Enphase Energy Reports Financial Results for the Third Quarter of 2018
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
Follow Enphase Online
- Read the Enphase blog.
- Follow @Enphase on Twitter.
- Visit us on Facebook and LinkedIn.
- Watch Enphase videos on YouTube.
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 CarrabinoEnphase Energy, Inc.Investor Relations[email protected]+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 | ||||||||||||
