Q2 2021 Enphase Energy Inc Earnings Call

[music].

Good day, and thank you for standing by welcome to the Enphase energy second quarter 'twenty.

'twenty 1 financial results conference call at this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded if you acquire any.

Assistance. Please press Star Zero I would now like to hand, the conference over to your Speaker today, Adam Hinckley. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss Enphase energy second quarter 2021 results on today's call are Badri, Cassandra Robyn Enphase as president.

This executive Officer, Eric <unk>, Chief Financial Officer, <unk>, <unk>, Chief products Officer. After the market closed today Enphase issued a press release announcing the results for its second quarter ended June 32021.

This conference call Enphase management will make forward looking statements, including but not limited to statements related to Enphase.

And <unk> is expected future financial performance and capability of our technology and products, including availability and features our operations, including in manufacturing and customer service the anticipated growth in our sales and in the markets in which we operate on target and the capabilities of our installation partners. These forward looking statements involve significant risks and.

As that uncertainties and Enphase Energy's actual results from the timing of events could differ materially from these expectations for a more complete discussion of these risks and uncertainties. Please see the company's annual report on form 10-K for the year ended December 31, 2020, which is on file with the SEC on quarterly report on form 10-Q.

And on border ended June 32021, which will be filed during the third quarter of 2021 and phase energy cautions you not to place any undue reliance on forward looking statements and undertakes no duty or obligation to update any forward looking statements as a result of new information future events or changes in its expectations also please note.

For the 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 in its earnings release posted today, which can also be found on the Investor Relations section of its website now I'd like to introduce Badri.

Note that Thunder Robbins, President and Chief Executive Officer of Enphase Energy Badri.

Good afternoon, and thanks for joining us today to discuss our second quarter of 2020.1 on financial results.

You had a good quarter, we reported revenue of $316.1 million shipped approximately 2.36 million micro inverters.

Cause on 43 megawatt hours of Enphase storage systems achieved non-GAAP gross margin of 48 per cent and generate strong free cash flow of $49.2 million, we exited the second quarter at approximately 41.16 20 food. This means 41% gross margin.

Gross and operating expenses and 24% operating income on as a percentage of revenue on a non-GAAP basis. As a reminder, on baseline financial model is 35.15 20.

Eric will go into details about their finances later in the call.

Let's now discuss how we are servicing customer.

16.

Our net promoter score weird weighted was 67 per cent compared to 63 per cent in Q1 and I would.

North American net promoter score was 71 per cent compared to 69% in Q1.

On average call wait time decreased to approximately 3 minutes in Q2 from more than 5 minutes in Q.

Customer 24 by 7 global customer support helped reduce the wait times and medicine, we are moving field service teams in the U S and Europe to provide onsite helped you out installers.

So I expect to have the team in Australia.

During Q4.

We remain laser focused on customer service and making sure.

That we have easier company to do business with.

Let's now talk about manufacturing as.

As we have discussed in the past earnings calls the demand for our micro inverter systems continues to be well ahead of supply in Q2, we experienced component constraints on the supply of AC drivers, which resulted in.

Micro inverter shipment volume slightly lower as compared to Q1, we had 3 AC drive on suppliers qualified by the end of the second quarter compared to 2.

In the first quarter for the third quarter, we continue to expect to remain constrained on micro inverter.

But the supply situation is better than what it was in the second quarter.

We expect to have full suppliers qualified by the end of the third quarter.

Regarding the fourth quarter, we are cautiously optimistic that the situation will be significantly better compared to the third quarter.

On the <unk>.

Yields on our micro Inverters, we have sufficient supply so that has not been a big constraint so far.

As previously discussed we are expanding our micro inverter manufacturing capacity in Mexico or India.

On a facility in India, we started a second fully automated line in Q2.

With production beginning at the end of the quarter. This brings our quarterly capacity to $1.5 million micro Inverters from India.

In Mexico, we expect to add a fully automated manufacturing line in Q4, this will bring quarterly capacity to approximately $2.2 million micro.

And voters in Mexico.

With our existing capacity in China, we expect to easily achieve our target capacity of $5 million micro inverters per quarter by the end of 2021.

Let's talk about batteries.

We have 2 sources for battery cell packs with a total capacity of 120 megawatt.

Per quarter.

I previously mentioned, we are going to add a third source in 2020 to increase our overall capacity.

Talking about our lead times, our lead times for storage systems.

Look at <unk> today between 12, and 14 weeks and we are working on streamlining our engineering and.

Manufacturing to bring them down below 10 weeks by the end of 2021.

Let's move on to the regions our U S on international revenue mix for Q2 was 81% and 19% respectively.

The U S market demand was very strong in Q2, but we were supply constrained therefore revenue.

I would only up 3% sequentially.

Our teams work hard.

To ensure customers that continuous supply of product.

The sell through from our distribution partners to installers remained very strong keeping channel inventory type, but at manageable levels.

Our teams ensured that all.

With numerous AD product that they needed to complete jobs and we're not forced to seek our tomatoes, although the constrained supply prevented customers from building buffer inventory.

In Europe, we reported record revenue in Q2 revenue increased 16% sequentially the.

Channel inventory was much data.

Cash totaled than the U S. But we expect it to improve in Q3 and Q4, we had solid growth in Netherlands, France, and Germany and continued strong micro inverters sales to maxion for DCM product during the second quarter. We also began selling our enphase storage systems in Germany during late Q2.

In Europe, and being the products first international expansion outside the U S. We launched our solar plus storage system estimate on sizing tool in Germany that showcases Pamela placement on the roof, along with storage sizing and a comprehensive financial analysis.

Germany represents a larger residential storage market in Europe with high attach.

Right.

The market response to the introduction of the Enphase storage system in Germany has been positive and we expect this to also drive the micro inverter business in the country.

Overall, I'm very pleased with our growth in Europe.

In the Asia Pacific region revenue declined 3% sequentially in Q2, primarily.

Due to Covid disruptions in Australia, along with normal seasonality. Despite these headwinds we are quite happy with micro inverters sales during the second quarter from the continued.

The option of a higher power IQ 7 product and our AC module partnerships, we expect to pilot Enphase storage systems in Australia.

In the fourth quarter.

In Latin America, Q2 revenue was up 38% sequentially largely due to increased sales of both enphase solar and storage systems in Puerto Rico.

As I discussed last quarter, we are expanding into Brazil, we have hired a team there to enter the Brazilian.

Market and we expect first revenue from this region in Q3.

Now that we've covered the regions lets discuss the overall bookings for Q3.

Our overall customer demand for Q3, once again significantly exceeds the higher end of our guidance range.

We continue to remain supply constrained in Q3.

Our component availability is improving in Q3 compared to Q2, but not at the rate of growth in demand.

Let's now move to our storage systems rollout.

We shipped 43 megawatt hours of Enphase storage systems.

In the second quarter.

During the quarter, we released load control a new feature.

That provides enphase storage systems with the capability to automatically shed non essentially on Lord during an outage.

With load control homeowners that the option to conserve their energy consumption and extend debt backup duration simply.

A 1 time setting of the unlike on that.

Let's now turn to training for our Enphase storage systems by the end of Q2, we trained 2592 installers cumulatively representing more than 1500 unique installation companies. This rapid.

<unk> was a significant jump compared to Q1, as we were able to resume some in person training in Q2.

We also continued to make steady progress on the commissioning of our Enphase storage systems and made numerous updates to our software.

Our goal remains a sub 60 minute commissioning.

In time, which will allow installers to visit the site install and commission and Enphase storage system in less than a few hours.

I am very pleased with the progress we have made on that front.

The introduction of non controlling late domain.

Along with some pricing adjustments, we did for our installers plus the improvements in the commissioning.

Process has resulted in an acceleration of demand for Enphase storage since June.

As a result, we expect to ship between 60, and 70 megawatt hours of Enphase storage systems in the third quarter.

We are already fully booked for Q3 on storage.

And our current lead times as I said before about 12 to 14 weeks, we are working hard to bring the lead times down to under 10 weeks.

Let's talk about our new products, specifically, the IQ 8 micro inverter and the IQ a b micro inverter product launches.

IQ 8 is the world's.

First grid independent micro inverters for residential solar and IQ 8 is the highest power 640 Watt AC micro inverter capable of supporting 2 panels for small commercial solar.

We are making good progress on the compliance reliability and system testing of these products. We expect first shipments of the IQ Inc.

PV micro Inverters in Q3, and first shipments of the IQ 8 D product in Q4, given our component supply challenges, we are going to ramp these products quite cautiously.

On the last earnings call, we discussed the generator compatibility feature for our Enphase storage systems.

Since last quarter.

On a little bit behind here as we took more time to complete the system test.

We are currently piloting generator compatibility with a handful of real homes and are seeing great results. We expect to introduce this feature in production by the end of the third quarter homeowners written down.

We have the ability to add generators to their enphase storage systems, and we'll be able to configure the generator behavior from the enphase that the.

On the Enphase home Energy management system provides a seamless transition from on grid to off grid, ensuring superior installer and homeowner experience.

This generated functionality as I said will be integrated into our mobile app. So the homeowners have full visibility and control from 1 app.

Let's now turn to digital transformation, both on our recent acquisitions.

Desk and the solar business MBIA and engineering are.

Will they integrated and exceeded our expectations with record revenue and installer accounts in Q2.

The 850, plus installers using solar grab software tool will soon have access to new features such as shading and storage system sizing.

Our permitting services are also undergoing.

Fully difficult improvements towards automation to drive mass adoption amongst the long tail of installers, our digital transformation initiatives focused on reducing soft costs, while improving profitability and efficiency for our installers, resulting in clean and affordable energy for all.

Let me now give you on a.

Goings on our Enphase installer network on <unk>.

We have now on board at 500 Installers in North America, 146, Installers in Australia, and 169 installers in Europe to our Enphase installer network through a highly selective process focused on quality and homeowner experience.

We also introduced.

Data networks.

In India and Mexico during the second quarter. This has been a highly successful initiative as we are adding trusted installers, who will act as RFP randomness on our behalf and are expected to provide an exceptional experience to homeowners.

Talk about our entry into grid services for the first time.

We have started participating in the connected solutions program, which on an incentive program implemented by 2 utilities in the northeast region of the United States to reduce.

Eric will demand during the high use periods, enphase storage customers and connected, Massachusetts, and Rhode Island and sign up monitored.

Track money on and control participation in the program using our enlightened mobile app.

These grid services programs enables utilities to leverage Enphase storage systems, instead of turning on polluting plants, while generating an income stream for the battery owner.

Enphase customers participating.

Connected solutions program can receive up to $1500 per year for our 10 kilowatt hour battery.

1 day share the battery when they when called upon by the utility.

Facilitating grid services participation or our customers will reduce the lifetime cost of Enphase.

Storage systems and help drive increased demand.

Plan to participate in more such programs in the future.

Enphase is laser focused on building best in class home energy management systems, and delivering them to homeowners through our digital platform, along with our Enphase Installer network and.

And distribution partners.

We now have solar storage load control grid services and generator compatibility as part of our home energy management.

We plan on adding other distributed energy resources down the line.

Our digital platform captures both installers and homeowners journeys, providing tools and services such as design proposals and permitting with the goal of reducing soft costs and accelerating the adoption of clean energy.

In summary, we're very happy with the performance in the first half of 'twenty and.

21, and the ongoing strong demand for our solar and storage products. We look forward to the ramping of our storage systems, introducing new products accelerating digital transformation and enhancing customer experience. We plan to host an analyst day in the fourth quarter and will provide more detail.

On our next quarter's earnings call with that I will hand, the call over to Eric for his review of our finances Eric.

Thanks, Barbara and good afternoon, everyone.

I will provide more details related to our second quarter of 2021 financial results as well as our business outlook for the third quarter.

Sales to 'twenty, 1 we have provided a reconciliation of these non-GAAP to GAAP financial measures on our earnings release posted a 2 day, which can also be found in the Investor Relations section of our website.

Total revenue for Q2 was $316.1 million, representing an increase of 5% sequentially.

Her of Trinity, which.

We shipped approximately 796 megawatts DC of micro members from 43 megawatt hours of Enphase storage systems in the quarter microphone better unit shipments declined slightly relative to Q1, but favorable product mix led to the sequential revenue growth.

Non-GAAP.

Gross margins for Q2 was 48 per cent compared to 41, 1 per cent for tier 1 the decrease was primarily as a result.

Higher logistics, and expedite costs, partially offset by disciplined pricing and favorable mix GAAP.

Gross margin was 44 per cent for Q2.

Non-GAAP.

Question on expenses were $51.7 million for Q2 compared to $43.7 million for Q1. The sequential increase was primarily due to increased investment in R&D and sales from marketing programs and increased hiring.

In addition, Q2 was the first full quarter.

Operating consolidation of their recent acquisitions of software on.

D I a M.

GAAP operating expenses were $68.4 million for Q2 compared to $61.6 million for Q1.

GAAP operating expenses for Q2, including $14.3 million of our stock based compensation.

Expenses and $2.5 million of acquisition related expenses and amortization for acquired intangible assets.

On a non-GAAP basis income from operations was $77.2 million for Q2 compared to $82 million for Q1.

On a GAAP basis income from operations.

<unk> of $59.4 million 42, compared to $61.4 million for Q1.

