Enphase Energy Reports Financial Results for the Second Quarter of 2020

FREMONT, Calif., Aug. 04, 2020 (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 2020, which included the summary below from its President and CEO, Badri Kothandaraman.

We reported revenue of $125.5 million in the second quarter of 2020, along with a record 39.6% for non-GAAP gross margin. Our second quarter revenue decreased 39% sequentially, or 22% sequentially, excluding the impact of $44.5 million of safe harbor revenue in the first quarter of 2020. We shipped approximately 355 megawatts DC, or 1,087,662 microinverters.

Highlights for the second quarter of 2020 included:

  • Shipments of Enphase Encharge™ energy storage systems in June for pilot runs to installers

  • Revenue of $125.5 million

  • Cash flow from operations of $25.4 million; ending cash balance of $607.3 million

  • GAAP gross margin of 38.5%; record non-GAAP gross margin of 39.6%

  • GAAP operating expenses of $37.5 million; non-GAAP operating expenses of $26.0 million

  • GAAP operating income of $10.9 million; non-GAAP operating income of $23.7 million

  • GAAP net loss of $47.3 million, including a non-cash charge of $59.7 million from fair value changes related to our convertible notes issued in March 2020 due to an increase in our stock price

  • Non-GAAP net income of $23.5 million

  • GAAP basic and diluted net loss per share of $(0.38); non-GAAP diluted earnings per share of $0.17             

Our revenue and earnings for the second quarter of 2020 are provided below, compared with those of the prior quarter and the year ago quarter:

(In thousands, except per share data and percentages)

 GAAP Non-GAAP
 Q2 2020 Q1 2020 Q2 2019 Q2 2020 Q1 2020 Q2 2019
Revenue$125,538  $205,545  $134,094  $125,538  $205,545  $134,094 
Gross margin38.5% 39.2% 33.8% 39.6% 39.5% 34.1%
Operating expenses$37,533  $35,963  $27,872  $26,024  $28,508  $22,478 
Operating income$10,854  $44,712  $17,447  $23,700  $52,773  $23,227 
Net income (loss)$(47,294) $68,936  $10,618  $23,549  $51,875  $23,173 
Basic EPS$(0.38) $0.56  $0.09  $0.19  $0.42  $0.20 
Diluted EPS$(0.38) $0.50  $0.08  $0.17  $0.38  $0.18 

Our non-GAAP gross margin increased to 39.6% from 39.5% in the first quarter of 2020, driven by disciplined pricing and cost management. Non-GAAP operating expenses decreased to $26.0 million in the second quarter of 2020, compared to $28.5 million in the prior quarter, primarily due to our tight spending controls. Non-GAAP operating income was $23.7 million, compared to $52.8 million in the prior quarter.

We exited the second quarter with $607.3 million in cash and generated $25.4 million in cash flow from operations.  Inventory was $31.2 million at the end of the second quarter of 2020, compared to $34.6 million at the end of the first quarter of 2020. I am proud of our team’s excellent inventory management and control.

We shipped our Encharge energy storage systems in June for pilot runs to a few of our installers and the feedback has been good. Encharge storage systems feature Ensemble™ energy management technology, which powers the world’s first grid-agnostic microinverter-based storage system. We started Encharge production shipments in July to customers in North America. We are pleased with the initial feedback from our customers, who see the Encharge energy storage system as a safe, reliable and powerful option for energy independence. I want to thank our engineers worldwide who worked tirelessly to bring this breakthrough product to market.

We continue to focus relentlessly on customer experience. The employees in all four of our customer experience centers – the U.S., Europe, India, and Australia – are fully supporting installers and homeowners, while working from home. Our worldwide Net Promoter Score was 66% in the second quarter of 2020, a slight increase from 64% in the prior quarter. During the second quarter of 2020, we launched the online Enphase Community which gives installers and homeowners the ability to communicate directly about Enphase products. In addition, we opened online stores in Europe and Australia to better service installers and homeowners. These stores, along with our U.S. online store, are increasing the accessibility of our clean energy solutions.

