Enphase Energy Reports Financial Results for the First Quarter of 2021

FREMONT, Calif., April 27, 2021 (GLOBE NEWSWIRE) -- Enphase Energy, Inc. (NASDAQ: ENPH), a global energy management technology company and the world’s leading supplier of microinverter-based solar-plus-storage systems, announced today financial results for the first quarter of 2021, which included the summary below from its President and CEO, Badri Kothandaraman.

We reported quarterly revenue of $301.8 million in the first quarter of 2021, along with 41.1% for non-GAAP gross margin. We shipped approximately 830 megawatts DC, or 2,452,765 microinverters. In addition, we acquired two companies to accelerate our digital transformation – Sofdesk, Inc., which provides solar design software to installers, and the Solar Design Services business of DIN Engineering Services, LLP, which provides permitting and proposal services to installers.

Financial highlights for the first quarter of 2021 are listed below.

  • Revenue of $301.8 million
  • Cash flow from operations of $75.8 million; ending cash balance of $1,489.0 million
  • GAAP gross margin of 40.7%; non-GAAP gross margin of 41.1%
  • GAAP operating income of $61.4 million; non-GAAP operating income of $80.2 million
  • GAAP net income of $31.7 million, including a non-cash loss of $56.4 million on the partial settlement of convertible notes; non-GAAP net income of $78.7 million
  • GAAP diluted earnings per share of $0.22; non-GAAP diluted earnings per share of $0.56

Our revenue and earnings for the first quarter of 2021 are provided below, compared with those of the prior quarter and the year ago quarter:

(In thousands, except per share data and percentages)

 GAAP Non-GAAP
 Q1 2021 Q4 2020 Q1 2020* Q1 2021 Q4 2020 Q1 2020*
Revenue$301,754  $264,839  $205,545  $301,754  $264,839  $205,545 
Gross margin40.7% 46.0% 39.2% 41.1% 40.2% 39.5%
Operating expenses$61,563  $42,824  $35,963  $43,699  $34,193  $28,508 
Operating income$61,386  $79,114  $44,712  $80,232  $72,356  $52,773 
Net income$31,698  $72,991  $68,936  $78,702  $71,342  $51,875 
Basic EPS$0.24  $0.57  $0.56  $0.60  $0.56  $0.42 
Diluted EPS$0.22  $0.50  $0.50  $0.56  $0.51  $0.38 

* Revenue for the first quarter of 2020 of $205.5 million included approximately $44.5 million of safe harbor revenue.

Total revenue increased 14% compared to the fourth quarter of 2020 as we continued to experience strong worldwide demand for our solar and storage systems. We reported record quarterly revenue in the U.S., Europe, and Australia, despite normal seasonality in the first quarter. Our operations team did an excellent job of navigating component supply constraints to best service our customer demand, while improving inventory in the channel.

Our non-GAAP gross margin increased to 41.1% in the first quarter of 2021, from 40.2% in the fourth quarter of 2020, driven by disciplined pricing and cost management. Non-GAAP operating expenses increased to $43.7 million in the first quarter of 2021, compared to $34.2 million in the prior quarter, primarily due to increased investments in research and development, increased hiring, payroll tax associated with employee stock vesting, and the consolidation of Sofdesk operations in late January. Non-GAAP operating income was $80.2 million, compared to $72.4 million in the prior quarter.

We exited the first quarter of 2021 with $1,489.0 million in cash and generated $75.8 million in cash flow from operations. The cash balance includes net proceeds of approximately $1,189.4 million from the convertible notes issuance in March 2021 and is partially offset by $304.8 million paid in principal amounts for the partial repurchase and conversions of the convertible notes due 2024 and 2025. Inventory was $34.9 million at the end of the first quarter of 2021, compared to $41.8 million at the end of the fourth quarter of 2020. The sequential decrease in our inventory was driven by an increase in customer demand coupled with supply constraints.

We made good progress on the rollout of our Enphase Storage systems by reducing commissioning times. We introduced 24/7 global customer support and are pleased to resume in-person installer training, while also continuing our online certification. In addition, we recently expanded our Enphase Installer Network (EIN) in the Netherlands and Belgium, after successful launches in the U.S. and Australia. Our EIN installers can enjoy a variety of tools and services on Enphase’s digital platform to help make the sales and installation process faster and easier, while providing an exceptional experience to homeowners across the globe.

