Enphase Energy Reports Financial Results for the Fourth Quarter of 2023

Enphase Energy, a global energy technology company and the world’s leading supplier of microinverter-based solar and battery systems, announced financial results for the fourth quarter of 2023, which included the summary below from its President and CEO, Badri Kothandaraman.

Enphase Energy reported quarterly revenue of $302.6 million in the fourth quarter of 2023, along with 50.3% for non-GAAP gross margin. The company shipped 1,595,677 microinverters, or approximately 660.1 megawatts DC, and 80.7 megawatt hours of IQ^® Batteries.

Financial highlights for the fourth quarter of 2023 are listed below:

• Quarterly revenue of $302.6 million
• GAAP gross margin of 48.5%; non-GAAP gross margin of 50.3%, with net IRA benefit
• Non-GAAP gross margin of 41.8%, excluding net IRA benefit of 8.5%
• GAAP operating loss of $10.2 million; non-GAAP operating income of $65.6 million
• GAAP net income of $20.9 million; non-GAAP net income of $73.5 million
• GAAP diluted earnings per share of $0.15; non-GAAP diluted earnings per share of $0.54
• Free cash flow of $15.4 million; ending cash, cash equivalents, and marketable securities of $1.70 billion

Enphase Energy’s revenue and earnings for the fourth quarter of 2023 are provided below, compared with the prior quarter:

(In thousands, except per share and percentage data)

	GAAP												Non-GAAP
	Q4 2023				Q3 2023				Q4 2022				Q4 2023				Q3 2023				Q4 2022
Revenue	$	302,570			$	551,082			$	724,652			$	302,570			$	551,082			$	724,652
Gross margin		48.5	%			47.5	%			42.9	%			50.3	%			48.4	%			43.8	%
Operating expenses	$	156,893			$	144,024			$	153,741			$	86,551			$	99,027			$	87,718
Operating income (loss)	$	(10,231	)		$	117,989			$	156,960			$	65,587			$	167,593			$	229,389
Net income	$	20,919			$	113,953			$	153,753			$	73,474			$	141,849			$	212,389
Basic EPS	$	0.15			$	0.84			$	1.13			$	0.54			$	1.04			$	1.56
Diluted EPS	$	0.15			$	0.80			$	1.06			$	0.54			$	1.02			$	1.51

Enphase Energy’s revenue and earnings for the fiscal year 2023 are provided below, compared with the prior year:

(In thousands, except per share and percentage data)

	GAAP								Non-GAAP
	FY 2023				FY 2022				FY 2023				FY 2022
Revenue	$	2,290,786			$	2,330,853			$	2,290,786			$	2,330,853
Gross margin		46.2	%			41.8	%			47.1	%			42.6	%
Operating expenses	$	612,647			$	526,334			$	382,115			$	303,724
Operating income	$	445,741			$	448,261			$	697,210			$	690,292
Net income	$	438,936			$	397,362			$	613,241			$	647,424
Basic EPS	$	3.22			$	2.94			$	4.50			$	4.78
Diluted EPS	$	3.08			$	2.77			$	4.41			$	4.62

Total revenue for the fourth quarter of 2023 was $302.6 million, compared to $551.1 million in the third quarter of 2023. Enphase Energy’s revenue in the United States for the fourth quarter of 2023 decreased approximately 35%, compared to the third quarter of 2023. The revenue in Europe decreased approximately 70%, compared to the third quarter of 2023. The declines were primarily the result of reduced shipments to manage high inventory at the distribution partners along with a further softening in demand.

Enphase Energy’s non-GAAP gross margin was 50.3% in the fourth quarter of 2023, compared to 48.4% in the third quarter of 2023, driven by increased net IRA benefit. The non-GAAP gross margin, excluding net IRA benefit, was 41.8% in the fourth quarter of 2023, compared to 45.8% in the third quarter of 2023, driven by product mix. The non-GAAP operating expenses were $86.6 million in the fourth quarter of 2023, compared to $99.0 million in the third quarter of 2023. The non-GAAP operating income was $65.6 million in the fourth quarter of 2023, compared to $167.6 million in the third quarter of 2023.

