Q3 2020 Enphase Energy Inc Earnings Call
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Energy third quarter 2020 financial results conference call.
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Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's third quarter 2020 results on today's call are boundaries goes on to Romit 10 pages, President President and Chief Executive Officer, Eric render his chief financial Officer, like Google or Chief product officer. After the market close today Enphase issued a press release announcing that.
Results for its third quarter ended September Thirtyth 2020.
During this conference call Enphase management will make forward looking statements, including but not limited to statements related to Enphase Energy's expected future financial performance, the availability of components and manufacturing capacity, the availability and market adoption of our products. The performance of the tools, we make available to and the capabilities of our installation partners Safe Harbor.
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Impact of the COVID-19 pandemic unexpected regulatory changes. These forward looking statements involve significant risks and uncertainties and enphase energys 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 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 third quarter ended September Thirtyth, 2020, which will be filed during the fourth 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.
Statement as a result of new information future events or changes in its 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. The company has provided a reconciliation of these non-GAAP financial measures to GAAP financial measures such as earnings release.
Posted today, which can also be found in the Investor Relations section of its web site.
Like to introduce Badri co founder Chairman, President and Chief Executive Officer of Enphase Energy Audrey.
Good afternoon, and thanks for joining us today to discuss <unk> third quarter to 2020 different engines I hope all of you and staying safe and healthy.
Our team continued to do a great job managing the impact of Colgate donor business, we reported revenue of $178.5 million shipped approximately 1.4 million Microinverters achieved record non-GAAP gross margin of 41% and generated strong free cash flow of 63.6.
Million dollars.
Our non-GAAP gross margin expanded $23 million refund on data, which we previously paid 'em microinverters due both to the U.S. from China.
In addition, we began volume shipments up Overindulge told it systems to customers in North America.
We exited the third quarter at approximately 41 17 24. This means 41% gross margin, 17% operating expenses and 24% operating income.
As a percentage of revenue on a non-GAAP basis as a reminder, I would've baseline financial model is 35 15 20.
I'm happy to report that I would worldwide demand significantly improved in Q3 I'm.
I'm proud that our employees continue to do an excellent job during depends I mean, why did working from home.
I'm also thankful for the strong support from our suppliers customers and partners worldwide.
These combined efforts, we've been able to increase our Q3 revenue by 42% sequentially.
Let's talk about how we are servicing customers.
Our customer experience personnel in all food weren't waiting patients U.S. Europe, India, and Australia are still working from home supporting installers in homeowners, we have not missed a beat and the systems up healthy.
Three NPS was 67%.
And I would not that many calls NPS was 71%.
Or whatever it's called wait time increased in Q3 more than three minutes as the steep growth them installations resulted in more calls from installers in homeowners.
In addition, the long jump in charge 20 system. During Q3, we entered more calls that's uninstalled has been learning hope installed the product. We are working hard this quarter to bring back the call lead times on that a minute my writing additional customers.
That's so much support personnel and improving self help services through enhanced installers told you could chat functionality on the enlighten map and the online in fees community.
Let's now discuss manufacturing.
Increased demand, we ramped production back up in Q3, and expect higher levels of production in Q4 or.
Factoring in Mexico is doing well is producing more than 75000, microinverters, but we think thats on track to achieve our target a million units from Mexico in the fourth quarter of 2020.
As I discussed on last quarter's call. We have completed the qualification of sales comp over the second contract manufacturing partner for Microinverters bids in India.
We began migrating more to the production of Salcombe earlier this month and we are expecting to start shipping to customers later in the quarter.
I have a high quality state of the art automated line with quarterly production capacity of half a million units and have the space to add a second line with the same capacity.
This is our second data for your manufacturing location for Microinverters after the flex Mexico.
In terms of battery capacity, we quantified I want a second supplier <unk>, a leading global supply of lithium ion batteries because in China.
You'd be able to provide the sales and that subsidiary poet I'm Technology limited provides the setback.
We'll be taking first anybody's, Romania later this quarter.
And when they want to eat one don't see at first qualified sales back supply on any deal not fully ramped up in the first half of 2021.
Good thing not to be the big capacity to 480 megawatt hours a year.
Moving onto the region. However, the U.S. and international revenue mix for Q3 was 78 and 22% respectively. We saw sequential revenue growth in all regions during the quarter. Despite COVID-19.
The U.S. market rebounded pretty nicely in the third quarter.
Revenue was up 39% sequentially bought 50 aided by Incharge storage system shipments. In addition sales from our distribution partners, what particularly was particularly strong for Microinverters leaching do you want to call it sounds.
So during the month of September was 49% higher than in the month of June.
You did that I caught felt through the end there now when we ended Q3 with our micro Invokana channel inventory slightly less than our target range of eight to 10 weeks.
We started production chips mines I've enjoyed its storage systems, Cummins toddlers and the U.S. during Q3.
528, installer personnel have completed online courses to achieve provisional certification in Q3, the demand for the product is strong and feedback from the installers in homeowners is positive as they appreciate it's Marty let it be reliability and safety. It is important to note that angel in storage.
System's going to do it at about 10% of <unk> overall revenue in Q3, we were constrained by new product introduction ramp in Q3, and then looking forward. What do you think this constraint that there were some plans to ramp up their deliveries.
In Europe, our revenue increased nicely by 67% sequentially.
We added 70, new installers and distributors during the quarter, including top distributors in Belgium, and Netherlands, Yeah, well staffed in Europe and are continuing to hire as we see opportunities. We launched like you say the name Microinverter, though what I used to call. It a product in Europe. During Q3, yet I'm just trying to do.
Teaching partnership with Sun and strong fabric to develop a high efficiency and phase and as James Basey Mont deal with like you seven plus Microinverters inaction, we expect to ship I would I'd use M&A Microinverters Maxion Z Monte was this quarter I'm.
I'm pleased with the teams performance in Europe, and I'm excited about the regions projected growth.
In Australia, we achieved record quarterly sell through and installing in its home despite colgate restrictions in Metropolitan Melbourne.
We intend to use the Q seven eight microinverter similar to Europe.
And this concludes M&A micro environment is ideal and cost effective for Highpower I know, it's up to 450 Watts. We also expect to ship I don't have any migraine burnished maxion, starting this quarter.
On the policy from the South Australian government's new rooftop solar winds didn't sell nation rooms, but I think the favorable competitive environment and into the future regulatory landscape put solo nationwide.
Only we had fully complying, but don't Australia's new regulations, but we also remain one of the few inverter manufacturers, who have submitted test reports that David.
Revenue from Latin America increased sequentially quarter on quarter in Latin America, Puerto Rico, when that's a strong rebound in activity. During Q3, we expect continued growth in this region, you'll note in charge donate systems.
Activity in Mexico also started to rebound well in.
In September we were honored to metal come the U.S. embedded into Mexico, Christopher Orlando are made in Mexico event, where you didn't seem to do it over the flex manufacturing facility in Guadalajara, along with an overview of in phases and investment in Mexico.
Now that we covered the regions, let's discuss the overall bookings for the quarter.
At this point, we had already 100% booked to the midpoint of Q4 revenue guidance.
We cannot Bernie Tobin 19 is going to play out in November and December So that's always a risk.
We feel very good about the progress we are making and the demand that we are seeing for both Microinverters and then charge Zillions. He is top of mind for people working from home.
