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Enphase Energy, Inc. (NASDAQ:ENPH) Q4 2023 Earnings Conference Call February 6, 2024 4:30 PM ET
Company Participants
Zachary Freedman - Head of Investor Relations
Badri Kothandaraman - President and CEO
Mandy Yang - Chief Financial Officer and EVP
Raghu Belur - Chief Products Officer, SVP and Co-Founder
Conference Call Participants
Brian Lee - Goldman Sachs
Colin Rusch - Oppenheimer
Julien Dumoulin-Smith - Bank of America
Philip Shen - Roth MKM
Mark Strouse - JPMorgan
Praneeth Satish - Wells Fargo
Eric Stine - Craig-Hallum Capital Group
Christine Cho - Barclays
Jordan Levy - Truist Securities
Kashy Harrison - Piper Sandler
Andrew Percoco - Morgan Stanley
Joseph Osha - Guggenheim Partners
Auguste Richard - Northland
Moses Sutton - BNP Paribas
Maheep Mandloi - Mizuho
Tristan Richardson - Scotia Bank
Vikram Bagri - Citigroup
Pavel Molchanov - Raymond James
Austin Moeller - Canaccord
Operator
Good afternoon, and welcome to the Enphase Energy Fourth Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Zach Freedman. Please go ahead.
Zachary Freedman
Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's fourth quarter 2023 results. On today's call are Badri Kothandaraman, our President and Chief Executive Officer; Mandy Yang, our Chief Financial Officer; and Raghu Belur, our Chief Products Officer.
After the market closed today, Enphase issued a press release announcing the results for its fourth quarter ended December 31, 2023. During this conference call, Enphase management will make forward-looking statements, including, but not limited to, statements related to our expected future financial performance, market trends, the capabilities of our technology and products and the benefits to homeowners and installers, our operations, including manufacturing, customer service and supply and demand. Anticipated growth in existing and new markets, the timing of new product introductions and regulatory and tax matters. These forward-looking statements involve significant risks and uncertainties and our actual results and the timing of events could differ materially from these expectations.
For a more complete discussion of the risks and uncertainties, please see our most recent Form 10-K and 10-Qs filed with the SEC. We caution you not to place any undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in expectations. Also, please note that financial measures used on this call are expressed on a non-GAAP basis unless otherwise noted and have been adjusted to exclude certain charges. We have provided a reconciliation of these non-GAAP financial measures to GAAP financial measures in our earnings release furnished with the SEC on Form 8-K which can also be found in the Investor Relations section of our website.
Now I'd like to introduce Badri Kothandaraman, our President and Chief Executive Officer. Badri?
Badri Kothandaraman
Good afternoon, and thanks for joining us today to discuss our fourth quarter 2023 financial results. We reported quarterly revenue of $302.6 million, shipped approximately 1.6 million microinverters and 80.7 megawatt hours of battery and generated free cash flow of $15.4 million. On our last earnings call, we said we would reduce channel inventory by approximately $150 million. We achieved a reduction of $147 million in Q4.
For the fourth quarter, we delivered 50% gross margin, 29% operating expenses and 22% operating income, all as a percentage of revenue on a non-GAAP basis and including the IRA benefit. Mandy will go into our financials later in the call. Let's now discuss how we are servicing customers. Our worldwide NPS was 77% in Q4, the same as Q3. Our average call wait time was one minute compared to 1.3 minutes in Q3. We have made good progress on solving customer issues by focusing on both automation as well as expanding our field service teams globally.
Let's talk about operations. The overall supply environment for microinverters and batteries is quite stable. Let's come to microinverters. We shipped approximately 913,000 microinverters to customers in Q4 from our contract manufacturing facilities in the U.S. We announced in December that we are seizing operations at our contract manufacturing locations in Romania and Wisconsin. We will manufacture microinverters in the U.S. with our two existing partners in South Carolina and Texas. The equipment currently located in Romania and Wisconsin will be redeployed for use at other facilities. Once our restructuring actions are complete in the first half of the year, we expect to have a global capacity of approximately 7.25 million microinverters per quarter of which 5 million will be in the U.S.