On a non-GAAP basis net income for Q2 was $74.3 million compared to $78.7 million for Q1. This resulted in diluted earnings per share of <unk> 53.

For Q2.

2 compared to 56 cents per share for Q1.

GAAP net income for Q2 was $39.4 million compared to GAAP net income of.

Of $31.7 million for Q1.

GAAP diluted earnings per share was 28 cents for Q2 compared to diluted earnings per share.

Of 22 cents for Q1.

Now turning to the balance sheet on the working capital from inventory was $37.8 million at the end of Q2 compared to $34.9 million at the end of Q1. The sequential increase was driven by higher primary cell product inventory to support the expected growth.

Both of Enphase energy storage system shipment sales.

These of inventory of funding was unchanged compared to Q1 and stood at 18 days, reflecting the current supply constrained environment as well as longer lead times.

Accounts receivable were 200 on any 1.

$2 million at the end of Q2 compared to $236.1 million at the end of Q1. The sequential increase was due to the higher revenue in Q2 and shipments being weighted to the second half of the quarter.

DSO of 65 days increased from 56 days in the prior year quarter due to the timing of.

Shipments.

We exited Q2 with a total cash balance of approximately $1.3 billion compared to approximately $1.5 billion for Q1, we fully utilize our $200 million share repurchase authorization on board approximately 1.7 million shares on an average share price of approximate.

<unk> $117 in Q2.

In addition, our board of directors authorized a new share repurchase program of up to $500 million over the next 3 years.

In Q2, we generated $65.6 million in cash flow from operations from $49.2 million.

And free cash flow.

Capital expenditure was $16.4 million for Q2 to expand my competitor on manufacturing capacity in Mexico, and India as well for costs related to in license software App development corporate website development and investment in <unk> and cloud infrastructure.

Now, let's discuss our outlook for the third quarter of 2021 we expect our revenues for the quarter to be within a range of $335 million to $355 million, which includes shipments of 60 to 70 megawatt hour so from basic storage systems.

We expect GAAP gross margin to be within a range.

37% to 40% and non-GAAP gross margin to be within a range of 38% to 41%, which excludes stock based compensation expenses, we expect our GAAP operating expenses to be within a range of 100 on 5 to 1 company on $8 million, including a total of approximately $46.

Of million estimated.

He made it for a stock based compensation expenses on 1.6 million estimated for acquisition related expenses on amortization.

We expect non-GAAP operating expenses to be within a range of $57 million to $60 million.

Let me provide some additional color on a few topics.

That's why they mentioned earlier, we will be on trained by confronting availability in Q3.

On your guidance assumes a modest increase in micro on better shipments, but the primary driver of growth will come from increase of storage systems.

We expect to ship 60 to 70 megawatt hours of our.

Our emphasis towards systems in Q3, representing approximately 50% sequential growth at the minute.

Point, we expect improved component availability for micro and better production in Q4 and continued momentum for they didn't face a storage system.

On the growth side, we are continuing to expedite.

Components on finished goods in Q3 to ensure customers come on adequate supply of our products to put on the magnitude of expedite cost into perspective. The expense in Q2 was larger than for all of 2020, we expect the quarterly expedited expenses to remain at similar levels for the remainder of 2021.

Due to the elevated logistics costs and increasing some component costs, we implemented a modest price increase for micro and better starting in Q3.

Next I would like to touch upon our Opex guidance, our guidance for non-GAAP operating expenses from a percentage of revenues expected to increase in Q3.

As we mentioned in the last earnings call, our Opex, maybe slightly above our 15% target at times, but we will still expect to be comfortably above our baseline financial model target of 20% operating Inc.

As we accelerate towards our vision of providing best in class home Energy management systems, we are in.

Investing significantly in R&D, particularly on the unanimous that further our competitive advantage such as E.

He's sick and so forth.

Book to integration on cloud software, our quarterly for initiation of.

That increase our system performance reduce cost and increase reliability.

We are also ramping.

Our marketing expense in the back half of the year to increase homeowners awareness of our solutions for QC accruals for both combination expenses from prior acquisitions are expected to be approximately $3.4 million.

Finally, I will touch on a net increase of the stock based compensation expense.

Expense in Q3.

Question on increased due to the higher number of employees globally as we continue to accelerate our growth plans.

Well as they need to retain top level employees as an S&P 500 company.

With that I will now open the lines for questions.

Thank you.

As a reminder to ask a question you will need to press star 1 on your telephone.

Jay Your question touched upon key.

And just at a time, we ask that you. Please limit yourself to 1 question and 1 follow up please standby will be compiled the Q&A last day.

Our first question comes from.

Mark Strouse with Jpmorgan Your line is open.

Yeah. Good afternoon, and thank you very much for taking our questions.

So badri I appreciate your comments about the supply looking significantly better in <unk>, but.

Yeah, I understand things are fluid, obviously, but can you just talk about your expectations today.

Day, assuming that that force supplier ramp goes to plan.

At what point do you feel that youll be able to fully meet demand.

Actually let me give you some color.

The micro Inverters has got 300 components.

A critical component.

Is what is called as an easy driver.

This is mainly to buy.

On a few semiconductor suppliers.

And.

In the first quarter of this year that we had.

2 such suppliers.

Qualified.

The market you know on the <unk>.

Semiconductor.

Supply chain today is a mess.

So we.

We worked hard we qualified a third supplier in the second quarter.

We were living hand to mouth in the second quarter and you saw the desserts.

Situation is.

Getting better day by day.

So in the third quarter I expect to do more.

The number of micro Inverters.

To qualify.

1 more supplier.

It's still the semiconductor supply chain stretched though.

Bye.

I cannot meet all my demand.

In the fourth quarter I see.

I see better visibility right now but.

Look I.

I predicted that in the first quarter, we are going to be out of the word soon.

Which is why it was not the case, so I remain cautiously optimistic that the situation is going to get better.

And.

You know we can meet.

Most of our demand.

May be difficult to meet all of our demand right now because with IQ a DRAM.

No I can never say, what's going to happen we are rapidly getting ready it's too early for me to talk about the fourth quarter, but what I am getting ready in terms of manufacturing capacity.

I wanted to exit the fourth quarter. It at least 5 million units of manufacturing capacity non demand.

And we'll continue to work on the suppliers on qualifying additional I may qualify 1 multiplier if I need to.

But at this point visibility is better than what I told you. The last time, however, I still remain cautiously optimistic about Q4.

Okay. That's very helpful. Thank you.

And I just wanted to ask a follow up about storage.

Yes, it's been a bit over a year since you introduced your storage solution.

Can you just kind of walk us through the past year I mean, what have you been surprised by as far as.

The feedback or applications.

Debt.

That you would've thought would've had more interest what have you been surprised as far as.

Homeowner demands that you were not prepared for.

And then can you touch on price, saying just the pricing that you implemented at this time last year does that now hold do you see any reasons to increase that.

That or necessarily decrease that.

Yeah, if I tell you a story that we introduced our Enphase storage systems in July of 2020.

On a very clear idea on our value proposition and that has largely not changed it has only gotten better.

Our value.

Value proposition is all in 1 solar plus storage solution.

We.

On.

Do not deal with Hyatt loyalty, just even for BC batteries, we only deal with low voltage DC.

Our battery solution 3.3 kilowatt hour on it's a modular.

Illusion.

Creating a lot of flexibility for our installers, our chemistry is a lithium iron phosphate chemistry that is.

Excellent and fire safety.

In addition, we focused on power.

And Youll start air Conditioner, you do need a soft start.

Doug.

But with our featured cards our chart, we are able to provide.

Extra powered for that search when the air conditioners turn on.

Those value propositions have largely remained intact.

Then.

You asked about.

Market feedback our customers gave us a lot of feedback our initial commissioning times.

Not that good.

The commissioning times, where on the order of several hours.

And customers did not like debt installers did not like net they gave US a lot of feedback we took all of that.

That feedback into perspective, and we improved our commissioning process a lot we have learned a lot in the last year homeowners also gave us valuable feedback in terms of.

In terms of micro grid failures like for example.

How do we provide the right notification to the home.

Manav, so that they know that okay now I am.

In off grid more.

Outage more and I need to take extra steps to conserve my battery life. So.

We learnt a lot from homeowners we are based on our.

Software multiple multiple.

At times during the last year.

And.

Recently in May we.

Introduced load control.

Lord controller is extremely important because in our for the people who have let's say a lot of air conditioner, They don't want to screw around with doing a partial.

Backup you can do a whole home backup and you can leave out the air conditioners by day part you can share the lords automatically so we.

We provide now and as of late May reintroduce full certification load control. So heavy loads can be automatically share through a 1 time apps.

Now you heard me talking about generator compatibility.

<unk>.

Pretty soon by the end of.

By the end of the quarter, we will be introducing again through software.

Our home energy management system.

And cost per lead generators to plug.

But then I'm, giving homeowners unprecedented visibility and control.

From on that.

Additional things we did we introduced reported by 7 customer support we have.

Now have a field service team, which will help the installers.

With the installers find it invaluable.

Have round tables weekly round tables, I personally meet with 10 to 15 and started every week get their feedback and make continuous corrections to the product.

Now, let's talk about pricing.

On the introduction and the last 1 year was by design I wouldn't term.

<unk> too much.

We learned a lot our cost initially were high.

As typical in our.

Our pricing was therefore, a little bit high.

And now I have learned a lot from the field, we have improved the commissioning process.

And we introduced a lot of control.

So we felt it was time to make the right pricing adjustment while.

Being very disciplined and doing.

Value based pricing.

So we did exactly that in late May along with load control along with the latest commissioning improvement.

Even introduced Brooklyn Eurex.

And a 15 year warranty plan.

<unk>.

We felt it on the right time to make a pricing adjustment, which we did.

And we have seen since June anonymous acceleration in storage demand, which is why.

We are guiding for.

<unk> per cent from.

Q2 shipments.

Any guidance mid point of guidance it'll be up 50% from Q2 shipments now we got to do 1 thing.

We need to improve our lead times on batteries.

When I mean 12 to 14 weeks, if somebody orders the batteries a day from me they can only against the battery and tried to 14 weeks, which is not acceptable I need.

To go work on streamlining both engineering manufacturing cycle time in order to push that down to under 10 weeks ideally 8 weeks. So that's something that I have to do.

And I do need to get a third supplier.

Because I see that I see us doing well.

Q have become more optimistic on batteries.

We don't need a third supplier.

So thats what were going on.

Okay excellent. Thank you very much.

Thank you.

Thank you. Our next question comes from Eric Li with Bank of America. Your line is open.

Hey, good afternoon, Thanks for taking my question.

As a follow up to the prior around the AC that driver constraints can you talk about the time.

The timeline for the newly qualified suppliers to ramp on your supply contributions.

And as was into discussions with.

Those new suppliers as higher firm ESP is a key part of that to get supply prioritization, we heard that some of our channel trucks in the semi industry. So curious to hear as Paul. Thank you.

Well in general the component costs.

Lawyers.

Have increased prices to us.

Because of the constraints on <unk>, that's a given in general and our guidance our AR reserves everything in countries that.

To answer your question on the fourth supplier, we expect the fourth supplier to turn on in the third quarter, we expect to at least get.

Get a.

A couple of hundred thousand micro inverters using that supply.

Got it on just as a follow up question on storage you mentioned that 60% to 70 megawatt hours from <unk> is already fully booked.

Can you just talk about what's new.

Needed to ramp to get closer to that 120 megawatt hours. If it seems like demand is not the issue if you're fully booked and we're only halfway through halfway through third quarter at this time.

If you could just talk us through the bottlenecks there on getting closer to that 120. Thank you.

Yes.

Yes.

Good day that drove devoting weeks as kind of excess it's kind of made worse by a couple of things 1 is our <unk>.

Internal manufacturing time is a little long and the logistics situation in this environment is is quite <unk>.

<unk> as well so in order to improve those and get the relative.

Relative to 14 down to under 10.

I'm going to work on my engineering issues, which are basically tax time in manufacturing.

Related those are well under my control and we'll be able to get that fixed within a quarter.

In terms of logistics.

We will see it is true.

I mean, the problem exists for the industry and it's not practical for me to ship batteries.

Air ship batteries, that's not going to happen because the cost of air shipping batteries will not make sense no matter whatever way you cut it I cannot ship from micro Inverters.

On <unk> by paying a little bit of money.

It is not true for battery is its too much of money and it won't be economically.

Sensible. So you know what I think is.

Within.

Ill be optimistic I mean sales within.

8 to.

10 weeks I should have all of this problem resolved I should be able to get back to mine capacity of 120 megawatt hours per quarter.

And.

From then onwards look for a third supplier to increase debt capacity.

Thank you.

Thank you. Our next question comes from Brian Lee with Goldman Sachs. Your line is open.

Hey, guys. Thanks for taking the questions.

Wanted to start off with a few on pricing if I could.

Maybe on the micro side, if if we assume battery revenue was.

Flattish in the quarter it implies asp's from micro and burgers was up.

Close to 10% in <unk> versus the first quarter.

Is that about the right ballpark and then.

You mentioned mix a number of times what exactly in the mix can you elaborate a bit as to what helped.

Pricing.

<unk> in the quarter since <unk> I think as you mentioned hasnt shifted shipping in Q3.

And you announced a price increase on micros, but that doesn't go into effect until Q3. So just kind of wondering what drove the better pricing mix and in the quarter and then related to that.