We continue to navigate through the COVID-19 pandemic with strong support from our partners and customers. Our sales and operations teams were laser-focused on managing the channel during the second quarter of 2020, working closely with our installers and distributors. While we saw a rebound in customer demand in June and July, we are carefully monitoring the resurgence of the COVID-19 pandemic in several states. We have a resilient business model that enables strong cash flow generation even during difficult economic periods, enabling us to invest in product innovation and digital transformation. We are well-positioned with Ensemble and look forward to accelerating the introduction of new products over the next eighteen months.

BUSINESS HIGHLIGHTS

On June 1, 2020, Enphase Energy announced its expansion into Poland in collaboration with SmartX Sp. z o.o., a solar distributor with headquarters in Bytom, Poland. SmartX’s installer network throughout Poland offers both residential and small commercial microinverter systems, utilizing Enphase IQ 7™ family of microinverters including IQ 7, IQ 7+™ and IQ 7X™.

On June 25, 2020, Enphase Energy and Q Cells, a renowned total energy solutions provider, announced a strategic partnership to develop Enphase Energized™ Q CELLS AC Modules (ACMs) based on seventh-generation Enphase IQ™ microinverters. The ACMs are available from major distributors in the U.S. 

On July 6, 2020, Enphase Energy announced the launch of Enphase University, a combination of online and in-person training resources for solar and storage installers and Enphase system owners. Enphase University includes an integrated, web-based Learning Management System (LMS) that enables installers to complete training modules and manage training plans online.

On July 15, 2020, Enphase Energy and Maxeon Solar Technologies, SunPower’s planned spin-off, announced a strategic partnership to produce the new Enphase Energized Maxeon AC Module, featuring a factory-integrated seventh-generation Enphase IQ microinverter. The AC Module will be commercialized by Maxeon Solar Technologies to residential customers in key international markets starting in the fourth quarter of 2020.

On July 29, 2020, Enphase Energy announced that it began shipping Encharge energy storage systems to customers in North America during June. For the first time, homeowners can easily generate, store and control energy with technology, all designed by Enphase.

THIRD QUARTER 2020 FINANCIAL OUTLOOK

For the third quarter of 2020, Enphase Energy estimates both GAAP and non-GAAP financial results as follows:

  • Revenue to be within a range of $160 million to $175 million

  • GAAP gross margin to be within a range of 36% to 39%; non-GAAP gross margin to be within a range of 37% to 40%, excluding stock-based compensation expenses

  • GAAP operating expenses to be within a range of $41.0 million to $43.0 million, including $13.0 million estimated for stock-based compensation expenses and acquisition related amortization

  • Non-GAAP operating expenses to be within a range of $28.0 million to $30.0 million, excluding $13.0 million estimated for stock-based compensation expenses and acquisition related 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 second quarter 2020 results and third quarter 2020 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 1782661. 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 one year. In addition, an audio replay of the conference call will be available by calling (855) 859-2056; participant passcode 1782661, beginning approximately one hour after the call.

Forward-Looking Statements

This press release contains forward-looking statements, including statements related to Enphase Energy’s expectations as to the impact of the COVID-19 pandemic, future financial performance, expense levels, liquidity sources, the capabilities, advantages, and performance of our technology and products, our business strategies, including anticipated trends, growth and developments in targeted markets, new products, performance in operations, and the performance of our partners. 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 manage solar generation, storage and communication on one intelligent platform. The Company revolutionized the solar industry with its microinverter technology and produces a fully integrated solar-plus-storage solution. Enphase has shipped more than 28 million microinverters, and over 1.2 million Enphase systems have been deployed in more than 130 countries. For more information, visit www.enphase.com.

Enphase Energy®, the Enphase logo, Encharge, Ensemble, IQ, IQ 7, IQ 7+, IQ 7X, Enphase Energized, and other trademarks or service names are the trademarks of Enphase Energy, Inc. Other names are for informational purposes and may be trademarks of their respective owners.

