Q4 2020 Enphase Energy Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Enphase Energy's fourth quarter, 'twenty and 'twenty financial results Conference call and this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session ask a question. During the session you will need to press star one on your telephone please be.
I advise that today's conference is being recorded if you require any further assistance. Please press star zero and I would now like to hand the conference your speaker today, Adam Hinckley. Please go ahead Sir.
Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's fourth quarter 2000, and 'twenty results on today's call are battery costs on to Robyn and faces President and Chief Executive Officer, Eric <unk>, Chief Financial Officer, and Rod, Google or Chief products Officer. After the market closed today Enphase issued a press.
Release announcing the results for its fourth quarter ended December 31 2020.
During this conference call Enphase management will make forward looking statements, including but not limited to statements related to Enphase energy is expected future financial performance the capability of our technology and products, our operations, including and the manufacturing and customer service, the anticipated growth and ourselves and and the markets and which we operate and target and performance of.
The tools, we make available to and the capabilities of our installation partners and expected regulatory changes. These forward looking statements involve significant risks and uncertainties and Enphase Energy's 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 comps.
<unk> annual report on form 10-K for the year ended December 31, 2019, which is on file with the SEC and annual report on form 10-K for the year ended December 31, 2000, and 'twenty, which will be filed with the SEC and the first quarter of 2021, 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 and its expectations. Also please note that financial measures and 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 and its earnings release posted today, which can also be found on the Investor Relations section of its website.
To introduce Badri co founder on and President and Chief Executive Officer of Enphase Energy Badri.
Good afternoon, and thanks for joining us today, and just because the fourth quarter of 'twenty and 'twenty financial income.
We had a good quarter.
Revenue of $264 $8 million shipped approximately $2.3 million micro inverters and <unk>.
Non-GAAP gross margin of 42% and generated strong free cash flow of $78 $5 million.
We exited the fourth quarter and approximately 40.
And 27, and this means 40% gross margin.
<unk> percent operating expense and.
And 27% operating income on <unk>.
As a percentage of revenue on a non-GAAP basis and.
And our baseline financial model is 35, 15 20 and.
And it will go into greater detail I'm on.
And finances, Nathan and the call.
Let's now discuss how we are servicing customers and our customer experience person and on food worldwide locations and the U S Europe, India, and Australia are still working from home, while supporting installers and homeowners. Our Q4 net promoter score worldwide was 62% compared to 67% and <unk>.
And three and our North American and net promoter score and was 68 per cent compared to 71% and Q3.
Our average call wait time increased in Q4 and more than five minutes as we on boarded new installers and seemed it more call it relating to our storage systems.
We are not happy about and does increase and wait times and on working to bring them back to under a minute.
And the ramp up on and Enphase storage system is also include increased call volumes as our installers on learning how to commission the system and homeowners that are learning about and the systems. The features.
Let's now talk about manufacturing and operations team did a great job mixing manufacturing is 'twenty and 'twenty Plano.
And when the pandemic began we've got manufacturing and Q2 of 'twenty and 'twenty and then had to quickly ramp back up to meet the surge in demand and Q3 and Q4.
Production in Q4, it was more than two times the level and I am very pleased with the ramp up on Mexico factory that met our target of <unk>.
Using more than 1 million units in Q4.
As part of our supply chain strategy, and diversified production, Japan, and free and cost competitive and locations globally.
Again micro inverter production and some comp India in October of 2020 and started shipping to customers during Q4.
I have a high quality and state of the art automated line.
Quarterly production capacity of half a million units and.
And the space to add a second line with the same capacity.
The production ramp and is going very well and we expect to produce approximately 400000 migraine mergers and India in Q1.
We have seen a strong increase in demand for our micro inverter systems over the past several months as we continue to onboard new installers and at the same time, the uptick and got economic activity and stress the global semiconductor supply chain. We are seeing the constraints on a few semiconductor components used in our micro inverters on.
Listing suppliers and are working very hard to increase the availability of components for us, which coupled along with the new suppliers. We have qualifying should help easing the constraints into the second quarter of 2021.
To put on the supply constrained into perspective.
We see this as a manageable situation.
And the high voltage AC fed shortage, we experienced in late 2018 early 2019.
In terms of battery pack supply our second supplier to begin delivering setbacks and Q4 ex plan and we'll be ramping capacity throughout the first half of 2021.
And we expect to have 120 megawatt hour is available to us in the third quarter of 2021, we have adequate supply of setbacks with two suppliers. Although we are continuing discussions with the nation on suppliers from geographic diversification and let's.
Now move on to the regions on a U S and international revenue mix for Q4 was 82 and 18% respectively.
And we saw sequential revenue growth and all regions during the quarter and record sell through from distributors to installers.
The U S market was quite strong and Q4.
U S revenue was up <unk>, 5% sequentially.
Sell through of micro Inverters from other distributors to installers increased nearly 40% from Q3, which was also on a car.
And then on the channel inventory per micro Inverters and the end of Q4 remained slightly lower than our target range of eight to 10 weeks, we expect channel inventory to remain at these low levels on the end of Q1 due to strong demand and the semiconductor and supply constraints. We continue on ramping shipments of our sone and <unk>.
Systems' nicely, we shipped 35% more megawatt hours in Q4 compared to Q3.
And Europe, we reported record revenue for Q4.
Revenue increased 10% sequentially.
On an annual basis, the revenue from Europe increased 32% and 2020 Annualizing. The Q4 revenue from Europe would have put us closer to achieving our pre pandemic target of doubling the revenue and the region I am very pleased with our team's performance and I'm excited about the regions projected growth in 'twenty and 'twenty one and.
And the new markets. We recently entered continued to gain traction we will also be introducing our enphase <unk> system for the European market makers and the third quarter of 2021, adding yet another growth driver and.
Australia.
And we breakdown on a strong Q3 results and achieved record quarterly sales and record installed on Comed and Q4.
And a few others by the launch of our Enphase installers net yeah.
And as well as growing demand for our high power IQ seven and micro Inverters, plus a favorable competitive environment as regulations and new to shift towards safer and smarter and solar and we expect to introduce a and Enphase <unk> system for the Australian market during the fourth quarter of 2021.
And Latin America, we reported record quarterly revenue.
Rico showed strength for micro inverter systems as well as our <unk> systems.
Now that we've covered the regions lets discuss overall bookings for Q1.
Our customer demand for Q1 significantly exceed the high end and therefore guidance range for Q1.
We are constrained by the semiconductor and component availability as we discussed earlier.
Our top priority is to take care of and installers and our teams and working hard to minimize customer disruption.
And have already factored and expedite costs into our Q1 guidance to ensure we put maximum number of units and customer hands.
Let's go and out of storage rollout.
Shipped 32 megawatt hours of storage systems, and Q4, net presenting a growth of approximately 35% compared to Q3.
Around 360 unique installers and commissioned at least one enphase storage system by the end of Q4.
We're learning tremendously from the installers and homeowners and thankful to them for and dealing with that early on.
Mistakes and others we.
And we have made many updates to our software as well as our release process and as a result of their feedback.
