Enphase(ENPH) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported quarterly revenue of $263.3 million, a decrease from the previous quarter, with a gross margin of 46% and operating income of 15% on a non-GAAP basis [27][56] - Non-GAAP net income for Q1 was$ 48 million, down from $73.5 million in Q4, resulting in non-GAAP diluted earnings per share of$ 0.35 compared to $0.54 in Q4 [56][80] - GAAP net loss for Q1 was$ 16.1 million, compared to a net income of $20.9 million in Q4, leading to a GAAP diluted loss per share of$ 0.12 [56][80] Business Line Data and Key Metrics Changes - Approximately 1.4 million microinverters and 75.5 megawatt hours of batteries were shipped in Q1, with a focus on reducing channel inventory by $113 million [27][28] - The company shipped about 506,000 microinverters from US manufacturing facilities that qualified for 45X production tax credits [28] - The sell-through of microinverters and batteries in the US was down 23% in Q1 compared to Q4, with California experiencing a 30% decline [29][44] Market Data and Key Metrics Changes - In non-California states, overall sell-through was down 21% in Q1 compared to Q4, while in California, sell-through of microinverters was down 37% and batteries down 18% [29][44] - In the Netherlands, sell-through was down 4% compared to Q4, but demand signals improved following government support for net metering [30] - The company reported a 70% sequential revenue increase in Europe, with sell-through of microinverters up 3% and batteries up 28% in Q1 [45] Company Strategy and Development Direction - The company plans to increase battery manufacturing capability in the US during Q3 2024 and is focused on operational excellence, reducing operating expenses, and maintaining healthy gross margins [28][37] - The introduction of new products, including the IQ8 Microinverters and IQ Batteries, is part of the strategy to expand market share in Europe and Asia [34][45] - The company is optimistic about the long-term potential of NEM 3.0 systems, which have a high battery attach rate and are expected to stabilize California revenue [73][77] Management's Comments on Operating Environment and Future Outlook - Management indicated that Q1 was the bottom quarter, with expectations for recovery in Q2 driven by improved demand in Europe and non-California states [68][77] - The company is cautiously optimistic about the future, noting that installers are adapting to NEM 3.0 and that financing options are becoming more available [32][123] - Management highlighted the importance of maintaining profitability and free cash flow while navigating through market challenges [52][83] Other Important Information - The company repurchased 332,735 shares at an average price of$ 126.21 per share, totaling approximately $42 million in Q1 [57] - Capital expenditures were reduced to$ 7.4 million in Q1 from $20.1 million in Q4 due to decreased US manufacturing spending [58] - The company expects GAAP gross margin to be in the range of 42% to 45% for Q2, with non-GAAP gross margin expected to be between 44% and 47% [59][84] Q&A Session Summary Question: Can you discuss the under-shipment in Q1 and the expected normalized demand? - Management acknowledged under-shipping due to softer demand and indicated that normalized demand is expected to be around$ 490 million after accounting for inventory adjustments [65][93] Question: What are the dynamics around pricing and discounts as inventory is cleared? - Management emphasized discipline in pricing and indicated that the average selling price (ASP) variance is primarily due to product mix rather than price drops [64][90] Question: How is the company forecasting sell-through for Q2? - Management noted that sell-through demand is expected to increase to $400 million in Q2, reflecting improved conditions in various markets [68][93] Question: What is the outlook for new markets and energy storage? - Management expressed confidence in the growth of energy storage and the transition to solar plus storage in new markets, particularly in Europe [89][120]