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Enphase Energy, Inc. (ENPH) SEC Filing 8-K Material Event for the period ending Tuesday, July 31, 2018

Enphase Energy, Inc.

CIK: 1463101 Ticker: ENPH
Exhibit 99.1
 enphearningsp_image1a04.jpg
Enphase Energy Reports Financial Results for the Second Quarter of 2018
PETALUMA, Calif., July 31, 2018 - 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 2018, which included the summary below from its President and CEO, Badri Kothandaraman. Highlights for the quarter included:
Revenue of $75.9 million, including a $2.0 million milestone payment from a partner on IQ 8
IQ 7 shipments at 22% of all microinverters
GAAP gross margin of 29.9%; non-GAAP gross margin of 30.5%
GAAP operating loss of $0.6 million; non-GAAP operating income of $4.1 million
GAAP EPS of $(0.04); non-GAAP EPS of $0.02
Ending cash balance of $58.5 million
Revenue and earnings for the second 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
 
Q2 2018
 
Q1 2018
 
Q2 2017
 
Q2 2018
 
Q1 2018
 
Q2 2017
Revenue
$75,896
 
$69,972
 
$74,704
 
$75,896
 
$69,972
 
$74,704
Gross margin
29.9
%
 
26.2
%
 
18.1
%
 
30.5
%
 
26.5
%
 
18.4
%
Operating income (loss)
$(558)
 
$(2,475)
 
$(9,247)
 
$4,133
 
$861
 
$(4,017)
Net income (loss)
$(3,738)
 
$(5,128)
 
$(12,093)
 
$1,550
 
$(1,255)
 
$(6,632)
Basic EPS
$(0.04)
 
$(0.06)
 
$(0.14)
 
$0.02
 
$(0.01)
 
$(0.08)

Our second quarter revenue was $75.9 million, an increase of 8% sequentially from $70.0 million, and an increase of 2% year-over-year. We shipped 203 megawatts DC, or 675,000 microinverters. Our non-GAAP gross margin was 30.5%, an increase of 400 basis points from 26.5% in the prior quarter. The increase was primarily due to pricing management, supply chain optimization, transition to IQ 7, and the IQ 8 milestone payment. Our non-GAAP operating expenses were $19.0 million, an increase of 7% compared to the prior quarter. We are very pleased to report non-GAAP operating income of $4.1 million, our third consecutive quarter of non-GAAP operating income. Non-GAAP net income was $1.6 million, which resulted in basic non-GAAP earnings per share of $0.02.
We exited the quarter with $58.5 million in cash. Inventory was $17.5 million in the second quarter, at the lowest point since 2014, compared to $18.5 million in the first quarter and $20.8 million in the second quarter of 2017.
In summary, we are pleased with our continued progress towards our 30-20-10 target operating model, which we expect to achieve in the fourth quarter of 2018.