Overall, we are very pleased with the market interest and all.
<unk> system, although we did fall a little bit sharp on internal shipment expectations for Q4.
And I attribute this to growing pains and ramping a new product as we actively work with installers on selling and installing and commissioning of this new product category that is much more complex and time consuming and solar only systems with the strength of the micro inverter system and a micro inverter system demand being so good long term.
And <unk> naturally default into prioritizing solar on these systems that they know how to sort of interest and fees and the responsibility to their phone and shoot a best in class and installer experience and is on doing business for <unk>.
Both solar plus storage installs.
In addition to the long tail and soldiers we are working with a number.
Of large installers, we recently announced storage agreements with de Novo. So what are the optimum and momentum sooner. These announcements provides confidence and a continued steady ramp and shipment volumes into 'twenty and 'twenty, one we expect stone and shipments to grow nicely in Q1, and a similar rate debt Q4. Despite.
The negative seasonality of the industry.
And each Q1.
And on coming back once again to long tail installers. They are on a top priority and we have made major modifications to our commissioning process to reduce installation and commissioning times for storage to sub 24 hours.
This helps crew scheduling and be more predictable and helps the installers profit on.
Storage installs with installers facing labor constraints, they improved commissioning time sure.
Them and should help incentivize them to sell solar plus storage and just focusing on solar on it.
Let's talk about more new products that we're coming out with the recently announced that <unk> systems are now compatible with existing and 215 and M 250, based solar systems and expanded compatibility and provides approximately 300000 additional enphase system owners and the U S with deposit.
Ability of achieving and energy resilience through the Enphase upgrade program.
And we're also working on additional features to our Enphase <unk> system to make it a lot more powerful decent.
These include generator compatibility load control power control and 200% over note we expect to release these featured sharply.
Let me cover them quickly one by one.
Homeowners can add generators to that Enphase system.
And with our system and generating the eds and automatic transfer switch is not necessarily nanabhay driving down costs and simplifying things on homeowners and configure the generators behavior from debt Enphase that.
The system can turn the generator on when the grid things either immediately on.
And when the battery charge just below a certain level.
Next just load control.
With this new feature a homeowner and we'll be able to control up to four critical loads by connecting them up to the Enphase system.
The homeowner and reconfigure the behavior of the system via the Enphase that.
He can he or she can identify non political loan such as on pump to automatically tune off when the grid fails on them.
Based on the sustained up charge on the backing this ensures that the home that's not blackout during and grid outage, the antibody and providing a good customer experience.
The next featured and scarred Pcs, Paul and control system is a software capability and not a system to regulate itself and the manner, which does not increase the amount of current on the homeowners Mangled center. This avoids and expensive upgrade of the main load center and a homeowner and wants to add both solar and storage.
And last feature and an important one and the 200 per center.
Motor nodes, such as Acs and well pumps have a significant Paul will need during startup, which if not met will blackout to home.
One way to solve the problem is to throw more dollars that it reaches to oversize and storage system, which is expensive and solve this problem with and intelligent hardware and software based function part Paul to start.
In addition, we have increased the capability and a micro and mergers to supply up to 200% on debt rate power on a short duration and order to start motors and shooting that the home does not blackout and Enphase <unk> system with this feature will help the home on that optimized and system size.
And maximize value.
Next we are making progress on our IQ eight grid independent solar micro inverters.
We already have IQ eight alpha systems, with and without Enphase storage running at various sites.
We expect to complete on installations and I expect to begin shipping production in Q2.
Our small commercial.
Solutions based on <unk>, and 640 Watt AC micro inverter is making some other progress.
Similar to residential solution, we expect to provide a complete solution that includes and micro inverter system and a comprehensive digital platform to capture the entire journey of the installer and the system Warner the platform will provide a sophisticated design and proposal to ultimate package development service submission.
On an activation software and tools vote operations, and maintenance and farm and striking and feed fleet management, we have begun alpha and installations here and expect to start shipping production in Q2.
Let me next talk about our portable power station and maybe you see referred to as ensemble in a box.
On a little bit behind here, but I have a good plan going forward.
This will be our first consumer product it will provide.
Energy security indoors as well as energy on the globe.
When you go outdoors and as <unk>.
Connected and control via the Enphase Act.
We view this as just talked on product for homeowners, who are not yet ready.
And our full solar storage system the <unk>.
Product will support up to 1.3 kilowatt hours of storage.
Provided one find six kilowatts continuous and three two kilowatts of peak power.
It will keep the homes basic appliances, such as lights mobile devices and refrigerators on for a few hours during an outage we expect to release this product during the fourth quarter of 2021.
Let's now cover digital transformation and.
I'm excited about our two recent acquisition announcements the first one on softness.
Headquartered and Montreal soft debt provides design and proposal and software.
Used by solar and roofing companies and the second announcement and the proposed acquisition of the solar design services business and.
And engineering based and <unk>, India business provides rapid and cost effective proposal drawings and permit planned text installers, we expect to close this acquisition by the end of Q1. These two acquisitions will add significant capabilities to our digital platform.
Providing such tools and services to the installers, we aim to simplify the sales process, while reducing soft costs.
And providing and enhance buying experience for homeowners.
Turning to the other aspects of our digital platform. We have now on board at 440, installers and not America toward Enphase installers and <unk>.
And we're highly selective process focused on installation quality and homeowner experience with.
We launched out here and in Australia during Q4, and look forward to launching <unk> in Europe, and India next how about EBITDA and installers can enjoy a variety of tools and services and Enphase with digital platform to make the sales and installation process faster and easier and that you Shouldnt, we have modified our highly interactive enphase.
System estimators to enable accurate sizing of storage systems, and various home appliances and starters can leverage this tool to provide and improve homeowner experience.
And he simply announce that Allison Johnson has joined Enphase as our CMO, Chief marketing officer and experience at some of the world's leading brands is key as we look to accelerate our growth and establish and face as a recognized consumer product leaders and the global transition to home electrification.
And full energy independence and.
Summary, we are happy with our performance and excited about the strength and wanted to buy and demand the ramp of our stood it systems or <unk>.
Upcoming new products and digital transformation efforts.
And I will hand, the call over to Eric for his review of our finances.
And.
Thanks, Bradley and good afternoon, everyone.
And we'll provide more details related to our fourth quarter of 2020 financial results as well as our business outlook for the first quarter of 2021.
We have provided a reconciliation of these non-GAAP to GAAP financial measures and our earnings release posted today, which can also be found in the IR section of our website.
We are very pleased with the significant increase in demand for our micro and better systems and Q4 2020, despite the pandemic.
Revenue for Q4, 2020 was $264 $8 million, which did not include any revenue from hardware shipments during the quarter.
Total revenue increased 48% sequentially and we shipped approximately 762 megawatts DC micro and burgers on 32 megawatt hours of storage systems in Q4, 'twenty and 'twenty.
The 32 megawatt hours is equivalent to $12 two megawatt hours of power.
As we've previously discussed some of our micro inverter units met certain sites on Voip criteria qualifying them for and exclusion from section 301 tariffs on prior shipments.
