Q3 2022 Enphase Energy Inc Earnings Call
Good afternoon, and welcome to the Enphase Energy third quarter 2022 financial results Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.
Please note this event is being recorded.
I would now I'd like to turn the conference over to Karen <unk>. Please go ahead.
Yeah.
Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's third quarter 2022 results on today's call are Badri Cup under arming, our president and Chief Executive Officer, Andy Yang, Our Chief Financial Officer, and Ragu below our chief product officer. After the market closed today and issued a press release announcing the results for its third quarter.
<unk> ended September 30th 2022.
During this conference call <unk> management will make forward looking statements, including but not limited to statements related to our expected future financial performance and capabilities of our technology and products and the benefits to homeowners and into dollars are.
<unk>, including manufacturing and customer service and supply and demand anticipated growth in existing and new markets. The timing of new product introductions and regulatory matters. These forward looking statements involve significant risks and uncertainties and our actual results and the timing of events could differ materially from these expectations for a more complete discussion of the risks and uncertainty.
Please see our most recent Form 10-K, and 10-Qs filed with the SEC. We caution you not to place any undue reliance on forward looking statements and undertakes no duty or obligation to update any forward looking statements as a result of new information future events or changes in expectations. Also please note that financial measures used on this call are expressed on a non-GAAP basis.
Otherwise noted and have been adjusted to exclude certain charges. We have provided a reconciliation of these non-GAAP financial measures to GAAP financial measures in our earnings release furnished with the SEC on form 8-K, which can also be found in the Investor Relations section of our website now I'd like to introduce Patrick The Thunder, Amon, President and Chief Executive Officer of Enphase energy.
Eric.
Good afternoon, and thank you for joining us today to discuss our third quarter 2022 financial results, we had a good quarter.
Reported record quarterly revenue of $637 million achieved quarterly non-GAAP gross margin of 42, 9% and generated free cash flow 179, $1 million approximately 47% of our Q3 micro inverter shipments of our IQ eight.
We exited the third quarter at approximately 43 12 31, this means 43% gross margin.
<unk> percent operating expenses and 31% operating income all as a percentage of revenue on a non-GAAP basis, we will go into our financials later in the call.
Let's now discuss how we are servicing customers. Our Q3 M. P. S worldwide was 70% compared to 68% in Q2.
Our North American NPS score was 71% the same as Q2.
Our average call wait time was 4.8 minutes compared to 4.7 minutes in Q2.
Now, let me call wait times over the past few quarters are related to the rapid growth in our business is not happy with the call retirement, we are targeting to get them to call wait times under a minute by more aggressive staffing of our teams in U S Europe and Australia.
We remain laser focused on customer service the emphasis on superior customer experience as part of that increase you can see we had a rather anemic during the recent storm in Puerto Rico, and Florida, our customer service team field service technicians, and engineers were able to help customers with their shoes, they finish but our systems performed well in general there is some more.
Room for improvement and focus on St. Jude.
Seamless installer and homeowner experience through such events. Our teams have shared many stories with us on their efforts to help customers and customers have also expressed their deep gratitude for the health I'm quite proud of our teams.
Let's talk about micro inverter manufacturing.
Situation remains quite stable right now near to.
Diligent supplier management as well as part of vacation of multiple sources.
Quarterly capacities around 5 million micro inverters today, we.
We are on track to begin manufacturing and flex Romania, starting in Q1, 'twenty three enabling a global capacity of 6 million micros per quarter.
The inflation production act or you are a and extended the investment tax credit ITC for residential solar.
To 30 per cent for another 10 years and also implemented a standalone stoneridge I D. C. With the same terms both are very good for the industry at large and that he shouldn't be I already has a provision for 11 cents, but do you see what <unk>.
<unk> based tax planning for domestic manufacturing of micro Inverters. Therefore, we have been actively looking at manufacturing in the U S.
We are working with three contract manufacturing partners, one new and two.
Two we have today already.