Let's talk a little bit about what uncharted system rollout.
We started shipping the product in July after extensive I'm fun be taught testing.
We intend to use online training and certification in July but on a long tail installers.
We now know what engineering field application engineers and customer service teams working round the clock to support the installation.
A few issues early on between sort of relatively quickly but in general it was that alone has been pretty smooth.
We have developed metrics and dashboards to track problems that have pulled in by installers in homeowners and not making them I'd be visible across the company we.
We are treating every issue that a homeowner not installed a report that's a defect.
I'm really proud of the tremendous Providence, our teams have made in a very short amount of time.
We have always been very clear that long tail installers out our number one priority.
We see them acting as confident tends to homeowners and influence their buying decisions.
Many of these installers that are doing that first storage installations. Therefore, the cycle I'm learning is understandably height.
The job is to make the entire process as seamless and quake and installation sort of the installer.
In the first week first few weeks of the product rollout, we have identified a few things to iron out in the installation process and are laser focused on leaning out the process.
Maximize they install nurse productivity, we expect to get this activity done in the fourth quarter sales.
I'll bet, a based on enlighten platform bullets on the installed as well as homeowner.
I would now like to provide some color on our backs and he's held back supply.
In Q4 this this Florida.
Have a profit remained to be 50 megawatt hours coming from anyone doing threed systems, and we have got someone orders for most of that capacity.
We expect to start shipping in charge 200 systems with the ideal battery packs only in the first quarter of 2021 yeah.
Expect day, one two and three to be fully ramped in Q1, 21, and AG yet to be fully ramped by the end of Q2, 21, well see shutting us with total capacity in the back half of 2021.
The reception from our long tail installers has been very encouraging.
These customers are going to take some time to scale as more and more of them get trained and finish that first few installation.
We are receiving a lot of interest for Incheon storage systems from tier one tier two installers and I've been working very closely with these important customers.
Philosophy on value based pricing is unchanged here and we have confidence that larger installers, we'll see a benefit that our product and platform brings.
Are you able to shed them based on these developments and then when a property.
Let's talk about our upcoming products and features.
Oh, then John it's dawning system is compatible because they started base up by Q, six and I Q seven microinverters on that okay.
This corresponds to more than 300000 homes.
On our last earnings call, we discussed making the unchartered student system compatible and then started to base of M series Microinverters on the roof. This adds another 300000 homes to our served available market. We expect to release a software update in Q4 this quarter to make this happen.
And already have Pos systems running today.
The other features Janet Ito integration once again made possible through the following up on some of.
We expect to allow the baby is generate interest would be probably didn't do hour and power smart switch obviating the need for a separate engineering you know they do yes.
I would like to the mobile App will seamlessly integrate the genetics of functionality, providing a single comprehensive you all are distributed energy resources to the homeowner.
We expect this feature to be released through enlighten in Q1 21.
We are making great progress on launching I excuse me I would not think so lot of microinverter.
We already have like you read on file system and without any John storage systems in started that media sites.
As a reminder, I do age is the world's first in an independent microinverter.
We expect to complete between star lesions on this system in the first quarter of 2021.
Our small commercial product the six party wants it seems like you may be Microinverter is also making good progress.
The design and the liability testing of the Microinverter is already complete now.
The focus is now shifting on photos system testing and put farming diligent and fun bead artist.
Summing up do I came away, we expect big time installations on dike QAM di system in Q1 of 2021.
Lets now briefly cover a digital transformation.
Our approach yet it's pretty simple to provide a great experience for homeowners and installers through a comprehensive digital platform.
Installers can leverage the platform to accelerate the installation process and improve the homeowner experience.
We have on boarded more than 400 installed nerds in North America, well, what enphase installed on a mentor.
We're highly selective process focused on installation quality and home one of the experience.
These installers can benefit from Enphase lead generation, they ought to be access to new products and that but I'd have to lose on the digital platform makes things donation morning fish.
Regarding tools, we have currently piloting permitting services for installed ours and as Jim.
Allocation services for home owners, we are working on introducing more tools in the near future, namely for solar and storage design financing as well as good services.
In summary, we are pleased with our results for the third quarter.
We are excited about the rebound of customer demand worldwide.
As we look to close the year, we have focused on ramping and John its Tony system wide.
While providing a superior customer experience, introducing the new products, which I talked about and Exelon evening older digital transformation.
As always the health and safety of our employees customers suppliers and partners remains our top most priority.
I will hand, the call over to Eddie for his review of our finances.
Thanks, Bobby and good afternoon, everyone I.
I will provide more of these sales related to our third quarter of 2020 financial results as well that's how we're business outlook for the fourth quarter of 2020, we have provided a reconciliation of these non-GAAP to GAAP financial measures you know what earnings release posted today, which also can be found in the Investor Relations section of our website.
During the third quarter of 2020, we kinda, where first significant revenue and margin contribution from in charge of storage system sales. This reflects the beginning of a new where I am face huge story, which allows homeowners to begin their journey towards full home electrification and energy independence.
Nothing is more exciting that successfully introducing industry, leading software defined profit jewelry market, while continuing to support our profitable growth.
We're also very pleased with the rebound you might remember that the mine and our distribution channel management. Despite the impact of the pandemic in the third quarter of 2020.
Oh, sorry, I won't discuss lazy in our fourth quarter guidance, we remain focus I don't talk for continued profitability.
Total revenue for the third quarter of 2020 was $178.5 million, which did not include any revenue from same hardware shipments during the quarter total revenue increased 42% sequentially and we shipped approximately 478 megawatts DC in the third quarter of 2020.
We are very pleased.
To have returned to year over year revenue growth after excluding some hardware revenue from the prior bring you your despite the challenging microeconomic microeconomic environment, resulting from the about funding mix.
As we discussed on our last earnings call certain of our might consider problems meant an exclusion took essentially three or one timers that we have been running part to the U.S. from our China contract manufacturing since September 24 2018.
With that I'll work my quick bet on med certain size and weight conditions Forest solution. He said.
I mean 12 were protein opinion.
We took we funds totaling approximately $39 million plus our Queen trust, which $23 million with approved so far and have been accounted for in a sub reduction in cost of goods sold in the third quarter of 2020, we have already collected $60 million today and how it's doing it.
Honestly funds from non-GAAP financial results to present, a more accurate picture of ongoing business performance.
The 6.3 or one thought its exclusion expiring or no go 720, 20, once again, making those Mike looking better for all subject to talk.
Non-GAAP gross margin for the third quarter of 2020, which include our first significant contribution promise in charges storage system sales and excluded the $23 million salaries, We fund.
Sales have record, 41% compared to 39.6% for the second quarter of 20 choice.
The reported gross margin was achieved despite its working production office in charge storage systems, we generating a healthy gross margin for the quarter.
The sequential improvement was driven by stable pricing on weight clean better and continuous cost reduction efforts.
GAAP gross margin was 53.2% for the third quarter of 2020.
Non-GAAP operating expenses were $29.6 million for the third quarter of 2020 compared to $26 million for the second quarter was 20, joining the sequential increase was primarily due to engineering and regional so could count on these shows to support our innovation on growth.
Overall, we hired 113 noon 17, new employees during the third quarter.
GAAP operating expenses were $43.2 million for the third quarter of 2020 compared to $37.5 million for the second quarter of 2020, GAAP operating expenses for the third quarter of 2020 included 13.1 million reversal for stock based compensation expenses due to higher headcount and fight ended up.