Enphase Energy exited the fourth quarter of 2023 with $1.70 billion in cash, cash equivalents, and marketable securities and generated $35.5 million in cash flow from operations in the fourth quarter of 2023. The capital expenditures were $20.1 million in the fourth quarter of 2023, compared to $23.8 million in the third quarter of 2023. Capital expenditure requirements decreased due to a reduction in the U.S. manufacturing spending.

In July 2023, the Board of Directors approved a share repurchase program with authorization to purchase up to $1.0 billion of shares of the common stock. In the fourth quarter of 2023, Enphase Energy repurchased 1,183,246 shares of their common stock at an average price of $84.51 per share for a total of approximately $100.0 million.

Enphase Energy started shipping IQ8P™ Microinverters with peak output AC power of 480 W for the small-commercial market in North America, and grid-tied residential applications in South Africa, Mexico, Brazil, and India. The company introduced IQ8™ Microinverters into more countries in Europe – Austria, Italy and Belgium. Enphase Energy’s newest product, the IQ8X™ microinverter with peak output AC power of 384 W for panels with high DC voltage, is shipping to customers in the United States. Enphase Energy now ship IQ8 Microinverters into 21 countries worldwide.

Enphase Energy shipped 80.7 megawatt hours of IQ Batteries in the fourth quarter of 2023. The company now ship the third generation of IQ Batteries, the IQ^® Battery 5P, to the United States, Puerto Rico, Australia, and the United Kingdom. Enphase Energy launched this battery in Italy during the fourth quarter of 2023. More than 4,700 installers worldwide are certified to install the IQ Batteries.

Enphase Energy continued to release new features in Solargraf℠, their cloud-based design and proposal software platform during the fourth quarter of 2023. They began offering electrical design and single line diagram features while continuing to offer NEM 3.0 functionality for solar and battery systems in California. The software platform is currently available to installers in the United States, Germany, Austria, and Brazil.

Enphase Energy shipped approximately 913,000 microinverters manufactured in the United States to customers in the fourth quarter of 2023. As part of their plan to streamline manufacturing, the company is ceasing operations at their contract manufacturing locations in Romania and Wisconsin. Enphase Energy will focus on manufacturing microinverters in the United States with the two existing contract manufacturing partners in South Carolina and Texas. Once these two U.S. sites have fully ramped production, the company expect to have a global capacity of approximately 7.25 million microinverter units per quarter, of which 5 million units of capacity will be in the United States.

Business Highlights

• On Jan. 29, 2024, Enphase Energy announced that it started shipping IQ8HC™ and IQ8X Microinverters with peak output AC power of 384 W designed to seamlessly pair with a full range of solar modules up to 540 W DC.
• On Jan. 23, 2024, Enphase Energy announced that it started shipping IQ8 Microinverters in Belgium, with peak output AC power of 384 W, to support newer, high-powered solar modules.
• On Dec. 13, 2023, Enphase Energy announced that it is expanding its support for virtual power plants (VPPs) through grid services programs across the United States powered by the IQ Battery 5P.
• On Dec. 5, 2023, Enphase Energy announced the launch of the IQ Battery 5P and IQ8 Microinverters, for customers in Italy.
• On Nov. 30, 2023, Enphase Energy announced that it started shipping IQ8P Microinverters, with a peak output AC power of 480 W, in Mexico to support newer, high-powered solar modules.
• On Nov. 16, 2023, Enphase Energy announced the launch of its new IQ8 Commercial Microinverters, featuring the IQ8P-3P™ Microinverter which enables a peak output AC power of 480 W, for the small commercial solar market in North America.
• On Nov. 13, 2023, Enphase Energy announced that it started shipping IQ8P Microinverters, with peak output AC power of 480 W, in Brazil to support newer, high-powered solar modules.
• On Nov. 2, 2023, Enphase Energy announce that it started shipping IQ8 Microinverters, with peak output AC power of 384 W, in Austria to support newer, high-powered solar modules.
• On Oct. 30, 2023, Enphase Energy announced the launch of IQ8 Microinverters to support high-powered modules and the IQ Energy Router™ family of devices in Switzerland.