We plan to open four to six manufacturing lines in the U S by the second half of 2023.
Our thought process is that we will need the additional capacity anyway, considering our fast paced growth globally.
There are still a lot of questions to be answered regarding the actual implementation of the April domestic manufacturing U S Department of tragedies seeking comments from stakeholders in early November but a clarification on these questions and we are working with industry partners and stakeholders to provide comments once the details have been.
Finalizing the implementation is clear the U S manufacturing could provide a substantial benefits in terms of the production base tax credit.
Let's talk about IQ batteries, we are on track to add an additional cell pack supplier from China early next year for a third generation battery.
Lead times for batteries are 10 to 12 weeks, allowing us to respond a little more quickly than before for customers.
Let's move on to the regions of the U S and international revenue mix for Q3 was 71% and 29% respectively.
Strong growth in Q3, both in North America, as well as in Europe , and U S revenue increased 7% sequentially and 16, 9% year on year.
We had record quarterly revenue and record sell through for micro Inverters in Q3.
Our micro involved with channel inventory in the U S was at a very healthy level at the end of Q3, one of tillage channel inventory was a little elevated you don't longer install times.
I'll go into more details about the rank your batteries made during the call.
In Europe revenue increased approximately 17% sequentially and 136% year on year.
Led by strong demand for our micro inverters in the Netherlands, France, Germany, Belgium, Spain, and Portugal, and photo I'd IQ batteries in Germany and Belgium.
Microphone burner supply continues to be tight.
And channel inventory continues to be below normal.
We continue to invest heavily in Europe , we are expanding engineering sales and customer service teams along with opening a manufacturing line in Romania in Q1 'twenty three.
In addition, we expect to begin shipments of IQ eight micro inverters into the Netherlands, and France in the fourth quarter.
And rest of Europe in the first half of 'twenty three.
We also plan to introduce IQ batteries into Austria.
In the fourth quarter.
We recently acquired Green Com networks, a home energy management software company with headquarters in Germany.
The acquisition allows us to add a local engineering team to service the accelerating clean energy transition in Europe .
Installers with our complete home energy management system, integrating and phase micro Inverters and Enphase batteries with third party, EV Chargers and heat pumps, and enabling homeowners to monitor and control all of these devices from the end of Phase F.
In summary, we are quite pleased with our growth in Europe look forward to the continued momentum.
In Latin America revenue increased a 100% sequentially.
And 129% D&O and here we.
We had steady growth in our solar plus storage business in Puerto Rico during Q3, and expect continued growth in the region.
The demand for solar and storage has increased since the recent pelican.
The storage attach is nearly 100% in Puerto Rico.
And IQ eight micro inverters as relevant to your batteries are wearing a differentiated solution.
And valuable to customers during the storms.
Now I'll provide some general color on Australia, Brazil and India.
Australia is a solar market continue to recover in Q3, and we believe the forecasted increase in electricity prices really drive demand, we expect to introduce IQ batteries in the first half of 'twenty three in Australia.
Yes, it's for Brazil, we had sequential revenue growth in Q3 due to a steady increase in demand for IQ seven a micro and workers.
In India, we made progress on adding more installers in the unfit installer network.
The module power is substantially increasing in these emerging markets.
We plan to introduce a 40 watt AC high power residential microenvironment in the first half up 23 to match the increase in module color.
Let's discuss the company's overall bookings for Q4.
And the demand for Q4 is quite robust and easily exceeded the higher end of our guidance range.
As for Q1 is a little bit early to comment, but we see that the bookings are quite healthy right now.
On supply the component availability is getting better.
There are still some spots of tightness that keep coming up from time to time and our operations team is doing a nice job closely managing the situation.
The logistics situation has also improved a living but with reduced shipping times.
Let's talk about batteries.
We have now certified approximately 2100 installers worldwide since the introduction of a few batteries into North America, Germany and Belgium.
We shipped 133.6 megawatt hours of Ico batteries in Q3.