$46000 or more base station expenses for acquired intangible assets.
Our non-GAAP basis, when I hung up basis income from operations was $43.7 million for the third quarter of 2020 compared to $23.7 million for the second quarter of 20 trading on a GAAP basis income from operations was $51.8 million for the third quarter of 2020.
Well I'm not GAAP basis net income for the third quarter of 2020 was $41.8 million compared to $23.5 million for the second quarter of 2020. This resulted in diluted earnings per share of 30 cents for the third quarter of 2020 compared to 17 cents for the second quarter of 2020.
GAAP net income for the third quarter of 2021 $39.4 million compared to GAAP net loss of $47.3 million for the second quarter of 2020, just to remind everybody future.
Q2, GAAP futures GAAP net loss was driven by a non cash charge in fair value of derivatives related to our convertible notes. Due 2025 does anybody is where we measured at fair value and we classified traditional paid in capital on the balance sheet in the second quarter of 2020.
I was hoping knowing common steam any impact in Q3 20 or future periods.
GAAP diluted earnings per share was 20 cents for the third quarter of 2020 compared to diluted loss per share of 38 cents for the second quarter of 2020.
Now turning to the balance sheet and the working capital from inventory was $37.5 million at the end of Q3 2020 compared to $31.2 million at the end of Q2 2020.
The sofi inventory of standing excluding the 23 million dollar type credits decreased to 32 days compared to 37 days in Q2, the sequential Boulder, increasing inventory was driven by the purchase of battery sales for the projected increase shipments hoping charge in Q4 20 to support our new program.
As well as to when this first and a higher level of Microinverter shipments.
Accounts receivable were $122.4 million at the end of Q3 20 compared to $89.5 million at the end of Q2 joint.
The sequential increase was due to the higher revenue in Q3.
Dsos were 52 days increased slightly from 50 days in the prior quarter.
We exited the third quarter of 20 training with a total cash balance of $661.8 million compared to 600 on $7.3 million for the second quarter of choice.
We did not make any share repurchase against our 200 million, but our share repurchase authorization. However, we have spent a $52 million on we'd hope to covert best transactions year to date through September 30 on employee stock vesting that prevented the issuance of approximately 1.2 million shares.
We generated 57.5 million bonus in cash flow from operations and $63.6 million of adjusted free cash flow for the third quarter of 2020 capital expenditure was $3.9 million for Q3 20, mainly for the insurance pottery manufacturing capacity increase idea enhancements.
And the license software development costs, and Provo production ramp with our second contract manufacturing partner.
Now, let's discuss our outlook for the fourth quarter of 2020, we expect our revenue for the fourth quarter of 2020 to be within a range of $245 million to $260 million.
Our revenue guidance does not include any sales hardware shipments.
Turning to margins, an additional $60 million of Tommy we fans have been requested but not yet approved as a result of both our GAAP and non-GAAP guidance for the fourth quarter excludes any tax refunds, we expect GAAP gross margin to be within a range of 37% to 40% and.
Non-GAAP gross margin within the range of 38% to 41%.
Which excludes stock based compensation expenses, we expect our GAAP operating expenses to be within a range of $51 million to $54 million, including a total of approximately $60 million committed for stock based compensation expenses and like we see should we then amortization, we expect non-GAAP operating expenses to be within a range.
At June $35 million to $30 million the sequential increase in operating expenses you to continue as higher to support our growth plans and the expectation of resuming bonus accruals and payments, which have not occurred during the past two quarters.
Before opening the call to questions I would like to discuss the potential for safe Harbor shipments.
Specials her home sales hardware shipments have picked up recently and there maybe some modest sales hardware sales in the first quarter of 2021 access money to you still uncertain, but it won't be a fraction of the $44.5 million hardware revenue in the first quarter of 2020.
Recall that to satisfy the so called more provisions customers will have to take the LIBOR before the yearend or prepay for these profit before yearend.
With that I will now open the line for questions.
As a reminder, ladies and gentlemen, if youd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
To withdraw your question press the pound key please.
Please standby, we compiled acuity roster.
Our first question comes from Erik Li with Bank of America Merrill Lynch. Your line is now open.
Hey, good afternoon, thanks for taking the question and congrats on the quarter.
Hi, Bert.
Hey, So first off your maybe to touch upon and charge a bit more you mentioned that this was about 10% of third quarter revenue could you talk about how.
How much volume on a megawatt hour basis was shipped friend charge and perhaps what the gross margin associated with that segment might be tracking that.
Yeah, we.
I've been very clear that end charted will fall in line with our corporate gross margin targets, which is 35 15 printing.
And then we are not breaking out the mega the exact megawatt hours, but what we have done for you is.
In order to you that it is about 10% of revenue and also we have given.
Q4 capacities thing that you know we.
We have to fill the capacity of 50 megawatt hours and we are.
Mostly book to it.
Okay Gotcha nowhere is if you can provide a further granularity there yet at this time could you talk about.
What are your expectations for battery capacity on a forward basis might be I know you talked about the 480 megawatt hours, but I believe you have mentioned a third supplier in the mid 2021, how should we think about the.
The potential capacity increase associated with that or is that something still up for determination based on how demand trends into that decision.
Hey, we obviously need to look at how demand is going to come but to just simply answer to your question. We from Q3 onwards, we will be at the capacity of 180 megawatt hour this quarter.
Current two suppliers through today 123 in LTL.
Then from then on words, we are talking to a third third.
Third supplier of batteries and a you know right now the plans.
Plans are in solid we will share.
Those plans with you when they are finalized, but we expect to have somebody on board by the end of 2021 third to play.
Hey, remember that the supply information that we're providing he's come picture lysine our capacity availability in the event of the mine being available right too. So it's not a statement of the Miami system enough supply also remember that we are capex and Opex flex because we use contract manufacturing. So we are in.
In in a great position here to flex that capacity up and down as we can see that the mine into the future and finally I don't know if you remember we always talk about having that 36% surge capacity available that is outpacing driving the number that bother you just mentioned that we need to cover in case of demand remains pretty strong right.
So all of those things are baked into the number that you just heard from body as we ramp our capacity in this quarter.
Okay and one last question for me and I'll jump back into the queue here could.
Could you just talk about.
Where attach rates are currently standing I know you have provided the 8% to 10% attach rate guidance for fourth quarter, but what was that number for third quarter. If you may.
A lot of.
A lot of the folks in our industry talk about that today.
We talked about the attach rate last quarter, but then it started to get confused.
Confusing because we ship product anybody I mean to all the states in the U.S. many of these states.
And are still ramping up on storage. So we have to really give you.
A much more granular data and an overall attach rate.
Almost meaningless that's why what we did was we provided even more visibility to you in terms of megawatt hours. That's why for Q4, we said.
Look we have a capacity of 50 megawatt hours.
I mean, almost where did that capacity and that will give you.
Easier easier modeling, but having said that we've always been clear that long tail installers out our number one priority.
Our attention is extremely healthy with the Longtail installers.
And now like what we have going for US is we had an talks with several.
Tier ones and twos, who basically wanted to get on board because ensemble has an extensive black.
When you have a platform on which is capable of.
Giving you a long life cycle, which is you know you can start with you can start with solar.
And I would what is kind of the then and.