We expect to ship approximately 500,000 microinverters to customers from our U.S. manufacturing facilities in Q1. We expect that our shipments from U.S. facilities will be lower in the first half of the year as we reduce both factory as well as channel inventory. We anticipate a higher level of shipments in the second half of the year. For IQ batteries, we have two cell pack suppliers, both in China which have sufficient manufacturing capacity to support our ramp in 2024. In addition, we will have the capability to manufacture IQ batteries in the U.S. in the third quarter of 2024.
Let's now cover the regions. Our U.S. and international revenue mix for Q4 was 75% and 25%, respectively. For more visibility into our business, we are providing you regional breakdowns and sell-through dollar metrics by region until the channel is healthy. In the U.S., our revenue decreased 35% sequentially as we undershipped to the end customer demand. The overall sell-through of our micro inverters and batteries in the U.S. was down 9% in Q4 compared to Q3. Let's discuss market trends we are seeing in the U.S. split by non-California states and California. For non-California states, our overall sell-through was only down 1% in Q4 compared to Q3. The sell-through of our microinverters was flat and the sell-through of our batteries was down 8% in Q4.
In California, our overall sell-through was down by 7% in Q4 compared to Q3. The sell-through of our microinverters was down 27% in Q4 primarily due to the NEM 3.0 transition. However, the sell-through of our batteries increased by 58% in Q4 due to the high attach rate of NEM 3.0 systems as expected. As we discussed on our last earnings call, it will take a few quarters for our installers to fully transition the NEM 3.0 and normalized sales. I'll provide more statistics on NEM 3.0 later in the call.
In Europe, our revenue decreased 70% sequentially as we under ship to the end customer demand. The overall sell-through of our microinverters and batteries in Europe was down 20% in Q4 compared to Q3. The sell-through of our microinverters was down 23%, and sell-through of batteries was down 2% in Q4 compared to Q3. I'll provide some color on our key markets in Europe, Netherlands, France and Germany.
In Netherlands, our overall sell-through in Q4 was down 37% compared to Q3. Customers are fearing an export penalty for solar, and there is confusion about the ending of net metering. We kicked off the New Year with the Solar Next event in Netherlands, where we hosted 800-plus installers across the country, promoting a comprehensive solution with Solar Plus batteries and energy management software that will unlock the full potential of the Dutch energy market. We believe Solar Plus batteries are going to become the norm as dynamic tariffs and grid services become more prevalent. We are already seeing a steady ramp in batteries in the region and expect the trend to accelerate in 2024.
In France, our overall sell-through in Q4 was only down 1% compared to Q3. We see a lot of potential for this market to grow and evolve into a Solar Plus battery market as utility rates have moved higher and are expected to increase even more in 2024. In Germany, our overall sell-through in Q4 was down 32% compared to Q3. However, we saw sequential growth in activations for both solar and batteries as we continue to gain traction in the region.
We are introducing our products into more countries in Europe. In the last few months, we have entered U.K., Sweden, Denmark, Greece, Switzerland, Austria, Italy and Belgium markets with our IQ8 microinverters and IQ batteries. In Australia, we are seeing growth for our Enphase Energy systems powered by IQ8, microinverters and IQ Battery 5P, latest third-generation battery, which we introduced in June of 2023.
In Brazil, our sell-through is stabilizing nicely as we focus on building the installer base. In India, we are starting to ship our IQ8HC and IQ8P microinverters to support high-power panels. In Mexico, we just recently started shipping IQ8P microinverters for residential applications. As a reminder, IQ8P is our highest power microinverter at 480 watts AC for both residential and commercial applications.