We are working hard to improve our customer experience as it is not yet up to our standards.
We continue to host a weekly installed around the table to deeply understand their pain points.
Our installers in North America experienced a median commissioning time of 118 minutes exiting Q3.
We have made substantial improvements in our software, which was just released a few days ago.
It was commissioning times further and make good transitions motor robust.
With these changes we expect the median commissioning times improved to 80 minutes exiting Q4.
The third generation of battery product will have additional features which further addresses the installer pain points.
Our installers and extremely busy given the strong demand.
Any inefficiency in the installation process impacts their profitability. This means that a battery and solar.
The battery installation experience must be as good as the micro inverter experience, which is what we are working to improve.
With the significant changes we are making in the product. We are confident that storage installations will become as efficient as micro inverter installation and that has a dessert installer profitability will improve.
And storage deployments will accelerate.
We expect to ship 120 to 135 megawatt hours of ICU batteries in Q4.
And we expect steady progress throughout 'twenty three.
On the new product front.
We expect to generate our third generation Nike battery.
Starting in North America, and Australia in the first half of 2003.
We then plan to introduce it into Europe and emerging markets in the second half.
The battery will have wired connectivity to the IQ Gateway and system controller V. A can bus.
The modularity of the batteries five kilowatt hour.
The battery will have double the continuous and peak power compared to the second generation, enabling heavier loads such as air conditioners to start more easily.
We are targeting commissioning times to be sub 30 minutes with this battery.
With every generation of batteries, we expect to make steady improvements in the customer experience just like what we did with micro inverters.
We're already working on our fourth generation I do badly domain produced in 'twenty 'twenty, four which will result in a substantial energy density improvement compared to the third generation.
Let's talk about our product for small commercial solar in the U S.
Based on customer feedback from pilot runs on IQ eight beach, which was our previous product we are increasing the power of the micro inverter by 50% from 320 watts to 40% part D. C and we are reverting back to a single panel architecture. We understand this is a few more months of delay, but we think it is the right long.
Term decision as panel power continues to increase rapidly and the small commercial space.
We expect to pilot this product in the first half of 'twenty. Three this product is very closely aligned with the full daily what residential micro inverter for emerging markets, except for the three phase cabling.
We are bullish about penetrating the small commercial solar business shortly with this powerful new product.
Let's just because EV Chargers, we shipped more than 6370 charges in Q3 compared to 8250 in Q2, we are on track to manufacture infant branded EV Chargers at our contract manufacturing facility in Mexico by the end of this year, helping us to increase capacity and cut down costs.
As for new products, we expect to introduce smart EV Chargers to U S customers in the first half of 'twenty three followed by Europe .
We are excited about this product as it will provide connectivity and control, enabling use cases, like green charging and allowing homeowners visibility into operation of the Enphase solar plus storage plus EV system.
Through the end of phase that.
We are very bullish about our EBIT charging business and continued to invest in a significant.
Let me give you a quick update on our Enphase installer network or yeah. Yeah. We have now on boarded more than 1200 installers draw the yen worldwide through a highly selective process focused on installation quality and an exceptional experience to homeowners across the globe.
We have talked about our installer platform on previous calls from lead management to design and proposal defentect connectivity to automated permitting to installation and commissioning in the operations and maintenance, we recently added back.
Battery design and document management feature to our solar graph software.
We are also making enhancements to our solar graph software to cut down permit plan said creation cycle time significantly.
Next I'd like to comment on NIM three in California.
As of now there is still no decision from the California Public Utilities Commission CPUC.
Hope the CPUC eliminates the grid participation charge, while providing a glide path for the solar only market as well as incentivizing the solar plus storage market.
In summary.
We are happy with our performance and strong demand for our products. We are working on several important initiatives to grow our business.
Fully ramping IQ eight micro inverter and across the world.
Fixed and customer experience are not IQ batteries.
Accelerating out of business in Europe further.
