Q2 2020 Enphase Energy Inc Earnings Call
Ladies and gentlemen, thank you for standing Bonnie and welcome to the and save Energy second quarter 2020 financial results Conference call. At this time all participants are in listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session. You want me to press Star one on your telephone.
Please be advised of today's conference is being recorded if you require any further assistance. Please press star zero I would not only to hand the conference over to your Speaker Mr. Adam Hinckley. Please go ahead Sir.
Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energys second quarter 2020 results on today's call or Baldry cofounder, Ami and pages, President and Chief Executive Officer, Eric brand to raise Chief Financial Officer, Ragu below our chief product Officer.
The market close today Enphase issued a press release announcing the results for its second quarter ended June Thirtyth 2020.
During this conference call and piece management will make forward looking statements, including but not limited to statements related to Enphase energys expected future financial performance the capabilities availability and market adoption of our current and future technology and products, our performance and the performance of our installation partners and shells and operations and our X.
Hi patients as to the impacted the cobot 19 pandemic. These forward looking statements involve significant risks and uncertainties and Enphase energys actual results and the timing events could differ materially from these expectations for a more complete discussion of the risks and uncertainties. Please see the company's annual report on form 10-K for the year.
Ended December 31st 2019, which is on file with the FCC and quarterly report on form 10-Q for the second quarter ended June Thirtyth, 2020, which will be filed during the third quarter of 2020.
Enphase energy cautions you not to place any undue reliance on forward looking statements and undertakes no duty or obligation to update any forward looking statements as a result of new information future events or changes in its expectations. Also please note that financial measures used on this call or expressed on a non-GAAP basis, unless otherwise noted and had been.
Good certain charges. The company has provided a reconciliation of these non-GAAP financial measures to GAAP financial measures in its earnings release posted today, which can also be found in the Investor Relations section of its website now I'd like to introduce Badri co founder Chairman, President and Chief Executive Officer of MTGE energy boundary.
Good afternoon, and thanks for joining us today to discuss I want to second quarter, 2020 financials, and such I hope all in a few on staying safe and healthy.
I would deem did a good job navigating a difficult macro environment cost Mike Hogan 19.
We reported revenue of $125.5 million shipped approximately 1.1 million microinverters.
Being channel inventory back to multi level.
Cheap credit card non-GAAP gross margin of 39.6% and generated strong free cash flow of $21 million.
In addition, we began shipping noting John noted system featuring ensemble Energy management technology. This is an important part of police fund fees more than the shockey.
We exited the second quarter on an approximately 40 21 19. This means 40% gross margin, 21% operating expenses and 19% operating income on as a percentage of revenue on a non-GAAP basis, that's had in mind and our baseline financial Martin It's Tony Fyfifteen.
Well it 19 created a significant downward pressure on demand during the second quarter of Carney trendy, but many countries implementing shows that in Louisiana sanctions on aspects some daily life what impacted.
Not in children's medical considered a century and service providers in some locations that business processes had to be at invented.
And for an industry that are like largely on in person seems meeting with homeowners a few months ago.
Speed with regions dollars have migrated to what you've been selling has been impressive.
[noise] worldwide locations U S Europe, India in Australia, fully supporting installers and homeowners, while working from home.
Right you too Netra motor squad over 66 per cent and if not the America and extra motor squared was 73% the ability to show consistent results with employees working from home during the quarter was no easy feet and is a testament to the business processes, we implemented.
Or average call wait time decreased slightly and cue to the approximately a minute.
Continue to enhance our service and chat capability is reduced call volumes and lower or wait time.
Specifically, we launched the online interface community during you too.
Which give installers and homeowners the ability to communicate directly about enface products. In addition to the Enphase online store relaunched in the U S. During Q4 19.
Also added online stores in Europe, and Australia during cue to better service or installers and homeowners with quick cycle times, let's quickly go to manufacturing.
Given the reduce demand situation in Q2, we weren't very closely with their contract manufacturing partners dropped demised overall and mentally birds in both China in Mexico, maintaining a tight lid on inventory is critical for us, especially during the stuff times.
We were pretty successful S V reduce the inventory levels were nearly $3.4 million.
<unk> took you wanted.
Or a factory in Mexico is very important for us and we feel confident you'll be able to produce a million micro inverters bike ya for twenties, it justified by product demand <unk>.
We currently manufacturing both China in Mexico, with our existing contract manufacturing partners and we have an excellent relationship with them.
On a previous earnings call I've discussed qualifying a second contract manufacturing partner for micro and murders. We're doing this to create for the flexibility as we grow up business the contract manufacturer cellcom and that factories and chimney India.
Setting up a fully automated lined with them.
[noise] vacation is going well, we're very happy with the progress and we expect to start producing micro inverters from the Cellcom Jan ninth factory and the fourth quarter of 2020.
In terms of battery storage, we have one qualified supplier for our cell pack and we are in the finals changes of qualifying an additional supplier.
This will bring up our capacity to a total of 480 megabyte hours a year once the two supplier factories are fully lamps in the first half of 2021.
You also expect to qualify a third so next year. So that we have fully flexible supply chain for battery's going forward much like our micro invertor supply chain.
Still using lithium my own phosphate batteries as they provide differentiation in terms of fire safety and thermal stability, which is very critical to homeowners.
Let us know moved to the regions or the U S. N International mix for you to was 80 and 20% respectively.
<unk> stood out during the quarter demonstrating sequential revenue growth from two one.
Alright covered 19.
U S market, what's the hardest hit region due to Corbett 19, with solar installation shut down in the areas of California, and several northeastern States April witness that romantic slow down.
And then stoners became more proficient in clothing online sales and is building department has accelerated online permits we started to see activity picking up towards June.
Our average weekly sell through from distributions installers was 26% higher in June versus April.
He worked very closely with their distributors, an installer throughout you to to optimize channel inventory.
[noise] weeks on hand at the end of two two was a boa typical level, but still within a healthy range <unk>.
In addition hour install account increased sequentially you too despite the low overall sell through.
This highlighter success at continuing to win new installers.
We also announced the strategic partnership and killed too with yourself.
Pacey modules based on our seventh generation IQ, seven plus micro and murders.
For the third quarter, we are seeing it nice pick up and fell through during July.
A weekly sell through in July was 14 person better than in June.
We expect to be at target inventory range of eight to 10 weeks at the end of two three.
In addition, restarted shipping the uncharged storage systems in the U S.
We have ramping the battery supply chain and have more demand than what we can support and Q3.
As I have said weird rapidly, bringing an additional capacity without a second battery supplier for you for.
Another important subjects is in charge training for installers.
<unk> July we permitted to online training for installer through the Enphase University.