Powered smart switch you can start with lightweight solar and then Broadsmart switch then you can add batteries you can come back after a year you can add generators you come back I've done some more time and say, okay. I don't Wanna Dendreon I won't add a fuel cell fine then you can add each adrs soon so we.
If you're thinking about and.
Extensible architecture capable enough load control.
And so when you know we shared our product road map with all of these tier ones and twos that has enormous interest.
And so we are working closely with them.
We're not going to compromise on value based pricing like what I said.
We'll inform you you've done a significant developments that huh.
Got it thank you.
Thank you.
Our next question comes from Mark Strouse with Jpmorgan. Your line is now open.
Yeah. Good evening. Thank you very much for taking my questions.
Boundary, a oh I hope I'm not splitting hairs here, but just wanted to go back to your comments about the VI Q a D.
I I think you said.
Shipments or revenues starting in one Q of 21.
Yeah, I think previous comments, where we're kind of testing that product out later in 2020.
Im just wondering if there's any change in the timing of that product and.
If not how we should take your comments about one in Q.
Should we just expect that to be kind of.
Testing or revenue or that could there be kind of more material volume shipments. Thank you look I mean, we've always been very clear that even on our storage product I refuse to go to the market go to market until we are apps.
Absolutely ready quality and customer experience is our number one priority.
That's so we go to market that so even market share and that's as that has been a success story on the micro inverters, it's going to be no different on a Q a b.
Thank you Andy the Great news is that meeting into like like a microinverter, what because almost done which is the design and the liability, but it is no longer a microinverter. It is a complete volume.
Total system.
And you know it is it is a cultural change for us in the company in order to make sure everybody thinks about it like a pull system.
So therefore, what we are doing this quarter is that an alpha systems, which have already begun fuss systems. We expect anywhere from 50 kilowatts to 200 kilowatts real love US system installed we are going to be commenting on those.
Based upon the learning about and John storage systems. We think you know we think applying the same best practices, we will be able to start beta installations in the first quarter of 2021.
That's why I gave you that number I mean that date and you know that that's our expectation and if that is the change we will let you know.
I just want to add one more thing on these bark last year, when we didn't really see I actually mentioned that there will be some beta revenues potentially in Q4 very small. So you are right. We said that you normally pay that revenue is very small will not make a mark and I think that what bothered.
He is doing now we spend more time on the software element of the rock and looking at the subsystem and you think you more time on the 15 sites will debate our revenue will come in Q in Q1, instead of Q4, but it was never meant to be materially important more symbolically important for the company about having the new protein production in the quarter.
By the way I, just want to clarify that because that's that's correct. You said some revenue in Q4 and daddy's slipping into Q1.
Yeah, Yeah Grand scheme of things not that big a deal just want to make sure my models.
So thank you for that.
And then just Eric real quick and I apologize if I missed this did you give the split of U.S. versus international either for megawatts or revenue.
Yeah, we did it for both the thing right. We provided the international we didn't do it by region by 78%.
Domestic which is actually a pretty impressive if you think forward because we were over 80% or 90% actually.
Last quarter and now the presence of Europe, and Asia Pacific, especially Europe, becoming very prominently even though we also have in some more shipments in Q3. So that's the providing that up with the growth in Europe is helping on the regional this diversification of robbing right. So the answer is 70 822 seven.
The 8% revenue not in in the U.S. and 22% International.
Excellent okay. Thank you very much.
Our next question comes from Brian Lee with Goldman Sachs. Your line is now open.
Yes, hi, guys. Thanks for taking the questions I hopped on a little bit late so apologies if youve already covered this but did I hear that a 10% of revenues were from battery storage in Q3 and that you're switching over from the 8% to 10% attach rate guidance for Q4, and you're just talking about adding capacity.
And maybe asking it a different way are you basically saying you had a little less than $20 million of revenue from batteries in Q3, and based on 50 megawatt hours of capacity and being sold out in Q4 that seems to imply a more than doubling to $40 million of revenue in Q4.
Thats right is right and that is that the right.
You're obviously going to demand approximately right.
And yes, we did a little bit more than 10%.
Yeah for overall revenue in storage, which is fantastic, but a new product in the first quarter.
Okay. That's great appreciate that additional clarity that maybe two more questions and I'll pass it on but the the gross margin bump sort of guidance in Q4, I know its subtle but you guys continue to kind of move it up into the right how much of that from the mix of and charge revenues in the quarter, a increasing sequentially and how much of.
That.
Is just organic margin expansion on the Micros and then secondly, now that you're talking about the sort of in capacity terms can you remind us sort of from the 50 megawatt hours in Q4, where the the interim targets are for maybe early 21, and then as we move through the back half where you'd be in.
In the back half of 21 thinks that's right right. Okay. Thank you for the question. So first in the gross margin question.
Gross margin depends upon pricing and cost and we are extremely disciplined in both.
Pricing is value based pricing cost as we hammer on costs on Microinverters axis cities.
Stoneridge accessories. This.
And John storage system, so all of that.
We've just started hammering on the storage cost because we just introduced the product yeah pretty.
Pretty recently, so most of our cost reduction so far has been coming.
From the micro Inverters.
Just fantastic and we believe we have long legs, there because you've already started to focus on a few nine.
Which which will probably you know probably come on in 2022 early 2022.
Dan you know I Q nine we are focusing on a very advanced materials, plus an easy quarter can take just that would substantially reduce both the footprint as well as the costs and the efficiency.
We're working on that it to.
A lot of innovation. They have so we are going to take some time there.
Regarding the question on capacity of batteries. So we said Q4 is roughly 50 megawatt hours.
We think.
I like what I said in the script by the end of Q2 21.
Capacity will be around 120 megawatt hours, but what.
With our existing to sublet.
That's the answer.
Alright, Thanks, guys appreciate it I'll pass it on.
Jim.
Our next question comes from Jeff Osborne with Cowen and company. Your line is now open.
Hi, good afternoon, and congratulations on the results just two questions on my end I was curious Eric on the Safe Harbor comments.
Around the early visibility there is there any dependency on the outcome of the election and for example, if Trump wins do you anticipate more safe harboring as opposed to us.
I think that is and there is also an element of.
I've done it before I know how to do it in a wait and see if so that is less complication on figured out the mechanics and that he got to see piece right remember the words. These water specific contracts, we have a lot of especial language to a lot of logistics order fulfillment work, how seen requirements labeling requirements all of those.
Our learnings from the past. So now these guys are probably waiting yes.
It probably until the last possible time in order to make a decision we don't see a lot of activity for Q4. This time is that he some we will probably see it in Q1 and it will be Oh really notice because he was let's hear from RBC arcs of Yo in Q1 of this year. So we should assume.
Next we'll see some but maybe not a screening.
And then speaking of Q1, what what visibility do you have lined up to that just given the ramp in recovery in the market and some projects seem to be pushed for a variety of reasons labor shortages et cetera are you hearing from your distributors or customers that you have projects are being pushed to Q1 at this point or no.
No no I mean, I think we would know normally don't comment about Q1 beyond the core right, Jeff and frankly I'm on the same car or what I told you. So all right all right okay.
Okay, maybe one day you will answer you certainly have ample cash can you just talk about what your thoughts on M&A either in software other adjacent areas. Just given there has been some activity in your sales yeah, we have actually deep thoughts on that area in Reich, who is actually working with data around the clock, we'd have a very healthy pipeline of M&A opportunities.