And introducing high powered ICU H micro inverter variance, but residential and small commercial solar markets with that I will turn the call over to Mandy for a review of our finances Mandy.
Thanks, Patrick.
And good afternoon, everyone.
You'll find more details related to our third quarter of countries in Asia as well.
For the fourth quarter of 'twenty to 'twenty two.
We have provided reconciliations of these non-GAAP to GAAP financial measures no earnings release posted today, which can also be found in the IR section of our website.
Total revenue for Q3 was $634 $7 million, representing an increase of 20% sequentially and a quality high tech we shouldn't approximately 1700 <unk> nine megawatts DC on Nickelodeon brothers.
133.6 megawatt ourself.
non-GAAP gross margin for Q3 was 42, 9%.
With a 42.2% due to the.
The increase was driven by a sample IQ eight months, partially offset by the further strengthening of the U S start at this juncture.
Our Q3 gross margin was negatively affected by 70 basis points from the euro to USD FX rate declined from Q2.
Yeah first margin was 42.2% okay.
non-GAAP operating expenses were $78 $6 million for Q3 compared to $71.2 million for kitchen.
The increase was driven by investment in R&D, how can I say.
Yes.
GAAP operating expenses were $130 million to $45 million for Q2 compared to $125 million for Q2.
GAAP operating expenses for Q3 include a $49 $1 million of stock based compensation expenses and.
$4 $8 million or so of acquisition.
And the foundation for acquired intangible assets.
I can try to parse that consolidation.
I don't know that.
Income from operations for Q3 was $193 $9 million compared to $154 million for Q2.
Okay.
Income from operations was $135 $4 million compared to $94 million, okay too.
Oh, okay.
Net income for Q3 was $175 $5 million compared to $149 9 million subject to.
This resulted in non-GAAP diluted earnings per share of $1 25 for Q3.
Compared to $1.07 for Q2.
Net income for Q3 was $114.8 million.
Compared to net income of <unk> <unk>.
$77 million for Q2.
This resulted in GAAP diluted earnings per share of 80 cents for Q3, compared with 54 cents for Q2.
We exited Q3 with total cash cash equivalence and marketable securities.
Approximately $1.42 billion.
We have approximately one point to $5 billion at the end of Q2.
Interestingly, we generated $188 million in cash flow from operations and $179 $1 million in free cash flow.
Capital expenditure was $8 $9 million for Q3 compared to $27 million for Q2.
Now, let's discuss our outlook for the fourth quarter of 2022.
Our revenue for the fourth quarter of 2022, it will be within a range of 682 $720 million.
With increased shipments of 120 to 135 megawatt hours of eye to Paris.
We expect GAAP gross margin to be within a range of 39% to 42%.
non-GAAP gross margin to be within a range of 40% to 43%.
Once you exclude stock based compensation.
Acquisition related amortization.
We assume that conservative euro FX rate in our Q4 guidance.
We don't expect significant impact to our financials from the U S Eastern time.
And then most of our revenue is denominated in U S dollars.
We expect operating expenses to be within a range of $152 million to $156 million.
Including approximately $65 million estimated for stock based compensation.
Restructuring charges for site consolidation.
Physician related expenses and amortization.
We expect our non-GAAP operating and comfortable to be within a range of $87 million to $91 million.
As we discussed last quarter, we thought you entered their profit reported with respect to use the loss of our net operating loss and research tax credit carryforward tiny tiny too that'd be kind of U S.
Taxpayer.
Our non-GAAP tax expense to reflect cash taxes.
Yes.
Our non-GAAP tax expense for the fourth quarter of 2020 to be approximately 15% of our non-GAAP profit before tax.
We expect cash taxes to be approximately 22% of profit before tax for the fourth quarter of 'twenty two.
Moving forward to 2020 three.
We expect to have our non-GAAP and GAAP tax rate at 22% plus or minus 2% before any II impact.
<unk> implemented several times to us for domestic manufacturing.
Tax rate may be reduced from 22%.