Nearly 134 installers have completed the online courses to achieve provisional certification and another 531 installers out in the process of completing the training.
And somebody we are confident a resolving supply in training challenges targeting an 8% to 10% average storage attach right for the U S. In your phone, which is higher than what we said at our analysts today in December of 2019, as a reminder of the storage attach rates vary.
<unk> on geography, and we expect attach rates from your significantly higher in California, and Florida.
[noise] in Europe, we are expanding our sales photos and all key region, even more than what were you originally planned before.
Are cute cute too revenue in Europe, increasing Glen Shirley 8% from tier one.
Installer attendant that feels webinars during you two more than double relative to in person attendance in Q1.
As a result hour installer account increased by more than 20% sequentially.
Distributor games were made both the new market, such as Germany, Poland in Spain.
As well as existing market of Netherlands in Belgium.
We expect to grow significantly in Europe. During two three although our target of doubling revenue on an annual basis is unlikely to cover it.
We anticipate adding several new installers and distributors during Q.
We recently announced the strategic partnership with Sunpower to produce the new interface interchanged Maxion ASE module.
Raised on seventh generation Ikea migrant workers overall, I'm very happy with our team's performance in Europe.
Revenue from both Asia Pacific in Latin America decrease sequentially at a rate consistent with the U S. When excluding safe Harbor revenue from you want.
In Latin America, Puerto Rico witness a strong rebound activity during the second half of you too [noise] in anticipation of the hurricane season after being shut down in the first half of the corner.
Storage storage attach recent Puerto Rico at high so this could be an interesting market at least ram shipments of orange or storage system.
In Australia, we've been focused on winning new distributor installer partners, and our installer count and cue to reach the multiyear height.
Really and market suffers from an abundance of low quality products.
Differentiation on C D C.
Alrighty and customer servers are living up to gain sure.
During Q3, we plan to introduce in Australia, our highest power product like use seven eight which can paired with high-power D. C modules up to 450 Watts. This will help installers optimize that overall system costume performer.
In addition, we expect to ship micro Inverters for Maxion AC modules starting in Q4 20, we expect sequential revenue growth from these initiators through 2020 and beyond.
Now that we covered the regents, let's not talk about the overall bookings worldwide for the third quarter.
At this point, we are 100% booked for the midpoint of Q3 revenue guidance.
We cannot predict how covered 19 is gonna play out in August or September. So that's always arrest. However, we feel very good about the progress we are making and the demand that we have seen.
Let us know turn to new products. The feedback that we have received an orange or distorted system has been quite good installers like the modularity ease of installations and all in one energy system. In addition to a trademark quality in service.
No not like the products functionality.
You know safe chemistry, one company to call transparency of it when they're working on the ability to go up through the mobile app.
Just to recap.
I'd like to go through the features and benefits of the Uncharge storage systems in detail.
First and all in one AC coverage system or distributed solid and storage.
Second intelligent brown out built with.
And fees power start technology, which uses the software based approach to mitigate initial demand spike from motor driven appliances, such as air conditioners and pumps.
Third.
MS modular architecture, along with you 95, four P. A fire certification based upon very safe lithium iron phosphate chemistry.
Along with air cooling.
And food is no single point of failures due to redundant micro inverters in every and charged three three kilowatt hour battery.
One is the standard easy to install.
<unk> a N face that all hour long tail installers, it used to and come to expect now.
The next one is unprecedented insight into solar and storage performance with the ability to go off grid simply through the mobile app.
The last one that's plug and play compatibility with existing and new and solar systems with IQ Micro Inverters and one thing that is new is we are going to make the in charge of compatible with M-series.
T V systems microphone murder systems, and we're going to introduce that in the fourth quarter of 2020. This is a big deal as it is going to enable easier easier upgrades for 300000 homeowners who have the M series Bay, a solar system on the roofs.
Let me quickly elaborate a little bit about the power start technology, which helps to start motor driven appliances like AC and pumps. We all know that there is an initial surge in power demand.
When you start an AC or a pump and that can collapse of homes microcredit.
Our power start a technology uses the software based approach to flatten that demand spike without impacting the user experience I would like to provide a quick story to highlight disadvantage our chief operating officer recently installed in charge on his home and it's home runs their whole home pressure pump to supply.
[noise] water by the way it 13 million American homes rely on Wellwater.
Prior to joining in phase. He was told by competition that you would need 40 kilowatt hours to start this month.
<unk> solve the challenge with only 23 by three kilowatt hours have been charged batteries.
Let me caution that this system size reduction is dependent on the north profile of each home, but it does demonstrate the power of ensemble and.
<unk> face can create a better user experience despite the smaller battery sides and that's one of our he advantages <unk>.
Not every kilowatt hours the same as we like to say.
Beyond in charge, we have an exciting lineup of new products, we are making good progress on launching a rescue APB.
A good agnostic micro invertor on the roof, but thank you ate solar can power to the home even when the greatest down without a bad.
We're also moving quickly on a small commercial offering IQ a D as well as the Portugal ensemble in a box solution preliminary information on diet Qad's already on our website.
Now that we have the based on sample platform in good shape getting these products out will become more predictable.
Let me briefly touch upon digital transformation I talked about it in the private earnings call. Our approach here is pretty simple provide a great experience for both installers and homeowners through a comprehensive digital platform one's installers and homeowners get on the platform they should never ever leave it.
In early July relaunched our interface installer network in the U S network of frustrated installers deliver exceptional homeowner experiences using and faced products.
Installer Network Korea, E&S, we'd like to call it.
Basketball enough for digital platform.
We have on board more than 300, installers, who will benefit from access to a digital platform that delivers homeowner leads an area of tools for design proposal financing scheduling and services such as for meeting labor an incentive processing in order to improve their business sufficient.
Plan to deliver these tunes and services to the installers over the next few quarters.
By providing out installers with best in class tunes and services and buy continuously being connected to them and homeowners digitally we hope to take customer experience to a new level worldwide.
In summary, we are pleased with the results for the second quarter, considering the coverage 19 pandemic, the health and safety of our employees customers and partners remain our top most priority we're optimistic about the resurgence in market demand for the third quarter and excited about the ramp up for an charged batteries storage systems, we look forward.
Accelerating both our new products and digital transformation efforts over the next 18 months before I turned the call over to Eric discuss our financial I would like to briefly address baseless short report that came out in June like the report issued by the same entered in 2018.
Notice blatantly falls and misleading, we operate with the higher standards of ethics and integrity.
Run the company based upon our core values and will not compromise them somewhat me, we take great pride in the products that we create an operational excellent we have achieved till date.
Will continue to focus on delivering the best customer experience building, great products with the highest quality standards and driving exceptional shareholder value with that I will hand, the cold over to Eric photos review of a finance Eric.
