Release Date: April 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Enphase Energy Inc (ENPH, Financial) reported a strong quarterly revenue of $356.1 million, shipping approximately 1.53 million microinverters and 170.1 megawatt hours of batteries.
- The company achieved a 49% gross margin and generated free cash flow of $33.8 million in Q1 2025.
- Enphase Energy Inc (ENPH) is expanding its product offerings, including the launch of the fourth-generation IQ battery and the IQ9 microinverter, which are expected to drive future growth.
- The company is actively diversifying its supply chain to mitigate the impact of tariffs, with plans to source battery cells from outside China by Q2 2026.
- Enphase Energy Inc (ENPH) is seeing growth in international markets, particularly in Europe, with new product introductions like the Flex phase battery and IQ EV charger.
Negative Points
- Enphase Energy Inc (ENPH) faces challenges from newly announced tariffs on products from China, which are expected to impact gross margins by 6% to 8% starting in Q3 2025.
- The US solar market is under pressure due to high interest rates and financial challenges faced by large national lease providers, impacting customer demand.
- The company's Q2 2025 revenue guidance is lower than Q1, with expected revenue between $340 million to $380 million, indicating potential demand softness.
- Enphase Energy Inc (ENPH) reported a decrease in US revenue by 13% in Q1 compared to Q4, primarily due to seasonality and softening customer demand.
- The company is experiencing elevated microinverter channel inventory, which could indicate slower sell-through and potential future inventory management challenges.
Q & A Highlights
Q: The Q2 guidance includes a 2% gross margin headwind from tariffs, potentially increasing to 6-8% in Q3. Why is Enphase absorbing some of these costs instead of passing them entirely to customers?
A: Badrinarayanan Kothandaraman, President and CEO, explained that while the tariffs impact battery costs, Enphase's diversified supply chain minimizes the effect on microinverters. The company plans to absorb most of the tariff impact, expecting to recover within two to three quarters by qualifying cell sources outside China. This strategic decision aims to maintain competitive pricing and customer relationships.
Q: Is the Q2 guidance accounting for any worsening demand trends due to IRA uncertainty or financial challenges faced by large national lease providers?
A: Badrinarayanan Kothandaraman noted that the guidance reflects current bookings, which are healthy at 80%. While financial challenges of a large lease provider affected Q1 sell-through, Enphase expects demand to improve as installers find alternative financiers. The company is also optimistic about the seasonal demand increase in Q2.
Q: Can you discuss the expected revenue cadence for Q3 and Q4, and any potential growth drivers?
A: Badrinarayanan Kothandaraman highlighted several growth vectors, including the ramp-up of the fourth-generation battery system and the introduction of IQ9 microinverters in Q4. In Europe, new products like the Flex phase battery and IQ EV charger are gaining traction. Despite policy uncertainties, Enphase is focusing on product innovation to drive growth.
Q: How will the tariffs impact battery storage margins, and what is the timeline for returning to pre-tariff margin levels?
A: Badrinarayanan Kothandaraman stated that the tariff impact on battery storage margins will be significant in the short term, but Enphase plans to mitigate this by sourcing cells outside China. The company expects the gross margin impact to improve each quarter, with a return to normalcy by Q2 2026.
Q: How is Enphase addressing potential logistics disruptions, particularly in shipping components from Asia?
A: Badrinarayanan Kothandaraman assured that Enphase's supply chain is well-diversified, with 85% of microinverters manufactured in the US. The company has established a robust logistics stream for raw materials, minimizing potential disruptions. Enphase is also increasing domestic battery production to further mitigate risks.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
