power performance, are lightweight (1.08 kg) and offer a compact form factor (212 mm x 175 mm x 30 mm). With 96.5% efficiency, IQ 7 microinverters produce up to 23% more power at nearly half the weight of Enphase's fifth-generation S-series microinverters, which they replace in Australia and New Zealand.

+ On July 19, 2018, Enphase announced the addition of ‘Service-on-the-Go' for the Enlighten Manager, which provides detailed diagnostic capabilities, as well as fleet management tools, and the Installer Tool Kit platforms. As part of the Enphase customer experience initiative, Service-on-the-Go enables a solar installer to request a return and quickly activate a new microinverter in an existing system from the field using a smartphone or computer, 24 hours a day, seven days a week.

+ On July 24, 2018 Enphase announced that Momentum Solar, one of the fastest growing home solar service providers in the U.S., chose Enphase to be its exclusive inverter supplier. Enphase's seventh-generation IQ microinverters will be interoperable with Enphase Ensemble™, a technology that will enable new grid-agnostic solar use cases in eighth-generation Enphase microinverters and enhance Momentum Solar's ability to bring grid-agnostic solar to eligible homeowners.

THIRD QUARTER 2018 FINANCIAL OUTLOOK

For the third quarter of 2018, Enphase estimates both GAAP and non-GAAP financial results as follows:

  • Revenue to be within a range of $76 million to $82 million
  • GAAP and non-GAAP gross margin to be within a range of 30% to 33%
  • Non-GAAP operating expense to be within a range of $18.0 million to $19.0 million
  • GAAP operating expense to be within a range of $22.0 million to $23.0 million, including an estimated $4.0 million of stock-based compensation expense.

Follow Enphase Online

Use of Non-GAAP Financial Measures

The Company has presented certain non-GAAP financial measures in this press release. To view a description of non-GAAP financial measures used and the non-GAAP reconciliation schedule for the periods presented click here.

Conference Call Information

Enphase Energy will host a conference call for analysts and investors to discuss its second quarter 2018 results and third quarter 2018 business outlook today at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time).  The call is open to the public by dialing (877) 644-1284; participant passcode 8696758.  A live webcast of the conference call will also be accessible from the "Investor Relations" section of the Company's website at investor.enphase.com. Following the webcast, an archived version will be available on the website for 30 days. In addition, an audio replay of the conference call will be available by calling (855) 859-2056; participant pass code 8696758, beginning approximately one hour after the call.

Forward-Looking Statements

This press release contains forward-looking statements, including statements related to Enphase Energy's expected future financial performance, and the expected timing of product introductions. These forward-looking statements are based on the Company's current expectations and inherently involve significant risks and uncertainties. Enphase Energy's actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of certain risks and uncertainties including those risks described in more detail in the Company's most recent Annual Report on Form 10-K and other documents on file with the SEC and available on the SEC's website at www.sec.gov. Enphase Energy undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in its expectations, except as required by law.

A copy of this press release can be found on the investor relations page of Enphase Energy's website at investor.enphase.com.

About Enphase Energy, Inc.

Enphase Energy, a global energy technology company, delivers smart, easy-to-use solutions that connect solar generation, storage and management on one intelligent platform. The Company revolutionized solar with its microinverter technology and produces the world's only truly integrated solar plus storage solution. Enphase has shipped approximately 18 million microinverters, and more than 780,000 Enphase systems have been deployed in over 120 countries. For more information, visit www.enphase.com.

Enphase Energy®, the Enphase logo and other trademarks or service names are the trademarks of Enphase Energy, Inc.

Contact:

Christina Carrabino
Enphase Energy, Inc.
Investor Relations
ir@enphaseenergy.com 
+1-707-763-4784 x7294


ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2018   2017   2018   2017
Net revenues $ 75,896     $ 74,704     $ 145,868     $ 129,455  
Cost of revenues 53,195     61,157     104,851     108,861  
Gross profit 22,701     13,547     41,017     20,594  
Operating expenses:              
Research and development 9,462     7,947     17,082     17,552  
Sales and marketing 6,828     6,274     13,055     12,732  
General and administrative 6,969     4,964     13,913     10,797  
Restructuring charges     3,609         10,856  
Total operating expenses 23,259     22,794     44,050     51,937  
Loss from operations (558 )   (9,247 )   (3,033 )   (31,343 )
Other expense, net:              
Interest expense (2,269 )   (2,080 )   (4,562 )   (4,219 )
Other income (expense) (572 )   88     (698 )   1,148  
Total other expense, net (2,841 )   (1,992 )   (5,260 )   (3,071 )
Loss before income taxes (3,399 )   (11,239 )   (8,293 )   (34,414 )
Provision for income taxes (339 )   (854 )   (573 )   (984 )
Net loss $ (3,738 )   $ (12,093 )   $ (8,866 )   $ (35,398 )
Net loss per share:              
Basic and diluted $ (0.04 )   $ (0.14 )   $ (0.09 )   $ (0.44 )
Shares used in per share calculation:              
Basic and diluted 97,321     84,434     94,026     80,542  


ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
  June 30,
 2018
  December 31,
 2017
ASSETS      
Current assets:      
Cash and cash equivalents $ 58,471     $ 29,144  
Accounts receivable 58,696     65,346  
Inventory 17,471     25,999  
Prepaid expenses and other 20,741     9,957  
Total current assets 155,379     130,446  
Property and equipment, net 23,100     26,483  
Goodwill 3,664     3,664  
Intangibles, net 363     515  
Other assets 36,030     8,039  
Total assets $ 218,536     $ 169,147  
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Accounts payable $ 21,895     $ 28,747  
Accrued liabilities 39,370     29,874  
Deferred revenues 34,954     15,691  
Debt, current 18,429     17,429  
Total current liabilities 114,648     91,741  
Long-term liabilities:      
Deferred revenues, noncurrent 75,107     29,941  
Warranty obligations, noncurrent 23,367     22,389  
Other liabilities 1,970     1,880  
Debt, noncurrent 33,559     32,322  
Total liabilities 248,651     178,273  
Total stockholders' deficit (30,115 )   (9,126 )
Total liabilities and stockholders' deficit $ 218,536     $ 169,147  
               


ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
  Six Months Ended June 30,
  2018   2017
Cash flows from operating activities:      
Net loss $ (8,866 )   $ (35,398 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Depreciation and amortization 4,469     4,583  
Provision for doubtful accounts 753     707  
Asset impairment and restructuring     1,765  
Amortization of debt issuance costs 1,133     1,063  
Stock-based compensation 5,860     3,550  
Changes in operating assets and liabilities:      
Accounts receivable 5,897     3,910  
Inventory 8,528     11,121  
Prepaid expenses and other assets (1,551 )   (5,338 )
Accounts payable, accrued and other liabilities (3,817 )   (14,107 )
Warranty obligations 1,826     199  
Deferred revenues (6,791 )   3,620  
Net cash provided by (used in) operating activities 7,441     (24,325 )
Cash flows from investing activities:      
Purchases of property and equipment (1,475 )   (3,515 )
Net cash used in investing activities (1,475 )   (3,515 )
Cash flows from financing activities:      
Proceeds from issuance of common stock, net of issuance costs 19,923     26,425  
Proceeds from debt 5,580     24,240  
Principal payments on term debt (3,129 )    
Payments under revolving credit facility     (10,100 )
Proceeds from issuance of common stock under employee stock plans 1,370     170  
Net cash provided by financing activities 23,744     40,735  
Effect of exchange rate changes on cash (383 )   294  
Net increase in cash and cash equivalents 29,327     13,189  
Cash and cash equivalents—Beginning of period 29,144     17,764  
Cash and cash equivalents—End of period $ 58,471     $ 30,953  
               


ENPHASE ENERGY, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
 
    Three Months Ended
June 30,
  Six Months Ended
June 30,
    2018   2017   2018   2017
Gross profit (GAAP)   $ 22,701     $ 13,547     $ 41,017     $ 20,594  
Stock-based compensation   417     211     615     449  
Gross profit (Non-GAAP)   $ 23,118     $ 13,758     $ 41,632     $ 21,043  
                 
Gross margin (GAAP)   29.9 %   18.1 %   28.1 %   15.9 %
Stock-based compensation   0.6 %   0.3 %   0.4 %   0.4 %
Gross margin (Non-GAAP)   30.5 %   18.4 %   28.5 %   16.3 %
                 
Operating expenses (GAAP)   $ 23,259     $ 22,794     $ 44,050     $ 51,937  
Stock-based compensation(1)   (3,871 )   (1,410 )   (5,245 )   (3,101 )
Restructuring charges       (3,609 )       (10,856 )
Reserve for non-recurring legal matter           (1,765 )    
Acquisition related expenses   (403 )       (403 )    
Operating expenses (Non-GAAP)   $ 18,985     $ 17,775     $ 36,637     $ 37,980  
                 
(1) Includes stock-based compensation as follows:                
Research and development   $ 1,149     $ 636     $ 1,767     $ 1,387  
Sales and marketing   997     285     1,358     663  
General and administrative   1,725     489     2,120     1,051  
Total   $ 3,871     $ 1,410     $ 5,245     $ 3,101  
                 
Loss from operations (GAAP)   $ (558 )   $ (9,247 )   $ (3,033 )   $ (31,343 )
Stock-based compensation   4,288     1,621     5,860     3,550  
Restructuring charges       3,609         10,856  
Reserve for non-recurring legal matter           1,765      
Acquisition related expenses   403         403      
Income (loss) from operations (Non-GAAP)   $ 4,133     $ (4,017 )   $ 4,995     $ (16,937 )
                 
Net loss (GAAP)   $ (3,738 )   $ (12,093 )   $ (8,866 )   $ (35,398 )
Stock-based compensation   4,288     1,621     5,860     3,550  
Restructuring, asset impairments and other charges       3,609         10,856  
Reserve for non-recurring legal matter           1,765      
Acquisition related expenses   403         403      
Non-cash interest expense   597     231     1,132     743  
Net income (loss) (Non-GAAP)   $ 1,550     $ (6,632 )   $ 294     $ (20,249 )
                 
Net loss per share (GAAP)   $ (0.04 )   $ (0.14 )   $ (0.09 )   $ (0.44 )
Stock-based compensation   0.04     0.02     0.06     0.04  
Restructuring, asset impairments and other charges       0.04         0.14  
Reserve for non-recurring legal matter           0.02      
Non-cash interest expense                
Income tax effect on acquisition/divestiture   0.01         0.01     0.01  
Net income (loss) per share (Non-GAAP)   $ 0.02     $ (0.08 )   $ 0.00     $ (0.25 )
                 
Shares used in per share calculation GAAP and Non-GAAP   97,321     84,434     94,026     80,542  
                         

 

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