In closing we are pleased with all our financial performance.
Point of our Q4 guidance. So that's the first three quarters of 2022 actual.
SMA Huntington due to year over year revenue growth of 67%.
And in our non-GAAP gross margin to 42%.
non-GAAP operating income to 29% of our estimate it 22 revenue.
With that I will now open the line for questions.
We will now begin the question and answer session.
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Our first question is from James West with Evercore ISI. Please go ahead.
Hey, good afternoon buttery.
Alright.
But I'm curious how you're thinking about.
So you're increasing your manufacturing expansion in particular Europe , given the strong growth. There do you think it's time to maybe go ahead with another when you bring them online on now I understand that but bring another line on and then maybe secondarily with the I O Ray how are you thinking about U S manufacturing capacity.
Right, we talked about it earlier in the in the prepared remarks. So we are.
We are opening the line and flextronics.
Yeah.
That will start production in Q1 of 'twenty three.
That that's got a fully automated line capacity is around 750000 units.
We'll review that and see if we need to add one more line immediately.
Now coming to the U S. We explain the following.
Hmm.
Because of the production base.
The tax credit of 11 cents per watt on micro Inverters manufactured in the U S.
We are planning.
For domestic manufacturing here.
We are working with three contract manufacturing partners, two of which are existing and one of which is new.
We are planning to add a total of four to six.
Lines.
In the U S. At this time, we are planning that by the end of Q4 'twenty three.
So phone lines, you know per line would be 750000 units a quarter.
All lines will be 3 million units a quarter in the U S.
Six lines would be for the half a million units.
Quarters in the U S.
We are going ahead with those plans because you know for.
For us anyway, we need the auto lines.
Regardless of where they are so we are already going ahead with the capital.
Because we need those lanes no matter, what but then we are in.
Looking at the finer details of the year, our implementation plan, we are working with them.
The department of Treasury as well as all of the steak.
Stakeholders there.
And basically there are some key details and clarification that needs to be finalized.
Regarding our domestic content et cetera.
Once all of those are.
Clear to US then we can tell you I'm more precisely the financial impact of our actions.
Okay. That's very helpful. Thanks, So thanks, Badri and then one question on the battery side, you talked about the the install.
There may be issues, there with the 118 minutes or so and you're getting that down.
Is that really purely a software and maybe modularity issue on the actual battery itself or is there more more to that.
Well I mean, it's a complex system.
And you know it's got it's a mixture of both hardware.
And software.
And basically.
You know first of all to give you a big picture that we introduced our batteries in the third quarter of 'twenty 'twenty.
We introduced batteries at that time.
Our premise was it it's an AC battery.
It's an adequate battery there is no liquid cooling.
Marty.
Refined three kilowatt hours added at that time.
It is easy to use.
And are you know we plan to provide 24 by seven support.
All in one system with solar plus storage.
I think you know we needed to do better wasn't installation experience of installers.
The commissioning time, so we it's no secret we have highlighted that in almost every call. The commissioning time was multiple hours before that now.
It's a lot better a lot more stable we have learnt a lot is incredible.
The amount of learning that.
Regarding the company. In addition to commissioning times are there issues.
Your question B.
Making the battery performed flawlessly through through all types of great transitions is by no means easy.
We have learned we've learned that in places like Puerto Rico with the grid basically can have a ready ready deep slow which has very high flow things can change drastically.
Voltage and frequency can change yet we need to make sure our customer experiences.
He's right.
And we have learned a lot.
We made mistakes.
We've learned from it from both our installer round tables as well as <unk>.
Customer calls, we've gotten better and better and better with.
With every quarter I think now we are in great shape as what I would say rich.
We just released software.
That'll help.
In commissioning and a better experience and great transition like what I said.
None.
We are incredibly optimistic.
In storage, our installers, when we meet with them on a weekly basis, they want to install more of Enphase batteries.
And we need to help.
They improved their profitability so I think.
That the improvements that we made.
