Enphase reports third quarter of losses in Q2 2016


Today Enphase released results for the second quarter of 2016, reporting a 22% fall year-over-year fall in revenues to $79.2 million despite selling nearly 800,000 microinverters. The company also reported a -20% operating margin and a net loss of $16.7 million.

This is Enphase’s third consecutive quarter of losses. The company appears to be pursuing growth at the expense of short-term profits, and repeatedly alluded to the reduction of prices for its products. “We took some very aggressive pricing actions, both the latter part of 2015 and the first half of 2016,” noted Enphase on its quarterly earnings call.

The company is similarly attempting to reduce costs 50% over a two-year period, and says that its cost reduction efforts are “well on track”. However, these clearly are not enough to put the company in the black.

Enphase seems to feel that this pricing strategy is necessary. The company stated in a conference call that it believes that if its products are competitively priced, installers will choose Enphase microinverters over other inverter products due to inherent advantages including ease of installation and safety.

However, competition in the small distributed applications where Enphase sells products does not only come from pure-play inverter makers, and a chief competitor has been module level power electronics maker SolarEdge. SolarEdge’s products offer many similar features to Enphase’s, but while Enphase reports losses, SolarEdge is pulling healthy profits while growing rapidly.

Enphase’s cash position fell to only $8.2 million at the end of the second quarter, however the company notes that it has access to a $50 million “accordion” revolving fund, and in early July entered into a $25 million term loan to provide short-term capital.

Enphase is introducing a number of new products that it says will boost its bottom line. The company expects to roll out volume shipments of its AC battery in Australia “in the next couple of weeks”, and expects to begin selling AC batteries in Hawaii and Europe by the end of 2016.

The company expects both its AC batteries and its energy management systems to boost revenues, and for margins to improve over the next few quarters. However, Enphase does not expect to become cash-flow positive until 2017.

Enphase reports growth in both Europe and Australia, including four new distribution partners in the Benelux region. However, the United States still represents 85% of Enphase’s business, and the company says that roll-out of its battery product will skew sales more towards the United States.

In the third quarter Enphase expects revenues to increase to $87-$93 million, but it also expects a similar gross margin and a slight increase in operating expenses.

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