Probably I will provide more details related trouble second quarter of 2020 financial resolved as well as our business for the third four of 23.
You have provided reconciliation of these non gap to get financial measures in our arms release sports or today, which can also be following the investor relations sexual in our website.
Ooh revenue for the second quarter of 2020 was 125 $5 million and deep not include any revenue from savings hardware shipmaster in the corner.
Total revenue for the second quarter of 2020 degrees, 39% sequentially young 6% a year over year.
Clearing the impact of $44.5 million of Saint hardware revenue from the first quarter of 2022nd quarter revenue decreased 22% sequentially.
We worked with our distribution is from your partner to cancel pushout all of us.
The industry adjusted to the new realities of operating during cookies 19 from them.
Well this resulting in a material sequential defining revenue. It was the correct action to bring channel inventory now too healthy levels and position and <unk> for the second half of 2020, we shipped approximately 355 megawatts P C and the second quarter of 2020.
Non grabbed longer gross margins for the second quarter of 2020, or 39, 6% a record compared to 39, 5% in the first quarter of 2020, I am extremely proud of the entire theme for sending a record for non cap gross margin when revenue decline on a sequential basis.
Non gap operating expenses water $26 million for the second quarter of 2020 compared to 28 $5 million for the fourth quarter of 2020. The sequential decrease was primarily driven by lower bonuses travel and entertainment experience payroll taxes on better equity.
Yup operating expenses worth $37.5 million for the second quarter of 2020 compared to $36 million for the fourth quarter of 2020 <unk>.
Cap operating expenses for the second quarter of 2020 included $11 million of Stock-based compensation expenses and $546000 of amortization expenses poor acquire intangible assets Stock-based compensation expenses for the second quarter were hired forecast view.
You too the time in defense of estimating the experience and receiving a third party is top prize forecast.
We expect the Stock-based compensation experience to remain at this level for the next several quarters.
Oh no longer basis income from operations was 23 points familiar for the second quarter of 2020 compared to $52.8 million for the first quarter of 2020.
On a cat basis income from operations walk them $9 million for the second quarter of 2020.
For a Nokia basis net income for the second quarter of 2020 was 23 $5 million compared to 51 $9 million for the first quarter of 2020. This resulted in diluted earnings per shares of 17 cents for the second quarter of 2020 compared to 38 cents for the first quarter of 2020.
Got that loss for the second order of 2020 was 47 $3 million compared to net income of 68 $9 million for the first quarter of 2020.
Cabinet lost in the second quarter of 2020th included in non-cash charged for 59 $7 million for the change in fair value of derivatives, partially upset by a six 6 million dollar income tax benefits.
These non-cash cherishes relate to the convertible note do 2025 worry issue in March 2020, and the hitching transaction to increase the effective compression premium.
At the time of insurance of the note with is not having enough authorized sheriff to sell denouncing anything but cash.
Nope, the compression option convertible no pitch and Warren transactions, which I'll refer to as derivative transactions require mark to market accounting.
Mark to market loss of 59 $7 million was mainly driven by our stock price traveling from $32 on March 31st $264 may 20th when our store holders approved and increasing authorized call shelves at all our annual meeting.
The approved increasing authorized sheriff enable us to civil derivative transactions in cash.
Sure of common stock or a combination of the two hour of discretion.
Accordingly, the river this where we measure that's fair value on reclassified two additional painting capital on the balance sheet in the second quarter of 2020.
We no longer speak to report a changing fur body of derivatives in the income a payment going forward.
Let me also remind you that the gap net income in the first quarter of 2020 include a 15 $30 million on our benefit from changes in fair value of the remote is related to the convertible notes do 2025.
11, 49 million dollar income tax benefits.
Non-cash benefit of $15 $3 million from changes in front of ideas of derivatives was primarily due to the declining our short price from $43 March nine when we close our 2025 converting a note to $32 on March 31 is here.
Yep Deluded lost for sure well 38 cents for the second quarter of 2020 compared to deluded earnings per share of 50 cents for the first quarter of 2020.
Got dilutive lost for sure for the second quarter of 2020, including a faulty unit central off from the change in fair value for everybody and a <unk> income tax benefits.
Now turn into the balance sheet inventory was $31.2 million at the end of your 200 2020.
234, 6 billion bonus at the end of Q1 2023 operations theme did a great job on with using them battery levels. Despite the buildup require for in charge shrimp.
Receivable, where 89 5 million bonus at the end of Q2 20 compared to 95 $5 million at the end of Q1 20.
Election was primarily due to lower Shipman volume in Q2, 20, adding has collisions airforce upset by weaker shipman linearity in the corner.
Our final theme data exceptional joke managing court.
Okay collections during the second quarter, resulting in a substantial improvement in accounts receivable quality compared to the prayer quarters, despite the weaker economic microeconomic environment.
We exited the second quarter of 2020 with a total of cash financial 607.
$3 million compared to $593.8 million in the first quarter of 2020.
The cash balance in the corner was reviews by nine $4 million for employee with Kobe, Texas to necessarily stocked compensation grabbed the invested in the second quarter of 2020 at.
These prevented the issuance of approximately 177000 shares we did not make any sure repurchases against our 200 million dollar shut repurchase authorization.
We generated $25.4 million in cash of operations $21 million Justice sneak a slope of the second quarter of 2020 capital expenditure was four $4 million. Four Q2, 20, mainly to increase hovering charged battery capacity manufacturing improvements in the lounge of out.
Second contract manufacturing partner.
As you know the company has been paying section three O. One terrorist since <unk> September 2018, 22 microphone Burger programs manufacturing Chang.
As part of our birth mitigation plants, we migrated a portion of our manufacturing to Mexico.
Certain of our microphone better programs met an exclusion took a section three O one parrots.
This exclusion credit strict limits on on the burgers dimension wait.
Our <unk> focus on driving down the component count on our bichrome better through semiconductor integration enable us to meet these limits.
We therefore thought refunds from U S costume, some vulgar protection for the terrorists, we permanently paid for this microphone patterns.
We expect to have a positive material impact on our financial it's payments in all of the request a refund.
If all of it reported and refunds are approved in the future.
Approximately $39 million plus accrue interest these cats no material impact when our financial results for Q2 20.
This time it exclusion will expire on over 720 20, and the company has already filed a comment reporting an extension of the town is exclusion with a U S three or 4% of the we continued to pay section three O. One terrorist one hour of storage and communication probes as well as other accessories manufacturing China.
Now, let's discuss our outlook for the third order of 2020, we expect our revenue for the third quarter of 2022 be within a range of $160 million to $175 million. Our revenue guidance. There are some not include any safe Harbor Shipman.
Turning to margins, we expect gas.
