Enphase Energy Reports Financial Results for the Third Quarter of 2018

November 6, 2018 at 4:05 PM EST

FREMONT, Calif., Nov. 06, 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 third quarter of 2018, which included the summary below from its President and CEO, Badri Kothandaraman.

Highlights for the quarter included:

  • Revenue of $78.0 million, including a $3.3 million milestone achievement from a partner on IQ 8
  • Record ending cash balance of $116.2 million
  • IQ 7 shipments at 78% of all microinverters
  • GAAP gross margin of 32.4%; non-GAAP gross margin of 32.8%
  • GAAP operating expenses of $25.6 million; non-GAAP operating expenses of $18.6 million
  • GAAP operating loss of $(0.4) million; non-GAAP operating income of $7.0 million
  • GAAP diluted EPS of $(0.03); non-GAAP diluted EPS of $0.04

Our revenue and earnings for the third 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
  Q3 2018   Q2 2018   Q3 2017   Q3 2018   Q2 2018   Q3 2017
Revenue $ 78,002     $ 75,896     $ 77,038     $ 78,002   $ 75,896   $ 77,038  
Gross margin   32.4 %     29.9 %     21.4 %     32.8 %     30.5 %     21.8 %
Operating income (loss) $ (374 )   $ (558 )   $ (5,901 )   $ 6,975   $ 4,133   $ (102 )
Net income (loss) $ (3,470 )   $ (3,738 )   $ (6,854 )   $ 4,626   $ 1,550   $ (964 )
Basic EPS $ (0.03 )   $ (0.04 )   $ (0.08 )   $ 0.05   $ 0.02   $ (0.01 )
Diluted EPS $ (0.03 )   $ (0.04 )   $ (0.08 )   $ 0.04   $ 0.01   $ (0.01 )

We shipped 204 megawatts DC, or approximately 665,000 microinverters. Our non-GAAP gross margin was 32.8%, an increase of 230 basis points from 30.5% in the prior quarter. Our non-GAAP operating expenses were $18.6 million, compared to $19.0 million in the prior quarter. Non-GAAP net income was $4.6 million, which resulted in basic non-GAAP earnings per share of $0.05 and diluted non-GAAP earnings per share of $0.04. Inventory was $17.9 million in the third quarter, compared to $17.5 million in the second quarter and $25.3 million in the third quarter of 2017.

Customers continued to appreciate our differentiated products, quality and service initiatives during the third quarter. Our strong balance sheet with a $116.2 million cash position was instrumental in driving increased customer demand. Our biggest challenge in the third quarter was meeting this additional demand as we experienced supply shortages which constrained our revenue by more than $10 million. We expect the supply shortages to continue in the fourth quarter of 2018 and have made appropriate investments to alleviate these constraints by early 2019.

In summary, we are pleased with our cash management and progress towards the achievement of our 30-20-10 target financial model. Our immediate priorities are to optimize our supply chain to meet the incremental demand and continue providing outstanding service to our customers worldwide.

BUSINESS HIGHLIGHTS

+  Enphase completed the acquisition of SunPower's microinverter business for a total of $25 million in cash and 7.5 million shares of Enphase common stock. Enphase is now the exclusive module level power electronics (MLPE) supplier for SunPower's residential business in the U.S. and expects volume shipments of IQ 7XS microinverters in the fourth quarter of 2018 and an acceleration of the ramp throughout 2019.

+ Enphase announced it has expanded its manufacturing agreement with Flex to include Mexico. Starting in the second quarter of 2019, Flex will begin delivering Enphase products produced in Mexico to the U.S. market to supply our growing demand and as part of a mitigation plan for the USTR Section 301 tariff in the U.S. 

+ Enphase is building on the success of its IQ Combiner™ series by announcing the IQ Combiner 3™ with Enphase IQ Envoy™. The IQ Combiner 3 makes PV and storage installations fast and flexible while offering improved aesthetics, by providing a consistent, pre-wired solution for residential applications.

+ Enphase raised approximately $62.4 million from a convertible debt offering with the settlement date on August 17, 2018. Enphase intends to use the net proceeds for general corporate purposes, which may include the repayment of indebtedness, working capital, and to fund potential acquisitions and strategic transactions.

+ On October 15, 2018, Enphase announced it has expanded its partnership with BayWa r.e. Solar Solutions Co., Ltd., a leading solar photovoltaic (PV) distributor globally, to distribute its seventh-generation Enphase IQ™ microinverters to installers across Southeast Asian countries including Thailand, Vietnam, the Philippines, Singapore, Indonesia, and Malaysia.