Will help a lot in Madison, we learned from one generation to another generation like hold we have eight we had another eight generation of micro inverters.
We're going to be in the third generation of batteries pretty soon.
Right there we are.
Going to go to a wired you know architecture today on a battery is based on a zigbee wireless architecture, we're going to go to a wired architecture that is similar to the automotive standards as the can bus.
That'll make communications quite robust in addition, we're going to double.
The continuous and peak power, which means that it becomes they don't need to buy more kilowatt hours.
For the air Conditioner.
For example.
<unk>.
We'll be able to provide a lot more juice for the same kilowatt hours in terms of discharge pulse.
So the combination of all the things I said.
I think we're in a fantastic shape.
Our installers.
Want to use us.
And we're gonna make steady progress.
Throughout 2023.
Okay, great. Thanks, a lot.
Thank you.
The next question is from Colin Rusch with Oppenheimer. Please go ahead.
Great. Thanks, so much for the detail on the incremental functionality in the battery I'm curious about the decision to add those features and is that coming from the field is that you know was that on the roadmap initially and are those elements real drivers for incremental demand as you bring the port in Uruguay.
I mean, they are coming.
Both somewhat already planned.
And some are coming from the field. This is why we made without installers.
Their requirements.
They have a long list of requirements, which we carefully review and we put into the features we are already planning.
You know I said about the third generation that will come.
In the first half of 'twenty three we're already working on the fourth generation.
Our technology team the CTO team is already working on the fourth generation, that's got more feedback from the installers.
Our you know.
Product development cycle times are a little bit long, which is what I'm suddenly you're working on.
And so to answer your question I mean, we're learning all the time from the field.
Some things that are just good to do that we have already planned prior but a lot of things we learned from it in stores.
That's that's super helpful. And then on the commercial rooftop market you know in terms of changing the approach can you talk a little bit about the margin opportunity you know with the change in architecture and an mis approach versus what we had thought about before with the.
The the two models for micro inverter and how we should think about that relative to corporate corporate margins.
Yeah, I mean or the thought process when we talked about IQ eight b before it was okay. We we can generate we can get a 640 watt micro inverters that addresses two panels that means per panel.
Micro inverter will produce 320 Watt AC.
And yes, we have been a little bit delayed on that product.
And what when we did pilot testing a few months ago. Our installers basically you know once again gave us feedback that.
The module roadmap for small commercial it is well beyond <unk>.
500.
What's right now.
And if it is 500 and you take 500 divided by three 'twenty. That's the D C. A ratio of 1.5.
On buying five is is not ideal.
We want to stay under 1.3.
So for us.
And how we thought about it hard.
We said.
And our installer feedback is critical.
We need to.
We need to change we need to get.
Our product with much higher <unk>.
<unk> powered.
Earlier, we were not that much advanced on game.
Now.
What we can do is to pack that food 80 Watt <unk>.
AC power into the same footprint for IQ Tonight.
So in <unk> nine we plan to have that food 80 watts.
A V C in the same footprint as a QE.
And how is that possible it is possible because of innovative technology like game.
So again, our sense for gallium nitrate.
Gallium nitride output transistors, right no real silicon transistor 600 volt silicon transistors.
These gang transistors can basically they have the thermal characteristics can withstand.
High powered.
And so those will enable us to keep the footprint.
Quite quite competitive and state of the art and then the.
Additional benefits on the Gan allows us to operate the fact that the higher frequency today, we operated under Kilohertz Gan allows it to operate.
A lot more up to one megahertz, we are planning to utilize one megahertz, what I <unk> Tim.
<unk> nine we will probably be around 200 to 300, kilo Hertz and and then what happens is the transformer scales.
Basically two these two one over the square root of the increase so that means that the transformer can come down the size of the transformer can come down.
You know the transformer is big and you have seen the round around thing they are in the top left of the micro inverter. That's the transformer so that footprint can come down the volume can come down there.
The first can can still be the same.