Since.

Asps are up again in Q3, given the price increase just wondering.

Is it a similar range on it.

Single digits mid single digits, how should we be thinking about the price trend on microwave burgers versus Q2.

Yes so.

You got it right.

So basically.

The pricing on accessories or the volume is on accessories is a little bit higher and because of that the the pricing book.

Micro inverted up your price.

<unk> when you take the same revenue divided by the number of micro Inverters appeared high to you because we shipped a lot more accessories.

So number 1.

1 <unk>.

Number 2 you asked about the price increase in the low single digits.

Okay, Great and then just on.

Similarly on price and you you mentioned adjustment a number of times on the battery side that went into effect in May can you give us some quantification.

<unk> is that.

Double digit pricing adjustment it something more modest than that just trying to sort of square up the pricing strategy in batteries as well.

Yes, im not going to talk about the exact number but on trade as it is.

Meaningful price adjustment there.

Yeah.

Fair enough and then last 1 here and I'll pass. It on just you know budget you mentioned lead times 12 to 14 weeks, obviously not ideal on energy storage do you want to get down to 8 to 10, but if you do have lead times of 12 to 14 weeks today. It would imply you know you've already got some.

Ability into probably the first month, maybe first month and a half of.

Q4 deliveries just given the bookings cycle here, so wondering what youre seeing in the backlog relative to.

Same period heading into Q2.

Visit bid, we'd be expecting sort of a similar acceleration in demand from <unk> to <unk> just wondering what the.

The sort of trends you're expecting on a on Q4 energy storage given the bookings run rate Youre, saying now.

Yes. It is.

Too early to talk about Q4, but I'm very happy in the fill rate.

I'm very happy.

Shines the customers have.

Ordering a lot on product on storage.

So.

That's all I can say right on on because it's going to be too early to talk about Q4.

I just want to make 1 clarification on a third of overruns.

On the question from.

You can price up by <unk>.

The number of the lead times on our storage will immediately unleash the fulfillment of a capacity of 100 on 20 megawatt hours. We'd also have commissioning and activation that we're watching very very closely so I wouldn't assume a society by the compression.

From already.

12% to 14 weeks into something like 10, or a day poverty batteries targeting.

On might be free unleash that fulfillment on the capacity. So that's a clarification.

The ramp is not as steep as you may think.

1 of them.

Thank you. Our next question comes from Colin Rusch with Oppenheimer. Your line is open.

Thanks, So much guys given that you're supply constrained and you're looking at entering into some new markets, including the commercial market and a more robust way how are you allocating product.

It really set yourself up.

With a strong foundation for growth through the balance of this year into next year.

Which is exactly why we are going to be quite quite cautious that's weighted I haven't ramped.

Product in Q3, it will be very cautious ramp which is piloting too.

Few installers in hour.

But enphase installer network.

We'll be doing that first we look at that experience. We may make some course corrections and then we'll do a study of that.

Because we understand the component shortages are that Q4 is going to look a lot better like what I said.

But we will start piloting in jewelry and on the.

In a commercial product.

We'll start by noting that in Q4 zone.

That will be even better than the than the IQ 8 micro inverters.

Thanks, So much and then in terms of the installation process for the batteries can you give us a sense of.

How many of your customers what percentage of your customers are.

Fully trained and how much of their staffs are fully trained on the new expedited process first on systems.

I mean, we as I mentioned we.

We have about 2500 installed on personal.

Fully trained.

And off that we have about 1500.

Small patient companies.

They basically are trained.

And in addition to training.

Usually when we call them is certified as when they finish.

The first installation.

We basically hand over to them for the first installation which is weighted.

Yes.

You know we go through the complex.

We go through the.

Yes complex today, but will be simple intermodal simple process of commissioning.

And.

That number.

A number of certified installers is usually half of the number of.

Trained installation companies so that would give you an idea.

We are talking about a significant number.

Of long tail installers.

That we obtained in the last 4 quarters.

And that's the name on the game once we make it.

So easy.

Commission.

So easy for them to install.

We believe the ramp will come out on Monday.

So much guys.

Yeah.

Thank you. Our next question comes from Philip Shen with Roth Capital Partners. Your line is open.

Hi.

Thanks for taking my questions.

Badri I think you just mentioned that the pricing for the battery is.

Lower or you've made some meaningful price adjustments. There I was wondering if you could comment on the margins for storage are they in line with corporate average or them, perhaps a little bit below.

And what the margin.

Look in general it might be for storage.

Right like what I said, when we introduced the product in July.

On the at that time of introduction as typical with a new product the product costs will be slightly higher and.

And so at that time, we started off with a higher.

With a slightly higher pricing.

Then we also had.

As typical in a new product it takes some time for the new product to be streamlined.

So.

We had commissioning issues and now we have learned in the last year, we have reduced the streamlined commissioning I think it is pretty decent right now.

I still want it to be a lot better. So now we are ready.

Meaning we felt we were ready therefore.

We made the adjustment to the pricing and that doesn't mean, we compromise any of our guiding principles.

As we will always price on value.

We will never enter a business.

Net debt until we're sure that it can support the corporate gross margin of 35%. So all of those are still intact.

Great and then as it relates to.

On the mix of Micros can you comment on in Q2.

What the mix was between.

Between IQ 7 versus 7 plus and then what do you expect that trend to be in.

In Q3, and Q4, because my sense is the IQ 7 plus has.

On a better price profile and then.

Perhaps if you can also comment on the margin outlook or our profile for each of those.

Items as well.

Well just for the people on the call IQ 7 plus.

It's a higher power micro inverter compared to <unk>.

Thank you 7 IQ 7 plus has got a $2.90.

What AC output.

<unk> 7.

<unk> got a 250.

What AC output and.

And because of that IQ 7 pluses usually used.

For higher end modules.

And on a higher end modules maybe around.

$343.50 watts Youll start using IQ 7 plus so you don't compromise on.

Carlos <unk>.

Historically, we haven't broken out the mix between 7% and 7 plus we are not going to do it even now but.

We obviously, we are definitely seeing.

A trend towards.

The higher focus and Thats.

On what is not a surprising.

Then in the industry.

That's what the industry debt so the power of the DC modules keeps going up therefore, the micro inverters have to go up so IQ 7 plus is here to stay is here to ramp.

And on.

In terms of the pricing the way.

Way, we do pricing is.

In terms of dollars per watt and so if you provide increased weighted share, meaning if I pro rating increase what is the price of that micro inverters automatically.

In addition, other things are also contributing to pricing. In addition to just what is its quality.

That's the et cetera on customer experience matters too that all variables on pricing, but I.

<unk> 7 plus is definitely mode.

And we're coming to the reverse day to the equation is IQ 7 plus required us to make some small tweaks compared with IQ <unk> IQ 7.

Micro inverter in terms of hardware.

So the trend the the <unk>.

<unk> pharma, maybe a little bit different.

Some of the transistors input transistors, maybe a little different.

So the cost is not the same of the micro inverter.

However, again like what I said, we price products and value.

Quality insurer calculate gross margin has always met and.

We obviously like higher powered products, because they give us a little bit extra margin compared to lower part.

As you can imagine.

So long and so on 1 thing.

Yes.

Sorry, Budd when do you think you might be able to hit.

And are you a majority of 7 plus in Q2 or where are you in or if not do you expect to be majority of 7 plus in Q4.

Like a lot of the channel is already converting has converted already to 7 plus it's really the safe Harbor.

Inventory that that 7.

Yes.

I don't have numbers for you, but it is it is it will be up into the right every quarter. That's all I can say.

Okay. Thanks for the detail.

Thank you. Our next question comes from James West with Evercore ISI. Your line is open.

Hey, good afternoon guys.

Badri.

I know, you're rolling out storage or attended to rollout storage in Europe, your wood into Germany This quarter.

In Australia I believe in the second half does the fact that you're.

Do you have some constraints Chisholm some lead time issues that you're working on is that slow that international.

Pullout or you're continuing on pace.

No, it's not going to slow my Australia rollout like like what I said, we will do methodically in all markets right like how the we had a nice ramp in North America, I would say that in North America last year.

4 quarters.

Right.

What we learned from day installers weighted we learned from the homeowners, we course corrected and we did a lot of work like that every country is going to be different than on <unk>.

Germany, Germany, maybe a little bit easier for us may not be full quarters, maybe 1 to 2 quarters, Australia could be different because they usually have a little bit more.

Meaning.

On the power grids on Australia may not be as stable as Germany. So they will use backup.

More than Germany, so that will be.

That will be a little bit different and they're all different.

Great.

Voltages.

We are well on frequency.

So we learned that for some time and by that time, all those manufacturing issues will be resolved.

Okay makes sense and then I know you noted a big acceleration in demand in June and you've gone through a lot of.

Feedback cycles on feedback loops on on storage.

Just the culmination of all that feedback or was there some <unk>.

Specific component of the debt all of a sudden kicked in maybe the installation time or something like that that led to that big jump in June.

Okay.

The way I said it right the introduction of load control that helped the reduced commissioning.

Pages in times debt that we really achieved in Q2 that helped the adjustment of pricing that helped we also introduced.

<unk> on warranty.

For customers. So that if you do on storage only financing you have to pay less dollars a month.

Right.

So we introduced kind of these 4 now we're introducing grid services and offerings for certain regions. So that will help.

So basically.

Yeah, and the last 1 to generate greater compatibility, although we haven't released it it's coming.

So.

That will also help so I think all put together you can see that the ramp is.

Thanks Charles.

Thank you. Our next question comes from J B Lowe with Citi. Your line is open.

Hey afternoon Badri Eric.

From.

Question is on capital allocation you guys.

A lot of cash on the balance sheet in times of your share repurchase very well earlier this year.

But you also get another 20 million of investment.

On the private side I'm just wondering.

What kind of targets you are seeing out there in the marketplace and how do you.

Eric I'll juxtapose that against.

The share repurchase potential, but you guys have maybe you have another $500 million.

Authorization.

Yes, well thank you for the question.

Sure.

We have a big appetite.

4.

M&A.

But.

We are not willing to pay sometimes the prices as were all aware, especially over the last few quarters now there is a little bit of a more market is opening over better some of the effects on pulling back pricing appears to be more plausible on the way. We are doing the analysis in terms of IRR per park.

So on on all of these acquisitions.

As a communications on Brightcove here I mean, we are very diligent on making sure that all the acquisitions that we do meet our high bar of payback IRR.

In all of those things that are very important to us.

When we think about.

So on location the amount that we have we sell for M&A is pretty important so that's something important to us too to convey on.

Which will be opening over the next few quarters.

In terms of the $500 million.

Over 3 year share buyback program that the board approved I think these phenomenal.

<unk> allows us to redeploy that capital into share buybacks.

On the opportunity accounts with the volatility on the stock throughout that period, so meaning we are non U.

Using that 1.

More of on strategically positioning the company.

Because.

Re buy the shares for example that we issue as part of the converts in this case, we have formulary share issue, we bought $1.7 millions on our shares back at a weighted reasonably low price. So that's just kind of give you a sense of how we are thinking in terms of the utilization of that.

Approval by the board of $500 million.

2 or 3 years.

And finally, we know how to run the company with very little cash So my cash flow and cash that I mean on the balance sheet to run the company.

He is been about between 300 or $400 million. So that tells you that as we continue generating cash with on a replay.

On a finished up over the year over to the right. So so that's kind of the problem that we have in a lot of M&A insight.

Opportunistic share buyback on the 500 million on our provided 1 over 3 years.

And quite.

Quite a bit of internal growth. So that's why we commented on the opex as well.

We play in as we see going forward, sometimes we decided to build that capability in house that means.

Hiring more people, increasing our opex, but we're still committed to be comfortably above a 20% operating income for the company as a whole so hopefully that answer long, but these airlines will give you a sense on how we're managing.

Cash.

Yes, that's correct.

Follow up question is just you know as you're kind of you're being cautious on the accurate.

And I agree with your rollout.

Kind of a higher level question like how should we think about let's say going into by the end of 2022, let's say.

What percentage of your sales would you expect IQ.

It could be as just given the kind.

Kind of changing nature of the rollout next year.

Yeah, I mean look.

On experience from IQ 6 to 7.

That took about 4 to 5 quarters.

And with.

<unk> be different.

Everybody has been waiting for <unk>.

And they are going to move to <unk>.

<unk> offers exceptional value.

Is for the first time you can.

And Brandon on Sunshine without the grid.

So.

And all.

I think it should should ideally be faster, but let me put on my caution is that day.

We we have.

In the middle of components in place shoes.

We cannot get ahead of ourselves.

I would say at least full quarters.

At least for a quarter.

What I think.

<unk>.

B.

Yeah, plus or -1 or 2.

Okay. Thanks, guys.

Thank you. Our next question comes from Kashi Haralson with Piper Sandler Your line is open.

Hi, good afternoon, and thank you for taking my question.

<unk>.

Yes, so a few weeks ago.

<unk> announced they were entering the inverter space via the <unk> acquisition, you guys inverted invented the micro inverter 15, or so years ago, and you know the product better than anyone and they go to market strategy better than anyone else.

Just curious how you think.

Florida is about you know maybe some of the some.

Some of the challenges you think new entrants may face in trying to enter the space and compete with you and maybe even just broadly how you think about the competitive landscape of of the of the <unk>.