We are evaluating and you know how we are right. We we look at every deal. We look at every angle, we see the multiples on some of these opportunities are commanding then we want to make sure that we do the right thing for the company at the right time right. So yes, it's very active very visible in this part of the development of the digital is three.
Did you have the platform the bother you mentioned earlier so yes.
Got it thank you.
Sure.
Our next question comes from Colin Rusch with Oppenheimer. Your line is now open.
Oh, thanks, so much I, just wanted to get a little bit into the customer awareness and understanding of the value of the grid formation tells you that you guys have you know you talked about the pricing strategy for where are you at in terms of really educating customers in terms of that functionality and the flexibility that you have over time.
With it.
Yes, I think.
This fargo so.
I mentioned.
Installed or still have a pretty big influence in a in a in our Denver did have selling the product.
Homeowners so they do a lot of education and plus we do extensive amount of training win with the installers as well and educate them on the important so good farming not only with obviously with energy storage, but also with the current PV that's coming soon after and then to great extent as we mentioned.
Right up there today people working from home.
Resiliency is top of mind. So they want to have systems that are backup systems and of course, all the challenges that you're seeing here in California. It's on everybody's mind is that how do I provide a and a backup solution and the conversation naturally lead Gen. Two okay that wind solar and storage. So it's a lot of training.
A lot of education, what happens and then of course the environment itself has such that people are quite aware anymore.
Thanks, and then just looking at the Opex trends and specifically in R&D and then as you guys start to scale up revenue no more substantial way and you've got some.
Financial flexibility in terms of.
The target model I mean, how should we think about R&D spend and target areas. Obviously sensitive question about M&A, but you know.
Thinking about the internal team and where you're focused.
You know focusing resources, how should we think about tell us of that spend and where are you focusing in terms of the development.
Its technology platform.
Yeah, I think what we've told you before 35 15 20 is Martin.
Opex.
Martin is about 15% of sales, but we have to grow sales grows faster, we have a little bit more room on opex, having said that.
We live and die by innovation.
The basically on the stuff majority on Q nine.
We are working on it requires a lot of Jimmy years triangulate various things. So I would R&D centers of excellence are in India, and not a new thing.
Management oversight from the U.S., we're investing very heavily that's where you know Eric said this underlying 13, new hires in the quarter.
No. These 65 people out from the top universities in India.
For the Indian Institute of Technology, extending ingenious software engineers hardware engineers out conversion in two years.
And mix, but we expect to be hiring moves such people.
In fact, I and I can't I don't have enough engineers.
The company and.
You know, we're going to we're going to hire and how do you that you're gonna be discipline.
Making sure it out.
We are going to be owned that Martin.
Hi, there thanks guys.
Thank you.
Our next question comes from Amit Dayal with H.C. Wainwright. Your line is now open.
Thank you Hi body could you talk about some of the deployment challenges you may be facing just any examples to help us visualize you know what are the issues and how you are addressing those.
When you said the deployment.
You know deployment challenges you mean limits.
The storage.
Yes, yes, yes, yes.
Yes.
Yeah with respect to storage.
Yeah, you know many many times.
You know people for example, they.
A switch.
They switched off grid.
Product and let's say it happens and they don't even know because it product seamlessly switches.
I'm going to do off grid.
If they don't change there.
User patterns.
Then what happens is you know the batteries can deplete quickly.
And so by the time the night is over.
The battery say deplete then.
The house May not have power.
And so in those cases are you know obviously, our next generation product would it take care of those cases, because it is going to have little control.
And when it has looked control when you switch from one grid off grid, we will make sure to the critical loads out on first.
You know right now.
The product that we introduced.
Doesn't yet have that feature so therefore, we have to educate people that.
You know, sometimes this happens and that education cannot come.
Cannot come manual it has to be some form of push notification that comes on there.
On their devices phones, they pads looks like but I think that you have no off grid start.
Start to reduce consumption considerably or consumption so that.
Morning, some comes up and get batteries again batteries that automatically charge so.
Education like that your next I mean, you might think about it as pretty simple, but remember the people we are selling this product too.
You know they belong to video is demographics various you know.
In the Twentys during their seventies.
And so we have to make sure this product works seamlessly.
On that.
On the product development kit in the in the short term.
We have to educate people and we have to educate people without customer service team.
Engineering team needs to do some quick containment, which.
We are actually working on I gave you. An example, but those are the types of things we.
Yeah, we are doing right now.
Understood. Thank you for that and just maybe one more question on the guidance for the fourth quarter, you know 50 megawatt hours coming from it.
Then finally, the storage side.
Mike written order roughly flat year over year, then for the fourth quarter.
No Microinverter, we said if you take a look at it the B I mean think about it like this my revenue in.
In Q2 was.
Q2 was in the.
One Twentys Q3 is 170.
Q food is 200 midpoint is 253.
This cannot happen with them and with the Microinverter revenue flat the Microinverter point of sales.
Has gone up by 49%.
In the last three months I'll, let us sell through.
For Microinverters in September it's 49% higher.
Dan in June leading direct card point of sales for Microinverters, we are continuing to.
Continuing to take share I believe on Microinverters, and especially and I talked about the long tail long tail of installers before it's the quality of the customer experience as long as we you know our leading on that front.
We believe this will continue to happen.
I mean remember that we have 50 megawatt hours of capacity and if you are let's say hypothetically fully booked.
That basin. The dollar per kilowatt hour assumption gives you a number might also be true 52.5 midpoint of the guidance that shows you our growth from 178.5 that.
That is pretty well, but anybody I'm pretty pretty pretty big right. So if you do it that way they might whatever number you use when you know what I wear on ASP. So so this is a good year for micro site.
I was comparing it to Fourq your 19.
Well I mean think about its vote your name being we have added the pandemic dependent.
The pandemic so.
What we are looking is if you if you look at the revenue.
Proximity in Fourq, you, we had a lot of safe Harbor et cetera at that point in time, and if we had excluded safer, but in full view 19.
That number.
Is is roughly in the one sixtys for Q4 19, now we dig that number now we compare with our midpoint of guidance, which is to 52.5 minus the 40 megawatt hours.
And if you apply.
That or minus the 50 megawatt hours you apply the model you will see that that is still very significant growth even in Microinverters Iranian.
Yeah I was in fact, making the safe Harbor will be banking. So that's critical for you to track because they found but is not like.
Like a you guys know better than me. He does it is a lot of you know forward, Poland and we made a special mention on same covered on our guidance and I actually where are the first ones that came up with two cardboard carving out the numbers to make it easier for you guys. So I mean anytime.
Yeah understood. Thank you guys appreciate it.
Robert.
Our next question comes from Eric Stine with Craig Hallum. Your line is now open.
Hi, everyone. Thanks for taking the questions.
Hi.
Okay. So I guess if it.
Asking this question in the context of the resurgence for CNN coals and.
Right now and thinking back to the second quarter really tough quarter for the industry, but there were also a number of positive steps taken installers and other industry participants just starting to do business differently. So I mean, when you think about going forward and if things do trend.
To where things get worse I mean, how do you.
How do you think the industry or does it give you comfort that you think that the impact to your business.
Would not be severe asset was as severe as it was in the second quarter.
You know I think one of the things that we've seen is the how quickly the industry adapted to.