BUSINESS HIGHLIGHTS

On March 29, 2021, Enphase Energy announced that it entered into an agreement with Rubicon Energy to distribute Enphase IQ™ microinverters for grid-tied photovoltaic (PV) applications to residential and commercial installers in the fast-growing South African market. To cater to the higher power modules utilized in the region, Rubicon Energy will predominantly distribute Enphase IQ 7A™ microinverters to residential and commercial installers.

On April 1, 2021, Enphase Energy announced that it completed the previously announced acquisition of the Solar Design Services business of DIN Engineering Services LLP. Based in Noida, India, the business is a leading provider of outsourced proposal drawings and permit plan sets for residential solar installers in North America.

On April 7, 2021, Enphase Energy announced that it is now providing 24/7 support for installers and Enphase system owners globally across its phone, online chat, and email communications channels. Providing around-the-clock support builds on the commitment Enphase has made to delivering the industry’s best customer experience. In recent years, Enphase has introduced online chat support; the Enphase Community platform for direct engagement with other Enphase system owners; Enphase University, an advanced online learning platform; and rapid, remote microinverter activation and returns processing with the Service-on-the-Go tool.

On April 8, 2021, Enphase Energy announced that after successful launches of its Enphase Installer Network (EIN) in the U.S. and Australia in 2020, the Company has expanded EIN into the Netherlands and Belgium, with more European countries to follow during 2021. The EIN recognizes a network of trusted installers that deliver exceptional homeowner experiences using Enphase products and is designed to help Enphase installers grow their business with a range of innovative digital tools and exclusive benefits.

SECOND QUARTER 2021 FINANCIAL OUTLOOK

For the second quarter of 2021, Enphase Energy estimates both GAAP and non-GAAP financial results as follows:

  • Revenue to be within a range of $300.0 million to $320.0 million
  • GAAP gross margin to be within a range of 37.0% to 40.0%; non-GAAP gross margin to be within a range of 38.0% to 41.0%, excluding stock-based compensation expenses
  • GAAP operating expenses to be within a range of $70.0 million to $73.0 million, including $17.0 million estimated for stock-based compensation expenses and acquisition related costs and amortization
  • Non-GAAP operating expenses to be within a range of $53.0 million to $56.0 million, excluding $17.0 million estimated for stock-based compensation expenses and acquisition related costs and amortization. The non-GAAP estimates include increased investments in new products, software, and marketing and a $3.5 million accrual for deferred consideration from the acquisitions.

All guidance estimates for the second quarter of 2021 include operations of both Sofdesk and DIN’s Solar Design Services business for the entire quarter.

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Use of Non-GAAP Financial Measures

The Company has presented certain non-GAAP financial measures in this press release. To view a description of non-GAAP financial measures used and the non-GAAP reconciliation schedule for the periods presented, click here.

Conference Call Information

Enphase Energy will host a conference call for analysts and investors to discuss its first quarter 2021 results and second quarter 2021 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 3396792. 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 approximately one year. In addition, an audio replay of the conference call will be available by calling (855) 859-2056; participant passcode 3396792, beginning approximately one hour after the call.

Forward-Looking Statements

This press release contains forward-looking statements, including statements related to Enphase Energy’s expectations as to future financial performance, expense levels, liquidity sources, the capabilities, advantages, and performance of our technology and products, including the ability to simplify and reduce installation time, our business strategies and anticipated demand for our products, the capabilities and performance of our partners, and the impact to homeowners. 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 manage solar generation, storage and communication on one intelligent platform. The Company revolutionized the solar industry with its microinverter-based technology and produces a fully integrated solar-plus-storage solution. Enphase has shipped more than 34 million microinverters, and approximately 1.5 million Enphase-based systems have been deployed in more than 130 countries. For more information, visit www.enphase.com.

Enphase Energy, Enphase, the E logo, IQ, IQ 7A, and other trademarks or service names are the trademarks of Enphase Energy, Inc.