We are requesting refunds totaling approximately $39 million plus accrued interest of which $23 million were approved in Q3, 2020 and $16 million with a proven and Q4 2020. These refunds have been accounted for as a reduction of cost of goods sold in the respective quarters.
Roof and.
The associated accrued interest was recorded and all the expenses, we have excluded tariff refunds from non-GAAP financial result, 2% and more accurate picture of ongoing business performance. We don't expect any further refunds in 2021.
Non-GAAP gross margin for Q4, 2020, which excluded the $60 million on our tariff approval refunds was 42% compared to 41.
41%.
For Q3, 'twenty and 'twenty.
The sequential decline was due to higher shipping and logistics cost comparison.
Yes.
Logistics cost related to components supply constraint on GAAP gross margin was 46 per cent for Q4 2000 and Troy.
Non-GAAP operating expenses were $34 $2 million for Q4, 'twenty and 'twenty compared to 29 $6 million on us for Q3, 'twenty and 'twenty. The sequential increase was primarily due to the hiring of 85 employees during the quarter, mainly focus on engineering costs and my experience and innovation.
GAAP operating expenses were $42 $8 million for Q4, 'twenty and 'twenty compared to $43 2 million for Q3 2020 and.
GAAP operating expense for Q4, 'twenty, and 'twenty, including $7 $8 million of our stock based compensation expenses and $684000 of acquisitions and related expenses and amortization for acquired intangible assets.
On a non-GAAP basis income from operations was 72 4 million on volumes for Q4, 'twenty and 'twenty compared to $43 $7 million for Q3, 'twenty and 'twenty.
On a GAAP basis income from operations was $79 1 million for Q4, 'twenty and 'twenty compared to $51.8 million for Q3, 'twenty and 'twenty.
On a non-GAAP basis net income for Q4, 'twenty and 'twenty was $71 $3 million compared to $41 8 million for Q3 2020.
This resulted in diluted earnings per share of <unk> 51 cents for Q4 2020 compared to <unk> 30 per share for Q3, 'twenty and 'twenty on an annual basis. We are pleased to report a record non-GAAP net income of $188 5 million.
GAAP net income for Q4, 2020 was $73 million compared to GAAP net income of 39 four.
$4 million for Q3, 'twenty and 'twenty and.
GAAP diluted earnings per share was <unk> 50.
For Q4, 'twenty and 'twenty compared to diluted earnings per share of <unk> 28 in Q3 'twenty Jordan.
Now turning to the balance sheet and the working capital from inventory was 48 $41 $8 million at the end of Q4, 'twenty and 'twenty compared to $37 $5 million at the end of Q3, 'twenty and 'twenty.
Sequential increase and inventory was driven by the plant increase of raw materials for our wood and face storage systems.
C patient of a production ramp in 2021.
Although the dollar value of inventory increase sequentially base of inventory of ton and decreased to 27 days compared to 41 based on Q3.
The sequential decrease.
Decrease in days of inventory and was driven by the higher shipment volumes and Q4, our target is 30 days nominally and we will always do what is right for customers.
Accounts receivables were $182 $2 million at the end of Q4, 'twenty and 'twenty compared to $122 $4 million at the end of Q3 2020, the sequential increase was due to the higher revenue in Q4.
DSO of 50 days decreased slightly from 52 days and prior year quarter due to our collection management, we remain committed to efficient working capital management and driving down our cash conversion cycle.
We exited Q4 2000 and training with our full cash balance of $679 4 million compared to $661 million for Q3 2000 choice.
And not make any share repurchases against our $200 million share repurchase Authorisation. However, we spent $16 $3 million on with culture corporate tax transactions on employee stock vesting that prevented the issuance of approximately 132000 shares and Q4 for.
For the calendar year, 'twenty and 'twenty, we spent $68 $3 million hat on.
On an average price of $50 per share and withhold to cover transactional and prevented the issuance of approximately one 4 million shares.
And Q4, we also spent $43 $9 million on the partial repurchase of convertible notes due 2024.
Since the end of Q4, we have received additional conversion and request a $61 $5 million.
And our deep in the money compared to the commercial price, we expect to repay debt principal amount of these conversions requesting cash and.
In the money amount.
And shares settlement will occur in Q1, 'twenty and 'twenty, one and Q4, 'twenty, two and we generated $84 2 million and cash flow from operations and $78 $5 million and free cash flow for calendar year 2020, we generated a record 190 $898 $9 million of free.
Cash flow cash.
EBITDA expenditure was $8 9 million for Q4, mainly for the Enphase storage and manufacturing capacity increase and.
<unk> and license software development costs, and the production ramp with our second contract manufacturing partner.
Capital expenditure for 2020 was $20 6 million.
Now, let's discuss our outlook for the first quarter of 2021, and we expect our revenue for the quarter to be within a range of $280 million to $300 million.
We expect GAAP gross margin to be within a range of 37% to 40% and non-GAAP gross margin to be within a range of 38% to 141%, which excludes stock based compensation expenses. The gross margin guidance includes a further increasing shipping and logistic costs to ensure we are best service.
And our customers and.
And then as many units as possible.
We expect our GAAP operating expenses to be within a range of $64 million to $67 million, including a total of approximately $22 million on us. If you made this point a stock based compensation expenses and acquisition related expenses and amortization.
We expect non-GAAP operating expenses to be within that range of $42 million to $45 million.
All guidance estimates include the Softbank acquisition, but do not include the deal sort of design services business.
I would like to touch upon our Opex guidance, our non-GAAP operating expenses are increasing quite a bit from Q4 to Q1.
And we see future lease on.
Hi.
Support our growth plans and consolidation of acquisitions, plus we did and incentive accruals and the hiring is related to the new product development and investment and innovation to create best in class home Energy management system.
And so this and <unk> solar and design services business acquisition of <unk>.
Building blocks that enable us to build a world class digital platform for homeowners and installers.
At the same time, we are not thinking on what ice on the baseline financial model and plan to maintain operating expenses up 15% operating.
Before turning the call back to the operator for questions I would like to mention a couple of effects first we published our inaugural ESG report a few weeks ago sustainability at the core of what we do on fees and we are proud of our team as we continue to enable clean energy and energy independence through innovation.
Second and face has recently added has been recently added to the S&P 500, and index and we are very proud of this accomplishment I want to acknowledge the current work on indication of entire and phase III.
With that I will now open the line for questions.
Thank you as a reminder to ask a question you will need the pets star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from Brian Lee with Goldman Sachs. Your line is now open.
Hey, guys. Thanks for taking the questions and congrats on a great quarter.
Maybe first if we could.
Sort of dig into the guidance a little bit I know, there's some shortages here on the micro side I'm, assuming there's some on the battery side as well but.
Can you give us a sense of sort of supply and demand for both the micro side as well as the and charge system.
It sounds like you're leaving some business on the table here and can you kind.
Kind of quantify what impact that's having on Q1 and is that expected to also persist into Q2, and then related to that I guess on gross margins what percent hit.