BUSINESS HIGHLIGHTS
+ Enphase announced a definitive agreement to acquire SunPower's microinverter business for $25 million in cash and 7.5 million shares of Enphase common stock. Enphase will become the exclusive microinverter supplier for SunPower’s residential business in the U.S. Enphase’s IQ 7XS microinverter offers 97.5% CEC efficiency and was designed specifically for SunPower's X Series 96-cell PV modules with peak AC output power of 320W and a Maximum Power Point (MPP) tracking range of 53-64V. We are on track to close at the end of the third quarter of 2018 subject to product qualification and other closing conditions under the definitive asset purchase agreement.
+ Enphase announced it started shipping its IQ 7X microinverters to solar distributors in the U.S. The Enphase IQ 7X Micro™ is the highest power and highest efficiency variant of the seventh-generation IQ family of microinverters. The Enphase IQ 7X Micro is ideal for integration into AC Modules (ACMs).
+ Enphase announced the introduction of IQ 7 in Europe during the second quarter at the Intersolar Europe tradeshow. This introduction represented Enphase's entry into the German and Austrian solar markets, while expanding its presence in other solar markets such as France, Benelux, UK, and Switzerland.
+ Enphase introduced IQ 7 in Australia and New Zealand during the second quarter. IQ 7 microinverters offer state-of-the-art power performance, are lightweight (1.08 kg) and offer a compact form factor (212 mm x 175 mm x 30 mm). With 96.5% efficiency, IQ 7 microinverters produce up to 23% more power at nearly half the weight of Enphase's fifth-generation S-series microinverters, which they replace in Australia and New Zealand.
+ On July 19, 2018, Enphase announced the addition of ‘Service-on-the-Go’ for the Enlighten Manager, which provides detailed diagnostic capabilities, as well as fleet management tools, and the Installer Tool Kit platforms. As part of the Enphase customer experience initiative, Service-on-the-Go enables a solar installer to request a return and quickly activate a new microinverter in an existing system from the field using a smartphone or computer, 24 hours a day, seven days a week.
+ On July 24, 2018 Enphase announced that Momentum Solar, one of the fastest growing home solar service providers in the U.S., chose Enphase to be its exclusive inverter supplier. Enphase’s seventh-generation IQ microinverters will be interoperable with Enphase Ensemble™, a technology that will enable new grid-agnostic solar use cases in eighth-generation Enphase microinverters and enhance Momentum Solar’s ability to bring grid-agnostic solar to eligible homeowners.
THIRD QUARTER 2018 FINANCIAL OUTLOOK
For the third quarter of 2018, Enphase estimates both GAAP and non-GAAP financial results as follows:
Revenue to be within a range of $76 million to $82 million
GAAP and non-GAAP gross margin to be within a range of 30% to 33%
Non-GAAP operating expense to be within a range of $18.0 million to $19.0 million
GAAP operating expense to be within a range of $22.0 million to $23.0 million, including an estimated $4.0 million of stock-based compensation expense.
Follow Enphase Online
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Watch Enphase videos on YouTube.

Use of Non-GAAP Financial Measures
The Company has presented certain non-GAAP financial measures in this release. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States of America, or GAAP.



Reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure can be found in the accompanying tables to this press release. Non-GAAP financial measures presented by the Company include non-GAAP gross profit, gross margin, operating expenses, income (loss) from operations, net loss and net loss per share.
These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same captions and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP. As such, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company uses these non-GAAP financial measures to analyze its operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. Enphase believes that these non-GAAP financial measures reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.
As presented in the “Reconciliation of Non-GAAP Financial Measures” tables in the accompanying press release, each of the non-GAAP financial measures excludes one or more of the following items for purposes of calculating non-GAAP financial measures to facilitate an evaluation of the Company’s current operating performance and a comparison to its past operating performance:
Stock-based compensation expense. The Company excludes stock-based compensation expense from its non-GAAP measures primarily because they are non-cash in nature. Moreover, the impact of this expense is significantly affected by the Company’s stock price at the time of an award over which management has limited to no control.
Restructuring charges. The Company excludes restructuring charges due to the nature of the expenses being unplanned and arising outside the ordinary course of continuing operations. These costs primarily consist of fees paid for restructuring-related management consulting services, cash-based severance costs related to workforce reduction actions, asset write-downs of property and equipment and lease loss reserves, and other contract termination costs resulting from restructuring initiatives.
Reserve for non-recurring legal matter. This item represents a charge taken for the potential settlement cost related to a dispute with a vendor. This item is excluded as it relates to a specific matter and is not reflective of the Company’s ongoing financial performance.
Acquisition-related expenses. This item represents expenses incurred related to the Company’s acquisition of SunPower’s microinverter business, which are non-recurring in nature and not reflective of the Company's ongoing financial performance.
Non-cash interest expense. The Company excludes non-cash interest expense, which consists primarily of amortization of debt issuance costs, because the expense does not represent a cash outflow for the Company except in the period the financing was secured and such amortization expense is not reflective of the Company’s ongoing financial performance.