Gross margin to be within a range of 36, 239% and for non gap gross margin to be within a range of 30 70 240 per cent.
We just glued of stocks based compensation expenses.
We expect that were gap operating expenses to be waiting a range of 41 $243 million, including approximately 30 million dollar 50, metaphoric stock-based compensation expenses and acquisition really long replace issue.
We expect long appleberry, an expensive to be within the range of 28 $230 million. Please note Q3 guidance, that's not including any benefit from the tariff refunds or order of nonrecurring items with that I will now open the line for questions.
Thank you as a reminder to ask a question you will need to questar, one on your telephone till with Johnny a question. Mr. Tanky. Please standby, while we compiled the Q&A roster.
My first question will come from finally from Goldman Sachs. Please go ahead.
Hey, guys. Thanks for taking the questions maybe just to start on the three Q revenue guide.
How much battery storage revenue his embedded in the outlook and then separately.
I have a follow up on the attachment right 44.
Alright, so Brian.
At this point, we are not breaking out exactly.
Three stoneridge revenue, but.
We already told you, we expect 8% to 10% storage attach rate average storage attach right.
Q4 of 20 so.
You can calculate that number and do some extrapolation for yourself.
But it is a significant amount.
Three.
Okay Fair enough I guess on the boundary on the 8% to 10% attach right for Q4.
Great pretty basic question, but can you remind us how you calculate that I guess, if you're expecting lower shipments in Q4 versus what you had originally expected last year. When you gave the 5% attach ray target at the analyst day. Prior to Covid, then is the 8% to 10% being driven by lower shipment.
Or I guess, how much of this is higher battery shipments versus just to lower denominator with the micro hamburger shipments being lower as a result of Kogut. So maybe if you can clarify that a bit.
I'll just tell you a general formula for calculating demand for my grandmother's is going to be the demand whatever it is in the fourth quarter at this at this time, we have a general feeling that the market is picking up so you know.
We expect that now you take.
With reference to the megawatt that we should be in the United States.
America, you take and you do an 8% to 10% of edge of that that gives you the rough number of megawatts.
Storage.
And that multiplane by two hours will give you a megawatt hours.
And that'll give you.
Very reasonable very reasonable number and that number is Q Ford.
And you can enter a bullet what you three will be.
By the way we are like what I've said Q for right now is demand limited.
Sorry, <unk> limited, we have Ah and.
Time maxed out on a battery capacity.
In Q3.
And we are we are bringing in capacity rapidly for you for and we are qualifying or second battery supplier into your phone.
So.
So we got a good story here on batteries.
Okay.
Clear I don't Wanna.
I don't want to put words on your mouth, but it sounds like it's higher battery shipment volumes relative to your original targets correct actually yearly right absolutely.
Okay, and then last one if I could squeeze it in N out pass it on his you mentioned, 100% book to the mid point of the revenue guidance for Q3.
Is that typical for this point in the quarter to be that fully booked or or.
Just kind of give us some context for for.
No that performance relative to what you're historically used to seeing at this point in the quarter with respect to to the visibility. Thanks guys.
Well it depends.
When for example, and 2019, when we had the power effect.
Our capacity problem.
At that time, we were usually fully booked.
At the time of the earnings call.
The last time when I told you.
Three months ago. When I said, we are fully booked but we do expect cancellations beautiful bed.
This time things look a little bit more upbeat and obviously I cannot predict what cove. It will happen you know what cover it will do August and September but what we are seeing in terms of P. O S.
We got a 26% improvement in North American B O S weekly fell through from June to April we have a 14% improvement from <unk> from July June.
In terms of the weekly P O S. So.
We feel good in general So we think you know 100% right now is a very L. P number.
Thank you. Our next question will come from my extra sauce with J P. Morgan. Please go ahead.
Yeah. Good afternoon. Thank you very much for taking our questions.
I was just hoping you could talk a little bit about how how are you plan around the upcoming election in the U S.
Yeah, it regarding inventory levels and manufacturing just.
Head of the ahead of the election and then immediately after.
If there is need to to increase manufacturing.
How quickly you could potentially do that.
Alright, I mean, we have flexible manufacturing capacity our whole.
And they are the strategy relies on the fact, we have a scalable model.
And we have low capex by definition, because our contract manufacturing partners are able to do a great job for US we were able to increase our microphone verdict capacity. For example in 2019 do almost two and a half million units per quarter.
There's no reason why that cannot be stretched if there is a sudden increase in demand.
Now for that reason now I I went in qualified.
Second contract manufacturer, then Cellcom Tonight, and we do have two factories with that first contract manufacturer flextronics both in China.
As well as Mexico, that's on the micro Invertor site understood inside.
In terms of battery capacity, we do have one supplier right now we're not we're not happy with the capacity that we had.
We are scrambling in order to get another supplier up and running very very soon by the beginning of the fourth quarter. So we can start addressing that demand and if it does require we will not hesitate to get a third supplier very fast when my plan right now is getting the third supplier you know in the middle of.
2021.
But in general you know I think we are.
Really well set in terms of manufacturing.
Okay. Thanks, a lot or you just.
Just want to go back to your comments around the small commercial product it sounds like it it's tracking expectations there, but I think previously you talked about <unk> release state for that is that still on track just wasn't clear from the prepared remarks.
The Ikea Lady product, let me just quickly elaborate about that product it is.
It's a two you know, it's a micro and voted for servicing two panels. It's a 640 watt E. C. Micro inverted outstanding power density and is able to address the key need of rapid shut down with the traditional.
High quality in customer service trademark of N face and the main reason for his lunch and get is because it's a natural extension of the residential market serviced by the same long tail installers and distributors. So what are we done.
We are making very nice progress on it the designers completely done.
Now we are basically working on the system performance, we already released Blender information on the website. We think we can have a beta piloting by the end of the year.
I mean, that's an aggressive aggressive date right now, but I'm holding that you know holding my team to that standard doesn't give a better update.
And the next three months in the next earning skull, but we feel optimistic there.
Okay, No follow up fine. Thank you very much.
Thank you next question will come from bread, Michael with Williams training. Please go ahead.
Hi, Thanks for taking my question could you add any more color on the recovery that you saw.
May June and July by reads across the U S. An in N out for Ya.
Right.
And first let me actually come to Europe, I mean, Europe is a great great story for us Despite corbett.
Two grew from you when we believe this is because we stopped the team really well.
Basically.
Had.
We hired all this is a sale folks and we are actually expanding expanding into more countries and what they're finding is.
You know and places like Netherlands et cetera.
Simply.
Because now we have more to feed on the street <unk>.
We are able to address.
More accounts, you're able to the modem installed visits we are able to win motor distributors.
They're doing that well and you know, Netherlands, and and friends are really.