First Quarter 2024 Financial Outlook

For the first quarter of 2024, Enphase Energy estimates both GAAP and non-GAAP financial results as follows:

• Revenue to be within a range of $260.0 million to $300.0 million, which includes shipments of 70 to 90 megawatt hours of IQ Batteries
• GAAP gross margin to be within a range of 42.0% to 45.0%, with net IRA benefit
• Non-GAAP gross margin to be within a range of 44.0% to 47.0% with net IRA benefit and 40.0% to 43.0% excluding net IRA benefit. Non-GAAP gross margin excludes stock-based compensation expense and acquisition related amortization
• Net IRA benefit to be within a range of $12.0 to $14.0 million based on estimated shipments of 500,000 units of U.S. manufactured microinverters
• GAAP operating expenses to be within a range of $144.0 million to $148.0 million
• Non-GAAP operating expenses to be within a range of $80.0 million to $84.0 million, excluding $64.0 million estimated for stock-based compensation expense, acquisition related expenses and amortization, and restructuring and asset impairment charges

For 2024, GAAP and non-GAAP annualized effective tax rate with IRA benefit, excluding discrete items, is expected to be within a range of 19.0% to 21.0%

Use of non-GAAP Financial Measures

Enphase Energy has presented certain non-GAAP financial measures in this press 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 (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 Enphase Energy include non-GAAP gross profit, gross margin, operating expenses, income from operations, net income, net income per share (basic and diluted), net IRA benefit, and free cash flow.

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 Enphase Energy’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. Enphase Energy 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 Energy 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 below, 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 Enphase Energy’s current operating performance and a comparison to its past operating performance:

Stock-based compensation expense. Enphase Energy 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 Enphase Energy’s stock price at the time of an award over which management has limited to no control.

Acquisition related expenses and amortization. This item represents expenses incurred related to Enphase Energy’s business acquisitions, which are non-recurring in nature, and amortization of acquired intangible assets, which is a non-cash expense. Acquisition related expenses and amortization of acquired intangible assets are not reflective of Enphase Energy’s ongoing financial performance.

Restructuring and asset impairment charges. Enphase Energy excludes restructuring and asset impairment charges due to the nature of the expenses being unusual and arising outside the ordinary course of continuing operations. These costs primarily consist of fees paid for cash-based severance costs and asset write-downs of property and equipment and acquired intangible assets, and other contract termination costs resulting from restructuring initiatives.

Non-cash interest expense. This item consists primarily of amortization of debt issuance costs and accretion of debt discount because these expenses do not represent a cash outflow for Enphase Energy except in the period the financing was secured and such amortization expense is not reflective of Enphase Energy’s ongoing financial performance.

Non-GAAP income tax adjustment. This item represents the amount adjusted to Enphase Energy’s GAAP tax provision or benefit to report the non-GAAP tax amount based on cash tax expense and reserves for periods prior to 2023. Effective January 1, 2023, Enphase Energy updated its methodology of computing the non-GAAP income tax adjustment from reporting cash tax expense and reserves to the projected non-GAAP annualized effective tax rate as Enphase Energy utilized most of its net operating loss and tax credit carryforwards in the year ended December 31, 2022 and became a significant cash taxpayer in the United States. Going forward, Enphase Energy will exclude the income tax effects of GAAP adjustments such as stock-based compensation, amortization of purchased intangibles, and other non-recurring items that are not reflective of Enphase Energy ongoing financial performance.

Non-GAAP net income per share, diluted. Enphase Energy excludes the dilutive effect of in-the-money portion of convertible senior notes as they are covered by convertible note hedge transactions that reduce potential dilution to the common stock upon conversion of the Notes due 2025, Notes due 2026 and Notes due 2028, and includes the dilutive effect of employee’s stock-based awards and the dilutive effect of warrants. Enphase Energy believes these adjustments provide useful supplemental information to the ongoing financial performance.

Net IRA benefit. This item represents the advanced manufacturing production tax credit (“AMPTC”) from the IRA for manufacturing microinverters in the United States, partially offset by the incremental manufacturing cost incurred in the United States relative to manufacturing in Mexico, India, and China. The AMPTC is accounted for by Enphase Energy as an income-based government grants that reduces cost of revenues in the consolidated statements of operations.

Free cash flow. This item represents net cash flows from operating activities less purchases of property and equipment.