Conference Call Information
Enphase Energy will host a conference call for analysts and investors to discuss its second quarter 2018 results and third 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 8696758. 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 8696758, 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, and the expected 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 approximately 18 million microinverters, and more than 780,000 Enphase systems have been deployed in over 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 Carrabino
Enphase Energy, Inc.
Investor Relations
ir@enphaseenergy.com
+1-707-763-4784 x7294





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,
 
2018
 
2017
 
2018
 
2017
Net revenues
$
75,896

 
$
74,704

 
$
145,868

 
$
129,455

Cost of revenues
53,195

 
61,157

 
104,851

 
108,861

Gross profit
22,701

 
13,547

 
41,017

 
20,594

Operating expenses:
 
 
 
 
 
 
 
Research and development
9,462

 
7,947

 
17,082

 
17,552

Sales and marketing
6,828

 
6,274

 
13,055

 
12,732

General and administrative
6,969

 
4,964

 
13,913

 
10,797

Restructuring charges

 
3,609

 

 
10,856

Total operating expenses
23,259

 
22,794

 
44,050

 
51,937

Loss from operations
(558
)
 
(9,247
)
 
(3,033
)
 
(31,343
)
Other expense, net:
 
 
 
 
 
 
 
Interest expense
(2,269
)
 
(2,080
)
 
(4,562
)
 
(4,219
)
Other income (expense)
(572
)
 
88

 
(698
)
 
1,148

Total other expense, net
(2,841
)
 
(1,992
)
 
(5,260
)
 
(3,071
)
Loss before income taxes
(3,399
)
 
(11,239
)
 
(8,293
)
 
(34,414
)
Provision for income taxes
(339
)
 
(854
)
 
(573
)
 
(984
)
Net loss
$
(3,738
)
 
$
(12,093
)
 
$
(8,866
)
 
$
(35,398
)
Net loss per share:
 
 
 
 
 
 
 
Basic and diluted
$
(0.04
)
 
$
(0.14
)
 
$
(0.09
)
 
$
(0.44
)
Shares used in per share calculation:
 
 
 
 
 
 
 
Basic and diluted
97,321

 
84,434

 
94,026

 
80,542



1



ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

 
June 30,
2018
 
December 31,
2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
58,471

 
$
29,144

Accounts receivable
58,696

 
65,346

Inventory
17,471

 
25,999

Prepaid expenses and other
20,741

 
9,957

Total current assets
155,379

 
130,446

Property and equipment, net
23,100

 
26,483

Goodwill
3,664

 
3,664

Intangibles, net
363

 
515

Other assets
36,030

 
8,039

Total assets
$
218,536

 
$
169,147

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
21,895

 
$
28,747

Accrued liabilities
39,370

 
29,874

Deferred revenues
34,954

 
15,691

Debt, current
18,429

 
17,429

Total current liabilities
114,648

 
91,741

Long-term liabilities:
 
 
 
Deferred revenues, noncurrent
75,107

 
29,941

Warranty obligations, noncurrent
23,367

 
22,389

Other liabilities
1,970

 
1,880

Debt, noncurrent
33,559

 
32,322

Total liabilities
248,651

 
178,273

Total stockholders’ deficit
(30,115
)
 
(9,126
)
Total liabilities and stockholders’ deficit
$
218,536

 
$
169,147






2



ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Six Months Ended June 30,
 
2018

2017
Cash flows from operating activities:
 
 
 
Net loss
$
(8,866
)
 
$
(35,398
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
4,469

 
4,583

Provision for doubtful accounts
753

 
707

Asset impairment and restructuring

 
1,765

Amortization of debt issuance costs
1,133

 
1,063

Stock-based compensation
5,860

 
3,550

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
5,897

 
3,910

Inventory
8,528

 
11,121

Prepaid expenses and other assets
(1,551
)
 
(5,338
)
Accounts payable, accrued and other liabilities
(3,817
)
 
(14,107
)
Warranty obligations
1,826

 
199

Deferred revenues
(6,791
)
 
3,620

Net cash provided by (used in) operating activities
7,441

 
(24,325
)
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(1,475
)
 
(3,515
)
Net cash used in investing activities
(1,475
)
 
(3,515
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock, net of issuance costs
19,923

 
26,425

Proceeds from debt
5,580

 
24,240

Principal payments on term debt
(3,129
)
 

Payments under revolving credit facility

 
(10,100
)
Proceeds from issuance of common stock under employee stock plans
1,370