Did you see it at a 100 bps is it more than that on Q4 given.
And the additional freight and logistics costs, you had to incur.
So let me start with the micro and orders and demand is is.
Quite high customer demand is quite high debt and.
And once again.
Go back and attribute it to our high quality and high customer experience.
So basically while I'm not going to quantify how much the demand is higher compared to the high end of the guidance I already said it is significantly high.
And our constrains.
Basically coming from the semiconductor components and that can and industry wide issue right now.
Two specific.
And our components that we are constrained on one is on what do you think that goes into the micro and the other is the effect drivers that actually drive the high voltage fit.
And then you know the name of the game is we are qualifying multiple.
And you know more sources, so that we have more supply as well as expediting product and I'm in touch.
Got you and the Ceos of those companies and they are helping as much as they can we expect to get all caught up.
Basically by by early April and our top priority through all of this is to ensure that we take care of customers. So we will do whatever it takes.
In order to ensure their lanes and running and that they are not affected so thats on the micro and voltage site and the soda and St.
Have enough capacity.
And you said.
And that we will.
We have about as of last quarter, and we had about 50 megawatt hours of capacity and then.
And as of Q3 of 'twenty, one and we will have 120 megawatt hours of capacity.
We have enough capacity and stood at site and on the storage side once again, reflecting back on on how we did.
We started shipping storage in the third quarter and print.
Really happy with the ramp.
Compared to the third quarter I did about our weighted about 35% more megawatt hours in Q4 compared to Q3.
And for Q1, we do expect to do a similar amount higher than Q4.
So let.
Let me come to some more statistics on stood it so that you get a flavor.
And it.
Essentially like what I've said and about 360, plus installation and all.
Install a unique and installation companies have and.
Start at least one and phase two it system.
We have trained over 650 unique installation companies.
We have trained overall more than.
200 installation and put us on that.
The.
What we are seeing we have learnt a lot and the process.
Mainly from installers as well as a lot of homeowners.
And we are improving and then one by one so on.
No.
And I said in the prepared remarks, I wish we had shipped a little bit more.
But I think we are doing the right things by fixing these problems for example.
And our commissioning time needs work.
And we are and the process of improving the commissioning time to sub 24 hours and it is all about for US. It is all about taking care of the installer and making sure that day.
And start up the experience seamless ease of doing business is what we are on a book and therefore, we will never compromise on the short term.
In order to.
In order to achieve that so.
For example is very often the installers, usually struggle on storage with main panel and rewriting and replacement.
That's a big pain point for the installers and re on working on steps to solve that.
He's a building when it comes to other ease of doing business.
<unk>.
The homeowner that's totally net incentive on.
Learning how to use storage system, so while the transition from on growth, but it is seamless.
Factored as seamless means that the homeowners and do not change their behavior and enphase needs to do a lot more day is to educate the homeowner and the seamless way. This is intelligent notification and intelligent text messaging and.
Intelligent load control and which we are actually working on.
And one more thing is to also go back and do the storage designed right and the firstly.
Very often people missed that storage is all about taking care of our properties.
And most of the people missed that once again it is.
And.
Enphase needs to take responsibility to do whatever it takes.
To simplify.
And the installers ease of doing business and of course.
And now I'm coming to the industry changes that are needed.
Which on them.
And our permitting needs to be a little bit faster and understood it and thats, an industry wide problem, which I'm sure many of our peers and that's we're going to be working on.
Last one is financing for the shortage, we need some kind of innovative financing schemes and student debt.
That also started accelerating overall.
And I Hope I gave you.
Some flavor, but.
If I were to summarize we are growing and a very nice clip, 75% from Q, Inc.
In Q4 compared to Q3.
We'll do similar rate in Q1 compared to Q4.
And and focuses on the long term, we will take care of.
Yeah and installers.
<unk>.
And our training and making our soda system easiest and stone that's on focus.
Thanks, Ravi that's super helpful color on maybe just I had a second question on batteries.
And then you touched upon some of this but.
If I kind of back into the numbers. It seems like you did maybe $25 million to $30 million of.
And charge revenue in Q4, and then that'll be.
Well into the $30 million plus range and Q1 are.
Based on the guidance. So first question on batteries is fair to assume those are the right revenue ranges and Theres no change to pricing and the near term and then <unk>.
Second question is just on I know it given it's a new product and the installation rates.
Our non ads.
Swift is what you are used to on the solar side.
And your shipments are not keeping up on necessarily with capacity you've talked about 120 megawatt hours by Q2 kind of 35% surge capacity you want to have in place. So maybe 80 590 megawatt hours really being the <unk>.
The shippable capacity Youre targeting when do you think we get closer to shipments.
Lining up with kind of your your applicable capacity thanks, guys.
So youre on ballpark flow to the revenue is right.
The second one is like what I said.
It's a long term game so once we fix.
The ease of doing business for the installers, we expected to ramp as Youll see we are making significant progress with both the long tail installers as well as the tier.
On the tier one and two installers you saw all of the press releases you will see a lot more going forward. So we continue to grow at a nice clip you can do the math, if we continue to grow at 30%.
Paul.
So we will need a third supplier that might happen in 2022, and we're already talking to those people.
Yes.
Alright, Thanks, guys I'll pass it on.
Thank you and next question comes from Moses Sutton with Barclays. Your line is now open.
Hi, Thanks for taking our questions and congrats on the quarter.
And so you say you'll start shipping <unk> eight in <unk>, how should we think about <unk> standalone pricing versus IQ seven.
That would be the range on the premium and might you expect overtime and majority of installers shifting more towards <unk> versus IQ seven years, the jewelry out on that question still.
I mean.
And it's not going to talk about the exact pricing right now, but we are.
Within a few months of going to market. So that will happen very soon with regarding.
Whether people are going to end.
And to update you ate overnight to seven we think there and that is a no brainer and there's going to be yes.
IQ eight grid independent micro inverter system.
So therefore.
I expect the adoption to be heightened when it is released and then and obviously a lot of combinations with <unk>.
And in some cases.
And people might prefer to buy IQ eight with the smaller storage system.
And we will be promoting the heck out of it.
Great looking forward.
And what percent of U S installers and using your products now still need to be trained on and charge and I know you gave the number of installers trained already or.
Our system.
Much has left and the U S training process.
And look I mean.
And we work with.
A couple of thousand installers and the U S.
Usually and we reported numbers off.
600, and just be unique installation companies that number we are catching up on those numbers very fast.
So we expect.
A couple of quarters to basically trained everyone that matters.
Got it got it and just one more for me and I'll jump back in the queue.
The annualized contribution from these two recent bolt on M&A that you debt.
And on revenue and gross profit if possible.
We're not going to breakout those numbers right now.
Got it understood. Thank you.
Thank you. Our next question comes from Mark Strouse with Jpmorgan. Your line is now open.
Yes, good evening and thank you very much for taking our question.
So quite a bit has changed.
And the macro environment since Youre <unk> Paul.
Can you just talk about how your customer conversations have changed if at all since the ITC was extended.
And then kind of a.
Follow up to that is yes.