+ On October 29, 2018, Enphase and LONGi Solar announced a strategic partnership to develop Enphase Energized™ LONGi AC Modules (ACMs) based on seventh-generation Enphase IQ™ microinverters. The Enphase and LONGi developed ACMs will be available in the U.S. starting in the fourth quarter of 2018.

FOURTH QUARTER 2018 FINANCIAL OUTLOOK

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

  • Revenue to be within a range of $80.0 million to $90.0 million
  • GAAP and non-GAAP gross margin to be within a range of 31% to 34%
  • GAAP operating expenses to be within a range of $25.0 million to $28.0 million, including a total of approximately $7.2 million estimated for stock-based compensation expenses, additional restructuring expenses and acquisition related expenses and amortization
  • Non-GAAP operating expenses to be within a range of $18.5 million to $20.5 million, excluding a total of approximately $7.2 million estimated for stock-based compensation expenses, additional restructuring expenses and acquisition related expenses and amortization

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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 third quarter 2018 results and fourth 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 2685735.  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 2685735, 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, product shipments, and 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 more than 18 million microinverters, and over 820,000 Enphase systems have been deployed in more than 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
September 30,
  Nine Months Ended
September 30,
  2018   2017   2018   2017
Net revenues $ 78,002     $ 77,038     $ 223,870     $ 206,492  
Cost of revenues 52,738     60,577     157,589     169,438  
Gross profit 25,264     16,461     66,281     37,054  
Operating expenses:              
Research and development 8,165     7,397     25,247     24,949  
Sales and marketing 7,375     5,453     20,430     18,186  
General and administrative 7,510     5,441     21,423     16,238  
Restructuring charges 2,588     4,071     2,588     14,927  
Total operating expenses 25,638     22,362     69,688     74,300  
Loss from operations (374 )   (5,901 )   (3,407 )   (37,246 )
Other expense, net:              
Interest expense (2,469 )   (1,760 )   (7,031 )   (5,979 )
Other income (expense) (379 )   623     (1,077 )   1,771  
Total other expense, net (2,848 )   (1,137 )   (8,108 )   (4,208 )
Loss before income taxes (3,222 )   (7,038 )   (11,515 )   (41,454 )
(Provision) benefit from income tax (248 )   184     (821 )   (798 )
Net loss $ (3,470 )   $ (6,854 )   $ (12,336 )   $ (42,252 )
Net loss per share:              
Basic and diluted $ (0.03 )   $ (0.08 )   $ (0.13 )   $ (0.52 )
Shares used in per share calculation:              
Basic and diluted 102,798     84,862     97,257     81,993  
                       
                       

 

ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

  September 30,
 2018
  December 31,
 2017
ASSETS      
Current assets:      
Cash and cash equivalents $ 116,164     $ 29,144  
Accounts receivable 54,117     65,346  
Inventory 17,886     25,999  
Prepaid expenses and other 21,631     9,957  
Total current assets 209,798     130,446  
Property and equipment, net 20,331     26,483  
Intangible assets, net 36,078     515  
Goodwill 24,783     3,664  
Other assets 35,520     8,039  
Total assets $ 326,510     $ 169,147  
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Accounts payable $ 28,103     $ 28,747  
Accrued liabilities 50,679     29,874  
Deferred revenues 32,015     15,691  
Debt, current 24,125     17,429  
Total current liabilities 134,922     91,741  
Long-term liabilities:      
Deferred revenues, noncurrent 74,065     29,941  
Warranty obligations, noncurrent 23,067     22,389  
Other liabilities 2,393     1,880  
Debt, noncurrent 87,907     32,322  
Total liabilities 322,354     178,273  
Total stockholders' equity (deficit) 4,156     (9,126 )
Total liabilities and stockholders' equity $ 326,510     $ 169,147  
               
               

 

ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

  Nine Months Ended
September 30,
  2018   2017
Cash flows from operating activities:      
Net loss $ (12,336 )   $ (42,252 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Depreciation and amortization 6,950     6,763  
Provision for doubtful accounts 668     911  
Asset impairment charges 1,636     1,638  
Amortization of debt issuance costs 1,880     1,337  
Stock-based compensation 9,911     5,277  
Changes in operating assets and liabilities:      
Accounts receivable 10,671     (8,761 )
Inventory 8,112     6,644  
Prepaid expenses and other assets (3,995 )   (5,110 )
Intangible assets(1) (6,000 )    
Accounts payable, accrued and other liabilities 4,672     3,051  
Warranty obligations 2,368     (1,062 )
Deferred revenues (10,280 )   5,036  
Net cash provided by (used in) operating activities 14,257     (26,528 )
Cash flows from investing activities:      
Purchases of property and equipment (2,384 )   (3,609 )
Acquisition(1) (9,000 )    
Net cash used in investing activities (11,384 )   (3,609 )
Cash flows from financing activities:      
Proceeds from issuance of common stock, net of issuance costs 19,771     26,425  
Proceeds from debt 68,352     24,240  
Principal payments on term debt (5,664 )    
Payments under revolving credit facility     (10,100 )
Proceeds from issuance of common stock under employee stock plans 2,151     174  
Net cash provided by financing activities 84,610     40,739  
Effect of exchange rate changes on cash (463 )   512  
Net increase in cash and cash equivalents 87,020     11,114  
Cash and cash equivalents—Beginning of period 29,144     17,764  
Cash and cash equivalents—End of period $ 116,164     $ 28,878  

                               

(1) We made a payment of $15.0 million for the acquisition of SunPower's microinverter business, of which $6.0 million was allocated to cash flows from operating activities rather than investing activities. The allocation was for the intangible asset related to the acquired customer relationship, and it was based on the valuation of the customer relationship relative to the total consideration. The remaining $9.0 million was reported as cash flows from investing activities.

 

 

ENPHASE ENERGY, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)

    Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2018   2017   2018   2017
Gross profit (GAAP)   $ 25,264     $ 16,461     $ 66,281     $ 37,054  
Stock-based compensation   330     347     615     796  
Gross profit (Non-GAAP)   $ 25,594     $ 16,808     $ 66,896     $ 37,850  
                 
Gross margin (GAAP)   32.4 %   21.4 %   29.6 %   17.9 %
Stock-based compensation   0.4 %   0.4 %   0.3 %   0.4 %
Gross margin (Non-GAAP)   32.8 %   21.8 %   29.9 %   18.3 %
                 
Operating expenses (GAAP)   $ 25,638     $ 22,362     $ 69,688     $ 74,300  
Stock-based compensation(1)   (3,721 )   (1,381 )   (8,966 )   (4,481 )
Restructuring and asset impairment charges   (2,588 )   (4,071 )   (2,588 )   (14,927 )
Reserve for non-recurring legal matter           (1,765 )    
Acquisition related expenses and amortization   (710 )       (1,113 )    
Operating expenses (Non-GAAP)   $ 18,619     $ 16,910     $ 55,256     $ 54,892  
                 
(1) Includes stock-based compensation as follows:                
Research and development   $ 878     $ 607     $ 2,645     $ 1,994  
Sales and marketing   1,151     227     2,509     889  
General and administrative   1,692     547     3,812     1,598  
Total   $ 3,721     $ 1,381     $ 8,966     $ 4,481  
                 
Loss from operations (GAAP)   $ (374 )   $ (5,901 )   $ (3,407 )   $ (37,246 )
Stock-based compensation   4,051     1,728     9,911     5,277  
Restructuring and asset impairment charges   2,588     4,071     2,588     14,927  
Reserve for non-recurring legal matter           1,765      
Acquisition related expenses and amortization   710         1,113      
Income (loss) from operations (Non-GAAP)   $ 6,975     $ (102 )   $ 11,970     $ (17,042 )
                 
Net loss (GAAP)   $ (3,470 )   $ (6,854 )   $ (12,336 )   $ (42,252 )
Stock-based compensation   4,051     1,728     9,911     5,277  
Restructuring and asset impairment charges   2,588     4,071     2,588     14,927  
Reserve for non-recurring legal matter           1,765      
Acquisition related expenses and amortization   710         1,113      
Non-cash interest expense   747     91     1,880     834  
Net income (loss) (Non-GAAP)   $ 4,626     $ (964 )   $ 4,921     $ (21,214 )
                 
Net loss per share (GAAP)   $ (0.03 )   $ (0.08 )   $ (0.13 )   $ (0.52 )
Stock-based compensation   0.03     0.02     0.10     0.06  
Restructuring and asset impairment charges   0.02     0.05     0.03     0.19  
Reserve for non-recurring legal matter           0.02      
Acquisition related expenses and amortization   0.01         0.01      
Non-cash interest expense   0.01         0.02     0.01  
Net income (loss) per share (Non-GAAP)   $ 0.04     $ (0.01 )   $ 0.05     $ (0.26 )
                 
Shares used in per share calculation GAAP   102,798     84,862     97,257     81,993  
Shares used in per share calculation Non-GAAP   110,900     84,862     104,746     81,993  

 

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Source: Enphase Energy, Inc.

 

 

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