Contact:
Adam Hinckley
Enphase Energy, Inc.
Investor Relations
ir@enphaseenergy.com
+1-707-763-4784 x7354


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,
 2020 2019 2020 2019
Net revenues$125,538  $134,094  $331,083  $234,244 
Cost of revenues77,151  88,775  202,021  155,586 
Gross profit48,387  45,319  129,062  78,658 
Operating expenses:       
Research and development13,192  9,604  25,068  18,128 
Sales and marketing12,371  9,054  24,143  16,487 
General and administrative11,970  8,583  24,285  18,463 
Restructuring charges  631    999 
Total operating expenses37,533  27,872  73,496  54,077 
Income from operations10,854  17,447  55,566  24,581 
Other expense, net       
Interest income282  593  1,373  804 
Interest expense(5,952) (1,351) (9,107) (5,102)
Other (expense) income, net653  (5,480) (271) (5,961)
Change in fair value of derivatives (1)(59,692)   (44,348)  
Total other expense, net(64,709) (6,238) (52,353) (10,259)
Income (loss) before income taxes(53,855) 11,209  3,213  14,322 
Income tax benefit (provision)6,561  (591) 18,429  (939)
Net income (loss)$(47,294) $10,618  $21,642  $13,383 
Net income (loss) per share:       
Basic$(0.38) $0.09  $0.17  $0.12 
Diluted$(0.38) $0.08  $0.16  $0.11 
Shares used in per share calculation:       
Basic125,603  113,677  124,567  110,951 
Diluted125,603  130,737  138,910  129,400 

(1)  Change in fair value of derivatives of $59.7 million and $44.3 million for the three and six months ended June 30, 2020, respectively, represents changes in fair value of the conversion option in the Notes due 2025, as well as the convertible note hedge and warrant transactions. Initially, conversion of the Notes due 2025 would be settled solely in cash as a result of the Company not having the necessary number of authorized but unissued shares of its common stock available to settle the conversion option of the Notes due 2025 in shares; therefore, the conversion option, convertible note hedge and warrant transactions were classified as derivatives that required marked-to-market accounting. On May 20, 2020, at the Company’s annual meeting of stockholders, the stockholders approved an amendment to its certificate of incorporation to increase the number of authorized shares of the Company’s common stock. As a result, the Company will now be able to settle the Notes due 2025, convertible notes hedge and warrants through payment or delivery, as the case may be, of cash, shares of its common stock or a combination thereof, at the Company’s election. Accordingly, on May 20, 2020, the conversion option, convertible note hedge and warrant transactions were remeasured at fair value and were then reclassified to additional paid-in-capital in the condensed consolidated balance sheet in the second quarter of 2020 and are no longer remeasured as long as they continue to meet the conditions for equity classification.


ENPHASE ENERGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

 June 30,
2020
 December 31,
2019
ASSETS   
Current assets:   
Cash and cash equivalents$607,254   $251,409  
Restricted cash—   44,700  
Accounts receivable, net89,504   145,413  
Inventory31,186   32,056  
Prepaid expenses and other assets29,257   26,079  
Total current assets757,201   499,657  
Property and equipment, net32,972   28,936  
Operating lease, right of use asset11,462   10,117  
Intangible assets, net28,086   30,579  
Goodwill24,783   24,783  
Other assets49,551   44,620  
Deferred tax assets, net93,872   74,531  
Total assets$997,927   $713,223  
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$24,135   $57,474  
Accrued liabilities46,691   47,092  
Deferred revenues, current40,256   81,783  
Warranty obligations, current10,170   10,078  
Debt, current102,271   2,884  
Total current liabilities223,523   199,311  
Long-term liabilities:   
Deferred revenues, noncurrent110,977   100,204  
Warranty obligations, noncurrent27,737   27,020  
Other liabilities12,340   11,817  
Debt, noncurrent253,174   102,659  
Total liabilities627,751   441,011  
Total stockholders’ equity370,176   272,212  
Total liabilities and stockholders’ equity$997,927   $713,223  


ENPHASE ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)