Who knows what's going to happen going forward, but if energy storage stand alone.
It is included in some kind of future revision to the ITC, what do you think that impact would be for enphase.
And specifically looking for retrofit activity.
Yeah, Hi, this is <unk>.
And clearly change and administration is something Thats very positive for us obviously and the first thing that happened was the ITC extension as a result, and you see on our numbers have no safe Harbor.
And so that was probably a pretty significant change that took place with regards to some bills that are in Congress and are being worked on right now.
The one that is really interesting is the one that wrong and Ron just on it and.
And the nice thing about our architecture and the fact that we and AC coupled means that it lends itself very well to a standalone system. So the combination of <unk>.
Standalone storage device plus 50.
Safety device the micro grid interconnect.
And now.
Substantial value to the homeowner both in terms of providing resiliency and event of an outage.
As well as participating and value added services touch on it.
So it has great services for example.
One could even extend their thinking into.
And our portable power station, but also some day, we participate in that as well in terms of providing both the resiliency is realized.
Participating and value added services. So we really are excited about the solid standalone discussions that are going on right now.
In terms of the ITC.
And said I think debt.
The ITC could be extended into storage and potentially even on a cash refund that is very appealing dry because think about it I mean homeowners.
Look at payments and other you mentioned financing.
All of those things help to create adoption and of course we.
Reducing and the cost per kilowatt hour and cost per watt it keeps on going down.
And we accelerated right. So we welcome both things.
Okay.
Thank you and then just a follow ups.
<unk> on.
And on soft desk and in particular.
Is the idea within acquisition and financially anyway.
Create.
Stickier relationship with your customers or.
Is there a financial rationale for these acquisitions as well and that kind of stand alone they would meet.
Kind of your corporate target.
Origin profile.
Yeah. So you know.
You got it right.
We love our long tail of installers.
We wanted to give them.
And wanted to make it easy to do business for them.
Therefore, we would like to give them.
You know, we'd like them to stay on our platform buyout product buyout software buyout permitting services and a lot more of that is coming.
Okay in terms of actually financially.
We look at those transactions and the style and the wrong fleet.
So rest assured about that.
And there.
Got it thank you.
Thank you. Our next question comes from Eric Li with Bank of America. Your line is now open.
Hey, good growth from the quarter.
On average.
And then I can currently and for refugees.
And as Eric you got it Eric.
Eric you got a really bad connection there.
And you hear me better now.
And we cannot hear you.
Can you hear me better now.
Let's give you are talking about there.
Slightly better.
Perfect.
Stuart.
On the constraints across the industry right now can you talk about your ongoing supplier discussions there and is there any color you can provide.
And the amount of storage capacity, you would expect to expand to near term weaker third supplier beyond the two existing suppliers and <unk>.
Follow up question after that.
Okay, Yeah, so yes.
Right now.
We have to qualify tablets.
First one.
And we have already ramped well.
The second one is and the process of ramping and started shipping to us and the fourth quarter.
And we said that basically in Q4.
During the quarter that just fast we had supplied a 50 megawatt hours.
In Q3 of 'twenty one.
We expect that's a play between these two suppliers to go up to 120 megawatt to 120 megawatt hour.
And if we.
If we find that.
Debt, we have short maybe by the time, we get into 2022.
We are already talking to a third supplier.
And are there multiple suppliers and then it takes us usually anywhere from.
Six to 12 months to qualify the product.
We are starting those discussions right now.
Got it and then just to clarify would you still expect to bring on a third supplier. This year or are you, saying that that's more going to contribute into 'twenty and 'twenty two.
We will have a third sublet and ready if we need it. So yes, we are starting to those activities that's correct.
Okay. Thank you and then just on the R&D cycle are there any updates you can provide on the development of IQ nine we're not currently stands at this time is it still being developed or is it and testing phase.
If you could provide any color there. Thank you.
Yes.
And actually working on.
On IQ and <unk> at this time and I Q nine out vision is basically.
Obviously smaller and <unk>.
<unk> faster.
Producing a lot lot more power than debt.
Eight.
Right now we are.
And focused on a few areas one is we'd like to see how to.
How to.
Reduce debt.
Print of of the Transformers.
The caps.
The six simpler and more DC effect.
Devices.
Through some semi through some semiconductor process innovation.
GAAP transistors are becoming widespread Gan on Gan Gan on silicon.
They are becoming widespread.
The advantage that again gives us.
Can now run my AC effects at a higher frequency.
Cosmic and barometer to higher frequency I can reduce my transformer sizes.
And because they can produce may transformers sizes, the entire footprint can get a lot.
Smaller.
Of course this is.
Me speaking theoretically.
And we need to demonstrate debt with both.
And prototype vehicles as well as.
Quantifying and reliability et cetera, I expect that.
Take the next 12 to 18 months.
And we will also be working on the next generation as well too to think about maybe.
Sophisticated cooling.
<unk>.
And ultra natives departing et cetera.
<unk> two.
Meaning.
So today, we have between our gate drivers.
And our AC fits and on DC first and we have a lot of components debt.
Using semiconductor packaging and gain and may be able to collapse all of those to substantially less number of components will be looking at those as well.
A lot of R&D is going on we hired our.
CTO.
The year ago. His name is Hans and.
He is an outstanding guidance.
And we have started all of those discussions and there is a.
Team actually behind that whenever Eric Brendan.
And branded as a CFO <unk> innovation and you mean.
He means that investment and the CTO team.
We are investing a lot more than before.
Got it and one last question and I'll pass it on here could you just talk about.
Any data points, you can give us on traction or progress with the long tail installers and Europe, how is that training process going.
Lumpy and installers actually I mean, Europe is a great story.
If you remember and the 2019 analyst day I had reported that they only had five salespeople and at that time and Europe and now we have I would say.
Increased debt, maybe QUADRA per day, or even more the number of sales folks we have a great team there that.
And that team is ramping in Netherlands and.
In Belgium, and France.
We have.
Recently.
We opened up offices and Poland.
Spain.
We have sales MFA deems debt.
And also launched a massive effort and Germany, where we are and the process of bringing a lot of installers.
And getting more and more and more installers on board.
Debt.
We will also introduce our <unk> solution.
Into Europe in the third quarter and Germany.
And is.
And it's a big market, it's one gigawatts of PV.
And with 80% attach rate.
Cause of the feed in tariffs being sourced model.
So we're very excited about debt market, but having said that it's.
Safe and matured market almost net out a bunch of suppliers and we have clear and differentiation.
And to take us a little bit of time.
But with our relentless focus on quality and customer experience supporting the long tail of installers.
And I'm sure, we'll start making significant progress in that region.
Thank you.
Thank you. Our next question comes from Colin Rusch with Oppenheimer. Your line is now open.
Thanks, So much guidance can you give us some sense of the progress that youre, making and pre selling the IQ.
And after that you've got going on in the commercial market right now.
Yeah, So clearly and we talked about I can a day bring lot of value and the commercial pipeline just to remind everybody.
IQ eight.
Two things one it's got 50 of the inverter itself and 50% higher power density and it connects to two panels into one device.
