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Enphase Energy Reports Financial Results for the Fourth Quarter and Fiscal Year 2016

Enphase Energy Reports Financial Results for the Fourth Quarter and Fiscal Year 2016

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Enphase Energy, Inc., a global energy technology company, announced recently financial results for the fourth quarter and year ended December 31, 2016. Enphase Energy reported total revenue for the fourth quarter of 2016 of $90.6 million, an increase of 2 percent compared to the third quarter of 2016 and an increase of 38 percent compared to the fourth quarter of 2015. During the fourth quarter of 2016, Enphase sold 194MW (AC) or 815,000 microinverters. GAAP gross margin for the fourth quarter of 2016 was 17.9 percent and non-GAAP gross margin was 18.2 percent. GAAP operating expenses for the fourth quarter of 2016 were $26.3 million and non-GAAP operating expenses were $23.4 million, a decrease of 19 percent sequentially. GAAP operating loss for the fourth quarter of 2016 was $10.1 million and non-GAAP operating loss was $6.9 million. GAAP net loss for the fourth quarter of 2016 was $13.2 million, or a net loss of $0.21 per share. On a non-GAAP basis, net loss was $9.3 million, or a net loss of $0.15 per share.

The Company exited the quarter with a total cash balance of $17.8 million. For the fiscal year 2016, total revenue was $322.6 million. During 2016, Enphase shipped a record 726MW (AC) or 3.1 million microinverters. GAAP gross margin for 2016 was 18.0 percent and non-GAAP gross margin was 18.4 percent. GAAP net loss for 2016 totaled $67.5 million, or a net loss of $1.34 per share. Non-GAAP net loss was $52.4 million, or a net loss of $1.04 per share in 2016. “A more competitive pricing strategy drove our inverter market share gains in the U.S. and globally during the second half of 2016,” said Paul Nahi, president and CEO of Enphase Energy. “The launch of our AC Battery storage solution in Australia and New Zealand during the third quarter and in the U.S. and Europe during the fourth quarter of 2016 helped drive multiple customer wins globally. Our product cost reduction efforts remain on track and we look forward to the U.S. launch of our Enphase Home Energy Solution with IQ™, our next-generation integrated solar, storage and energy management offering, during the first quarter of 2017.”

“We took several actions in the second half of 2016 to strengthen our cash position and reduce our operating expenses to better align Enphase’s resources with our long-term growth strategies,” said Bert Garcia, CFO of Enphase Energy. “Our third quarter restructuring initiatives resulted in $20 million of annualized non-GAAP operating expense savings starting in the fourth quarter of 2016. In addition, we took incremental restructuring actions in the first quarter of 2017, which we expect to result in an additional $18 million of annualized non-GAAP operating expense savings starting in the second quarter of 2017.”

Business Outlook

“We expect our revenue for the first quarter of 2017 to be within a range of $60 million to $65 million,” stated Bert Garcia. “While our first quarter results are typically impacted by normal seasonality, the extraordinarily wet winter in California, where we have a strong presence, has negatively impacted our first quarter guidance. We expect GAAP and non-GAAP gross margin for the first quarter to be within a range of 16 percent to 20 percent. Non-GAAP gross margin excludes approximately $250,000 of stock-based compensation expense. We expect our GAAP operating expense for the first quarter to be within a range of $27.5 million to $29.5 million and non-GAAP operating expense to be within a range of $19 million to $21 million, excluding an estimated $1.5 million of stock-based compensation expense and approximately $7 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 income (loss) and diluted net income (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 cash-based severance related to workforce reduction actions and asset write-downs of property and equipment, 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 fourth quarter and full year 2016 results and first 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 54561708. 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 54561708 beginning approximately one hour after the call.

Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to, statements related to Enphase Energy’s future financial performance, ability to drive down costs, market demands for its microinverters and future products, competitive position and advantages of its technology. 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 these risks and uncertainties, which include, without limitation, risks related to: the Company’s ability to raise additional capital to support its business, if required; the future demands for solar energy solutions; the reduction, elimination or expiration of government subsidies and economic incentives for on-grid solar electricity applications; the Company’s ability to achieve broader market acceptance of its microinverter and home energy solutions and to develop new and enhanced products in response to customer demands and rapid market and technological changes in the solar industry; the success and pricing of competing solar solutions that are or become available; the Company’s ability to effectively manage its operating expenses, its expansion into new markets, and its ability to maintain or achieve anticipated product quality, product performance and cost targets; competition and other factors that may cause potential future price reductions for its products;

the Company’s ability to optimally match production with demand, including distribution inventory levels, and dependence on a limited number of outside contract manufacturers and lack of supply contracts with these manufacturers; general economic conditions in domestic and international markets and other risks included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, which is on file with the SEC and available on the SEC’s website at www.sec.gov. Additional information will also be set forth in those sections in Enphase Energy’s Annual Report on Form 10-K for the year ended December 31, 2016, which will be filed with the SEC in the first quarter of 2017. All information set forth in this press release and its attachments is as of February 28, 2017. 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.