 
170

Net cash provided by financing activities
23,744

 
40,735

Effect of exchange rate changes on cash
(383
)
 
294

Net increase in cash and cash equivalents
29,327

 
13,189

Cash and cash equivalents—Beginning of period
29,144

 
17,764

Cash and cash equivalents—End of period
$
58,471

 
$
30,953




3



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


Three Months Ended
June 30,
 
Six Months Ended
June 30,


2018

2017
 
2018
 
2017
Gross profit (GAAP)

$
22,701


$
13,547

 
$
41,017

 
$
20,594

Stock-based compensation

417


211

 
615

 
449

Gross profit (Non-GAAP)

$
23,118


$
13,758

 
$
41,632

 
$
21,043






 
 
 
 
Gross margin (GAAP)

29.9
%

18.1
%
 
28.1
%
 
15.9
%
Stock-based compensation

0.6
%

0.3
%
 
0.4
%
 
0.4
%
Gross margin (Non-GAAP)

30.5
%

18.4
%
 
28.5
%
 
16.3
%







 
 
 
 
Operating expenses (GAAP)

$
23,259


$
22,794

 
$
44,050

 
$
51,937

Stock-based compensation(1)

(3,871
)

(1,410
)
 
(5,245
)
 
(3,101
)
Restructuring charges



(3,609
)
 

 
(10,856
)
Reserve for non-recurring legal matter




 
(1,765
)
 

Acquisition related expenses

(403
)


 
(403
)
 

Operating expenses (Non-GAAP)

$
18,985


$
17,775

 
$
36,637

 
$
37,980








 
 
 
 
(1) Includes stock-based compensation as follows:






 
 
 
 
Research and development

$
1,149


$
636

 
$
1,767

 
$
1,387

Sales and marketing

997


285

 
1,358

 
663

General and administrative

1,725


489

 
2,120

 
1,051

Total

$
3,871


$
1,410

 
$
5,245

 
$
3,101






 
 
 
 
Loss from operations (GAAP)

$
(558
)

$
(9,247
)
 
$
(3,033
)
 
$
(31,343
)
Stock-based compensation

4,288


1,621

 
5,860

 
3,550

Restructuring charges



3,609

 

 
10,856

Reserve for non-recurring legal matter




 
1,765

 

Acquisition related expenses

403



 
403

 

Income (loss) from operations (Non-GAAP)

$
4,133


$
(4,017
)
 
$
4,995

 
$
(16,937
)





 
 
 
 
Net loss (GAAP)

$
(3,738
)

$
(12,093
)
 
$
(8,866
)
 
$
(35,398
)
Stock-based compensation

4,288


1,621

 
5,860

 
3,550

Restructuring, asset impairments and other charges



3,609

 

 
10,856

Reserve for non-recurring legal matter




 
1,765

 

Acquisition related expenses

403



 
403

 

Non-cash interest expense

597


231

 
1,132

 
743

Net income (loss) (Non-GAAP)

$
1,550


$
(6,632
)
 
$
294

 
$
(20,249
)







 
 
 
 
Net loss per share (GAAP)

$
(0.04
)

$
(0.14
)
 
$
(0.09
)
 
$
(0.44
)
Stock-based compensation

0.04


0.02

 
0.06

 
0.04

Restructuring, asset impairments and other charges



0.04

 

 
0.14

Reserve for non-recurring legal matter




 
0.02

 

Non-cash interest expense




 

 

Income tax effect on acquisition/divestiture

0.01



 
0.01

 
0.01

Net income (loss) per share (Non-GAAP)

$
0.02


$
(0.08
)
 
$
0.00

 
$
(0.25
)







 
 
 
 
Shares used in per share calculation GAAP and Non-GAAP

97,321


84,434

 
94,026

 
80,542


4

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Ticker: ENPH
CIK: 1463101
Form Type: 8-K Corporate News
Accession Number: 0001463101-18-000072
Submitted to the SEC: Tue Jul 31 2018 4:12:44 PM EST
Accepted by the SEC: Tue Jul 31 2018
Period: Tuesday, July 31, 2018
Industry: Semiconductors And Related Devices
Events:
  1. Earnings Release
  2. Financial Exhibit

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