And the second thing is we're not looking at this as a.
And just as a standalone device itself, you're looking at it and the complete end to end solution and we want to leverage our digital platform everything from.
On our design service design and proposal services that come with it along with along with permitting package, a very sophisticated O&M system fleet management and performance tracking et cetera. So we're looking at bringing a complete solution set for the market, we have and alpha right now.
And Fi installs happening.
The installation processes.
Much simpler we weren't doing small commercial we're doing small commercial with 87 day as well, but it's a significant improvement from.
From IQ seven to the IQ eight day.
So a lot of progress there is more to come.
And we will report more as we make progress.
Great and then just in terms of just thinking about the integration of generators with the storage and.
And solar and you guys.
The competitive landscape and speak to the differentiation for their grit formation and functionality that you have and how long you think.
It will take before anyone else has a similar sort of capability out in the marketplace.
So on the generator is your question. So I think the agenda integration is a little unique.
For instance, so we have the micro grid interconnect devices smart switch because of that we don't need and.
Automatic transfer switch, which is what you typically required with the generator integration. So that function is effectively done and software for us. So just by simply the act of connecting the generator into their device. The entire system is now managed by by debt device and managed by the energy management Energy management system.
And on a few other.
Advantages as a result of the way we integrate everything into the sea domain is that the generator can now run in parallel distorted system. So what that means is the homeowner can configure it up their system and the system a lot of medically make decisions such as turn on for example, turn on when the Greenfield instantly turn the generator on <unk>.
And as a great field or for example on some good fails you only at on the generator on.
And then when the state of charges.
Certain level and then it turns back off on the state of charges reached another level and other functionality that is for example, it.
Quiet period right you can configure it up all of that and software you can configure it all up saying and during this time of Tonight.
And don't start to generators. So you can reduce noise pollution. So it's a very rich experience.
Get to see exactly how the power flow is in real time on your App.
And so much much more well integrated.
One stop shop solution.
And integrating generator into a common platform.
Alright, thanks, so much guys.
Thank you.
Thank you. Our next question comes from Philip Shen with Roth Capital Partners. Your line is now open.
Hi, everyone and congrats on the strong results.
My first question is on.
When do you think you might add the second line and India. So given how low channel inventory is and the overwhelming demand have you already made the decision to ramp up the second line and if.
Not why not and what else do you need to see.
No and we have already made the decision to add a second line Blake to remind everybody we have.
A familiar and micro inverters capacity.
And invest in adding and other line, which is and is it a half a million micro and murders Bay.
Secondly that will take about six months to come on board.
We have in the meantime, we have interim sources, we have China, which is we have a lot of capacity there and on a fully on plant than we have God God, just reached a mini and micro inverters and we are going to be investing and guar and as well and others in order for us to create a lot more capacity because what we see is.
<unk>.
Thank you Ain't going to come very soon and one to two quarters, we do see the necessity to increase our capacity is going to be working on it.
Okay. Thanks, Patrick.
And so when do you expect the second line and India to come online.
Fully.
And.
By the end of the year, if you add up all the capacity, China and Mexico, India. What is the quarterly run rate do you think we're at.
And maybe in Q4.
Well.
On the specific question and I would say six months on.
And a number for your overall capacity by the end of the year.
This is not about demand this is about purely capacity.
And so I would say between four and $5 million per.
Got it.
And what will be prepared for it.
Okay great.
And then.
As it relates to international.
I think on the last quarter you talked about.
By the end of this year getting to 70 30 U S International mix.
It would be reasonable and and.
You'd be perhaps even disappointed if you werent there whats your latest view on that mix and.
What do you think ends up being by the end of the year right through our current button on it by shipping the storage systems, which are entirely U S. Non we have to ship the international system storage systems and that issue to ramping on on the solar systems will be doing exactly that.
70, 30, maybe by the end of this year may be tough but.
Definitely middle of next year I see it as a possibility.
Okay, great, Thanks, Patrick and ill pass it on.
Thank you. Our next question comes from Eric Stine with Craig Hallum. Your line is now open.
Hi, everyone.
And maybe just on I mean, given the really strong free cash flow on and your cash balance will soon be pushed and $1 billion.
Just on capital allocation and are there any areas on the acquisition front I know you've made a few.
It seem like Theyre more strategic on the small side any acquisitions or areas and your business it might make sense from that perspective or is this more about.
Just sticking with product development and organic growth.
I mean, both are going to be critical.
The challenge with the organic growth ex that.
We also generate cash wafer because our framework that we saw.
So.
The acquisition approach.
It's going to be very active.
We have a lot of things that we need to complement our digital platform.
And actually right.
And items both of them are working around the clock.
With our pipeline and very healthy.
The pipeline of M&A acquisitions, and partly also because you.
He is on.
Set of rules, and which we need to find the right tenant and so targets. So so that's going to be a very active area. So you should see more throughout the year.
Got it okay.
And then any details on maybe not that any details on areas that you think I mean, I guess you mentioned the digital platform, but.
And anything whether it's new geographies or.
And just just thinking about potential paths you may take.
Yeah, So I think.
Internally we have.
Very clear view on what our long term strategy is about how are we going to continue growing our business.
Right.
Talking about we've talked about this and the past where we think about every home is being a micro grid and then interconnecting micro grids and farming pools of micro grids and.
And transacting energy across them, we talk about.
And significant electrification of homes that are going to happen, which will further increase the demand.
And electrification between on the appliances getting electrified evs et cetera. So.
While we cant provide you specifics.
And as Eric mentioned and a healthy pipeline of.
<unk>.
Areas that we're looking at but that should give you some context about how we are thinking about.
About on M&A M&A plans, it's both.
Digital.
Digital transformation piece as well as.
Product in order to meet our what we have is on strategically and there are no confines of companies within the space. So we are thinking now is expanding that into other sectors and software.
Over areas. So it's a very very diversified pipeline from multiple sources and its international as well.
Towards.
And that neither of those are actually and the U S and what we're looking across the world and the other one is the ability of the company to absorb and integrate those acquisitions, who is going to be very important so.
And I feel very confident on just like Neil's organization and the.
And those organization.
Two.
Ill deal with acquisitions integration. So so it will be a very active.
Please.
In 2021.
Yes, no that's very helpful.
Just last one for me just thoughts on the on updating the target operating model and I'm trying to think.
How many quarters. It took for you to go from 32010 to the new $35 $15 20.
And you are now at the $40 $15 25.
And any thoughts on how long you'd like to see that sustain before you officially update that.
Yes.
We want to make sure that we.
Conservatively and provide a baseline and thats, what we lead with the existing.
And framework.
And.
And when you're launching new products and you're entering new markets a lot of things happen and when Youre planning on the long term, that's the right framework right and the short term the midpoint of the guidance of the current quarter that we're guiding is the responsible thing in the short mid and short term, but for the long term I think that framework is cash.
Generating and remember we've got on Opex, Capex and other Cogs light business model and the company right. We don't have manufacturing plants and our capex is going to be higher this year, but at the same time, we can.