The new norm or do anything to the environment right. One of the things that started doing a lot of things went online and.
The second thing is again resiliency have become such a big such a key and important top of mind.
Issue for a lot of lot of the homeowners. So in some sense you know.
I've been fortunate that Ford has been it's been actually a really big advantage far for residential products such as energy storage second thing also that if you look at what we are doing with our digital transformation we are.
Building out a comprehensive platform that is helping our installer partners.
Very efficient journey, all the way from leads through Oh through design through through the permitting.
ER contract.
You know commissioning interconnection et cetera, So I think even if a situation like what you're saying our current reserve surgeons. The combination of the adaptability of our off our installation installer partners plus all the tools that we are bringing to bear I think the industry would be pretty resin are really pretty.
Absolutely getting going.
Got it.
Good to hear you I mean, obviously, hoping that is not the case, but a good perspective.
Maybe last one for me just on the upgrade program I know that.
Pass you've talked about this as a pretty substantial opportunity and the thought that you would upgrade the M series or see if homeowners wanted to upgrade the M series tie into the Q series.
What you talked about earlier I just wanted to confirm I mean, how should we think about that upgrade program. If you are targeting software that would make the M series compatible.
To end charges is there any change to that or have things changed.
It's a little different when we think about it going forward.
It's a massive opportunity for us I mean, when when do you get 300000 homes. Additionally, many have already served them. Once this one is an opportunity to seamlessly add storage to that existing solar installation, but having said that we've got to make sure that we get out of capacity issues solved and then we're going to I mean.
Beautiful thing is we know exactly where.
They are located we know their consumption patterns. We also know that that you know we can specifically target.
Those people for whom resiliency is top of mind, which is which is places like California and Florida.
No we can try to get those very easily.
When we have the right capacity. So it's very much on our mind and it is applicable for.
Thank you.
Also M series also.
And like what I said, we are planning to release that software upgrade in the fourth quarter.
And Ah you know.
We started the promotions.
Yes. So is it fair to then to think about it.
It's it's just more it's better for Enphase, if you are deploying and charged systems.
On those houses where their M series, microinverters, but they've gotten the software upgrade rather than go into I Q six and Q seven.
Okay very helpful. Thanks, a lot.
It is also the same token warranty remember that some of these some serious people bought in a long time ago. So some of it. They may say I may ask well change of switch many homeowners actually to our surprise they actually use the opportunity for deploying a reassessment of the energy requirements. How many people are getting maybe you know so.
The opportunity to occur each why Q you base your system, we they CMC. Many cases, you still there right right.
But I mean, the short answer is we don't expire we don't need them to do it that it was a bad deal that it's gone.
And you know some people like what are the point of load M. 190 day, if they'd warranty original Waterview was only 15 years, so Dan basically that almost running out but the but there are some folks with them do 50, whose whose warrantees they're only.
40 years into their warranty five years into that wasn't before them and.
Many of them will not wanting to move Dwight you and so even for them. It is no problem you can buy in charge in a seamless notion.
[noise] kind of thank you.
[music].
Our next question comes from Philip Shen with Roth Capital Partners. Your line is now open.
Hey, guys. Thanks for the questions.
So the mix of U.S. International was 70 822 in the quarter.
As you think through 2021.
How could this mix evolve do you think.
Thank God Europe, and other international markets could grow faster could we see 70 30 next year or do you think it stays the same.
So much of this 80 20.
Making huge progress in Europe.
Grew 67% compared to.
In in Q3 compared to Q2.
And are the areas of growth of the obvious ones Netherlands, France.
We are starting to make some serious inroads into Germany we.
We have hired a sales folks in many countries, we are going to introduce our you know our product in Italy very soon we have engaged.
I mean, we have partnerships with the Sun.
Funds from fabric, which is an easy important I've, we've not yet talked about a second DCM button up and we will soon and then we have a 30 cm partner with Maxim.
So that's good.
And again it is it is the the foundation is quality and customer experience. That's why do people you know.
That's way we are expanding rapidly.
Big thing rich.
Which will come we will introduce by Q3 of 2021.
I will be basically started systems in Germany and Italy.
We are going to be introducing in charge.
In Germany, and Italy in and the other countries that needed in Europe, and that's that's going to happen. We are also I mean, we are working on that product as well so.
I think I'd be disappointed if we don't get to 70 30.
You know what I believe to.
As we exit in our 2021.
Interesting. Thanks, Roger do you think the supplier for Germany, Italy would be the same too that you have now or or could it be a third I know you talked about earlier or possibly even a fourth that supplies Europe.
Yes, let's walk before we run first so we wont be the current two suppliers.
The design would be compatible to the parent do supplies and then if we had a demand constrained we will obviously recognize that fast and make sure we added their supply quickie.
We do we do have plans to do that by the end of the year anyway.
Okay fantastic in some of our checks we picked up that there might be some components.
Maybe shorts for you guys I just wanted to see if you might be able to talk through this but it's not the micro inverter or <unk> and sharp well Incharge certainly is insured and there's a lot of demand there, but just kinda peripheral components.
Do you expect this to sustain do you think you can catch up or do you think or is this not really an issue.
Thoughts on that would be great.
Yes, I mean look.
The nice thing is a channel is very lean right Rick.
We talked about Oh, not much elementary they did that means but we have much tighter than that yes, you're right. The channel is running light and but you know we have the capacity to catch up very quickly like.
Right now I have three sources right I have flood.
Flextronics Mexico.
Which produces Dennis free product up to a million units a quarter and I can expand that easily I have Sally comps Gen. Nine that produces data free product to 50000 units.
You know to under 250000 units.
For Q1 of 21, and probably half a million units wanted you to have 21, and then I always that China, which can go.
More than you know 1.5 to 2 million units and of course, they have the downside is we pay that if so why.
We have enough capacity microinverter capacity, we are systematically we have systematically but if the company is such that we don't I mean, we're not limited by demand for Microinverters.
And so there may be some short term constraints you had in there, but we are working furiously hour long tail installers and all other installers top priority for us.
And we had operationally excellent our chief operating officer job is to make sure no customers unsatisfied, especially in these times we.
We will continue to work with them and we're going to solve these issues.
Great. Thanks, Mike keep it up.
Thank you.
Our next question comes from Mike Seacoast with Needham and company. Your line is now open.
Hi, guys. Thanks for taking the questions here.
Just one for you on this digital transformation initiatives that you guys are talking through with the in sales Installer network I think I heard that you guys have now 400 installers onboard it and I'm just going through my notes here I think you work with call it about.
1500 of these long tail installers in the U.S. per year. So I wanted to get a sense of first how how big do you plan on growing that network.
And then secondly can you kind of walk us through how you guys are putting together these leads and packaging. These tools for that network just curious from a competitive dynamic with the with the responses and then can you guys actually give visibility on your and then as far as how close rates and other items like that are tracking.
So we have a much.
We view it very strategically when we think about about this comprehensive digital platforms that we were talking about Craig historically, the involvement of and phasing in life and specifically the tools started at the time of commissioning and then commissioning and interconnection permission to operate and then ER and then operations what do you.
What we have done now and extend that or the beginning of the process, which is starting with lead and lead management. That's one it also interweaves both the installer George.
Journey domain, which includes proposal, which includes design proposal contract permitting and so on and so forth as well as full visibility into how the interaction occurs between the homeowner as well as the installed or so we have mapped out that journey is important the goal being a provider.