<unk> resin inverter market moving forward.

Yes.

Hi, This is Doug.

Yes, there have been numerous entrants over the last 15 or so years, the bottomline as debt and.

And where business is it's very very hard and micros is even harder on R&D and Thats why they were even more micro inverter interest from.

And there are hardly any left.

Think about them and it's because you have to achieve a level of reliability cost and performance.

And to do that on the micro is extremely difficult to look we have a generations on innovation.

Under under our belt, so we have incredible amount of experiencing.

I know that was in our back actually.

So the bottom line is that again, we are relentless when it comes to innovation and when you think about innovation for us it's about innovation around semiconductors and software to talk on ASIC, It's kind of the key to what we do with our micro. So we are continuing to iterate in that net area.

The area.

So looking at kind of next generation materials like gallium nitride is an example of that and we're making sure that we continue down the path of.

Adding more value driving more performance.

Lower cost and.

Not compromising rely.

We're also ability in any way. So this is a hard business and we're really continuing down that innovation path yes.

We're done on already said I mean, no matter what.

And what are the other day as do our strategy is to innovate.

We have.

The eighth generation today, we.

Rely on the ninth and 10th.

Because of that innovation, we have 300 plus patents.

I'd now and.

And Thats a lot of IP.

And.

We'll create more IP to fortify this position.

So.

We'll do what we have done in the last theaters.

That's helpful. Thanks for that color from both of you and then just as my follow up.

During the prepared remarks, you made some commentary on grid services and as you mentioned this is the first time you've talked about it.

Can you just give.

As a sense of the revenue opportunity. How are you guys are thinking about the revenue opportunity associated with good services to Enphase and then maybe even just more broadly with software in general because you've done been in South Africa, and now Youre talking grid services, just how do you think about software revenues over time. Thank you.

Yes.

Yes.

We are entering grid services, a little bit early to talk about revenue.

On revenue model.

The name on the game as you know this this.

This helps the homeowner.

At the end of the day.

If I can.

If I can.

The payback period for the homeowner.

Hi.

Along with our installers.

So.

If we do that by offsetting meaning in the homeowners can help the utilities.

For many times during the summer.

On a few times during the winter they get paid for it.

For example, the connected solutions program is a lucrative program.

With the 10 kilowatt hour Enphase and charged battery.

You can get up to $500 a year in Rhode Island.

And you can get up to a thousand dollars.

In Massachusetts.

Extremely lucrative program of course the.

The dollars et cetera. Since these are still in pilot stage, the autos et cetera on questionable might come down.

When they are in fully full ramp.

Our win <unk> programs are they had amongst the maintenance.

On the year, but it has started.

It is starting it is going to help us sell.

Solar plus storage.

And we are solving a real problem for the utility so the utilities are.

I'm going to be participating in with us.

And there are some interesting business models that.

Very much.

And a few a.

A few times, we will work with the Aggregators like in the case of connected solutions. There are 2 utilities in the northeast.

Initial grid than ever.

Yes ever source.

<unk>.

They have partnered with an aggregator.

And we work with that aggregate.

It's not necessarily the case.

We could potentially start working with the utilities.

We are exploring such such partnerships on how that will work what are the puts and takes.

It's still at the infancy stage.

So which is why I don't think.

It's the right time to talk about revenue, but.

We are going to understand this market a lot more.

And the next.

A few quarters and coming back to the connected solutions, where do we differentiate.

As our differentiation is we make it so easy for a homeowner.

The growth of his app and grid services and he can.

And roll on to grid services programs easily with a touch of a button and once he then broad he can actually monitor how much he is saving he can.

He can basically.

Opt out.

The event like for example, if you have an event to model, where the where the utility warrants.

In our battery to debt chart, you can opt out to day.

That option is also through the App.

You can affect you.

Your reserve and debt.

The battery normally the utility will Saturday will recommend 10% in order to give you the full grid services benefit, but youre going to just debt and the after.

So the App makes it seamless.

And of course, that's where we come in.

We want to make sure we take care of the homeowner.

Donald and our installers and our partners there.

We weren't a priority on exceptional experience for the homeowner.

Thank you. Our next question comes from Moses Sutton with Barclays. Your line is open.

Thanks for squeezing me in bit of an ask your question thoughts on competition bidirectional EV charging.

You see competing with yours, and other more holistic energy storage offerings or.

Over time is it a threat in any way.

Of course, a limited product and what it can do but just thinking how you think of that evolving.

As the storage and backup market itself evolves over time.

Yeah, I think we are just struggling I think we have a goal on a M.

You look at it from a strategy point of view is to deliver best in class.

On a home energy management solutions and systems.

We considered all the available resources in.

That starts with solar stationary storage load control generators fuels et cetera, and bi directional <unk> will play a key role.

In providing a great homeowner experience, meaning that.

On the rent of an outage for example, now you have documents document.

On the homes.

On the resource available in order to ensure that the home stays up and you can ride through any outage, we do not consider this to be competitive.

In any way at all we consider that to be an integral part of the overall solution that we are offering and we have.

Our unique role to play.

But because we do the power electronics, the communication of the software that impact brain of debt home energy management system is what we offer I think bringing back bringing a bidirectional EV system onto our platform is going to just make the make the whole solution back much more resilient and I think thats a good a homeowner experience.

Plain and like I said, we play per unit call there.

Thanks, very good that's helpful and just 1 more I may have actually missed this.

Any logistics constraints further downstream on the AC module supplier side from those module companies holding back Reorders of micros, and enabling you to ship that supply to the direct model.

<unk> micro sales to distributors and installers.

No that's not an issue.

Thanks.

Thank you. Our next question comes from the heat Medline with credit Suisse. Your line is open.

Hey, thanks for taking our questions.

Yes.

Maybe 1 thing just on the software on the permitting businesses, which we recently acquired on wrapping up pretty well.

Yes.

Could you just talk about like is there any contribution from those businesses. So how should we think about debt either.

Either in the near term on the longer term.

We're not going to breakout the revenue.

But let me give you some color day.

We bought.

So look I mean, we bought soft desk soft desk is.

Software company that makes design and proposal software for installers and.

And license licenses to them.

And on the license fee in general is well understood by the industry.

And you can you can do some work on it. We also said that we have 850.

Installers.

Right now.

Utilizing that platform so that we can give.

Revenue for idea of.

Of the contribution.

On the more important thing the most important thing we are excited about areas.

Both of these companies the software company and the permitting services, which I will talk about next both of them.

Achieved.

Ricardo.

Give you erroneous.

The highest revenue.

And why because.

And on Enphase today as sellers.

Our product micro inverters and storage to a lot of long dated charters.

Our installer account is meaning installers, we observed.

<unk> is a 5000 long tail installers in the U S.

We probably interact with.

At least <unk> 500 on them.

And so it's a huge opportunity.

On understanding the overlap between.

Our installers who utilize.

On the solar graph.

Paul.

And understanding the overlap.

On who actually buys the products. So therefore that has an almost cope for us too.

Introduce our long tail of installers of.

2.

The solar glass, plus and Thats, what we are going to do.

We are going to make the platform a lot better investing a lot more there.

We are going to have sharing we are going to have.

Storage and we are going to make that a best in class.

<unk> software.

That's on me.

Soft desk, that's the acquisition based in Montreal debt, we completed early in the year.

The next 1 is even more interesting.

This is the permitting services company that we closed the acquisition in April.

That company.

Yes.

Permitting services for a significant fraction of the North American business.

The North American solar business.

And there again so far.

The permitting services.

Has been.

Restricted to a few big customers.

Simply because.

<unk>.

It is today, although we provided services, it's a 24 hour.

And we think there can be a lot of efficiency that can be taken out.

By automating debt.

Permitting service to make it almost like a self service.

It takes.

A couple of hours versus $24.

So again the name on the game there is to take that installer account from a handful today, which is mainly big installers too.

How's that.

Plus installers that we had.

Once again, that's what we are going to do.

By automation.

So.

And I gave you some color and you know, but the short story is both businesses are exceeding the targets that were promised to us before.

Yes.

They both have good leadership and we are thinking of interesting ways. The 2 companies can work together.

Matt I think the name on the game is to introduce more services to our installers.

Got it thanks for the explanation would be helpful.

And then maybe just on the screen.

Going back to on the questions on the competition in the mitral on water space.

Could you maybe talk about it.

It would make sense to use IQ it'd be kind of a product for the residential market because that seems to like BD.

And move for a couple of income.

But it has to offer 241441 in the residential space. So do you expect any.

Those applications for accuray team residential or getting a 1 for 1 makes more sense from a technical point of view or from a.

Customer point of view.

Yes, I mean look.

We think a 1 for 1 makes the most sense.

That said bread and butter business why because.

Quantity.

Once again when you when you when you put a lot of electronics there.

You have 2 panels.

That Ah connected foot panels that are connected.

On.

We.

We cannot provide that kind of exceptional quality to the homework.

It's difficult.

However.

Net are some regions where.

And some businesses like the commercial business and don't have the same stringent requirements.

And so for those <unk>.

Businesses.

It may be economic value to us and to panel.

1 micro inverters.

Thank you a day product.

And we'll be looking at debt harder.

It's not an easy question for our strength.

To answer it.

Looking at debt hard, but we are never going to deviate from our core product being.

Like when we go like 2.9 when we got <unk> 10, we wanted to make that single micro inverter a lot better.

That is the core for us, we're going to be making that a lot better but.

Markets like on.

Australia for example, where our market share and how we want them, we want to improve our market share we monetized some experiments.

Okay.

But there'll be done methodically and without deviating from our core platform.

Thank you. Our next question comes from Joe Osha with Guggenheim Partners. Your line is open.

Oh, Hi, there yeah, 2 completely unrelated questions first as regards to all of the conversation about grid.

Grid services I'm trying to understand how this works visa b the plans with some of the big.

Big developers like like Sunrun for example, or is this a cooperative relationship or are you going to begin competing with some of the initiatives that the large developers have on their own.

I'm just trying to.

No it's actually it does.

It has cooperated because we are the ones who provide day.

We are the developers on the equipment price. So we have a deep understanding of how the whole system within the home interact plus all of the software platform that allows gives you access into the into the system itself. So we feel that's still hold on.

Our relationship with them.

It's positive.

And on I want to make a comment about about grid services. If you look ahead.

It will be on requirement I mean unique coordination amongst all of the systems that are deployed.

Because as you think about the world evolving into a world of EV etcetera on home electrification Gordon.

And we'll become more and more important so having a system that's extremely intelligent that's behind the meter that is coupled to a very intelligent platform. That's in the cloud.

It is critical and that's a big.

<unk> advantage for us because we have built that system, we have architected that system from the bottoms up.

Underneath that allows very some clean energy.

And effective communication and control from the cloud to all of these day yards that are deployed behind the meter.

Okay.

Okay.

Yes to add a few things moving.

We know how markets evolve.

So right now on the solar market if you see.

It is 60% loan.

30% lease.

10% cash.

That is probably storage market will go.

The same way.

And on the advantage.

Rehab is we work with all customers.

We work with.

On slide syndrome, who.

Who have leasing.

We work with many number of long day of installers, who.

Basically providing.

Help.

And with the Fintech partners they offer.

Loans to the homeowners.

So when we come in is we can provide any kind of solution.

For the loan market, what we can do where the homeowner actually owns the homeowner owns Nevada.

When the homeowner.

The battery and Ive seen significant savings is.

Decision on buying the batteries easy.

And.

Whether it's whether it's loan whether it's lease we're going to be debt. It is our platform.

And we are going to make it so easy further on.

On our own.

To save money.

And our App gives unprecedented visibility.

So really proud of is everybody.

Okay. Thank you Bert that's that's helpful and then again totally unrelated question.

Obviously been very successful with your decision.

On a monitor to embrace RFP chemistry can be employed.

Other parts of the industry, including even parts of auto.

We are starting to maybe take a look at toggling to that chemistry.

As you look out this debt potential we create any day.

<unk> challenges for you.

Uh huh.

Tough question on predicting the future but.

We love LSP.

We like the fire resistant.

Aspect of it.

On.

We have.

<unk>.

Reputable batteries.

Susan.

In the MSP market is going to become big like what you said on the auto guys now want to come in.

Further the auto they will go back and forth between MSP and.

And other Chemistries because LSP comes with.

Motivate.

Supply of more weighted okay for Esa switches the stationary storage.

All right.

Is.

Questionable.

Although they get on some of them are moving more weight is questionable for Evs and I am sure that innovation is going to happen on that from.

So.

But for estimated shift we've made the right decision before I think we are happy that a lot of people are moving through it we have good partners, we're going to we're going to get a few more good partners to increase our capacity and.

Yes, our strategy is unchanged.

Yes.

Thank you. Our next question comes from X spine with Craig Hallum. Your line is open.

Everyone just sneak 1 in here at the end.

Note that the portable portable power systems, I guess call them sample on a box something that you've.

Been optimistic about.

Thank you were targeting for Q launch on that maybe on updated timeline is that still the plan and how does the component charges play into that.

Yes, although I didn't talk about it we are furiously working on it.

And we are planning to pilot the portable power station.

In the fourth quarter.

To our homeowners.

And installer section.

We're going to have more on analyst day free.

So in Q4.

Okay. So it's still basically on plan.

Yep.

Okay.