<unk> <unk> and friends really nice nice for Us in addition.
Work in Germany, we have started working Poland started working Austria.
And that's going pretty well.
So.
So I'm really happy with that team and like what I said impure three we expect much more significant growth.
Compared to cute too.
With reference to the U S.
We saw that California, with a little bit down in April.
New York, and New Jersey, but we're also.
Almost out in April.
But we have seen healthy trends.
[noise] towards June, California is almost back.
New Jersey Outback.
Florida.
Florida, and Texas were quite strong in Q too I've ever.
And are you are you guys all knew that there is some minor setback.
Some setback in Florida to increase covered cases, and you know in in July.
It doesn't seem to have have affected the solar installations much.
But you never know going forward.
Whatever California, and New York, New Jersey is still strong.
So we are generally optimistic that demand is coming back and like what I said every lead received better find ourselves.
Through.
I'm not a distributors to the installers versus the previous we can like what I said July is 14% higher than June.
So that's what is happening in the U S.
Thank you bothered to you also have the color on with the stroke demand for storage as that.
Broad based is that reasonably across the U S is that all California or or how many states are you seeing participating.
And I was it a lot of it's from northern California, where the outages where most severe.
Could you add the color on what the attached to re might get two next year.
Next year is too early to break bread, but you're right predominant demand is from California and Florida.
That's that's most of the demand and you know we we start you know like what I said.
<unk> pilot systems in June.
To a bunch of installers and they've been very happy with the product.
What they like about the product is it's in all in one E. C coverage system for the soda and storage. It is ideal for a long time installers really value quality and surface.
We have this amazing feature which is the power to start technology, which uses.
Software approach to mitigate demands bike so that.
<unk> like air Conditioners, and bums can be easily started with in charge versus other competitive solutions.
We have this modular architecture, where.
You don't need to add in very like one time of energy you add only steps a 3.3 kilowatt hours <unk>.
Yeah, that's important because if you see you in an hour and our executive team I have a 16 buying six kilowatt hour.
Eric has got 20 kilowatt hour, Jeff Mcneil has got 23 by three kilowatt hour so it matters.
We are able to fine tune.
Storage do exactly what they want.
So that's an important thing the U L 90, 548, five certification based on lithium ion phosphate chemistry safe chemistry, basically know cohort air cooling versus other systems that use liquid calling.
Micro Inverters I have multiple micro inverters in one named Charles three by three kilowatt hours. If for my you know I have four micro inverters and a three by three kilowatt hour battery. If one of the phone is not working it's not the end of the word charging discharging rate is going to drop a little bit, but it's not it's not the end of the word the system will continue.
Perform on more cool feature is you know the ability to go upgrade through the App.
And that I, particularly like because it helps you know it is koehn. It is with a click the button your suddenly disconnected from the utility and you know what.
I do experiments all the time I spend a weekend completely off with my wife doesn't even though it so.
And a modern mode I mean, we hope more and more people.
Would you use that feature.
Also a game.
Tomorrow is unprecedented insight into solar and storage performance like for example.
From the App, you'll be able to see what the micro grid voltages, what's the frequency is.
Every micro invertor and everybody in charge of three by three kilowatt hour, whether that is working Oh does the connectivity looked like you know how much is each micro invertor discharging.
We provided Lord of insight. So you know the homeowners, who really wanted to know the detail paranoid and they they have the comfort that that is technology in the back working all the time so.
That's that's okay and then the last one is an important one we obviously.
You don't have plug and play with the IQ microenvironment, but now you know a lot of folks came to us and they wanted.
Charles to be comparable to the M series, So I've had a team of people.
Going and they're working on this end we're happy to.
Say that we can we can release that in the you know towards the end of your food.
And I think that will be a big deal because it'll help easier upgrade for 300000 homeowners.
You know so so we're excited about it overall right.
Thank you very much my last question is just is there any update on the Lawrence of the ramp of the rooftop Ike you, a which would enable yep.
Solar array without stores to operate.
During the day, what percentage of volume you take that to be next year. Thank you.
All right now that there's ensemble it alright causes one this is this is now.
Control storage is under control.
The top priority for the company is to work on $2, which is the T. V. You know <unk> on the roof.
Basically means a grilled agnostic micro invader and set another way you have a free battery on your roof for 12 hours during the day so.
Basically you know again I expect a very similar timeline M D and like you a D. I expect in four months, we will lab.
Pilot.
We'll start piloting towards the installers and within a few weeks after that.
We will be able to at least that product.
Thank you. Our next question will come from calling rush with Oppenheimer. Please go ahead.
Thanks, So much guys can can you talk a little bit more about the channel dynamics particular in Europe.
Alright, I mean, as they're still some sell in and just some new geography, so you're you're benefiting from and the third quarter and.
Is that something that may continue onto the balance of it you're right now that I've got it so the fourth quarter.
No I mean look Europe is actually doing extremely well in Europe T amount of inventory and the general is pretty less.
P O S is nice.
No concerns on the channel being fully in fact, the general is Leeann right now.
Okay.
And then just about.
The pricing for the storage product certainly there's a number of products that are you know problem seem to be in the market in the next couple of quarters. How are you thinking about that that dynamic you've been pretty disciplined around with my friend burgers, but.
If there are multiple person the market are you Gonna ask me a bit more active on the person side.
Extra sections right.
Agree with that concept, but the way we have done pricing is we say the next best alternator, we take that and we compare the value that regenerate with respect to that bread and butter. The long tail installers. These long tail installed is a really excited because they have the first time and easy couple at all in one plug and play.
Solar and storage system ideal for them with the trademark quality in service I mean quality in service matters.
So I would I would say like what I said in Miami under the biggest reason for the growth and growth of our company in 2019 was.
You know IQ seven <unk> 700, fantastic product, but the key differentiator was highest quality if they need target I've not been trying to say or target is 500 D. P. P. M. I a N D. P. P. M means 0.05 per cent, that's our target and Ikea seven helped us to come closer to that target and that helped.
To get.
A huge market share so very similar here, we got a great. We got a great JC covered you know system for both soda and storage ideal for the long tail.
And then like what a rattle the intelligent pronto.
That matters for the <unk>.
Yeah that matter of actually for homeowners when they want to run an air conditioners and pumps seamlessly the model or architecture means that the homeowner it doesn't waste more dollars then he needs to end. The same time modular architecture helps the installer really make the installer install a breeze.
The U L. 1990, 540 certification is is important because that's fire safety certification that's possible because lithia my own phosphate gives you a enhanced thermal stability compared to the other chemistry.
800, my grandmother's I already told you air cooling is another big deal.
And I was told us like that because it is motor liable.
You have air cooling versus illiquid liquid liquid corn system.
Alright.