Contact:
Adam Hinckley
Enphase Energy, Inc.
Investor Relations
ir@enphaseenergy.com
+1-707-763-4784 x7354


ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

 Three Months Ended
 March 31,
2021
 December 31,
2020
 March 31,
2020
Net revenues$301,754  $264,839  $205,545 
Cost of revenues (1)178,805  142,901  124,870 
Gross profit122,949  121,938  80,675 
Operating expenses:     
Research and development21,818  15,801  11,876 
Sales and marketing19,622  14,139  11,772 
General and administrative20,123  12,884  12,315 
Total operating expenses61,563  42,824  35,963 
Income from operations61,386  79,114  44,712 
Other income (expense), net     
Interest income73  673  1,091 
Interest expense(7,329) (5,901) (3,155)
Other income (expense), net573  503  (924)
Loss on partial settlement of convertible notes (2)(56,369) (3,037)  
Change in fair value of derivatives (3)    15,344 
Total other income (expense), net(63,052) (7,762) 12,356 
Income (loss) before income taxes(1,666) 71,352  57,068 
Income tax benefit33,364  1,639  11,868 
Net income$31,698  $72,991  $68,936 
Net income per share:     
Basic$0.24  $0.57  $0.56 
Diluted$0.22  $0.50  $0.50 
Shares used in per share calculation:     
Basic131,303  126,980  123,531 
Diluted146,442  145,990  138,104 

(1)  We sought refunds totaling approximately $38.9 million plus $0.6 million accrued interest on tariffs previously paid from September 24, 2018 to March 31, 2020 for certain microinverters that qualify for the tariff exclusion on Chinese imported microinverter products that fit the dimensions and weight limits within a Section 301 Tariff exclusion under U.S. note 20(ss)(40) to subchapter III of chapter 99 of the Harmonized Tariff Schedule of the United States. The refund request was subject to review and approval by the U.S. Customs and Border Protection; therefore, we assessed the probable loss recovery in the three months ended December 31, 2020 was equal to the $16.5 million approved refund requests available to us. For the three months ended December 31, 2020, we have recorded $15.9 million as a reduction to cost of revenues and $0.6 million as interest income in our consolidated statements of operations as the approved refunds relate to paid tariffs previously recorded to cost of revenues. No tariff refunds were recorded as a reduction to cost of revenues in the three months ended March 31, 2021 and 2020.

(2)  Loss on partial settlement of convertible notes of $56.4 million for the three months ended March 31, 2021 primarily relates to the $9.5 million non-cash loss on partial settlement of $87.1 million aggregate principal amount of the Notes due 2024, $9.4 million non-cash loss on partial settlement of $217.7 million aggregate principal amount of the Notes due 2025 and $37.5 million non-cash inducement loss incurred on repurchase of Notes due 2025. Loss on partial settlement of convertible notes of $3.0 million for the three months ended December 31, 2020 is related to partial settlement of $43.9 million aggregate principal amount of the Notes due 2024.

(3)  Change in fair value of derivatives of $15.3 million for the three months ended March 31, 2020 represents changes in fair value of the conversion option in the Notes due 2025, as well as the convertible note hedge and warrant transactions. Initially, conversion of the Notes due 2025 would be settled solely in cash as a result of the Company not having the necessary number of authorized but unissued shares of its common stock available to settle the conversion option of the Notes due 2025 in shares; therefore, the conversion option, convertible note hedge and warrant transactions were classified as derivatives that required marked-to-market accounting. On May 20, 2020, at the Company’s annual meeting of stockholders, the stockholders approved an amendment to its certificate of incorporation to increase the number of authorized shares of the Company’s common stock. As a result, the Company is now able to settle the Notes due 2025, convertible notes hedge and warrants through payment or delivery, as the case may be, of cash, shares of its common stock or a combination thereof, at the Company’s election. Accordingly, on May 20, 2020, the conversion option, convertible note hedge and warrant transactions were remeasured at fair value and were then reclassified to additional paid-in-capital in the condensed consolidated balance sheet in the second quarter of 2020 and are no longer remeasured as long as they continue to meet the conditions for equity classification.