Thank you.

Thank you. Our next question comes from Michael <unk> with Raymond James Your line is open.

Thanks, very much just 1 question from from my end, we're hearing a lot of conversation from Washington about building out.

Okay.

Solar and other clean tech manufacturing capacity within the United States.

Your existing footprint, India, and Mexico as you've talked about.

Any interest in developing some type of supply chain.

Footprint within the U S.

Typically.

So we.

We're not ruling anything out if the economics are right.

The economic need to rewrite the incentive would need to be right.

It's possible.

And.

Anybody capable.

Put something up on volume pretty quickly is probably going to be X price and we know we have we know how to establish control manufacturing very quickly in partnership with our controlling factor.

No how to transfer without compromising our reliability.

Lines from place to place with proven.

It's actually come we know how to do that very quickly and in the event. The battery size to go the path of economics out of their weaker we probably are best suited to do it.

Thank you very much.

Thank you I'm not showing any further questions at this time I would now.

That was on the call back over to Mr. Costa on the Rodman for closing remarks.

So thank you for joining us today and for your continued support of Enphase. We look forward to speaking with you again next quarter.

This concludes today's conference call. Thank you for participating you may now disconnect.

I'd like to channel.

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Yes.

Yes.

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Okay.

Growth.

Yes.

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Okay.

Okay.

Sure.

[music].

[music].

[music].

Good day, and thank you for standing by welcome to the Enphase energy second quarter 2021 financial results conference call. At this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question.

And the answer session ask a question. During this session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.

I would now like to hand, the conference over to your Speaker today, Adam Hinckley. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss Enphase energy second quarter 2021 results on today's call are badri close on to Robyn Enphase is president and Chief Executive Officer, Eric <unk>, Chief Financial Officer, <unk> <unk> Chief products Officer. After the market closed today Enphase issued a press release announcing the results.

For second quarter ended June 32021.

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 and capability of our technology and products, including availability and features our operations, including in manufacturing and.

Service and anticipated growth in our sales and in the markets in which we operate on target and the capabilities of our installation partners. These forward looking statements involve significant risks and uncertainties and Enphase Energy's actual results from the timing of events could differ materially from these expectations for a more complete discussion on these risks and uncertainties.

Customers. Please see the company's annual report on form 10-K for the year ended December 31, 2020, which is on file with the SEC and quarterly report on form 10-Q for the quarter ended June 32021, which will be filed during the third quarter of 2021 and phase energy cautions you not to place any undue reliance on forward looking.

You mentioned and undertakes no duty or obligation to update any forward looking statements as a result of new information future events or changes in its expectations. Also please note that financial measures used on this call are expressed on a non-GAAP basis, unless otherwise noted and have been adjusted to exclude certain charges. The company has provided a reconciliation.

Looking station of these non-GAAP financial measures to GAAP financial measures in its earnings release posted today, which can also be found in the Investor Relations section of its website.

I'd like to introduce Badri cofounder, Amon, President and Chief Executive Officer of Enphase Energy Badri.

Afternoon, and thanks for joining us today to discuss <unk> second quarter 2021 and financial.

<unk> results, we had a good quarter.

Total revenue of $316.1 million share.

Approximately 2.3 dollars 6 million micro Inverters and 43 megawatt hours of Enphase <unk> systems.

<unk> non-GAAP gross margin of 48% and generated strong free cash flow.

$49.2 million.

We exited the second quarter net approximately 41.16 24. This means 41% gross margin, 16% operating expenses and 24% operating income on.

As a percentage of revenue on a non-GAAP basis as a reminder.

Our baseline financial model is $35.15 to 20.

Ed will go into details about our finances later on the call.

Let's now discuss how we are servicing customers. Our Q2 net promoter score on worldwide was 67% compared to 63% from Q1, and our North American net.

Net promoter score of about 71% compared to 69% in Q1.

Well the average call wait time decreased to approximately 3 minutes in Q2 from more than 5 minutes in Q1, our 24 by 7 global customer support and use the right times and net income we are moving field service teams in the U S and Europe.

They provide on site health to our installers. We also expect to have the team in Australia.

In Q4.

We remain laser focused on customer service and making sure that we have an easier company to do business with.

Let's now talk about manufacturing as we have discussed in the past earnings calls the demand for our.

Micro inverter systems continues to be well ahead of supply in Kyoto, we experienced component constraints on the top layer on ACF and drivers, which resulted in a micro inverter shipment volume slightly lower as compared to Q1, we had 3 AC drive non stop players qualified by the end of the second.

Second quarter compared to 2.

In the first quarter for the third quarter, we continue to expect to remain constrained on micro inverters, but the sublease the duration is better than what it was in the second quarter. We expect to have full suppliers qualified by the end.

The third quarter.

Regarding the fourth quarter, we are cautiously optimistic that the situation will be significantly better compared to the third quarter.

On the ASIC used in our micro Inverters, we have sufficient supply so that has not been a big constraint so far.

As previously.

Can you discuss we are expanding our micro inverter manufacturing capacity in Mexico, and India and on a facility in India. We started a second fully automated line in Q2 with production beginning at the end of the quarter.

This brings our quarterly capacity to $1.5 million micro Inverters from India.

In Mexico, we expect to add a fully automated manufacturing line in Q4. This will bring quarterly capacity to approximately $2.2 million micro Inverters in Mexico.

With our existing capacity in China, we expect to easily achieve on targeted capacity of 5 million micro inverters.

Per quarter by the end of 2021.

Let's talk about battery.

We have 2 sources for battery cell banks with a total capacity of 120 megawatt hour per quarter.

I previously mentioned, we are going to add a third source in 2020 to increase our overall capacity.

Talking about our lead times, our lead times for storage systems.

Looking ahead to day between 12, and 14 weeks and we are working on streamlining our engineering and manufacturing to bring them down below 10 weeks by the end of 2020.1.

Let's move on to the regions our use on international.

National revenue mix for Q2 was 80, 119% respectively.

As market demand was very strong in Q2, but we were supply constrained. Therefore revenue was only up 3 percentage sequentially.

Our teams work hard.

To ensure customers that continuous supply of product.

Sell through from our distribution partners to installers remained very strong keeping channel inventory tight but at manageable levels.

Our teams ensured that all customers AD product that they needed to complete jobs and we're not force to seek automated although the constrained supply prevented.

From building buffer inventory in.

In Europe, we reported record revenue in Q2, the revenue increased 16% sequentially. The channel inventory was much data in Europe than the U S. But we expect it to improve in Q3 and Q4.

We had solid growth in Netherlands, France, and Germany and continued strong micro.

Customer sales to maxion for DCM product during the second quarter.

So began selling our enphase storage systems in Germany.

In late Q2, representing the products first international expansion outside the U S. We launched our solar plus storage system estimate on sizing tool in Germany.

Net showcases panel placement on the roof, along with storage sizing and a comprehensive financial analysis Gen.

Germany represents a larger residential storage market in Europe with high attach rates.

The market response to the introduction on the Enphase <unk> system in Germany has been positive and we expect this to also drive the micro inverter.

Any business in the country.

Overall, I'm very pleased with our growth in Europe.

In the Asia Pacific region revenue declined 3% sequentially in Q2, primarily due to Covid disruptions in Australia, along with normal seasonality.

Despite these headwinds we are quite happy with micro inverters sales during the second quarter.

Volume from the continued adoption of higher power IQ 7 product and our AC module partnerships, we expect to pilot Enphase storage systems in Australia in the fourth quarter.

In Latin America, Q2 revenue was up 38% sequentially largely due.

Sales of both Enphase solar and storage systems in Puerto Rico.

As I discussed last quarter, we are expanding into Brazil, we have hired a team there to enter the Brazilian market and we expect first revenue from this region in Q3.

Now that we've covered the regions lets discuss the overall bookings.

On the inquiry.

Our overall customer demand for Q3, once again significantly exceed the higher end of our guidance range.

We continue to remain supply constrained in Q3.

Our component availability is improving in Q3 compared to <unk>.

But not at the rate of growth in demand.

Let's now move towards storage systems rollout.

We shipped 43 megawatt hours of Enphase storage systems in the second quarter.

During the quarter, we released load controllers, a new feature that provides enphase storage systems with the capability to automate.

<unk> totally shed non SMT and lowered during an outage with load control homeowners added the option to conserve their energy consumption and extend debt it back on duration simply by a 1 time setting of the enlighten.

Let's now turn to training for our Enphase <unk> systems by.

Matthew too we trained 2592 installers to Malaysia, only representing more than 1500 unique installation companies.

This represents a significant jump compared to Q1, as we were able to resume some in person training in Q2.

You.

<unk> continued to make steady progress on the commissioning of our Enphase <unk> systems and made numerous updates to our software.

Our goal remains a sub 60 minute commissioning time, which will allow the installers to visit the site installed and commissioned an enphase <unk> system in less than a few hours I am very pleased with the progress we.

Also paid on that front.

The introduction of non controlling led to me along with some pricing adjustments, we did for our installers plus the improvements in the commissioning process has resulted in an acceleration of demand for Enphase storage since June Eric.

As a result, we expect to share.

We are moving 60, and 70 megawatt hours of Enphase storage systems in the third quarter, we had already fully booked for Q3 on storage and our current lead times as I said before about a 12 to 14 weeks, we are working hard to bring the lead times down to under 10 weeks.

But let's talk about our new products, specifically, the IQ 8 micro inverter and the IQ a day micro inverter product launches Iq.

IQ 8 is the world's first grid independent micro inverters for residential solar and IQ 8 is the high power 640 Watt AC micro inverter capable of supporting.

Panels for small commercial solar we are making good progress on the compliance reliability and system testing of these products.

We expect first shipments of the IQ 8 PV micro in mergers in Q3, and first shipments of the IQ a D product in Q4, given our components.

Thing 2 challenges we are going to ramp these products quite cautiously.

On the last earnings call, we discussed the generator compatibility feature for our Enphase storage systems last quarter.

On a little bit behind here as we took more time to complete the system test.

We are currently piloting generator compatibility.

A handful of real homes and are seeing great results, we expect to introduce this feature in production by the end of the third quarter.

1 on drilling down will then have the ability to add generators to their enphase storage systems, and we'll be able to configure the generate on the behavior from the Enphase app.

With the Enphase home Energy management system provides a seamless transition from on grid to off grid, ensuring a superior installer and homeowner experience.

This generator functionality as I said will be integrated into our mobile app. So the homeowners have full visibility and control from 1 app.

Let's now turn to digital transformation, both our recent acquisitions.

And the solar business MBIA and engineering are fully integrated and exceeded our expectations with record revenue and installer accounts in Q2, the 850 plus installers using solar.

Software tool will soon have access to new features such as shading and storage system sizing.

Our permitting services are also undergoing significant improvements towards automation to drive mass adoption amongst the long tail of installers, our digital transformation initiatives focused on reducing.

Grabbed soft costs, while improving profitability and efficiency per hour installers, resulting in clean and affordable energy for all.

Let me now give you an update on our Enphase installer network on <unk>.

We have now on board at 500 Installers in North America, 146, installers in Australia, and 169 installers.

Using from Europe to our Enphase installer network through a highly selective process focused on quality and homeowner experience.

Also introduced <unk> networks.

In India and Mexico during the second quarter. This has been a highly successful initiative as we are adding trusted installers, who will act as RFP randomness.

<unk> on our behalf and are expected to provide an exceptional experience for homeowners.

Talk about our entry into grid services for the first time.

We have started participating in the connected solutions program, which on an incentive program implemented by 2 utilities in the northeast region of the United States.

And his views.

Demand during the high use periods, enphase storage customers and connected, Massachusetts, and Rhode Island, and sign up monitor track money in and control participation in the program using our enlightened mobile app.

These grid services programs enables utilities.

So there is enphase storage systems, instead of turning on polluting vehicle plans, while generating an income stream for the battery owner Enphase customers participating in the connected solutions program can receive up to $1500 per year for our 10 kilowatt hour battery.

1 day share.

To elaborate on it when the when called upon by the utility.

Facilitating great set of interest participation or our customers will reduce the lifetime cost of Enphase storage systems and help drive increased demand.

We plan to participate in more such programs in the future.

Enphase is laser focused.

The best building best in class moment on the management systems and delivering them to homeowners through our digital platform along with our Enphase Installer network and distribution partners. We now have solar storage load control grid services and generated a comparatively.

<unk> as part of our home energy management.

We plan on adding other distributed energy resources down the line.

Our digital platform captures both installers and homeowners journeys, providing tools and services such as design proposal.

Metabolic permitting with the goal of reducing soft costs and accelerating the adoption of clean energy.

In summary, we're very happy with our performance in the first half of 2021 and the ongoing strong demand for our solar and storage products. We look forward per the ramping of our reported systems introducing new products.

And accelerating digital transformation and enhancing customer experience, we plan to host an analyst day in the fourth quarter and we will provide more detail on our next quarter's earnings call with that I will hand, the call over to Eric for his review of our finances Eric.

Thanks Badri.

Good afternoon, everyone I.

I will provide more details related to our second quarter of 2021 financial results as well as our business outlook for the third quarter of 2021, we have provided a reconciliation of these non-GAAP to GAAP financial measures from our earnings release posted today, which can also be found in the <unk>.

Personal relations section on our website.

Total revenue for Q2 was $316.1 million, representing an increase of 5% sequentially with.