President did insight into solar and storage performance and going upgrade through the App, we think the homeowners who loved that.
Transparency and that's what they expect from interface.
And the last one is we have a million homes.
Oh, no vermilion homes.
Probably a lot with like you there is 300000 with M-series I'm, making a compatible seamlessly.
With those we think we have a lot to gain there so.
I Hope I gave you some color today.
That's helpful. Thank you so much.
Thank you.
Thank you. Our next question will come from Eric Stein with Craig Hallam. Please go ahead.
Hi, everyone. Thanks for taking the question.
Hi.
Alright, so just hello so.
Just curious if you were just touching on storage in the M series compatibility just curious I mean, what.
If you're able to or willing to maybe what type of demand. You expect you may see for that whether it's on launch her in 2021, and then how should we view the microphone Burger upgrade program in that context since.
I know one of the reasons that you would upgrade would be so that you could have storage to upgrade to be IQ series.
Alright, I mean, it too early to talk about 2021, but I'll tell you what you know the whole point of the M. C V S.
People with M. C D 's, Michael and murders, you don't need to upgrade their micro inverters and they can buy and charged storage from us. So obviously, if I turn on all the 300000 homes, if I start advertising.
I need to have the capacity to be able to do that so we need to tread carefully work with the homeowners well and get a lot more capacity. The other interesting thing that you said is there will be many of the micro many of these M. C. D. 's guys, let's say I want I want like you wait on the roof.
And the Ikea eight on the roof is gonna come.
Like what I said, we're going to start piloting towards the fourth quarter end of the fourth quarter and so.
That.
Some of those 300000 homeowners with them series are gonna say I want like you're right.
So you know it's it's too early to tell at this point, maybe I'll have more colored in three months, but I mean, the good news is we're gonna have a lot of demand.
Yeah. So we should read it it's not necessarily deemphasizing the.
Upgrading serious to the to the <unk> or the IQ serious it's more just giving options that's right till installed base okay.
Got it okay.
Eric one more thing.
We have planned capacity O four hungry or maybe you can make or what hours for next year alright.
Yeah.
Start important right the other thing <unk>.
Remember this upgrade program.
Really well right now.
190 theory stripe, which is.
Real success. So now we're talking about incorporating the <unk>, we're gonna be able to if the to to do so.
Alrighty.
Work with.
If I can face product.
The third one is the same people may say I've may ask Hoyle use this as an opportunity I changed my mind, if we get a good feel like I'm moving try to survey.
Or even I, Kuwait or I might cause everybody makes it so that that's kind of mindset right.
Okay, No that's great.
And then maybe last one for me I know.
Part of your strategy over the last couple of years on the pricing side and you have recently refocused a little bit on tier ones and making inroads with sunrun. So just curious.
The Sunrun <unk> combination thoughts on on the impact that might have on your business going forward.
Yeah, I mean, yet.
We have made it clear that.
Like long tail installers a lot.
We like Pier, one nine Dearborn installers as long as they recognize the value that we haven't we have a strategic relationship.
Yeah, very very good relationship it's Sandra.
It's too early to tell what their strategy is going to be after the merger but no.
We are doing well with them.
And the biggest the most important thing is our quality and our customer service. If we maintain that there is no reason why.
No. We we cannot have continued good relationship.
Sandwich with some power foil same with Seinfeld and also with turnover.
The same thing.
Got it okay I'll jump back into one thanks.
Thank you our next question what kind of.
Hi, Thanks for taking the questions most of them vanilla, but.
One quick question your Sunday IQ H T could you clarify like on the timing for IQ wait and thank you ready for those tool tied together because of the same architecture or does one come head of the just trying to see if there's any milestones which.
We need to keep track of on those lunches.
<unk> suddenly died however, you know they they do have the base hardware architecture.
Finalize long long time ago.
They are.
Two projects both of them remember, it's similar timeline.
I do expect pilot runs like what I said in December to installers based upon the feedback from them you know.
A few weeks give or take from that time.
So we expect.
A lot of revenue from those products in 2021.
Then could you clarify the on that thing or the analyst day, you spoke about serviceable market at $1.5 billion for that small commercial.
How much should do you expect.
Oh, when do you expect to reach most part of that market.
But I mean, we talked about the small commercial market is a nice extension of the residential Marquette, we send the value proposition that we offer that basically rapid turndown compliant high quality high customer experience. We also said there is no reason why we cannot get a fair share of the small commercial market.
Like the residential market, obviously market share gains.
New market take time, so there will be alenia Ram to it but you know let's say.
Two years from that I am two or three years from the Ram you should ask if you should expect us to be at the same market share on where we are at residential first one commercial.
Got it correct it makes sense.
And then just one last one are 930 and a.
A lot of them for me on that topic, but it does expand the power capacity have been water then.
But are you getting any inquiries on using D for residential markets and.
Price sensitive international residential markets.
Oh, let's say, it's it's obviously.
The question has come up you're not the first not the first one.
And you know, we we haven't finalize the strategy yet, but I think it's a good concept on basically using it for us in order to bolster our market share in.
You know Asia Pacific Australia. For example, we are still thinking about it but the nice thing is <unk>.
Technology is amazing we are able to get.
T percent.
I had a power density there.
Which is which is great.
So you know we keep you informed.
Got it and just one last thing on modeling from my side.
Stopping expenses, obviously pretend control and Q Q3.
But how should we think about.
Q4 and going forward.
With respect to that target operating.
Margin for the business.
We have an operating modern the operating model is 30 if I.
15, and 20, that's how you should Martin.
Q do a little bit of an anomaly due to cover it but in general that's the financial basically.
Got it thanks for taking the questions.
Yep.
Thank you. Our next question will come from Philippson with Ross Capital Partners.
Hi, everyone. Thanks for taking the questions can you provide a little more color on the visibility you have into Q4.
You know how much is booked for the corner murder business and what kind of discussions are you guys, having as it relates to safe Harbor have they started at all.
Do you expect yeah, I know the I T C and the potential for an extension there may impact things, but just curious if you're having any discussions yet and what what what kind of visibility have thank you for.
Well, it's too early for me to talk about Q for I don't have any visibility unsafe harbor shipments we have no safe Harbor revenues zoomed in Q3 guidance.
We already told you leaned in the living in Medford, we're talking about 8% to 10% storage attached.
That's what I can give you right now.
Okay. Thanks, Badri as it relates to you you were talking about.
The pricing strategy earlier on.
The source product can you talk through also.
The margins do you continue to expect storage to have similar margin instead of corporate average and and how do you as we get into 21, how do you think that pricing and the margin profile it could <unk>.
Yes, the answer it's going to be a line culprit margins.
And then we like how we have an excellent cost reduction program on the micro Inverters, we are using the same principles.