 Three Months Ended Six Months Ended
 June 30,
2020
 March 31,
2020
 June 30,
2019
 June 30,
2020
 June 30,
2019
Cash flows from operating activities:         
Net (loss) income$(47,294) $68,936  $10,618  $21,642  $13,383 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:         
Depreciation and amortization4,141  3,844  4,122  7,985  7,694 
Provision for doubtful accounts81  104  207  185  207 
Non-cash interest expense5,372  2,722  776  8,094  2,266 
Financing fees on extinguishment of debt        2,152 
Fees paid for repurchase and exchange of convertible notes due 2023    6,000    6,000 
Stock-based compensation12,300  7,515  4,934  19,815  8,224 
Change in fair value of derivatives59,692  (15,344)   44,348   
Deferred income taxes(7,067) (12,500)   (19,567)  
Changes in operating assets and liabilities:         
Accounts receivable6,529  49,637  (15,838) 56,166  (19,104)
Inventory3,430  (2,560) (7,123) 870  (3,827)
Prepaid expenses and other assets(4,525) (5,009) (7,155) (9,534) (9,568)
Accounts payable, accrued and other liabilities(13,323) (22,066) 11,954  (35,389) 16,805 
Warranty obligations406  403  1,951  809  1,699 
Deferred revenues5,689  (36,460) 4,326  (30,771) 5,904 
Net cash provided by operating activities25,431  39,222  14,772  64,653  31,835 
Cash flows from investing activities:         
Purchases of property and equipment(4,451) (3,353) (2,518) (7,804) (3,176)
Net cash used in investing activities(4,451) (3,353) (2,518) (7,804) (3,176)
Cash flows from financing activities:         
Issuance of convertible notes, net of issuance costs(591) 313,011  128,040  312,420  128,040 
Purchase of convertible note hedges  (89,056) (36,313) (89,056) (36,313)
Sale of warrants  71,552  29,819  71,552  29,819 
Fees paid for repurchase and exchange of convertible notes due 2023    (6,000)   (6,000)
Principal payments and financing fees on debt(485) (1,148) (391) (1,633) (45,122)
Proceeds from exercise of equity awards and employee stock purchase plan2,867  1,979  958  4,846  2,622 
Payment of withholding taxes related to net share settlement of equity awards(9,385) (34,267) (735) (43,652) (2,090)
Net cash provided by (used in) financing activities(7,594) 262,071  115,378  254,477  70,956 
Effect of exchange rate changes on cash and cash equivalents24  (205) 240  (181) 107 
Net increase in cash and cash equivalents13,410  297,735  127,872  311,145  99,722 
Cash, cash equivalents and restricted cash—Beginning of period593,844  203,046  78,087  296,109  106,237 
Cash and cash equivalents—End of period$607,254  $500,781  $205,959  $607,254  $205,959 
 


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

 Three Months Ended Six Months Ended
 June 30,
2020
 March 31,
2020
 June 30,
2019
 June 30,
2020
 June 30,
2019
Gross profit (GAAP)$48,387  $80,675  $45,319  $129,062  $78,658 
Stock-based compensation1,337  606  386  1,943  617 
Gross profit (Non-GAAP)$49,724  $81,281  $45,705  $131,005  $79,275 
          
Gross margin (GAAP)38.5% 39.2% 33.8% 39.0% 33.6%
Stock-based compensation1.1% 0.3% 0.3% 0.6% 0.2%
Gross margin (Non-GAAP)39.6% 39.5% 34.1% 39.6% 33.8%
          
Operating expenses (GAAP)$37,533  $35,963  $27,872  $73,496  $54,077 
Stock-based compensation (1)(10,963) (6,909) (4,217) (17,872) (7,220)
Restructuring and asset impairment charges    (631)   (999)
Acquisition related expenses and amortization(546) (546) (546) (1,092) (1,092)
Operating expenses (Non-GAAP)$26,024  $28,508  $22,478  $54,532  $44,766 
          
(1) Includes stock-based compensation as follows:         
Research and development$3,263  $1,919  $1,128  $5,182  $1,844 
Sales and marketing3,610  1,942  1,360  5,552  2,359 
General and administrative4,090  3,048  1,729  7,138  3,017 
Total$10,963  $6,909  $4,217  $17,872  $7,220 
          