We shipped approximately 796 megawatts DC you might remember from 43 megawatt hours of Enphase <unk> systems in the quarter.

<unk> Byker on better unit shipments declined slightly relative to Q1 on favorable program mix led to the sequential revenue growth.

Non-GAAP gross margin for Q2 was 48% compared to 41, 1% for Q1. The decrease was primarily as a result of higher logistics and.

Expedite costs, partially offset by disciplined pricing and favorable mix GAAP gross margin was 44 per cent for Q2.

Non-GAAP operating expenses were $51.3 million for Q2 compared to $43.7 million for Q1, the sequential increase was primarily.

Due to increased investment in R&D and sales from marketing programs and increased hiring.

In addition, Q2 was the first full quarter of consolidation of the recent acquisitions of software.

Yeah.

GAAP operating expenses were $68.4 million for Q2 compared.

Purchased $61.6 million for Q1.

GAAP operating expenses for Q2, including $14.3 million of our stock based compensation expenses and $2.5 million of acquisition related expenses and amortization for acquired intangible assets.

On a non-GAAP basis.

Income from operations was $77.2 million for Q2 compared to $80.2 million for Q1.

On a GAAP basis income from operations was $59.4 million 42, compared to $61.4 million for Q1.

On a non-GAAP basis net income for Q2 was 74.

$4.3 million compared to $78.7 million for Q1. This resulted in diluted earnings per share of <unk> 53.

For Q2 compared to 56 cents per share for Q1.

GAAP net income for Q2 were $39.4 million compared to GAAP net income.

<unk> of $31.7 million for Q1 GAAP.

GAAP diluted earnings per share was 28 for Q2 compared to diluted earnings per share of 22.

For Q1.

Now turning to the balance sheet on the working capital front inventory was $37.8 million at the end of Q2.

2 compared to $34.9 million at the end of Q1, the sequential increase was driven by higher primary cell product inventory to support the expected growth of Enphase energy storage system shipments.

Sales of inventory of funding was unchanged compared to Q1 and stood at 18 days, reflecting.

The current supply constrained environment as well as longer lead times.

Accounts receivable were $281.2 million at the end of Q2 compared to $236.1 million at the end of Q1, the sequential increase was due to the higher revenue in Q2.

Shipments being weighted to the second half of the quarter.

DSO of 65 days increased from 56 days in the prior year quarter due to the timing of shipments.

We exited Q2 with a total cash balance of approximately $1.3 billion compared to approximately $1.5 billion for Q1.

We fully utilize our $200 million share repurchase authorisation and bought approximately $1.7 million share is that on average share price of approximately $117 in Q2.

Nation, our board of directors authorized a new share repurchase program of up to $500 million.

And so over the next 3 years.

In Q2, we generated $65.6 million in cash flow from operations from $49.2 million from free cash flow.

Capital expenditure was $16.4 million for Q2 to expand my competitor manufacturing capacity in Mexico, and India as well.

Cost related to in license software App development corporate website development and investment in <unk> and cloud infrastructure.

Now, let's discuss our outlook for the third quarter of 2021, we expect our revenues for the quarter to be within a range of that he can't read on 35 to 355.

$4 <unk>.

Which includes shipments of 60 to 70 megawatt hour so from faces storage systems.

We expect GAAP gross margin to be within a range of 37% to 40% on non-GAAP gross margin to be within a range of 38% to 41%, which exclude stock based compensation expenses.

Our GAAP operating expenses to be within a range of 100 on 5 to 1 company on $8 million, including a total of approximately $46.4 million estimated for stock based compensation expenses and $1.6 million estimated for acquisition related expenses on amortization.

We expect non-GAAP operating expenses to be within a range of $57 million to $60 million.

Let me provide some additional color on a few topics as Badri mentioned earlier, we will be on trained by component availability in Q3 net revenue guidance assumes a modest increase in my combat our shipments but the primary.

The driver of growth will come from increase of storage systems.

We expect to ship 60 to 70 megawatt hours of our emphasis towards systems in Q3, representing approximately 50% sequential growth at the midpoint, we expect improved component availability for micro and better protection.

In Q4, and continued momentum for a bit and faces storage systems.

On the gross side, we are continuing to expedite components on finished goods in Q3 to ensure customers come on adequate supply of our products to put on the magnitude of expedite cost into perspective the expense in Q2 was larger.

Production then for all of 2020, we expect the quarterly expedited expenses to remain at similar levels for the remainder of 2021.

Due to the elevated logistics costs on increasing some component costs, we implemented a modest price increase for micro Inverters is starting in Q3.

Yes.

Ill share next I would like to touch upon our Opex guidance.

Guidance for non-GAAP operating expenses from a percentage of revenue is expected to increase in Q3.

As we mentioned in the last earnings call, our Opex, maybe slightly toward our 15% target at times, but we will still expect to be comfortably above our.

Client financial model target of 20% operating.

As we accelerate towards our vision of providing best in class home Energy management systems, we're investing significantly in R&D, particularly in areas that further our competitive advantage such as these.

And so forth from it.

Conductor integration.

Based on cloud software, our quarterly friend NCA shows that increase our system performance reduce cost and increase reliability.

We are also ramping up our marketing expense in the back half of the year to increase homeowners awareness of our solutions for Q3 accruals for both combination.

Our ratio of expenses from prior acquisitions are expected to be approximately $3.4 million.

Finally, I will touch on our lean crease of the stock based compensation expense in Q3 the sequential.

Increase is due to the higher number of employees globally as we continue to accelerate our growth plans as.

As well as their needs.

To retain top level employees.

<unk> hundred cooperating with that I will now open the lines for questions.

Thank you.

To ask a question you will need to press star 1 on your telephone.

Joe Your question touched upon key in the interest of time, we ask that.

Initially limit yourself to 1 question and 1 follow up please standby will be compile the Q&A last day.

Hi, first question comes from Mark Strouse with Jpmorgan. Your line is open.

Yeah. Good afternoon. Thank you very much for taking our questions.

So badri I appreciate your comments.

<unk>.

The supply looking significantly better than <unk>, but.

Yeah, I understand things are fluid, obviously, but can you just talk about your expectations today.

Moving that that force supplier ramp goes to plan.

At what point do you feel that youll be able to fully meet demand.

About actually let me give you some color.

The micro and the murder has got 300 components.

A critical component.

Is what is called as an E C fifth trailer.

This is mainly to buy.

On a few.

Semiconductor suppliers.

And.

In the first quarter of this year that we had.

2 such suppliers qualified.

The market and on the <unk>.

Semiconductor.

Supply chain today is a mess.

And so we.

We worked on.

So we qualified a third supplier in the second quarter.

And we were living hand to mouth in the second quarter and you saw the results.

The situation is.

Getting better day by day.

So in the third quarter I expect to do.

Motor number of micro.

I expect to qualify.

1 more supplier.

Still the semiconductor supply chain stretched which is why.

I cannot meet all my demand.

In the fourth quarter I see.

And what are the better visibility right now but.

Look I.

You know I predicted that in the first quarter, we are going to be out of the word soon that there was not the case. So I remain cautiously optimistic that the situation is going to get better.

And.

I see on how we can meet.

Most of our demand.

May be difficult to meet all of our demand right now because with IQ a DRAM and.

And I can never say, what's going to happen we are rapidly getting ready it's too early for me to talk about the fourth quarter book, but I am getting ready in terms of manufacturing capacity.

I wanted to exit the fourth quarter to at least 5 million units of manufacturing capacity non demand.

And we'll continue to work on the suppliers on qualifying. Additionally, I may qualify on motor simple Ed if I need.

But at this point, you know visibility is better than what.

Ill review the last time, however, I still remain cautiously optimistic about Q4.

Okay. That's very helpful. Thank you and then I just wanted to ask a follow up about storage.

It's been a bit over a year since you introduced your storage solution.

Can you just kind of.

Interest through the past year, I mean, what have you been surprised by as far as.

The feedback or applications that are that you would've thought would've had more interest what have you been surprised as far as.

Homeowner demands that you were not prepared for.

Walking on can you touch on price, saying just the pricing that you implemented at this time last year does that now hold do you see any reasons to increase that or necessarily decrease that.

Yes, if I tell you a story there.

We introduced our Enphase storage systems in July of 2020.

We had a very clear idea on our value proposition and debt has largely not changed it has only gotten better.

Value proposition is all in 1 solar plus storage solution.

We.

Do not build with high voltages.

Even for BC batteries, we only deal with low voltage DC.

Our battery solution 3.3 kilowatt hour on as a modular solution.

Creating a lot of flexibility for our installers, our chemistry is a lithium iron phosphate chemistry that is.

XL.

Excellent and fire safety.

In addition, we focused on power.

When you started air conditioned on US you do need a soft start but with our featured cards chart.

We are able to provide.

Extra powered for that search when the air conditioners turn.

On those value propositions have largely remained intact.

Then.

You added about market feedback on customers gave us a lot of feedback or initial commissioning times were not that good.

David.

The commissioning times, where on the order of.

Several allowance.

Customers did not like debt installers did not like net they gave US a lot of feedback we took all of that feedback into perspective, and we improved our commissioning process. A lot. We have learned a lot in the last year homeowners also gave us valuable feedback in terms of.

In terms of micro grid failures like for example.

How do we provide the right notification to the homeowner so that they know that okay now I am in.

In off grid more.

Outage, more and I need to take extra steps to conserve.

Battery life so.

We learned a lot from homeowners we are based on our software.

Notable multiple times during the last year.

And.

Recently in May we.

Introduced load control.

Load control is extremely important.

Barton because in our for the people who have let's say a lot of air conditioner. They don't want to screw around with doing a partial home backup you can do a whole home backup and you can leave out the air conditioners by day part you can share the lords automatically so we.

We provide now as of late.

Late May we introduced force load control, so heavy loads can be automatically share through a 1 time apps setting.

Now you heard me talking about generator compatibility.

And on.

Pretty soon by the end of.

By the end of the quarter we.

Introducing again through software on our home energy management system weighted incorporate generators to plug into them, giving homeowners unprecedented visibility and control.

From on that.

Additional things with it we introduced pretty good bye.

It will be in customer support we have we now have a field service team, which will help the installers.

With the installers finding valuable we have round tables weekly round tables I personally meet with 10 to 15 and started every week get their feedback and make continuous corrections to the product.

7 now let's talk about pricing.

You know the introduction in the last 20 years by design I wouldn't term.

<unk> too much.

We learned a lot our costs initially went high.

As typical in the ramp our pricing was therefore, a little bit tight.

And now I have learned to learn from the field, we have improved the commissioning process.

And we introduced load control.

So we felt it was time to make the right pricing adjustments while.

Being very disciplined and doing.

Value based pricing.

So we did exactly that in late May along with load control along with the latest commissioning improvement.

Even introduced roofing, Eric and a 15 year warranty plan.

<unk>.

We felt it was the right time to make a pricing adjustment, which we did.

And we have seen since June and <unk> accelerates.

And then storage demand, which is why we are guiding 50%.

From Q2 shipments Q3 guidance midpoint of guidance will be up 50% from Q2 shipments now we got to do 1 thing.

We need to improve our lead times on battery.

When.

Generation 12 to 14 weeks, if somebody orders a battery today from me they can only against the battery and tried to 14 weeks, which is not acceptable and need to go work on streamlining both engineering manufacturing cycle time in order to push that down to under 10 weeks ideally 8 weeks. So that's something that I have to do.

I mean, I do need to get a third supplier.

Because I see that I see us doing well.

And I have become more optimistic on batteries.

We don't need a total blood.

So thats what were going on.

Okay excellent. Thank you very much.

And Jim.

Thank you. Our next question comes from Eric Li with Bank of America. Your line is open.

Hey, good afternoon, Thanks for taking my question.

As a follow up to the prior around the AC step driver constraints can you talk about the time Tom.

Timeline for that.

Qualified suppliers to ramp on your supply contributions.

And as was in the discussions with those new suppliers is higher firm Asps is a key part of that to get supply prioritization, we heard that in some of our channel trucks in the semi industry. So curious to hear as Paul. Thank you.

Well in general the component costs in our suppliers.

We have increased prices to us because of the constraints on <unk>, that's a given in general and our guidance out on a result is everything in countries that.

To answer your question on the fourth supplier, we expect the fourth.

Do you require.

Turn on in the third quarter, we expect to at least get a.

A couple of hundred thousand micro inverters using that supply.

Got it and interest as a follow up question on storage you mentioned.

60 to 70 megawatt hours from <unk> is already fully booked.

Can you just talk about what's needed to ramp to get closer to about 120 megawatt hours. If it seems like demand is not the issue if you're fully booked and we're only halfway through or halfway through third quarter.

And at that time.

Is the whole if you could just talk us through the bottlenecks there on getting closer to about 120. Thank you.

Yes.

Today that drove devoting weeks is kind of exit it's kind of made worse by a couple of things 1 is our <unk>.

Internal manufacturing time is a little long and the logistics situation.

But in this environment is quite strength as well so in order to improve those and get the 12 to 14 down to under 10.

I'm going to work on my engineering issues, which are basically tax time in manufacturing.

Related those are well under my control and we'll be able to.

And net debt fixed within a quarter.

In terms of logistics.

We will see it is true for the I mean, the problem exists for the industry and it's not practical for me to ship batteries.