And you're operating with the control manufacturing approach so.
This framework should choose.
Like that until you can probably get an update when we though and I would say alright.
Recent updates.
Okay. Thank you.
Thank you. Our next question comes from Jim Ricchiuti with Needham and company. Your line is now open.
Hi, Thank you good afternoon, and I know, it's early days for storage, but I'm just wondering.
Given given what youre seeing in terms of demand trends and the competitive landscape.
I guess potentially more supportive government.
Policy initiatives I'm, just wondering how are you.
And just changing your view.
And how pricing might be trending and the market looking out over the.
And next year or so.
I think.
Our view is.
It comes to things like particularly around pricing et cetera, and the trend.
Our view is we have to continually add value price. So what that means is that it's not just thinking about storage as a.
Data storage is.
Battery right. It has to be and it is an integral part of a complete solution and energy management solution that includes.
And the solar that include storage.
And how does the whole thing and power system integrate load management generator integration you saw we have.
You've seen the announcement, where we are working with the fuel cell company and et cetera. So for us. It's not about is specific with jade and on a specific reduced pricing that's really not how we think about it we think about it in terms of how can we do the complete solution and add value for our installer partners and the homeowner.
Okay.
And should we anticipate.
Anticipate any change as we think about the mix.
With respect to storage long tail, and installers and Youre your tier one tier two and installers over the next one year or so.
No.
I think what we have today.
Alright.
Okay.
Thanks very much.
Yes.
Thank you. Our next question comes from Mohit <unk> with Credit Suisse. Your line is now open.
Hi, Thanks for taking our questions.
But and maybe this question is for you on the storage product.
I'd say that there are some delays and installation does and it's too.
And time to train installers.
That seems to be more applicable to also to your other competitor. So just wanted to understand if you're seeing that for other projects launched by your competition and the market as well or is that something.
Some things specific to and charged solution.
Which is impacting those two days.
I'm not going to comment on the other competitors, but you know.
We take pride in supporting on loan payments donors.
Many of them may or may not even have done two rich once.
But they have a lot of demand and you can expect.
And our job is to train them.
So that they can start doing storage and stone seamlessly.
You know right now.
We introduced this product and.
July.
As of the end of December 360, plus.
Long day installers unique installation companies.
And been started.
And phase III system that is a major win for us.
We continue to add 10 to 15 installers and read.
Weak.
Eric.
We have trained over 650, plus unique installation companies again.
And it's also a win but I'm sure we can empower the game up there.
Because there are thousands of installers and.
And I'm sure we can do a better job there, which we will be focused on in terms of the people.
Assuming every installed and that has got at least two people to train we have trained roughly or 1200 folks.
<unk>.
Okay.
And it's we do things.
We have a unique business model, we focus on the long tail, our job is to make debt installation smooth and seamless and what we will do for long term game.
And we're not going to take on any of the bulb day.
Got you.
And thanks for the explanation.
Just on the new acquisitions on the digital strategy.
Could you maybe talk about like.
What's the goal here in terms of reducing debt soft cost I think couple of on the.
Solar developers have talked about.
7000 hotels and dollars per customer and soft costs. So.
The idea here to kind of bring it down similar to probably what the soft quarters, and Europe and Australia or.
Sure.
Thank you Paul process here and.
Great.
Follow up after that thanks.
Yeah. So.
Soft cost as an outcome of what our goal is our goal is to provide our.
Our installer partners with the best service possible and so installer partners actually as well as the homeowners and we have mapped out a very detailed journey of both how the entire installation process as well for both installers as well as our homeowners starting with leads all the way through <unk>.
<unk> proposal permitting procurement.
Mentioning and.
Installation and commissioning permission to operate O&M et cetera, and so.
If we do.
And amazing job on that and where we create a very powerful platform and these acquisitions that we're talking about are important elements of pack journey, then I think the natural outcome of that is going to be introduction and the soft cost but.
And we are starting with a very clear focus that this is about bringing great value for our installed long tail installer partners. So on.
This has been a focus on the industry for quite a long time and everybody got to rethink spark into the easiest part of the value chain, which is.
Reduce the cost of it by the or reduce the cost of the car where it seems that there are easier tangible when youre thinking about for example, simplify and streamline and permitting.
Talking about multiple counties.
Paul different approaches different timing.
Different location so.
We have much more complex problem to tackle and that's the.
And that we are tackling and as Rocco said it we are tackling by understanding the problem from the standard point of view and soybean that individual problem.
And that incorporates pretty much every aspect of lead Gen. All the way through commissioning and have paused on the O&M process right, which we are digitizing many fronts right and these acquisitions.
Basically feel those gaps.
Got it.
That's helpful. And then just last one just housekeeping so the megawatt shipped and the quarter does that include mitral.
And Mike Turner Test chip.
To the storage product as well or just for the solar shipments.
Okay.
We will have to get back to you on debt I think I think right now and my off the cuff and that is basically only includes the micro inverters.
And then a few solar and and does not include the micro inverters and types of batteries.
We'll have to get back to you on debt.
Alright. Thanks.
Thanks for taking questions.
Thank you. Our next question comes from Joseph Osha with JMP Securities. Your line is now open.
Oh, Hi, there. Thanks for taking my question and I've got two completely unrelated questions. The first relates to dorms management as regard your storage business and you kind of alluded to this a little bit Bob right.
We've seen.
And on borrower get sold and <unk>.
It sold them go out, but Mike we see you make an investment and sort of the software infrastructure to really offer a fully integrated <unk> capability to your to your customers with utilities.
So obviously, we wont talk specifics, but in general Here's our view clearly clearly we'd see.
Debt at a value added service anytime with every single started system debt at yourself, so given that.
And given that we already have a pretty.
Powerful platform I think.
Our first step is ensure that at least debt we have partnerships with debt, we can fit into existing platforms that are out there that on a number of people that will fit into those platforms. There are a number of programs whether thats in the east coast and not even here in California that we can participate in those programs as we continue on ramp on <unk>.
And.
And and.
And I think photos, it's pretty and natural extension on whether on how to incorporate.
And what's called coordination of these <unk> and management of these coordinated Dr onto our platform I think that's a pretty natural extension for us.
Okay, and so that's interesting you would not have a problem say, making sure that you operate well with auto grid or somebody like that.
<unk> got on existing programs, we would do it and yes. There are in fact.
And et cetera is getting standardized on anyway.
And then the second completely unrelated question.
And here and you talk about wideband gap sets.
Can we imagine a world where all of the high energy.
MOSFET and <unk>.
Dubai, Sergei and or I was kind of surprised you Didnt mentioned silicon carbide is that the way this is headed.
No I did not mentioned Silicon carbide Gan is I think we think again is the way to go but obviously, we are only scratching the surface and working with a few companies.
And again on Gammon.
Interesting technologies, they will help us reduce our footprint.
Toward high power.
The thing that we want.
And just over time.
And I assume obviously at the moment, you're probably still working over time, we can reasonably expect to see those individuals little high power sockets, probably go go Weinberg wideband gap over the next couple of years and that the idea.