Enphase Energy, Inc. (NASDAQ:ENPH) Q4 2023 Earnings Conference Call February 6, 2024 4:30 PM ET
Company Participants
Zachary Freedman - 投资者关系负责人
不良 Kothandaraman - 总裁和首席执行官
Mandy Yang - 首席财务官和执行副总裁
Raghu Belur - Chief Products Officer, 高级副总裁兼联合创始人
Conference Call Participants
Brian Lee - 高盛
Colin Rusch - Oppenheimer 科林·鲁斯奇 - 摩根大通
Julien Dumoulin-Smith - 美国银行
Philip Shen - 罗斯MKM
马克·斯特劳斯 - 摩根大通
Praneeth Satish - 富国银行
Eric Stine - Craig-Hallum Capital Group 埃里克·斯坦恩 - 克雷格-哈勒姆资本集团
Christine Cho - 巴克莱
乔丹列维 - Truist证券
Kashy Harrison - Piper Sandler Kashy Harrison - Piper Sandler
安德鲁·佩尔科科 - 摩根士丹利
Joseph Osha - Guggenheim Partners 约瑟夫・欧夏 - 戈根海姆合伙人
Auguste Richard - 北地
Moses Sutton - BNP Paribas 摩西·萨顿 - BNP 巴黎银行
Maheep Mandloi - Mizuho
特里斯坦·理查森-加拿大丰业银行
Vikram Bagri - 花旗集团
Pavel Molchanov - Raymond James 保尔·莫尔恰诺夫（Pavel Molchanov） - 雷蒙德·詹姆斯
Austin Moeller - Canaccord-澳金证券
Operator
下午好，欢迎参加 Enphase Energy 2023 年第四季度财务业绩电话会议。所有参与者将处于听取模式。【操作员指示】。请注意，本次活动正在记录。我现在将会议交给 Zach Freedman。请讲。
Zachary Freedman
下午好，感谢您参加今天的电话会议，讨论 Enphase Energy 2023 年第四季度的业绩。今天的参与者包括我们的总裁兼首席执行官 Badri Kothandaraman、我们的首席财务官 Mandy Yang 以及我们的首席产品官 Raghu Belur。
今天股市收盘后，Enphase发布了一份新闻稿，宣布截至2023年12月31日的第四季度业绩。在这次电话会议中，Enphase管理层将发表前瞻性声明，包括但不限于有关我们预期未来财务业绩、市场趋势、技术和产品的能力以及对业主和安装商的好处、我们的运营包括制造、客户服务和供需情况、现有和新市场的预期增长、新产品推介的时机以及监管和税务事项。这些前瞻性声明涉及重大风险和不确定性，我们的实际结果和事件发生的时间可能与这些预期有实质性的差异。
为了更全面地讨论风险和不确定性，请参阅我们最近提交给SEC的10-K和10-Q表格。我们提醒您不要过分依赖前瞻性陈述，并且不承担更新前瞻性陈述的义务或责任，该更新可能基于新信息、未来事件或预期变化。另外，请注意，本通话中使用的财务指标在非依据美国通用会计准则（GAAP）的基础上表述，除非另有说明，并已经过调整排除某些费用。我们已经在与SEC提交的8-K表格中提供了这些非GAAP财务指标与GAAP财务指标的调节情况，同时也可以在我们网站的投资者关系部分找到。
现在我要介绍Badri Kothandaraman，我们的总裁兼首席执行官。Badri？
Badri Kothandaraman
大家下午好，感谢今天加入我们讨论2023年第四季度财务业绩。我们报告了季度收入为3.026亿美元，出货约160万台微逆变器和80.7兆瓦小时的电池，并实现自由现金流1,540万美元。在上一次的收益电话会议上，我们表示我们将减少约1.5亿美元的渠道库存。我们在第四季度实现了1.47亿美元的减少。
