Enphase Energy, Inc., a global energy technology company and the world’s leading supplier of solar microinverters, announced recently financial results for the first quarter ended March 31, 2017. Enphase Energy reported total revenue for the first quarter of 2017 of $54.8 million. During the first quarter of 2017, Enphase sold approximately 138MW (AC) or 573,000 microinverters. GAAP gross margin for the first quarter of 2017 was 12.9 percent and non-GAAP gross margin was 13.3 percent. Gross margin was lower than expected primarily as a result of cost absorption on decreased revenue volume.
GAAP operating expenses for the first quarter of 2017 were $29.1 million and non-GAAP operating expenses were $20.2 million, a decrease of 14 percent sequentially. GAAP operating loss for the first quarter of 2017 was $22.1 million and non-GAAP operating loss was $12.9 million. GAAP net loss for the first quarter of 2017 was $23.3 million, or a net loss of $0.30 per share. On a non-GAAP basis, net loss was $13.6 million, or a net loss of $0.18 per share.
The Company exited the quarter with a total cash balance of $30.0 million.
“Our revenue for the first quarter was lower than expected due to the extraordinarily wet winter in California, where we have a significant presence,” said Paul Nahi, president and CEO of Enphase Energy. “We started shipping our Enphase Home Energy Solution with IQ™, our sixth-generation integrated solar, storage and energy management offering, in the U.S. at the end of the first quarter. We look forward to the U.S. launch of our integrated AC solar modules, developed with our partners, during the second quarter. These modules, which we believe are the future of rooftop solar, will include our sixth-generation microinverters, creating a simpler and more consolidated solution.”
“The financing actions and restructuring initiatives we took over the past three quarters have helped to strengthen our cash position and reduce our non-GAAP operating expenses in the first quarter by 14 percent sequentially,” said Bert Garcia, CFO of Enphase Energy. “We expect the full effect of our restructuring initiatives will bring our non-GAAP operating expense run-rate to approximately 18 million dollars, starting in the second quarter, as we continue to focus on achieving sustainable profitability in the second half of 2017.”
“We expect our revenue for the second quarter of 2017 to be within a range of $72 million to $80 million,” stated Bert Garcia. “We expect GAAP and non-GAAP gross margin for the second quarter to be within a range of 17 percent to 20 percent. Non-GAAP gross margin excludes approximately $300,000 of stock-based compensation expense. We expect our GAAP operating expense for the second quarter to be within a range of $22 million to $24 million and non-GAAP operating expense to be within a range of $17 million to $19 million, excluding an estimated $1.7 million of stock-based compensation expense and approximately $3.2 million of additional restructuring expense.”
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.
Acquisition-related net charges (credits). These items include: (1) revaluation of contingent consideration and its income tax effects, which represent accounting adjustments to state contingent consideration liabilities at their estimated fair value, and (2) amortization of acquired intangibles, which consists of customer relationships. These items relate to a specific prior acquisition and are not reflective of the Company’s ongoing financial performance.
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 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.
Amortization of Debt Issuance Costs. The Company excludes amortization of debt issuance costs because the costs do 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 first quarter 2017 results and second quarter 2017 business outlook today at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time). Open to the public, investors may access the call by dialing 877-644-1284; participant passcode 7699348. A live webcast of the conference call, together with accompanying presentation slides, 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 7699348 beginning approximately one hour after the call.
This press release contains forward-looking statements, including statements related to Enphase Energy’s: launch of AC solar modules and belief that such modules are the future of rooftop solar; expectations regarding the future financial effect of restructuring initiatives on operating expense run rates; timing of achieving sustainable profitability; and expected future financial performance. 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.