Enphase Energy Lowered Channel Inventory While Exiting Q2/2024

Microinverter Maker Raised US Revenues By Around 32%; Swings To Profitability With $10.8 Million Net Income
Enphase Energy
Enphase Energy’s Q2/2024 revenues had a 65:35 US and international mix, respectively. (Photo Credit: Enphase Energy, Inc.)
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Key Takeaways
  • Enphase Energy’s Q2 2024 revenues improved by 15% sequentially but declined 57% on an annual basis  

  • It sees an uptick in customer demand, even in the US as the California market picks up pace  

  • It targets to launch several new products within 2024, including Balcony Solar Kit Solution  

  • In Q3/2024, it expects to report revenues within $370 million to $410 Million  

US-based microinverter manufacturer Enphase Energy exited Q2 2024 having raised its quarterly revenues by over 15% quarter-over-quarter (QoQ) to $303.5 million, even though this was a decline of more than 57% year-over-year (YoY). The increase was thanks to a 5% sequential improvement in customer demand.   

Its revenues during the reporting quarter were led by the US with a 65% share, where it improved by 32% sequentially. The overall sell-through of its products in the US was up 8% over the same period. The rest of the markets contributed 35% to the revenue mix during the quarter.  

The revenues from Europe remained flat QoQ. However, Enphase CEO Badri Kothandaraman confirmed that the company’s global channel inventory returned to normal levels as it exited Q2/2024.  

Enphase’s shipments comprised 120.2 MWh of IQ Batteries, a significant improvement over 75.5 MWh in Q1 this year with higher battery attach rates in California. The management attributes it to the increasing adoption of NEM 3.0 in the US state. Enphase is now shipping its 3rd generation IQ Batteries, the IQ Battery 5P to the US, Mexico, Canada, Puerto Rico, Australia, the UK, Italy, France, the Netherlands, and Luxembourg.  

In Germany and other European markets, it targets to introduce its latest products, including Balcony Solar Kit Solution later this year.    

Jeff Osborne of TD Cowen listed the positives working in favor of Enphase as, “Enphase is underexposed in Europe and ~10 new geographies are ramping. Battery attach rate in NEM 3.0 systems is ~90%, with over 50% of them using Enphase batteries versus fears of market share losses. US made product with a shift to domestic enclosure vendors will allow customers to get 35.6% tax credit vs. 19.2% today by the start of 4Q. The full 40% can be captured with fasteners versus the need to use rails and fasteners today.” 

Its installer database is reported to have grown from more than 4,900 in Q1/2024 to over 7,400 globally in Q2/2024.  

Enphase’s gross margin of 45.2% improved from 43.9% in the previous quarter, and it returned to profitability with $10.8 million in net income, compared to -$16.1 million loss reported in Q1/2024 (see Enphase Energy Suffers -$16.1 Million Net Loss In Q1/2024).    

The company operates 5 microinverter manufacturing sites globally—1 each in Mexico, India, and China, and 2 in the US—with a quarterly capacity of 7.25 million microinverters. The US fabs helped it ship approximately 574,000 microinverters during the reporting quarter that it said were booked for 45X production tax credits.   

Guidance 

Going forward, it guides for Q3/2024 revenues within the $370 million to $410 million range, including shipments of 160 MWh to 180 MWh of IQ batteries. GAAP gross margin is forecast within the 45% to 48% range with net Inflation Reduction Act (IRA) benefit which it expects to fall between $30 million and $33 million, based on estimated shipments of 1,100,000 units of US manufactured microinverters.  

Going by Enphase’s results, Philip Shen of Roth MKM believes the US recovery may be in view for Enphase as the market expects a rate cut, new products being introduced and domestic content upside for its revenues and margins. However, it may face increasing competition from Tesla’s PW3 storage/inverter combo that’s available for a much lower price.

Having said that, Shen stressed that Enphase may have accounted for volume loss from this competition in its outlook. It can counter PW3 benefits, but only after the next 3-4 quarters.  

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