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

 March 31,
2021
 December 31,
2020
ASSETS   
Current assets:   
Cash and cash equivalents$1,489,010  $679,379 
Accounts receivable, net236,090  182,165 
Inventory34,876  41,764 
Prepaid expenses and other assets31,386  29,756 
Total current assets1,791,362  933,064 
Property and equipment, net53,648  42,985 
Operating lease, right of use asset, net16,688  17,683 
Intangible assets, net47,917  28,808 
Goodwill61,038  24,783 
Other assets91,315  59,875 
Deferred tax assets, net132,231  92,904 
Total assets$2,194,199  $1,200,102 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$81,524  $72,609 
Accrued liabilities115,172  76,542 
Deferred revenues, current49,118  47,665 
Warranty obligations, current14,303  11,260 
Debt, current84,356  325,967 
Total current liabilities344,473  534,043 
Long-term liabilities:   
Deferred revenues, noncurrent142,985  125,473 
Warranty obligations, noncurrent40,250  34,653 
Other liabilities15,777  17,042 
Debt, noncurrent917,873  4,898 
Total liabilities1,461,358  716,109 
Total stockholders’ equity732,841  483,993 
Total liabilities and stockholders’ equity$2,194,199  $1,200,102 


ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 Three Months Ended
 March 31,
2021
 December 31,
2020
 March 31,
2020
Cash flows from operating activities:     
Net income$31,698  $72,991  $68,936 
Adjustments to reconcile net income to net cash provided by operating activities:     
Depreciation and amortization5,558  5,353  3,844 
Provision for doubtful accounts14  171  104 
Loss on partial settlement of convertibles notes56,369  3,037   
Deemed repayment of convertible notes attributable to accreted debt discount(15,579) (3,132)  
Non-cash interest expense7,156  5,309  2,722 
Change in fair value of debt security(1,437)    
Stock-based compensation14,844  8,289  7,515 
Change in fair value of derivatives    (15,344)
Deferred income taxes(35,367) (2,610) (12,500)
Changes in operating assets and liabilities:     
Accounts receivable(53,719) (57,854) 49,637 
Inventory6,888  (4,229) (2,560)
Prepaid expenses and other assets(5,040) (4,185) (5,009)
Accounts payable, accrued and other liabilities36,376  44,895  (22,066)
Warranty obligations8,640  2,134  403 
Deferred revenues19,440  14,011  (36,460)
Net cash provided by operating activities75,841  84,180  39,222 
Cash flows from investing activities:     
Purchases of property and equipment(9,940) (8,851) (3,353)
Investment in a private company(25,000) (5,010)  
Business acquisitions, net of cash acquired(55,239)    
Net cash used in investing activities(90,179) (13,861) (3,353)
Cash flows from financing activities:     
Issuance of convertible notes, net of issuance costs1,189,388    313,011 
Purchase of convertible note hedges(286,235)   (89,056)
Sale of warrants220,800    71,552 
Principal payments and financing fees on debt(1,078) (306) (1,148)
Partial repurchase of convertible notes(289,233) (40,728)  
Proceeds from exercise of equity awards and employee stock purchase plan214  3,687  1,979 
Payment of withholding taxes related to net share settlement of equity awards(9,185) (16,288) (34,267)
Net cash provided by financing activities824,671  (53,635) 262,071 
Effect of exchange rate changes on cash and cash equivalents(702) 903  (205)
Net increase in cash, cash equivalents and restricted cash809,631  17,587  297,735 
Cash, cash equivalents and restricted cash—Beginning of period679,379  661,792  296,109 
Cash. cash equivalents and restricted cash—End of period$1,489,010  $679,379  $593,844 


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

 Three Months Ended
 March 31,
2021
 December 31,
2020
 March 31,
2020
Gross profit (GAAP)$122,949  $121,938  $80,675 
Stock-based compensation982  522  606 
Tariff refunds  (15,911)  
Gross profit (Non-GAAP)$123,931  $106,549  $81,281 
      
Gross margin (GAAP)40.7% 46.0% 39.2%
Stock-based compensation0.4% 0.2% 0.3%
Tariff refunds% (6.0)% %
Gross margin (Non-GAAP)41.1% 40.2% 39.5%
      