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 more than 13 million microinverters, and more than 580,000 Enphase systems have been deployed in more than 100 countries. Visit www.enphase.com for more information.

Enphase Energy®, the Enphase logo and other trademarks or service names are the trademarks of Enphase Energy, Inc.

 

ENPHASE ENERGY, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
(In thousands, except per share data) 
(Unaudited)
       
  Three Months Ended
December 31,
  Twelve Months Ended
December 31,
  2016   2015   2016   2015
Net revenues $ 90,601     $ 65,629     $ 322,591     $ 357,249  
Cost of revenues 74,367     49,929     264,583     249,032  
Gross profit 16,234     15,700     58,008     108,217  
Operating expenses:              
Research and development 11,378     12,544     50,703     50,819  
Sales and marketing 7,592     10,922     38,810     45,877  
General and administrative 6,296     7,405     27,418     30,830  
Restructuring charges 1,060         3,777      
  Total operating expenses 26,326     30,871     120,708     127,526  
Loss from operations (10,092 )   (15,171 )   (62,700 )   (19,309 )
Other income (expense), net              
Interest expense (1,181 )   (196 )   (2,773 )   (501 )
Other income (expense) (1,164 )   259     (514 )   (893 )
  Total other income (expense), net (2,345 )   63     (3,287 )   (1,394 )
Loss before income taxes (12,437 )   (15,108 )   (65,987 )   (20,703 )
Provision for income taxes (751 )   (675 )   (1,475 )   (1,379 )
Net loss $ (13,188 )   $ (15,783 )   $ (67,462 )   $ (22,082 )
Net loss per share:              
Basic and diluted $ (0.21 )   $ (0.35 )   $ (1.34 )   $ (0.49 )
Shares used in per share calculation:              
Basic and diluted 61,881     45,504     50,519     44,632  

 

 

 

ENPHASE ENERGY, INC.
Consolidated Balance Sheets
(In thousands, except par value)
(Unaudited)
  December 31,
  2016   2015
ASSETS      
Current assets:      
Cash and cash equivalents $ 17,764     $ 28,452  
Accounts receivable, net 61,019     46,099  
Inventory 31,960     40,800  
Prepaid expenses and other 7,121     6,417  
Total current assets 117,864     121,768  
Property and equipment, net 31,440     32,118  
Goodwill 3,664     3,745  
Intangibles, net 945     2,220  
Other assets 9,663     5,677  
Total assets $ 163,576     $ 165,528  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 31,696     $ 25,569  
Accrued liabilities 31,533     26,364  
Deferred revenues 6,411     3,915  
Revolving credit facility 10,100     17,000  
Current portion of term loan 3,032      
Total current liabilities 82,772     72,848  
Deferred revenues, non-current 33,893     25,115  
Warranty obligations, non-current 22,818     23,475  
Other liabilities 2,025     2,641  
Term loan, less current portion 20,768      
Total liabilities 162,276     124,079  
Commitments and contingencies      
Stockholders’ equity:      
Preferred stock      
Common stock 1      
Additional paid-in capital 252,126     224,732  
Accumulated deficit (250,535 )   (183,073 )
Accumulated other comprehensive loss (292 )   (210 )
Total stockholders’ equity 1,300     41,449  
Total liabilities and stockholders’ equity $ 163,576     $ 165,528  

 

 

 

ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
   
  Years Ended  December 31,
  2016   2015
Operating activities:      
Net loss $ (67,462 )   $ (22,082 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:      
Depreciation and amortization 10,638     10,539  
Provision for doubtful accounts 3,097     1,502  
Asset impairment and restructuring 3,190     522  
Gain on business divestiture (640 )    
Amortization of debt issuance costs 145     163  
Stock-based compensation 10,326     12,696  
Revaluation of contingent consideration liability     (1,827 )
Deferred income tax (benefit) expense 651     642  
Changes in operating assets and liabilities (net of acquisition/divestiture):      
  Accounts receivable (18,017 )   (2,482 )
  Inventory 8,840     (19,210 )
  Prepaid expenses and other assets (4,759 )   (5,281 )
  Accounts payable, accrued and other liabilities 9,764     (6,013 )
  Deferred revenues 11,274     9,671  
    Net cash (used in) provided by operating activities (32,953 )   (21,160 )
Investing activities:      
Purchases of property and equipment (12,167 )   (12,525 )
Purchases of intangible assets (678 )   (237 )
Business divestitures (acquisitions) 1,050      
Change in restricted cash     300  
    Net cash used in investing activities (11,795 )   (12,462 )
Financing activities:      
Proceeds from public offering of common stock, net of offering costs 16,142      
Proceeds from term loan, net of issuance costs 23,989      
Proceeds from borrowings under revolving credit facility 10,000     46,000  
Payments under revolving credit facility (16,900 )   (29,150 )
Holdback payment related to prior acquisition     (300 )
Repayments of term loans      
Proceeds from issuance of common stock under employee stock plans 1,144     4,014  
    Net cash provided by (used in) financing activities 34,375     20,564  
    Effect of exchange rate changes on cash (315 )   (522 )
    Net increase (decrease) in cash and cash equivalents (10,688 )   (13,580 )
Cash and cash equivalents — Beginning of year 28,452     42,032  
Cash and cash equivalents — End of year $ 17,764     $ 28,452  