And ship batteries, that's not going to happen because the cost of air shipping batteries.

We will not make sense no matter whatever way you cut it I can add ship on micro inverters.

By by paying a little bit of money.

That is not true for battery is its too much of money and it won't be economically.

Sensible so.

What I think is.

Within.

<unk>.

Ill be optimistic I mean within.

8 to 10 weeks I should have all of this problem resolved I should be able to get back to mine capacity of 120 megawatt hours per quarter.

And.

From then onwards look for a third supplier.

<unk> increased debt capacity.

Thank you.

Thank you. Our next question comes from Brian Lee with Goldman Sachs. Your line is open.

Hey, guys. Thanks for taking the questions.

Wanted to start.

Start off with a few on pricing if I could.

On maybe on the micro side, if we assume battery revenue was fairly flattish in the quarter. It implies asp's from micro and burgers was up close to 10% in <unk> versus the first quarter.

Is that about the right ballpark.

Eric and then I know you mentioned mix a number of times what exactly in the mix can you elaborate a bit as to what helped.

Pricing in the quarter since IQ 8 I think as you mentioned hasnt shifted shipping in Q3 and.

And you announced a price increase on my growth, but that doesn't go into effect until Q3.

Just kind of wondering what drove the better pricing mix in the quarter and then related to that.

Since Asps are up again in Q3, given the price increase just wondering is it a similar range.

Low single digits mid single digits, how should we be thinking about the price.

Trend on microwave burgers versus Q2.

Yes, So you got it right.

So basically.

The pricing on accessories.

The volume is on accessories is a little bit higher and because of that the the pricing book.

Micro inverter a pure price.

Hi to you when you take the same revenue divided by the number of micro Inverters.

Hi to you because we shipped a lot more accessories.

Number 1 number.

Number 2 you asked about the price increase in the low single digits.

Okay, Great and then just on.

Similarly.

Really on price and you mentioned adjustment a number of times on the battery side that went into effect in may.

You give us some quantification is that.

Double digit pricing adjustment.

More modest than that just trying to sort of square up the pricing strategy in batteries as well.

I am not going to talk about the exact number but on paid is it is.

Meaningful price adjustment there.

Alright fair enough and then last 1 here and I'll pass it on just budget you mentioned lead times 12 to 14 weeks, obviously not ideal on.

Energy storage do you want to get down to 8 to 10, but if you do have lead times of 12 to 14 weeks today. It would imply you know you've already got some.

Visibility into probably the first month, maybe first month and a half of.

Q4 deliveries just given the bookings cycle here.

So wondering what youre seeing in the backlog relative to a same period heading into into Q2.

Should we be expecting sort of a similar acceleration in demand from <unk> to <unk> just wondering what the net.

What sort of trends you're expecting on.

On Q4 energy storage, given the bookings run rates you're seeing now.

Yes. It is.

Too early to talk about Q4, but I'm very happy in the fill rate on <unk>.

The trends are the customers have you now they're ordering a lot on product on storage. So.

That's all.

I can say that even on because it's going to be too early to talk about Q4.

I just want to make 1 clarification on its fair to hold on running.

The question from Eric you can price by solving the number of the lead times on our storage will immediately unleash the fulfillment of a capacity of.

I mean, I'm trying to figure out what hours, we'd also have commissioning and activation that we're watching very very closely so I wouldn't assume that society by the compression of the.

12% to 14 weeks into something like 10, or a day battery batteries targeting it will automatically unleash that fulfillment.

Once the capacity so that's a clarification so.

Trump is not as steep as you may think.

Thank you. Our next question comes from Colin Rusch with Oppenheimer.

Your line is open.

Thanks, So much guys you know given that you're supply constrained then you're looking at entering into some new markets, including the commercial market and a more robust way how are you allocating products.

Set yourself up.

With a strong foundation for growth through the balance of this year into next year.

Yeah, which is exactly why.

I'm not going to be quite quite cautious that's weighted I haven't ramped the product in Q3, it will be a very car share trend, which is piloting too.

Few installers in hour.

In our Enphase installer network.

We'll be doing that first we'll look at that experience. We may make some course corrections and then we will do is 20.

Because we understand component shortages or that kill photos on a look a lot better like what I said.

But we will start by looking in do you think and on the small commercial product is we'll start by noting that in Q4 zone that will be even better than the than the IQ 8 micro inverters.

Thanks, So much and then in terms of the installation process for the batteries can you give us a sense of.

How many of your customers what percentage of your customers are fully trained and how much their staffs are fully trained on the on the new expedited process for installing systems.

I mean, we as I mentioned.

<unk>.

From about 2500 installers personal.

Fully trained.

And off that we have about 1500 installation companies.

They basically are trained.

And in addition to training.

Usually when we call them uncertainty.

We hate it when they finish.

The first installation.

We basically had devoted to them for the first installation which is rare.

You know we go through the complex.

We go through the.

Yeah complex today, but will be simple intermodal simple process of commissioning.

And.

That number the.

A number of certified installers is usually half of the number of.

Trained installation companies so that would give you an idea.

That we are talking about a significant number.

Of long tail installers.

That.

That we obtained in the last 4 quarters.

That's the name on the game once we make it.

So easy to commission.

So easy for them to install.

We believe the ramp will come out on Monday.

So much guys.

Yeah.

Thank you. Our next question comes from Philip Shen with Roth Capital Partners. Your line is open.

Hi, everyone. Thanks for taking my questions.

Boundary I think you just mentioned that the pricing for the batteries.

Lower or you've made some meaningful price adjustments. There I was wondering if you could comment on the margins.

For storage are they in line with corporate average or them, perhaps a little bit below.

And what the margin outlook in general might be for storage.

Like what I said, when we introduced the product in July.

The at that time of introduction as typical with a new product the product costs will be.

Slightly higher.

And so at that time, we started off with the higher.

With a slightly higher pricing and then we also had.

As typically on a new product it takes some time for the new product to be streamlined.

We had commissioning issues and.

And now we have learned in the last year, we've reduced with streamlined commissioning I think it is pretty decent right now.

I still want it to be a lot better. So now we are ready.

And we felt we were ready therefore.

We made the adjustment to the pricing and.

That doesn't mean, we compromise any of our guiding principles is we will always price on value.

We will never enter a business until we are sure that it can support the corporate gross margin of 35%. So all of those are still index.

Great and then as it is.

Plates too.

The mix of Micros can you comment on in Q2, what the mix was between IQ 7 versus 7 plus and then what do you expect that trend to be in.

In Q3, and Q4, because my sense is the IQ 7 plus has.

On a better price.

This profile and then.

Perhaps if you can also comment on the margin outlook or our profile for each of those.

Items as well thanks.

Well just for the people on the call IQ 7 plus.

<unk> is a higher power micro inverter compared to 2.

Thank you 7 IQ 7 plus has got a $2.91.

What AC output.

<unk> has got a 250 watt AC output.

And because of that IQ 7 plus is usually used.

For higher end modules.

And on a higher end module.

Maybe around.

343.50 watts.

Start using IQ 7 plus so you don't compromise on what is called <unk>.

Historically, we haven't broken out the mix between 7% and 7 plus we are not going to do it even now but.

<unk>.

We obviously, we are definitely seeing.

A trend towards.

The higher policy and.

That's not a surprising turning in on trend in the industry.

That's what the industry debt. So the followed on the DC modules keeps going up therefore, the micro inverters have to go up so.

IQ 7 plus is here to stay is here to ramp.

And on.

In terms of the pricing the way we do pricing is.

In terms of dollar per watt and so if you provide increased wallet share, meaning if I pro rating increase what is the price of that micro.

And what is automatically.

In addition, other things that are also contributing to pricing. In addition to just what is it quality et cetera on customer experience matters too that all variables on pricing but.

IQ 7 plus is definitely mode and we're coming.

Coming to the reverse side of the equation is IQ 7 plus required us to make some small tweaks compared with IQ <unk> IQ 7 migraine motor in terms of hardware so.

So the trends.

Transformer, maybe a little bit different.

Some of the transistors input transistors, maybe a little different.

So the cost is not the same of the micro inverter.

However, the game like what I said, we price products on value and make sure on corporate gross margin as always met.

We obviously like higher power products, because they give us a little bit extra margin compared to lower book.

As you can imagine.

So long and so on.

<unk>.

Yes.

Sorry, Budd when do you think you might be able to hit.

Okay.

The majority of 7 plus in Q2 or where are you in or if not do you expect to be majority of 7 plus in Q4. It seems like a lot of the channel is already converting has converted already.

Plus it's really the safe Harbor.

Inventory that that 7.

Yes, I mean, maybe.

I don't have numbers for you, but it is what it is it will be up into the right every quarter. That's all I can say.

Okay. Thanks for the detail.

Thanks.

Our next question comes from James West with Evercore ISI. Your line is open.

Hey, good afternoon guys.

Badri.

I know you're rolling out storage are tended to rollout storage in Europe, you wouldn't in Germany This quarter.

In Australia I believe in the second half does the fact that you're.

Thank you you have some constraints on some lead time issues that you're working on does that slow that international rollout or are you continuing on pace.

No, it's not going to slow my Australia rollout.

Like what I said, we will do them methodically and other markets like like how.

Sure.

We had a nice ramp in North America, I would say that North America last year.

4 corners, where we learned.

Where we learned from day installers weighted we learned from the homeowners, we course corrected and we did a lot of work like that every country is going to be different.

Germany, Germany, maybe a little bit easier.

<unk> may not be 4 quarters, maybe 1 to 2 quarters, Australia could be different because they usually have a little bit more meaning.

On the power grids on Australia may not be as table as Germany. So they will use backup more than Germany, so that will be.

May will be a little bit different and they're all different.

Good.

Voltages and frequency.

So we learned that for some time and by that time, although the manufacturing issues will be resolved.

Okay makes sense and then I know you noted.

A big acceleration.

<unk> on demand in June and you've gone through a lot of feeds.

Feedback cycles on feedback loops on on storage with just the culmination of all debt feedback or was there some specific component of the debt all of a sudden kicked in maybe the installation time or something like that that led to that big jump in June.

That will take it all day.

The way I said it right the introduction of load control that helped the reduced commissioning times debt that we really achieved in Q2 that help the adjustment of pricing that helped.

Also introduced.

<unk> on warranty.

Per customer.

So that if you do on storage only financing you have to pay less dollars a month right. So we introduced kind of these forward now we're introducing grid services and offerings for certain regions. So that will help.

On.

So basically.

Yes.

Customer and the last 1 on generate the generator compatibility, although we haven't released it it's coming so.

That will also help so I think all put together you can see that the ramp has.

It's Charlie.

Thank you.

Next question comes from J B Lowe with Citi. Your line is open.

Hey afternoon, Badri, Eric Adam.

Question is on capital allocation you guys still have a lot of cash on the balance sheet you time your share.

<unk> very well earlier this year and I saw that you also get another 20 million of investment.

On the private side I'm just wondering.

What kind of targets you are seeing out there in the marketplace and how do you juxtapose that against.

On the share repurchase potential, but you guys have now that you have another $500 million.

<unk>.

Yes, well thank you for the question.

We.

Our next we have a big appetite for.

Sure.

M&A.

But we are not willing to pay sometimes the price that we're aware, especially over the last few quarters now there is a little bit of a more market is opening over better some of this part from pulling back.

<unk> seen appears to be more volatile.

<unk> on the way we are doing the analysis in terms of IRR per park on so on on all of these acquisitions.

As a communication from Brightcove here I mean, we are very diligent on making sure that all the acquisitions that we do meet our high bar of payback IRR.

Price.

All of those things that are very important to us.

On.

When we think about capital allocation the amount that we have we serve for M&A is pretty important so that's something important to us too to convey.

Which will be opening over the next few quarters.

In terms of the fight.

Julian.

Over 3 year share buyback program that the board approved I think these phenomenal project allows us to redeploy that capital into share buybacks.

On the opportunity accounts with the volatility on the stock throughout that period, so meaning we are not.

<unk> hundred on using that 1.

More than strategically positioning the company to re buy the shares for example that we issue as part of the converts in this case, we have formulary share sexual we bought $1.7 million that our shares back at a reasonably low price. So thats just kind of.

Sales of how we are thinking in terms of the utilization of that.

<unk> approval by the board of $500 million over 3 years.

And finally, we know how to run the company, we're very little cash so my cash flow and cash that I mean on the balance sheet to run the company.

<unk> is being about.

I'll give you an hour between 300 or $400 million. So that tells you that as we continue generating cash we're going to replenish that over the year over the years right. So so that's kind of the program that we have.

On a lot of M&A insight.

Opportunistic share buyback on the 500 millions on a provided 1 over 3 years.

And quite.

Quite a bit of internal growth. That's why we commented on the opex as well as we see going forward, sometimes we decide to build that capability in house that means.

Hiring more people, increasing our opex, but we're still committed to be comfortably above the 20% operating.

For the company as a whole so hopefully that answer wrong, but the tail answer I'll give you a sense of how we are managing cash yes.

Yeah, that's correct.

Follow up question is just you know as you're kind of you're being cautious on the accurate.

And I agree with your rollout.

Kind of a higher level question like how should we think about let's say going into.

At the end of 2022, let's say what percentage of your sales would you expect IQ 8 to be as just given the debt.

Kind of changing nature of the rollout next year.