Operating expenses (GAAP)$61,563  $42,824  $35,963 
Stock-based compensation (1)(13,862) (7,767) (6,909)
Acquisition related expenses and amortization(4,002) (864) (546)
Operating expenses (Non-GAAP)$43,699  $34,193  $28,508 
      
(1) Includes stock-based compensation as follows:     
Research and development$5,749  $3,271  $1,919 
Sales and marketing3,537  2,044  1,942 
General and administrative4,576  2,452  3,048 
Total$13,862  $7,767  $6,909 
      
Income from operations (GAAP)$61,386  $79,114  $44,712 
Stock-based compensation14,844  8,289  7,515 
Tariff refunds  (15,911)  
Acquisition related expenses and amortization4,002  864  546 
Income from operations (Non-GAAP)$80,232  $72,356  $52,773 
      
Net income (GAAP)$31,698  $72,991  $68,936 
Stock-based compensation14,844  8,289  7,515 
Tariff refunds  (16,538)  
Acquisition related expenses and amortization4,002  864  546 
Non-cash interest expense7,156  5,309  2,722 
Loss on partial settlement of convertible notes56,369  3,037   
Change in fair value of derivatives    (15,344)
Non-GAAP income tax adjustment(35,367) (2,610) (12,500)
Net income (Non-GAAP)$78,702  $71,342  $51,875 
      
Net income per share, basic (GAAP)$0.24  $0.57  $0.56 
Stock-based compensation0.11  0.07  0.06 
Tariff refunds  (0.13)  
Acquisition related expenses and amortization0.03  0.01   
Non-cash interest expense0.05  0.04  0.02 
Loss on partial settlement of convertible notes0.43  0.02   
Change in fair value of derivatives    (0.12)
Non-GAAP income tax adjustment(0.26) (0.02) (0.10)
Net income per share, basic (Non-GAAP)$0.60  $0.56  $0.42 
Shares used in basic per share calculation GAAP and Non-GAAP131,303  126,980  123,531 
      
Net income per share, diluted (GAAP)$0.22  $0.50  $0.50 
Stock-based compensation0.11  0.07  0.06 
Tariff refunds  (0.12)  
Acquisition related expenses and amortization0.03  0.01   
Non-cash interest expense0.05  0.04  0.02 
Loss on partial settlement of convertible notes0.40  0.02   
Change in fair value of derivatives    (0.11)
Non-GAAP income tax adjustment(0.25) (0.01) (0.09)
Net income per share, diluted (Non-GAAP) (2)$0.56  $0.51  $0.38 
Shares used in diluted per share calculation GAAP146,442  145,990  138,104 
Shares used in per share calculation Non-GAAP (3)141,746  139,527  135,168 
      
Net cash provided by operating activities (GAAP)$75,841  $84,180  $39,222 
Purchases of property and equipment(9,940) (8,851) (3,353)
Deemed repayment of convertible notes due 2024 and notes due 2025 attributable to accreted debt discount15,579  3,132   
Free cash flow (Non-GAAP)$81,480  $78,461  $35,869 

(2)  Calculation of non-GAAP diluted net income per share for the three months ended March 31, 2021, December 31, 2020 and March 31, 2020 excludes convertible notes due 2023 interest expense, net of tax of less than $0.1 million in each period from non-GAAP net income.

(3)   Effect of dilutive in-the-money portion of convertible senior notes and warrants are included in the GAAP weighted-average diluted shares in periods where the Company has GAAP net income. The Company excluded the in-the-money portion of convertible notes due 2024 totaling 2,984 thousand shares, 5,063 thousand shares and 2,936 thousand shares in the three months ended March 31, 2021, December 31, 2020 and March 31, 2020, respectively, from non-GAAP weighted-average diluted shares as the Company entered into convertible note hedge transactions that reduce potential dilution to the Company’s common stock upon any conversion of the notes due 2024. The Company excluded the in-the-money portion of convertible notes due 2025 totaling 1,713 thousand shares and 1,401 thousand shares in the three months ended March 31, 2021 and December 31, 2020, respectively, from non-GAAP weighted-average diluted shares as the Company entered into convertible note hedge transactions that reduce potential dilution to the Company’s common stock upon any conversion of the notes due 2025.


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