在第四季度，我们以非通用会计原则（non-GAAP）和包括IRA（退休金）福利在内，以营收的百分比来看，毛利率达50%，营业费用占29%，营业收入占22%。接下来会在通话中进行财务情况的解释。现在让我们讨论一下我们是如何为客户提供服务的。我们的全球NPS在第四季度为77%，与第三季度持平。我们的平均通话等待时间为一分钟，相比于第三季度的1.3分钟有所改善。通过自动化以及在全球范围扩大我们的现场服务团队，我们在解决客户问题方面取得了良好的进展。
让我们谈谈运营。微逆变器和电池的整体供应环境非常稳定。我们先来谈谈微逆变器。我们在美国的代工厂向客户发运了约 91.3 万台微逆变器。去年12月，我们宣布将停止在罗马尼亚和威斯康星的代工业务。我们将与我们在南卡罗来纳和德克萨斯的两个现有合作伙伴在美国进行微逆变器的制造。目前设在罗马尼亚和威斯康星的设备将被重新部署到其他设施中使用。在上半年完成我们的重组行动后，我们预计全球产能将达到约 725 万台微逆变器每季，其中 500 万台将在美国生产。
我们预计在第一季度从位于美国的制造设施向客户发运大约50万个微逆变器。我们预计在上半年从美国工厂的发货量会较低，因为我们会减少工厂和渠道库存。我们预期下半年的发货量会更高。至于IQ电池，我们有两个在中国的电池组供应商具有足够的制造能力来支持我们在2024年的发展。另外，我们还将在2024年第三季度开始有能力在美国制造IQ电池。
让我们现在来讨论各地区情况。我们在第四季度的美国和国际收入组合比例分别为75%和25%。为了更好地了解我们的业务情况，我们将按地区提供细分以及各地区的销售美元指标，直到渠道状况良好为止。在美国，我们的收入同比减少了35%，因为我们未满足最终客户的需求。我们的微型逆变器和电池在美国的整体销售在第四季度较第三季度下降了9%。让我们来讨论我们在美国看到的市场趋势，按照加州以外的地区和加利福尼亚来进行区分。在加州以外的地区，我们的整体销售在第四季度仅较第三季度下降了1%。微型逆变器的销售保持不变，电池的销售在第四季度下降了8%。
在加利福尼亚，我们整体的售出量在第四季度比第三季度下降了7%。与第三季度相比，我们的微逆变器售出量在第四季度下降了27%，主要是由于NEM 3.0过渡所致。然而，由于NEM 3.0系统的高附加率，我们的电池售出量在第四季度增加了58%，符合预期。正如我们在上一次收入电话会议上讨论的，我们的安装商需要几个季度来完全过渡到NEM 3.0和正常的销售。稍后在电话会议中我将提供有关NEM 3.0的更多统计数据。
在欧洲，我们的收入按季度同比下降了70％，因为我们没有及时满足最终客户的需求。与第三季度相比，我们在欧洲的微逆变器和电池的总销售额在第四季度下降了20％。与第三季度相比，第四季度我们的微逆变器的销售额下降了23％，电池销售额下降了2％。我将提供一些关于我们在欧洲关键市场荷兰、法国和德国的情况。
在荷兰，我们在第四季度的整体销售量与第三季度相比下降了37%。客户担心太阳能出口关税，同时对于净计量结束存在困惑。我们在荷兰举办了“下一代太阳能”活动，邀请了全国800多名安装商，推广太阳能电池以及能源管理软件的综合解决方案，这将释放荷兰能源市场的全部潜力。我们相信太阳能电池将成为常态，动态电价和电网服务的普及会加速这一过程。我们已经看到该地区的电池销量稳步增长，并预计到2024年这一趋势会加速发展。
在法国，我们在第四季度的整体销售量仅比第三季度下降了1％。我们看到这个市场有很大的潜力，可以发展成为太阳能加电池市场，因为公用事业费用已经上涨，预计在2024年还会进一步增加。在德国，我们在第四季度的整体销售量与第三季度相比下降了32％。然而，我们看到太阳能和电池的激活连续增长，因为我们在该地区继续获得增长势头。
我们将我们的产品引入更多欧洲国家。在过去几个月里，我们已经进入了英国、瑞典、丹麦、希腊、瑞士、奥地利、意大利和比利时市场，我们的IQ8微逆变器和IQ电池也已在这些国家获得认可。在澳大利亚，我们的Enphase Energy系统配备了IQ8微逆变器和IQ Battery 5P，这是我们于2023年6月推出的最新第三代电池，我们已经看到了市场的增长。
在巴西，我们的销售量稳定增长，因为我们专注于拓展安装商基础。在印度，我们开始发货我们的IQ8HC和IQ8P微逆变器以支持高功率面板。在墨西哥，我们最近开始为住宅应用发货IQ8P微逆变器。提醒一下，IQ8P是我们最高功率的微逆变器，适用于住宅和商业应用，交流功率为480瓦。
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