And so there will be an opportunity. Although we are not planning to do in the D. C stage, yet implement gain in the D. C stage theres opportunity for us to implement Gan in the D C stage as well.
So lots of optimization possible name of the game is to keep the footprint the same not bloated.
Our size is important for us and I think we can get the cost structure as well you know under control and if we are able to pack in <unk>.
For 80 Watts is C punch into.
Similar number of components similar cost structure than we'd actually get the cost benefit of that in terms of cost per watt.
Okay.
Sure.
Got it.
I think I'll take it offline thanks guys.
The next question is from Mark Strouse with Jpmorgan. Please go ahead.
Yes. Good afternoon. Thank you very much for taking our questions.
I've got two questions, maybe I'll, just kind of roll them into one the IQ eight we've you mentioned that was 47% of shipments this quarter I believe in <unk> that number was 37% are just kind of what drove that that seems like a relative kind of slowing than what I would've expected kind of the progression over the coming.
Orders to be.
And then the second part of that is no.
Despite that relatively.
Slowness in IQ age.
Gross margins are still coming kind of ahead of expectations. So just a bit more color on those two those two metrics. Please.
If you see you got to you got to.
Look at it a little bit carefully it's 37% of 3.3 point 3 million micro Inverters that we shipped in Q2, that's approximately one point something.
In Q2, while now it is 47% a full point 3 million micro and murderous though their vote.
I would say the IQ eight micro inverter volume has doubled from Q2 to Q3.
What we have seen historically the transition.
It's complex it can take over a four to six quarters, that's what I mean around four to six quarters. This is what we told you before.
We started Q1 was it 20 I think got 19 Q2, 37 Q3 47, we.
We expect it to further climbed in Q4.
Our target is to get to 90% conversion in Q2.
What are the target is.
You asked a question on gross margin.
<unk>.
On gross margin.
Mix of IQ eight.
What's higher like what I told you 47%.
In addition, you know we redo several initiated was done.
On World class cost.
It it's.
It's not that we.
We are here only working on IQ seven to eight conversion we are constantly looking at.
What are the opportunities for us to see.
Save money it could be in a you know putting price negotiation it could be converting our bulkhead from a custom bottle can do as.
Well to a standard bulk kits. So we can eliminate cabling.
It could be.
You know working on the cost of a heat spreader.
It could be working on elimination of off and I see a small IC by integrating it into the ASIC Sylvia.
A lot of cost reduction programs that are ongoing.
Any point in time.
And we have seen some of the benefits of that coupled with IQ eight.
Very helpful I'll take the rest offline. Thanks Badri.
Thank you.
The next question is from Brian Lee with Goldman Sachs. Please go ahead.
Hey, guys. Thanks for taking my questions.
Maybe first one for you badri.
We shape the color around the U S manufacturing strategy here heading into the end of 'twenty three.
Can you kind of speak to I know you mentioned quarters declines in a number of units per line, but.
Your your megawatt capacity on the inverter product and my grandmother product that's been going up steadily you got a $323 50 to 390 is what you printed this quarter, but then you've got the commercial product that's going to be all the way.
So as we kind of think about mix implications for what the actual megawatt or perhaps any new York gigawatt or perhaps there's going to be can you kind of get a sense of.
Should we be thinking of doing 131.
Mike.
Micros on average out of the corner fixed lines are you going to be doing some commercial as well. So it would be all the way up to <unk> and then.
I guess consistent where you know on that same topic the two to three.
Contract manufacturers, you're talking to here in the U S.
What are the sort of early discussions around is the credit. It is it's going to be a credit nuomi capture are you going to share some of the economics, what what are some of the discussions you're having with those partners.
Yeah I mean.
The answer to your first question is quite simple.
We believe.
The U S residential market as well as the Europe residential market will.
We'll keep you know module requirements will keep going up and we have the right products in the IQ eight family to take care of it you have a product the highest vote a family in the IQ eight.
Our family is IQ eight H.
And that is 384 to watch E C.