Excellent customer experience hormones.
He began very right from the beginning as part of the end of course, they need what enables this is the same installer network and Thats a worldwide network, it's a U.S. a as well as in all the regions that we got and adding we qualify them because they have to go through a pretty stringent selection process. So even though.
Talked with 1500 installers based on the quality of that installation and most important the customer experience we have inside the U.S. as an example, we have now 400 installers in not.
So we continue to provide.
As we continue developing additional tools for them et cetera.
The metrics that we are going to track and of course at the appropriate time. Good shared some of those metrics similar to what you have done.
You know I'd be track NPS as an example, we do we do something similar to the appropriate just to clarify we do business with more than 2500 progress in any given year right. So these E M or in phase sort of mid work.
Very exclusive unique.
You know group of external stuff that are meet up or Dick will are defined criteria of excellence weve customer experience.
Installation designs and they get access to the full suite of digital platform tools, including leaves and other benefits right. So that our classified into three categories. We have very very clear way to be fine that and that's why we are doing but we continue to do.
In business, we pretty much you know that's kind of all of this you something right and if you actually go to our website and if you go look at the particular Zip code.
And if your type that didn't you can see the platinum gord and fill it in dollars in that area you can actually see how they have started you can see the rating.
Public readings that they have no. Your question was how is it embedded into the platform.
We are in the process of releasing the platform. We haven't leads to get screened to take us a little bit more time, but.
The way we are thinking about is for example, if a homeowner from a particular Zip code.
Approaches in fees and fees were given.
Would show the Enphase installed network in that area.
The enphase installed with the network the way we will prioritize is obviously by the people who service the homeowners with the highest net promoter score.
Hi, yes customer experience. So therefore, what we would do is we would have and they'll go to them, which you know fix the REIT installers.
A few of them, maybe three or four.
Sure. The homeowner. So then the homeowner makes that a decision on what is good for him, but he will be based upon in fifth installment Nicolas It's also important to know that.
These installers.
I've actually.
Given all of that be take.
That homeowner who would like to see.
They are making a decision and the details means for example, which the gold they service what is there a pricing a button and and the lower end of pricing.
Watt for solar.
Is there a pricing for storage what are their preferences are they is the installed okay to delay the CE Mark Hughes you know what.
If we do upgrade programs.
What ought to be you know rates that he's going to charge the homeowner so.
We are building a comprehensive database.
The 400 installed the data base is going to be very comprehensive because that.
Will be the basis of the digital plates.
When a lead becomes data will be automatically taken from the platform from those installers and that installed on data will.
We'd be directly shown to the homeowner without interference from in phase I.
All we choose the best moment experience not.
Nothing else so.
That's our philosophy and we do need to do more I mean, we don't need to do more work before we release it.
And we need to add several tools.
Our installers, Oh, the young and fit installer, Nick what they get priority to the tools that we have.
For example, if we have the solar and storage design software.
Hey, let's see special priority, depending upon the key.
But theres platinum gold production.
Similarly, if we introduce the permitting service. They will then they will get special priority.
That's the whole point, we want to but at a very high quality network that sort of business.
Job is to service the homeowner with the best customer experience.
Thank you for that level of detail cylinder sales.
Probably an opportunity there and then one more if I may just picking through the the baseline financial model that you guys laid out that 35 15 20.
Given how you guys have been outperforming that model.
Maybe you can talk us through how you. So you think about that model moving forward or the opportunity to increase those margins over time.
I think that what we normally see.
C to embed Tos is think about the immediate midpoint of the guidance has a very short term view of our performance and forecast the media you know.
Immediate quarter Im thinking along those lines. We also need to think through that we all see the concept of growth requires significant amount of you know flexibility and we want the flexibility we need the flexibility and as we continue ramping up new products.
Actual for new products, all continued to increase the volume on existing products like in symbol.
We'd like you folks to focus on that the baseline model is the right model for the long term.
When we feel comfortable to improve warmed up model, we will communicate that one as we did before right by the in the short term midpoint of the next quarter games sounds about right in the <unk> I will see you know me Army. Upon me term scenarios I think you should think through the 35.
Gross margin I'm, sorry, good baseline well discuss generating we got very flexible operating model. So in terms of the business right. So.
All right very helpful. Again, Thank you guys. Good luck.
Our next question comes from Sean Milligan with Williams trading your line is now open.
Hey, guys. Thanks for taking the question.
If we think about.
Where you're exiting this year and 50 megawatt hours on the battery storage side of capacity and where you're heading mid year next year.
What are kind of the biggest gating factors to hitting you know sales that are equivalent to that 120 megawatt hours mid next year is it bringing on additional installers is it.
Just a matter of having the capacity because the demand is there just trying to understand if there is some kind of gating factor in the first part of next year.
Yes. Thank you for the question.
So basically.
No like what I talked about.
We focus on long deal in stores.
And we have been clear long term installers is number one.
Priority.
And that business does not happen overnight.
It is hard for us to build it installed little bite installer.
Installers have to go through online training.
Because right no. That's that's the way to do things they have to do their first installation we have to be patient with them.
To make sure that installation experience is a seamless experience.
Please note all efficiencies in the process, we need to get the installed to less then one day installed.
Then the I know <unk> and make sure that we are on top of.
Those long been in dollars. That's that's one that is a might peak quarter process.
Thanks, like hell be but it doesn't microinverters.
Micro inverter business it took us a long time to bird one brick at a time.
Storage business, especially with the long day is.
They claimed however, once bid.
He is an extremely healthy business to have.
Because our foundation is based upon outstanding quality outstanding customer experience and.
At full day.
Desired as they look nowhere else for buying front.
No you know having said that we.
We also want to work with.
The tier one and two in dollars.
Who like ensemble.
Who liked the fact that like you eight is going to be the first grid independent microinverter and the word.
They want to engage on our platform.
And so we like to work.
With the tier one into his daughters.
And like what we said in the script prepare.
Prepared remarks.
We are working with several of them.
And getting them on board.
Within charge and on some.
And that is you know Pete.
At the same time.
To add a long day.
That could happen to let me quickly, but still that's the time consuming activity.
So those are the two things that need to happen.
Yeah, so fired with 10 payments, we had extremely happy yet.
At the number of people, who have gone through dreaming and the way we manage the installation so far we have not perfect, but actually when we had problems we jump on them right I mean, we treated everybody homeowner.
Every issue as a defect I look at it.
My Dad executive staff looks at it we start the executive staff meetings with.
The focus on homeowners for ensemble.
So.
So I'm very happy with the progress we have made there's more to be done.
On both fronts getting more lawndale, installers and getting tier one and two in stores.
Okay, great. Thank you guys for the question.
Thank you.
Our next question comes from Mohit Mandloi with Credit Suisse. Your line is now open.
Hey, Thanks squeezing me in just one and charge could you talk about like these installations for new solar installations are you.
Getting any retrofit demand for order solar installations, either from your M series or other I do it seven six series customers or from the customers.
I think it is a pretty healthy mix I would say many.
New installations say many of the true profit its you know.
Our eldest statistics is limited so far.
I think it will be meaningful if we give something to you next quarter right No statistics arent.
You know I didn't I didn't again, a meaningful enough to give you I mean to draw a conclusion, but I see you know a healthy trends on book.