Five.
World class costs on the on the batteries.
<unk>.
Be amused.
Battery controller.
<unk>.
The transfer to switch.
Interesting everything Holistically.
And we are making a lot of progress that we are confident we can maintain a gross margins.
And trying to anyone.
Thanks, and then as it relates to the Mexico capacity and also your new contract manufacturer. When do you expect to be able to serve 100% of the U S demand from non tariff locations are we looking at Q4 could it be.
Q1, and how much I don't know if you gave this sorry, if I missed it but how much of Q2 was served by Mexico and how much of curious or do you expect to be served from a non tariff location.
Alright, So general what I said was.
Mexico can do up to a million microinch murderers per quarter.
That's that's required and then now we have Cellcom cellcom chimney.
Ramping in in Q for it's too early to talk about that but.
There is no reason why that cannot be.
Nice number in the middle of 2021.
And then.
Yeah, so that will basically cover.
Cover.
The U S demand and if you know if the million units is not enough, it's easy for us within a quarter rather it takes a quota once we make a decision increase that capacity to from one to one and a half all we need to lose to invest a capital and move forward in Mexico.
The advantage of working with somebody very strong like flex.
No it's easy to do it.
What was your other question.
<unk>.
Oh, Thanks pleasure how much volumes was served how much volume of served from Mexico, and cute too and then expectations for Q3.
We normally do not break it out but.
In this case.
Because of covered because of a demand situation was less.
A fraction that was manufactured in Mexico wasn't that time.
Yeah, Yeah, I would fade.
Let them, 50% of the of the overall shipments.
Thank you yeah that was.
That was for cute too <unk> expectations for two three.
Expectations for Q3, we don't really break it out and so yeah, I lost Garrick and.
Talk about it or to give you the data.
I I don't have it with me right now.
Okay. Thanks, I'll pass it on.
Thank you. Our next question comes from makes he goes with medium <unk>. Please go ahead.
Hey, guys. Thanks for taking the time on the call here just wanted to circle up on the training or the installers.
If we're talking about in charged with the installer, how that's progressing versus your answer all expectations and also wanted to try and get them read as far as what would be involved there hell above the process would be for training and soldiers on the IQ H D small commercial microphone burgers.
In general where favorite thing to online training you see this is available right now our interface universities online you can take.
They're at about eight courses on an ensemble that a installer has to take in order to achieve provisional certification. It takes several hours and you cannot go through that training without proper focus.
Understanding because there is a chris.
After each each course that going very successfully we you know about 134 installer personal I'm already completed that online training and in addition to those who completed face to face training at N face.
Prior to cover it and <unk>, we have 530 plus people.
Basically taking the course as we speak and they usually have a cycle time off in a couple of weeks in order to finish that goes the nice thing from that causes we have an M. P. S. Net promoters good of 80 plus percent.
That means everybody likes the cause.
They they are able to understand it I've done Dakota myself, very intuitive very nice and fill it up the same for <unk>.
What we realized from the ensemble.
Yeah from the Untraveled exercises that it is a very complex system gazzola storage communication transferred switch and so we have adopted the same a proton IQ A&D, which is focusing on the end system understanding the system performance versus thinking about it.
Like a micro thinking about it holistically, we will make sure those aspects are included in the in the training for the installers and.
I'll have the training online.
Thanks for that one more <unk>, if we're looking at coupons this 8% to 10% attach right that we've been talking about for the in charge does this consider it all.
I guess demand from your current and install base or is it still primarily coming from new installed.
Oh, the current bill installed Bailey.
Who reserve that's you know, we do business with almost 1500.
Long tail installers.
Every year in the United States.
And this is our main.
They are our customers.
And they are service through distributors.
They all have a nice storage demand, especially the long tail installers in California and Florida.
Basically ninth ninth storage demand.
And.
We already have them they know us.
They are very familiar with how to contact them they like our quality they like our customer service. So they are the ones who are gonna be ramping with us.
Okay. Thank you.
Thank you. Our next question will come from Jeffrey Campbell with Chili Peppers. Please go ahead.
Good afternoon, thanks for getting ma'am.
Badri, how would you characterize back down.
[noise] to produce the I T.
Seven.
Module versus your prior relationships Harper Sunpower the same on the outside the same but a bigger cup them that.
The the answers to listen.
Well you know when I presented to you guys the investor community on this end power.
Transaction at that time, I said, one of the possibilities from that I was excited about was in addition to the North American business, which which was a commitment.
There was a possibility of getting the international business, especially Europe in Australia, that's now coming to.
The ocean.
And it's obvious right I mean that data sunpower as an anonymous success with that equinox Nancy module.
And there is no reason why that concept will not work elsewhere.
So.
They have made the right decision, which is to work with the best micro Invertor make it in the world.
And now both of us.
Going together.
Best Best panel.
Yeah on the market plus the best micro Invertor in the market.
Right.
My second question was I was wondering if there were any digital innovations that you've made.
In response to see the 19th maybe such as in Phase University or others that you might want to point out.
There you intend to maintain even after.
Some returned to normal lives is more under control.
Right. We are only scratching the surface that obviously then V as universities. The nice thing the Enphase Installer network is something that we introduce and this one is a powerful one reclassified installers into platinum.
Gold and silver these are the installers, who who who.
Who trust us and we trust them.
That was the first step that we did.
But I think we have a lot.
Bigger and bigger plans in terms of digital transformation.
The name of the game is how we can.
How we can provide those installers right tool then services. So that we can maximize that productivity that it is gonna be a no brainer for them to choose M face all the time every time.
And.
That's something that we're working on and we will shed a lot more things there when we already.
<unk>.
Co pays my team situation already prompted pretty much everybody's to become much more digitalize.
Time, we lounge the yeah yeah.
Face Installer network.
Hi reward on M. P. S. A lot of things in terms of equality of the design.
Training capabilities.
Market share of being salary in terms of the using our technology. So long. So I think that all these things are converging and with the easy of the tools small extended really appreciate it would be part of our platform right. They don't have their own resource Christmas early to deploy yourself dishy talk to some of them pretty sophisticated right. So they need to cover.
Purple radio for a variety of foods that they need to achieve or get through the web here, we bring it all together nice with a complete platform with a great customer service question. We did reward of reclassification have these color level. So.
Perfect timing.
Consolidated we'd eat it.
Alright, yeah that sounds like a very smart embarrassment and.
The installer.
Tears that are are your strength my last question was.
If I understood correctly earlier the remarks, you mentioned some disappointment with your current battery supplier I'm. Just wondering was this dude a more demand than you expected or was it.
I'm sort of issue on the supplier side. Thanks.
You know, it's all about ramp when you have a new product you always have teething dealing issues in the room, but here. It is a combination of.