Yes, I mean look.

Our experience from IQ, 6% to 7.

That took about.

Both the 5 quarters.

And.

We're like you wait to be different.

Thank you everybody has been waiting for IQ eights.

And they are going to move to <unk>.

Thank you ate offers exceptional value.

Is for the first time you can.

And Brandon on Sunshine without the grid.

So.

Ill.

I think it should should ideally be faster, but let me put on my caution is that.

We we have.

We're in the middle of components Ablate shoes.

We cannot.

Full of ourselves.

I would say at least 4 quarters.

At least 4 quarters is what I think.

Could be.

Yes, plus or -1 or 2.

Okay. Thanks, guys.

Thank you our next.

Net of hedging comes from cash he has been with Piper Sandler Your line is open.

Good afternoon, and thank you for taking my questions.

So yes, so a few weeks ago <unk> announced they were entering the inverter space via the chiller call on acquisition you guys converted invented the micro.

<unk> 15, or so years ago, and you know the product better than anyone in the go to market strategy better than anyone else. So just curious how you think about you know maybe some of the some.

Some of the challenges that you think new entrants may face in trying to enter the space and compete with you and maybe even just <unk>.

And where do you think about the competitive landscape of of the of the <unk>.

<unk> market moving forward.

Yes, Hi, this is Robert.

Yes, there have been numerous entrants over the last 15 or so years. The bottom line is that the real business is it's very very hard.

<unk> high growth is even harder on argue that's why they were even more micro inverter and from from.

And there are hardly any left.

And it's because you have to achieve a level of reliability cost and performance.

To do that with a micro is extremely difficult to look we have a generally.

And missions on innovation.

Under under our belt, so we have incredible amount of experiencing.

We have had on arrows in our back actually.

So the bottom line is that again, we are relentless when it comes to innovation and when you think about innovation for us it's about innovation around semiconductors.

Generate on software to talk our ASIC, it's kind of the key to what we do with our micro so we are continuing to innovate in that.

The area.

So looking at kind of next generation materials like gallium nitride is an example of that and we're making sure that we continue down that path of.

<unk>.

And more value.

Driving more performance.

Lower cost and on.

Not compromising reliability in any way. So this is a hard business and we're really continuing down the innovation path.

Do they were done on already said I mean.

Momentum.

Adding momentum what are the other day as do our strategies to innovate.

We have.

The eighth generation today, we will fill NAV, the ninth and 10th.

Because of that innovation, we have 300 plus patents right now.

That's a lot of IP.

And.

We'll create more IP to fortify this position.

So.

We'll do what we have done in the last few years.

Yeah.

That's helpful. Thanks for that color from both of you and then just as my follow up.

And on the prepared remarks, you made some commentary on grid services and you know as you mentioned this is the first time you've talked about it.

Can you just give us a sense of the revenue opportunity. How are you guys are thinking about the revenue opportunity associated with good services to Enphase and then maybe even just more broadly with software in general because you've done then.

And in South Africa, and now Youre talking grid services, just how do you think about software revenues over time. Thank you.

Yeah.

Yes.

We are entering grid services, a little bit early to talk about revenue.

On revenue models.

The name of the game on this.

This.

This helps the homeowner.

At the end of the day.

If I can.

I can reduce the payback period for the homeowner.

I went along.

Along with our installers.

So.

If we do debt.

By offsetting meaning the homeowners can help the utilities.

But many times during the summer.

And a few times during the winter they get paid for it.

For example, the connected solutions program is a lucrative program with.

With the 10 kilowatt hour Enphase and charged battery.

That you can get up to $1500 a year in Rhode Island.

And you can get up to a thousand dollars a year in Massachusetts.

Extremely lucrative program of course the.

The dollars et cetera. Since these are still in pilot stage dollars et cetera are questionable might come down.

When they are in full full ramp.

When thousands such programs are debt amongst the United States, but it has started.

It is starting it is going to help us sell.

Solar plus storage.

And we are solving a real problem for the utility.

Down <unk>.

I'm going to be participating in with us.

And there are some interesting business models that very much.

And on a few a few times, we will on what it could be aggregators like in the case on connected solutions that our 2 utilities in the northeast national grid in average.

So the tariffs ever source and they have partnered with an aggregated.

And we worked with debt aggregate.

That's not necessarily the case.

We could potentially start working with the utilities.

We are exploring such.

Such partnerships on how that will work.

On the percent day.

It's still in the infancy stage.

So which is why I don't think its the right time to talk about revenue but.

We are going to understand this market a lot more.

In the next.

A few quarters and.

<unk> back to the connected solutions, where do we differentiate.

As our differentiation is we make it so easy for a homeowner.

The growth of its app and he can pick grid services and he can.

And roll on to grid services programs easily with a touch up on button.

And 1 thing you've embroidered he can actually monitor how much he is saving he can.

He can basically opt out.

Off the event like for example, if you ever event to model, where the where the utility warrants.

You bet.

Batteries and discharged you can opt out to date.

That option is also through the App.

You can set.

Your reserve and the battery normally the utility will search engine would recommend and 10% in order to give you the full grid services benefit, but youre going to just debt and the after.

So.

The App makes it seamless.

And of course, that's where we come in we want to make sure we take care of the homeowner and our installers and our partners there and we want to provide an exceptional experience for them.

Thank you. Our next question comes from Moses Sutton with Barclays. Your line is open.

Thanks for squeezing me in a bit of an ask your question thoughts on competition bidirectional EV charging them, how do you see competing with yours and other more holistic energy storage offerings.

<unk>.

Overtime is it a threat in any way it's of course, a limited product and what it can do but just thinking how you think of that evolving as the storage and backup market itself evolves over time.

Yes, I think we have described I think where growth.

And our goal on a M.

Look at it from a strategy point of view is to deliver best in class.

<unk>.

And home energy management solutions and systems.

We consider all the available resources in the home that starts with solar stationary storage load control generators fuels et cetera, and bi directional <unk> will play a key role in.

In providing a.

Homeowner experience, meaning that.

In the event of an outage for example, now you have documents document another.

Another resource available in order to ensure that you have.

Home stays up and you can ride through any outage, we do not consider this to be competitive.

In any way at all we consider that to.

An integral part of the overall solution that we're offering and we are.

Hum.

Our unique role to play in that because we do it upon electronics the communication of the software that entire range of debt home energy management system is what we offer I think bringing that bringing a bidirectional EV system on tour.

Our platform is going to just make the make the whole solution. That's much more resilient and I think that's a good a homeowner experience and like I said, we play a very neat Colbert.

Thanks, very good that's helpful and just 1 more I may have actually missed this.

Any logistics constraints further downstream on the AC module suppliers.

Flyer side from those module companies holding back Reorders of Micros, and enabling you to ship that supply to direct my micro sales to distributors and installers.

No that's not an issue.

Thanks.

Thank you. Our next question comes from the.

Heat Medline with credit Suisse. Your line is open.

Hey, thanks for taking our questions.

Maybe 1 thing just from the software on the permitting businesses, which we recently acquired and ramping up pretty well.

Yes.

Could you just talk about like is there any contribution from those businesses. So how should we think about debt.

Either in the near term on the longer term.

In the U S or other markets.

They're not going on breakout the revenue, but let me give you some color day.

Bart.

Solar I mean, we bought soft desk soft desk is.

Software company that makes.

And proposal soft correct for installers.

And license licenses to them.

And on the license fee in general is well understood by the industry.

And you can you can do some work on it. We also said debt we have 800.

50 <unk>.

<unk> charters.

Right now.

Utilizing that platform. So that we can give you a rough idea of.

Of the contribution.

And the more important thing to move more.

Important thing we are excited about areas.

Both of these companies.

On the software company and the permitting services, which I will talk about next both of them.

<unk>.

The record revenues this is the highest revenue.

And why are you because.

And on Enphase today as sellers.

Our product micro inverter that storage tool.

A lot of long dated charters.

Our installer account is meaning installers, we observed.

Out of the 5000 long tail installers in the U S.

We probably interact with.

At least.

500 on them.

And.

And so it's a huge opportunity.

On understanding the overlap between.

The installers who utilize.

On the solar glass.

<unk>.

And understanding the overlap.

On who actually buys the product.

So therefore that has enormous scope for us too.

Introduce our long tail of installers on white products tooth.

Solar growth plus.

And Thats, what we are going to do.

We are going to make the platform a lot better investing a lot more there.

We are going to have.

Shading, we're going to have.

Storage and we are going to make that a best in class.

Software to book.

That's on deep.

Soft desk, that's the acquisition based in Montreal debt, we completed early in the year.

The next 1 is even more interesting.

This is the permitting services company that we closed the acquisition in April.

That company does.

Permitting services for a significant fraction of the North American business.

The North American solar business.

Okay.

And there again so far.

The permitting services.

It has been restricted to a few big customers.

Simply because.

It is today, although we provided services to 24 hours.

And we think there can be a lot of efficiency that can be taken out.

By automating that permitting service to make it almost like a self service.

It takes.

A couple of hours versus $24.

So again the name on the game there is to take <unk>.

That install.

Installer count from a handful today, which is mainly big installers too.

<unk> thousand per.

Installers that we have.

Once again, that's what we're going to do.

By automation.

So and I gave you some color and.

But the short story is both businesses are exceeding the targets that were promised to us before.

Yeah.

Both have good leadership and we are thinking of interesting ways. The 2 companies can work together.

Matt I think the name on the game is to introduce both services to our installers.

Got it thanks for the explanation would be helpful.

Maybe just on the just going back to on the questions on the competition in the mitral on water space.

Could you maybe talk about.

It would make sense to use IQ it'd be kind of a product for the residential market because that.

That seems to like BD.

For a couple of your competitors to offer 24141 in the residential space.

Do you expect any of.

Those applications with accurate dean residential or getting a 1 for 1 makes more sense from a technical point of view or from a.

Customer point of view.

Yes, I mean look.

We think on 4.1 makes the most sense.

Thats, our bread and butter business why because.

Quantity.

Once again when you when you when you put a lot of electronics debt.

2 panels that are connected foot panels that are.

Connected.

On.

We cannot provide that kind of exceptional quality to the homework.

It's difficult.

However.

Net are some regions where.

And some businesses like the commercial business.

And don't have the same stringent requirements.

And so for those.

Businesses.

It may be economic value to us.

<unk> panel.

1 micro inverters.

Thank you a day product.

And we'll be looking.

At that time.

It's not an easy question for our strength there will.

We will be looking at debt hard, but we are never going to deviate from our core product being <unk>.

When we go like 2.9 when you go to IQ10, we wanted to make that single micro inverted a lot better.

That is the colored photos, we are going to be making debt a lot better but in markets like.

Australia for example, where our market share.

We want them, we want to improve our market share we may try some experiments.

Okay.

But there'll be done bringing on methodically.

And without deviating from our core platform.

Thank you. Our next question comes from Joe Osha with Guggenheim Partners. Your line is open.

Oh, Hi, there yeah, 2 completely unrelated questions first as regards all up the conversation.

About grid.

Grid services I'm trying to understand how this works because the the plans on some of the big developers like like Sunrun for example, or Mr. Cooperative relationship or are you going to begin competing with some of the initiatives that the large developers have on their own.

Yeah.

I'll just start.

No it's actually it is.

It has cooperated because we are the ones who provide the actual or the developers on the equipment price. So we have a deep understanding of how the whole system within the home interact plus all of the software platform that allows gives you access into.

Into the into the system itself so.

We feel that's doable.

On the relationship with <unk>.

It's positive in general I want to make a comment about about grid services. If you look ahead.

It will be a requirement I mean unique coordination amongst all of the systems that are deployed.

Because as you think about the world evolving into a world of EV etcetera on home electrification. This coordination will become more and more important so having a system. That's extremely intelligent that's behind the meter that is coupled to a very intelligent platform. That's in the cloud.

It is critical.

And that's a big competitive advantage for us because we have built a system, we have architected that system from the bottoms up that allows very clean energy.

And effective communication and control from the cloud to all of these day yards that are deployed behind the meter.

Okay.

Okay.

Yes to add a few things mode.

We know our markets evolve.

So right now on the solar market if you see.

<unk>.

It is 60% loan.

30% lease.

10% cash.

That is an appropriate storage market will go and.

In the same way.

And on the advantage we have is we work with all customers.

We work with.

On slide syndrome, who.

Who have leasing.

We work with men.

Many number of long tail of installers, who are.

Basically providing help.

Working with the Fintech partners they offer.

Loans to the homeowners.

So when we come in is we can provide any kind of solution.

For the non.

Market, what we can do where the homeowner actually owns the homeowner owns Nevada.

When the homeowner onto the battery and the EC is significant savings is.

Decision on buying the batteries easy.

And alright.

Whether it's whether it's loan weather.

Whether it's lease we're going to be debt. It is our platform.

And we are going to make it so easy for the homeowner.

To save money.

And our App gives unprecedented visibility.

So really sort of is everybody.

Okay. Thank.

That's that's helpful. And then are again totally unrelated question, you've obviously been very successful with your decision to embrace LLP chemistry seems like on.

Other parts of the industry, including even parts of auto.

Our starting to maybe take a look at toggling to that chemistry.

As you look out does that potential we create any.

Availability challenges for you.

It's a tough question on Inc.

In the future, but we like we nonetheless be.

We like.