Income from operations (GAAP)$10,854  $44,712  $17,447  $55,566  $24,581 
Stock-based compensation12,300  7,515  4,603  19,815  7,837 
Restructuring and asset impairment charges    631    999 
Acquisition related expenses and amortization546  546  546  1,092  1,092 
Income from operations (Non-GAAP)$23,700  $52,773  $23,227  $76,473  $34,509 
          
Net income (loss) (GAAP)$(47,294) $68,936  $10,618  $21,642  $13,383 
Stock-based compensation12,300  7,515  4,603  19,815  7,837 
Restructuring and asset impairment charges    631    999 
Acquisition related expenses and amortization546  546  546  1,092  1,092 
Non-recurring debt prepayment fees and non-cash interest5,372  2,722  6,775  8,094  9,390 
Change in fair value of derivatives59,692  (15,344)   44,348   
Non-GAAP income tax adjustment(7,067) (12,500)   (19,567)  
Net income (Non-GAAP)$23,549  $51,875  $23,173  $75,424  $32,701 
          
Net income (loss) per share, basic (GAAP)$(0.38) $0.56  $0.09  $0.17  $0.12 
Stock-based compensation0.10  0.06  0.04  0.16  0.07 
Restructuring and asset impairment charges        0.01 
Acquisition related expenses and amortization    0.01  0.01  0.01 
Non-recurring debt prepayment fees and non-cash interest0.05  0.02  0.06  0.07  0.08 
Change in fair value of derivatives0.48  (0.12)   0.36   
Non-GAAP income tax adjustment(0.06) (0.10)   (0.16)  
Net income per share, basic (Non-GAAP)$0.19  $0.42  $0.20  $0.61  $0.30 
Shares used in basic per share calculation GAAP and Non-GAAP125,603  123,531  113,677  124,567  110,951 
          
Net income (loss) per share, diluted (GAAP)$(0.38) $0.50  $0.08  $0.16  0.11 
Stock-based compensation0.09  0.06  0.04  0.14  0.06 
Restructuring and asset impairment charges    0.01    0.01 
Acquisition related expenses and amortization      0.01  0.01 
Non-recurring debt prepayment fees and non-cash interest0.04  0.02  0.05  0.06  0.07 
Change in fair value of derivatives0.48  (0.11)   0.33   
Non-GAAP income tax adjustment(0.06) (0.09)   (0.14) $ 
Net income per share, diluted (Non-GAAP) (2) (4)$0.17  $0.38  $0.18  $0.56  $0.26 
          
Shares used in diluted per share calculation GAAP125,603  138,104  130,737  138,910  129,400 
Shares used in diluted per share calculation Non-GAAP (3) (4)135,770  135,168  130,737  135,557  129,400 

(2)  Calculation of non-GAAP diluted net income per share for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019 excludes convertible notes due 2023 interest expense, net of tax of less than $0.1 million, $0.1 million and $0.4 million, respectively, from non-GAAP net income. Calculation of non-GAAP diluted net income per share for the six months ended June 30, 2020 and June 30, 2019 excludes convertible notes due 2023 interest expense, net of tax of less than $0.1 million and $0.8 million, respectively, from non-GAAP net income.

(3)  Effect of dilutive in-the-money portion of convertible senior notes and warrants are included in the GAAP weighted-average diluted shares in periods where the Company has GAAP net income. The Company excluded the in-the-money portion of convertible notes due 2024 totaling 3,677 thousand shares and 2,936 thousand shares in the three months ended June 30, 2020 and March 31, 2020, respectively, and 3,353 thousand shares for the six months ended June 30, 2020 for non-GAAP weighted-average diluted shares as the Company entered into convertible note hedge transactions that reduce potential dilution to the Company’s common stock upon any conversion of the notes due 2024.

(4)  Effect of dilutive in-the-money portion of Stock Options, RSUs, PSUs, shares to be purchased under the Company’s ESPP, the Notes due 2023 and the warrants issued in conjunction with the Notes due 2024 are included in the non-GAAP weighted-average diluted shares in periods where the Company has non-GAAP net income, which totaled 10,167 thousand shares in the three months ended June 30, 2020.

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