Heavy increase demand that we saw that we see further for the fourth quarter and what we saw in the third quarter. So.
It it's about ramping our current supplier and getting on capacity with the new supplier ramping that new supply and getting to it for 180 megawatt hours that'd be talking to one.
And thank you. Our next question will come from Joseph Osha with JMP Security. Please go ahead.
Hello, everyone. Thank you.
Like two questions first going back to <unk> I'm wondering if you might share with is what you think sort of the practical upper women might be in terms of.
Assistant size, a couple hundred kilowatts, maybe I know from an engineering standpoint, it's it's it's larger than that but what what might be from an economic standpoint, a practical whopper limit for system sorry, some thing.
Yeah, Hi, this struggle.
<unk> has been designed.
Targeted towards a small commercial so that 200 kilowatt limit is about why we're targeting because of the values that we bring in that and that segment.
Rooftop so there's a regulatory requirements for a chair down as a as an example.
[noise] Installer partners, who do residential also do installs of that after I typically of that size anywhere from 5200 to 200 kilowatts.
And it's the Villa they also really like the simplicity of it in fact, I forgot I would argue that I can read these yet again simpler to install because of it said two panel one microphone butter, the cabling et cetera makes the installation extremely.
Simple so it really plays very well to meeting the requirements of our installer partners, what installing and back.
Segment, and a small commercial segment.
Okay. Thank you. Thank you that's helpful 200, K W. O and then on on the storage start I'm I'm curious as your own product Rams what is the house physician on.
Third party storage are you willing to do it while you're active we discourage it do you do not care of in particular are some larger developers come back to you and start pushing you aren't working works out third party storage, what what's your position there.
And third party and storage.
You know we have.
We have not taking a position right now we say that everyone must use us.
Right now.
But there are companies.
Currently the existing storage system some of the most popular one do easily work.
Medically <unk> and faith solar system, so it's not that.
We need to do something.
It is that they already work yeah. It sounds good couple of comments. There. This is the power basic offered architecture is people can.
Commandment interconnect into into an existing micro invertor system, if you have there.
However.
Benefits that you get from having our own started systemic complete all in one system.
But.
To earlier on next user experience will be significantly better when you have a micro on the roof and you are in charge and Europe, microcredit interconnect device or the it yes.
One app pier, one phone call to make one training one procurement just they all in one solution is extremely powerful and of course are storage solution is is also lithium LSP based the little mind phosphate base. So it comes with the benefit of additional safety and performance because of it.
Because of how it does ceremony so.
Yes in charge you a third party storage systems are connected easy covering toward micros, but.
Benefits of having a solution is significantly higher.
But it is possible and you wouldn't active we stop it if people continue could do that it's obviously your own so she's gonna be bedroom, but it's alright, it's something that you would allow people to continue to do.
Yes, correct alright, thank you.
Thank you. Our next question will come on if it comes from Dave King with be rally. Please go ahead.
Alright, this is Danny on forgave.
Thanks for taking the question I was wondering if you could comment on the impact of Covid on revenues for.
The second quarter.
Well the impact of covered was that our revenue declined by 22% overdrawn.
Excluding safe Harbor that goes the impact for the second quarter.
Okay, great. Thank you and I was wondering if you could comment on the current burned Ray New Mexico.
We have 70000 a week.
You had a may I was wondering if you have any current numbers on that.
Alright, I mean.
Limited by the capacity, Mexico, right in because of the radios demand situation.
The.
Excess capacity and that's the nice thing for us to work with the contract manufactured or like flags. So the Mexico factory was not loading for me and you saw would reserves that the inventory.
We reduce the inventory and such a task water, we dropped the inventory from $34 million to 30 $31 million that was excellent inventory management by the team.
Mexico no longer you know.
[noise] capacity problem, we do have all the capacity and we can like what I said, we can make a million units per quarter. You know like you for drink that's not an issue.
Thank you and our next question will come from <unk> with each ceiling may. Please go ahead.
Alright, guys. Thank you for taking my questions that'll be quick.
10% of Bachelorette Badri for storage is this based off of any bookings you are seeing or some other type of rest of Madera plain.
It is.
It is obviously based upon the demand profile that we have based upon the bookings. We have is upon preorders, we originally had and conversation with distributors.
Which are real.
Yes.
Okay and.
On the deployment side for in charge can you just give us some color on how it works within one so many places in order in when somebody can receive it and it's all working for the customer.
Alright, so basically look I mean, our channel.
<unk>.
You know and face shifts product to distributors distributorship product installers installers installed products.
At the homeowners.
That that sounds a supply chain blocks and when distributors place you know orders.
Obviously, when we are not full.
Cycle time is anywhere between.
Six to eight weeks and we are a full.
Meaning when when we have maxed out of capacity that's cycle time, obviously really really get extended.
And then typically now because the products that flying off distributor shelves.
There you know that that cycle time is truncated.
And especially because of the fire season, right now in northern California, and install that happening furiously right now.
Giving you a long answer.
It's a.
Pickles vehicle time should be from when we ship when homeowners get even start.
In a typical time when I'm not constrained by capacity.
It shouldn't be around the corner.
Understood. So you know how does this potentially impact you know how you manage in winter going forward win.
Let's start scaling up for you I'll just need probably one of you up a little bit of inventor of this.
Any color and that would be helpful.
That's where we need very strong contract manufacturing partners and we do have just in time inventory models and work with a lot of suppliers. This is what.
Flextronics does and redo you know, we work really close mostly with them.
And.
We are we are confident that we can ramp.
Product at the same time ensure that we don't believe in excess inventory.
Matter of fact, these experiences that we have with the fifth and with the coronavirus swiped a flexing the inventory levels I'm working with their inventory levels of the contract manufacturers I mean, those were incredibly valuable because that a strengthening the connections from the business processes.
Very much lower levels right, meaning we do know exactly how much inventory. They have of every single component of a source for our systems, alright, and and we don't and they flex a pretty quickly cause they don't want to help inventory on the books and they can drop it very very quickly working.
With a supply yourself I think.
We're in good shape in terms of business processes there.
The product advantages as well right. If you look at within the hour in charge wherever we have the microwave my current burger with them in charge as well so at the same microammeter. That's on the roof is also in within in charge. So that helps on the inventory management site as well.
Understood.
That's all address thank you so much thank.
Thank you. Thank you.
Ladies and gentleman that concludes our question and answer session for today I would not only to turn the call back over to Mister Badri Cassandra Robyn for any further Vermont.
Thank you for joining us today and for your continued supportive interface. We look forward to speaking with you again during the Q3 2020 earnings call.
Bye.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation. You may know disconnect didn't have a wonderful day.
[music].