Yes.
Alright, thank you so much.
Thank you. Our next question comes from Sameer Joshi with H C. Wainwright. Your line is now open.
Thanks, Thanks for taking my questions.
Just a couple and digging into the storage.
In terms of sort of bottlenecks or headwinds do you see it more from that.
And like a slow greening of installations installed loose or is it because the customers and not educated and mouse or maybe the pricing is not great and.
And the corollary question is.
Do you find the and charged to the St. George then demand different and the like.
Do you see any change and sizing of the product moving forward.
And I like what I told.
Earlier and maybe even.
And Brian Lee's question and they went through the detail. So let me let me cover the months again.
Basically.
There are several things that can go wrong.
And the installers and storage.
And there are some things that we are quietly and responsible for enphase.
Like the installers wanted to come on to a job site and they want to finish their installed and they wanted to leap we didn't dwell hours.
And if our commissioning time is excessive.
We are going to place burden on and stores and we understand that we are working with them to rapidly reduce net commissioning time.
An example, the second one is very often and.
<unk> have to come in and Rewire the main panel.
And that is often several thousands of dollars if we can help them free.
Year to SMB version, which does not need that thats ease of doing business for installers and number two.
Number three.
And as homeowners start to experience the storage systems, they are going to be calling installers often.
For example.
And then switch from on grid to off grid.
If you haven't made any adjustments and your lifestyle.
And Youre Glitazone and external greater zone utility grid is out there.
And then youre going to quickly run out of storage and $304 because your air conditioner is going to be on.
So therefore.
People, who do not even know that they are offering.
But I noticed storage and.
And there are other followed and they call installers and the installers have to go and help them and.
And a truck roll for them that means lost profit.
One of them. So how can enphase help there in order to eliminate all of those problems for installers.
Make it slow easy debt an enphase system.
<unk> provides intelligent notification for homeowners.
And and Enphase system seamlessly provide load control and such debt.
The homeowner can automatically set and the app, saying and I switch to upgrade and do not turn on my AC. So you maximize your storage systems life.
Right and then going back to it all is.
Even when the.
Total system is being designed and the first place.
As a consolidator and stable between the homeowner and the installer, what can and phase two is to make sure that complete transparency to the homeowner.
So that is the <unk>.
Simple yet to complete.
Yeah.
And I think those on things that are entirely and Enphase is control and it would be remiss, if we don't take it as fungibility there that's one.
And then I talked about the industry overall industry, what all day.
<unk> debt on our problems with permitting cycle times are too long, it's not acceptable and.
And we always metered out periods I'll need to need to fight that battle.
And the last one is.
The just as financing for solar is getting a lot more mature.
Financing for the storage needs to attain that maturity.
And then what happens is you start and more people will.
Start to.
They are comfortable with monthly payments.
And then cash.
Yes, cash up to and a lot of cash upfront so.
Those two on industry problems that will be working.
It's a combo of Enphase specific stuff, which we are going to put a lot of another genome.
And industry changes that we are going to try to influence.
Those are the things we need to do in order to any in order to ensure we start ramping.
Much more than our other day nice strengthen.
And so sameer.
Yes, Lisa.
Many of the comments made by poverty are not unique to them face we are approaching this.
Like.
We are training.
Nevertheless, and installation before storage and they're doing really well, we micro inverter so for them to say I need to and components on myself pitch and new product.
Convinced on the homeowner that day.
And the great product and then when they do that after that.
And you get everything lined up with the crews and the commissioning and do installation completed training and everything he takes time price and right now they are.
Basically hand to mouth with the micro and better systems right.
And we decided to launch with a long tail, that's an investment that we're making once they've made the investment using our system. We believe they will.
We have a hard time switching to a potential alternative because they are all trained the novel technologies and our pitch and then.
We that concurrently we have and interest from tier twos and tier one is that they are sophisticated they've done and stops before.
Kind of completed that process with competitive products and they feel on what product it will be and we see trade right. So all of those things are being affected on the same time.
Yes, no. It's certainly commendable actually that you have identified the exact problems that you're facing sort of deep and troubles.
And actively addressing those and kind.
And.
Just switching gears a little bit.
You mentioned that and your Q1.
Outlook, the DNI and revenues.
And.
I thought that DNI and.
Some sort of a back office support.
Sure.
And your operation performance as against revenue generating source and then.
Looking at it wrong.
Yes, you are you on.
Right.
And basically provides permitting services to installers.
For revenue.
In addition to permitting services they also put away.
Design and proposals services.
The whole point is how can installers.
Get the right paperwork permit plant sites in 24 hours.
And once again it is it is it as far as the fleet is obvious because.
That's what we care about and.
And that our long tail installers cared about week and about even more.
Right right.
And then last one.
The last several years, you have had settled and instances.
Supply constraints.
And now that you are sitting on.
700.
Approximately $700 million is there and.
Towards going.
Upstream.
No I mean, it's very clear, it's going to be capex laid up ex light.
In this case.
In this case this was.
Because.
We never expected such a massive increase in demand coming out of the pandemic and maybe we should have maybe we should've, but we didn't and and obviously because on product is well received.
It's a high high quantity and we're always taught to do the targeted 500 ppm and.
And great customer experience those on one month for us.
And we don't anticipate.
The.
Such a big increase.
And so we have somewhat.
Constrained because of that.
Having said that.
It's not as severe as.
What we and in the past and I think.
We are looking at adjustments and the way we run the company going forward on.
On health and not a low situations like this to happen.
And that's what we do we learn from mistakes.
And we are going to put in the right business processes, but there's no need to change our approach to capital light approach.
Thanks for taking English.
Thank you. Our next question comes from <unk> <unk> with Susquehanna. Your line is now open.
Okay.
Thank you thanks, and thanks for taking my question.
Obviously.
And the rollout of it.
Storage product, but from the initial trend demand trends that youre seeing and any thoughts on what level of attachment rates and you can see.
Looking out a few years.
And the three or five years out.
And we refrained talking about identity, we actually gave you a megawatt hours, which is a lot.
Net other than a debt rates that you can you can calculate and eventually because it's a complex function of the states you on it.
And for example, and storage may be more popular and California Dan.
And some other states.
So.
And the metrics that are different so you cannot just talk about attach rate.
Without any context, which is why we gave you megawatt notes so I would not like to talk about the debt today I'd like to talk about megawatt hours.
And like what we talked about we are growing at a steady clip Q3 to Q4, 35% Q4 to Q1 and expect a similar rate.
And debt.
That's the progress, we're making on megawatt hours.
On megawatt hours.
And that number that we can sort of.
Target looking out a few years or.
Or is it that we need to give longer term guidance.
Yes.
Right now this product is in the early stages of grant and it's hard for us to be the.
Give a number right now.
Any day, because a few more quarters.
Yes.
That's fair thanks.
Thank you.
And I'm not showing any further questions at this time I would now like to turn the call back over to Badger close on the Rodman for closing remarks.
Thank you for joining us today and and for your continued support of Enphase. We look forward to speaking with you again next quarter.
Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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