 

ENPHASE ENERGY, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
         
    Three Months Ended
December 31,
  Twelve Months Ended
December 31,
    2016   2015   2016   2015
Gross profit (GAAP)   $ 16,234     $ 15,700     $ 58,008     $ 108,217  
Stock-based compensation   281     304     1,188     1,217  
Severance costs       52         52  
Gross profit (Non-GAAP)   $ 16,515     $ 16,056     $ 59,196     $ 109,486  
                 
Gross margin (GAAP)   17.9 %   23.9 %   18.0 %   30.3 %
Stock-based compensation   0.3 %   0.6 %   0.4 %   0.3 %
Gross margin (Non-GAAP)   18.2 %   24.5 %   18.4 %   30.6 %
                 
Operating expenses (GAAP)   $ 26,326     $ 30,871     $ 120,708     $ 127,526  
Stock-based compensation(1)   (1,807 )   (2,813 )   (9,138 )   (11,479 )
Amortization of acquisition-related intangibles   (15 )   (45 )   (150 )   (180 )
Revaluation of contingent consideration liability       227         1,827  
Restructuring, asset impairments and other charges   (1,060 )       (3,777 )    
Severance costs       (472 )       (1,952 )
Operating expenses (Non-GAAP)   $ 23,444     $ 27,768     $ 107,643     $ 115,742  
                 
(1) Includes stock-based compensation as follows:                
Research and development   $ 832     $ 1,180     $ 3,879     $ 4,559  
Sales and marketing   385     652     2,144     3,162  
General and administrative   590     981     3,115     3,758  
  Total   $ 1,807     $ 2,813     $ 9,138     $ 11,479  
                 
Loss from operations (GAAP)   $ (10,092 )   $ (15,171 )   $ (62,700 )   $ (19,309 )
Stock-based compensation   2,087     3,117     10,326     12,696  
Amortization of acquisition-related intangibles   15     45     150     180  
Revaluation of contingent consideration liability       (227 )       (1,827 )
Restructuring, asset impairments and other charges   1,060         3,777      
Severance costs       524         2,004  
Loss from operations (Non-GAAP)   $ (6,930 )   $ (11,712 )   $ (48,447 )   $ (6,256 )
                 
Net loss (GAAP)   $ (13,188 )   $ (15,783 )   $ (67,462 )   $ (22,082 )
Stock-based compensation   2,087     3,117     10,326     12,696  
Amortization of acquisition-related intangibles   15     45     150     180  
Revaluation of contingent consideration liability       (227 )       (1,827 )
Restructuring, asset impairments and other charges   1,060         3,777      
Severance costs       524         2,004  
Non-cash interest expense   44     43     145     163  
Income tax effect on acquisition/divestiture   653     745     653     745  
Net loss (Non-GAAP)   $ (9,329 )   $ (11,536 )   $ (52,411 )   $ (8,121 )

 

Net loss per share (GAAP)   $     (0.21 )      $      (0.35 )      $      (1.34 )      $      (0.49 )
Stock-based compensation   0.03     0.07     0.20     0.29  
Amortization of acquisition-related intangibles                
Revaluation of contingent consideration liability               (0.04 )
Restructuring, asset impairments and other charges   0.02         0.07      
Severance costs       0.01         0.04  
Non-cash interest expense                
Income tax effect on acquisition/divestiture   0.01     0.02     0.01     0.02  
Net loss per share (Non-GAAP)   $ (0.15 )   $ (0.25 )   $ (1.04 )   $ (0.18 )
                 
Shares used in per share calculation (Non-GAAP)   61,881     45,504     50,519     44,632  

Christina Carrabino

Enphase Energy, Inc.

Investor Relations

ir@enphaseenergy.com

+1-707-763-4784 x7294

 

Anand Gupta Editor - EQ Int'l Media Network

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