Yeah, and just to be clear MCT is really will building cities are patch would be that product that will be it will be launched at the end of this year, that's a software upgrade.
Our system to enable it to work with the MTTS product.
Right.
Oh Gosh I know you all talked about that and just on the in frozen shoulder network just quick thoughts on.
How does that.
Compete with a tier one tier two installers are probably are also offering better on a services similar to what you have done and last just like God, what and so could we expect that the honor to stay a little this year. Thanks.
Thanks, Yeah, I mean, it's we've always been clear on our strategy.
We while we will you go you know absolutely all out take Canada for tier one and two customers our bread and butter, there's always been a long long, Dave installers Longtail installers do not have.
Clearly.
Comprehensive platform to work today.
And our objective.
Well not being that again is if we can create such a platform where.
We generate leads we transferred to the installers, we track the entire installation or even manage at least that in total it is actually bring.
And we give them 700 tools during that process.
We think we will make these installers you know.
We have 11 sticky experience.
And that's that's our philosophy too, but didn't highest quantity take care of both homeowners and to keep installers homeowners in enphase continuously coming to the dollar.
That's the digital platform.
So, yes, you're going to hear more in the mood in the analyst day, which would probably be sometime.
Soon.
And you know.
We'll keep you informed.
All right. Thank you.
Our next question comes from Joseph Osha with JMP Group. Your line is now open.
Wow I made it hello, everyone.
Hey, how you doing.
As far as Joe two questions for you one sort of a easy one or more and more complicated one oh I'm easy. So I'm wondering if you can share with us on and charge, what sort of where your typical or customer configuration is ending up in terms of size. That's the first question and then the second question is.
Actuate starts to show up in these grid capabilities starts to show up.
How do you think about the potential for working with you know installers going on grid services, that's yeah, and obviously that that might inform the type of installers that you're you're going to work with it how how do you think about about that warm sworn sorry, Greg. Thank you.
So first part of the question I think it is anywhere between 10 and 15 kilowatt hours.
Okay.
And the second yeah.
Great services.
Storage becomes more and more prevalent out there, especially be particularly behind the meter storage, which is what we service.
Ordinations coordinating all these de ours is going to become more and more critical and that's the opportunity and what we are doing what our plan is to offer grid services as an integral part of the solution that we are providing so.
It's good to be available to any installer, that's any any money not yet any what I put in solar so operator.
I'd like to offer it to them to the to the homeowner customers. So they can sign up for if you will if you opt into who are taking advantage of because they have their storage solution and give to the program program available for good choices and they can opt in and sign up for it so we're going to make it a bit.
Probably not broadly available.
Okay, and then as a follow up to that I'm. Just wondering in this kind of follows on one of the questions about M&A or or you won't see that generac bought a ball or fluency bought A.M.S. and I'm wondering as you look at this do you feel that there are any sort of derms your management skills that you need to acquire do.
Have what you need at this point.
Give me one we don't get into any such details at this time, but in general we have a very powerful.
Powerful platform in a in a in with enlighten and show over there whether that's done through there.
Good opportunities available ill provide a p. ice to provide great services are all of the entire ensemble system in all these on which means it's fully connected ordination of all of these de ours is going to be.
Launched off off by existing enlighten platform itself. So how we go about doing the detailed effect.
We will try to decide but suffice it to say that we've seen that he our coordination is extremely important and will offer that water for installer partners.
Thank you.
Our next question comes from Marshall Carver with Heikkinen Energy Advisors. Your line is now open.
Yes. Thank you.
You saw really impressive sequential growth internationally, particularly in Europe and three Q.
He comments on for Q 20 growth rates.
That's versus international or give us there.
Anticipated approximate revenue split U.S versus international.
Usually don't break that out, but our team is doing a really nice job.
In all the regions, we had a very strong and basically Netherlands. We are continuing to grow we just added distributers top distributors in Netherlands and been Gms indication.
We are making a lot of progress in Germany as they said we.
Introduced like Q, seven hopefully in Italy, very very soon in Q1.
Then.
Then there are several other countries in Europe that we have actually hired sales.
Sales people before we only had five salespeople last year at this time.
Full of 19 views, we only had five even I think no we have not 15 or 20.
Increased my Fourx and we plan to increase.
Even more going forward so in general I think.
Things look good there the.
One big market data storage, especially Germany, Italy, and I think we'll be ready for that like what I said in the.
The third quarter of 2021.
Okay. Thank you.
And gifts.
Our next question comes from Pavel Molchanov with Raymond James Your line is now open.
Thanks for taking the question you mentioned Dean.
Safe Harbor, playing a much less noticeable rollover versus a year ago I'm curious as you.
The I.T.C. word could be extended.
Part of a post election day.
Stimulus package in Congress, which the trade groups of course have been lobbying for.
How would that impact kind of the trajectory of.
Oh, the business into next year, the they'd be safe Harbor.
I think your yes. So obviously if I see gets extended then there's been no nothing no real need to do I like the safe Harbor anything. So you will obviously see that that's at least the safe Harbor contribution was not going to be doing them as hard on not just actually are expected to be nonexistent.
In general our view on Safe Harbor. It there's a lot of learning from last year, and so I think people know what to do and how to go about how to go about.
Executing on say voting and if somebody does want it we'd be ready for it.
Okay.
One more question about M&A, if I may I know a lot of interesting comments from you guys about software, which which is fascinating.
[laughter] target.
In your mind, whether our dollar value or percentage.
Oh, the revenue mix that you would like to have requiring overtime, so that managed services et cetera.
That's not how we think about it we think about it is is what is the right is it a good strategic fit for what we do is it very complementary.
With the.
With what we are providing and I'd be bringing real value throughout homeowners in order to provide the best homeowner expedience. So thats kind of the criteria that we use of course, we do incredible amount of diligence in terms of how much of it being funny evaluations and so on and so forth, but at the end of the day, it's all about making sure.
We delivered the best Hamada expedient and it would be things like fun. We are in a good position. We've got an incredible architecture. We've been somewhat so we've got plenty of optionality. There on how we want to play that out you Steven we want I believe it outright.
You no matter, what we need to think about these from the homeowners.
Point of view, that's what we are thinking so.
Not backwards into us and through our healthy relationship with our partners distributors and he stuff right in them in so everybody wins in the process, especially the homeowner we twice our products right. So, but we have no.
Discarding any possibility right on how we're going to approach. Our you go to market a strategy on providing different services through our profit either enlighten or our digital platform type lighting as well.
Thanks very much.
You're welcome.
Our next question comes from the line of I may dial with H.C. Wainwright. Your line is now open.
Hi, Barry sorry, I, just had one follow up I'm, the 120 megawatt hours per quarter by the second half of next year.
The storage side.
Are you going to rely on the long term that work to deploy this or should we expect maybe some partnerships to come through between now and then.
Hope support that deployment.
It's too early to tell but I would just go back to the micro inverter business Microinverter business today is a nice healthy mix of lung function as well as.
You know tier one in two installments, because everyone wants to work with us due to high quality and high customer experience. So if we do a good job on the storage side.
And all of this capacity can be can turn out to be positive for us.
What we need to execute.
Thank you Doug.
That concludes today's question and answer session I'd like to turn the call back to Patrick I thought the Robin for closing remarks.
Thank you for joining us today and for your continued support of in Phase. We look forward to speaking with you again 30.
Early next year.
Right.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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