Enphase Energy, a major provider of solar microinverters, held its Q3, 2022 earnings report, announcing record revenues of $634 million. The company operated with GAAP gross margins of 42.2%, net income of $114 million, and diluted earnings per share of $0.80 ($1.25 non-GAAP). The company has a free cash flow of $179.1 million, and ending cash, cash equivalents, and marketable securities of $1.42 billion.
The report shows that Enphase has continued its remarkable growth story, operating with strong financial health. This strength has only been emboldened by the passage of the Inflation Reduction Act (IRA), which is set to provide manufacturing incentives for its products, including the flagship IQ8 microinverter. The IRA includes an 11 cents per AC Watt production-based tax credit for domestic manufacture of microinverters.
Enphase CEO Badri Kothandaraman said on the call that the company has signed letters of intent with new manufacturing partners and said the company will extend partnerships with existing ones. Enphase plans to open four to six manufacturing lines in the US by the second half of 2023 to meet sharply rising demand.
“The logic is we are anyway growing fast as a company. We have to build extra lines somewhere. And therefore, these lines that I invest in, they’re not going to be wasted. They’re not going to be extra. They will probably be required. You can think about it as I’m accelerating them by a few months,” said Kothandaraman on the call.
The company said it has many questions to be answered about the implementation of the IRA as it relates to domestic manufacturing, and it is currently working with industry partners and stakeholders to provide comments to the Department of the Treasury.
“We are going to iron out those details, hopefully in the next three months, and things will be a lot clearer. But for now, we are investing in it,” Kothandaraman said.
IQ8 microinverters constituted approximately 47% of all microinverter shipments during the third quarter of 2022. Q8 Microinverters can form a microgrid and provide “Sunlight Backup” during an outage, even without a battery. With the company’s Sunlight Jump Start feature, IQ8 Microinverters can restart a home energy system using sunlight only after prolonged grid outages that may result in a fully depleted battery. This eliminates the need for a manual restart of the system.
The company also expects to continue expanding its international presence. Revenues in Europe increased 70% over the previous quarter, which followed 69% growth from Q1 to Q2. Enphase currently works with contract manufacturers to build its products at sites in Mexico, India, and China, with plans to introduce another site in Romania to service the EU market in 2023.
Looking ahead
For its Q4 outlook, Enphase said it expects Revenue to be within a range of $680 million to $720 million, which includes shipments of 120 to 135 MWh of Enphase IQ batteries. It projects GAAP gross margin to be within a range of 39.0% to 42.0%; non-GAAP gross margin to be within a range of 40.0% to 43.0%, excluding stock-based compensation expenses and acquisition related amortization.
Enphase forecasts GAAP operating expenses to be within a range of $152.0 million to $156.0 million and Non-GAAP operating expenses to be within a range of $87.0 million to $91.0 million, excluding $65.0 million estimated for stock-based compensation expenses, restructuring charges for site consolidation, and acquisition related costs and amortization.
ROTH Capital Partners said IRA value could be higher than expected for Enphase, and reiterated a “buy” rating with a $310 price target for Enphase shares.
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