So we expect you know slowly out of mix to move from IQ eight plus.
Two IQ eight H or wood over the years.
However, the emerging market if you see you know.
If you see India, you see Australia.
If you see Brazil.
Even even pockets in France et cetera.
Is.
They're the module power is increasing disproportionately.
And 550 watt panels, sometimes are common.
There so the full data you are basically microbe.
We'll be able to address the residential emerging markets for solar.
And then I talked about small commercial.
And the same for the 80 watt micro with minor changes for three phase cabling.
We'll be able to address the small commercial market for quite some time.
Was there a game the panel voted claim being about 500, even if it goes to 600. This product will still have an outstanding D. C. S duration. So.
To answer your question most of the volume will be closer to the.
384 watch so over time that'll be and a portion of it will be.
We'll be at 40 and this line these lines I'm planning and it's still early days these lines I'm planning.
Can produce product for everybody not just the U S could.
But also produce product.
Other you know other markets.
Second question you asked.
The financial discussions with the contract manufacturer we are still in the early stage we have signed.
You know a letter of intent with those however, I think we still.
Need a lot more clarification from the.
From the U S government on.
You know what kind of domestic content they need.
And other rules, whether it's the whether it's a direct direct pay out or whether it's the tax credit.
There's too many fine details that need to be ironed up however for us. The logic is we are anyway growing.
Faster as a company we have to bid.
Extra lines somewhere and therefore these lines that I invest in.
They're not going to be wasted.
They are not going to be you know extra there will probably be required you can think about it is accelerating them by a few months.
So stay tuned we will you know as we know mode. We will we will shed a lot more details with you on.
On the financial benefit.
Okay Fair enough Super helpful. Just stomach I just squeeze in a quick modeling one.
I know this will be lumpy quarter to quarter, but if I look at them.
The implied ASP go on this.
This is the first quarter in a while where it was down sequentially and not only by a decent amount versus the five disorders is there something in the mix here in the corner of Hudson, we'd be thinking about.
And that price trend.
Yeah.
Yeah, I mean with regarding pricing the pricing remains stable. So it must be mix related and they will have a team follow up with you after.
Okay I'll take it off line.
Your next question is from Eric Stine with Craig Hallum. Please go ahead.
Yeah, Hi, its Aaron is Paul on for Eric Thanks for taking the question.
Thank you Bob.
Thanks, and on the battery side, you know you kind of mentioned the China capacity coming out in the first quarter can you just remind US you know what that gets you to an and then how you're thinking about capacity as we look forward and then any thoughts on kind of U S. As you think about that.
Yeah I mean.
The third generation battery.
He is going to be released in the first half of 'twenty three.
And for that battery, we are going to add an extra self back supplier from China.
And in General you should think about our battery capacity.
Be well not off.
250 megawatt hours a quarter, that's what we're going to get.
With regarding U S manufacturing of batteries, we don't have any concrete plans at this point in time.
We are looking at it but we will we will share something when we are ready.
Understood. Thanks, and then maybe just one follow up you know great girlfriend, and the EU can you just kind of talk a little bit about the competitive dynamics there with the growth you're seeing and then just you touched on it a little bit, but maybe a little more on the investments that youre looking to make in those markets.
So in Europe .
We're very strong in the Netherlands, we are continuing to win customers there.
We are strong in France as well.
We are starting to grow a lot significantly in Germany.
We had.
We have a healthy business in Belgium.
Spain is also ramping for Spain, and Portugal are ramping for us.
We are starting to look at.
You know Poland, Austria.
There will be starting to.
Ramp a lot of our efforts there as well as Italy.
That's the high level view.
We have.
You know, what we realize from Germany as that sector coupling is very popular what does that mean and why why is it important.
Natural gas prices in Europe .
Is causing people to consider full home electrification.
When you want to electrify your home you need everything to be connected.
You need them you know your your mobility.
It needs to be connected to you.
So we are energy system.
Heating equipment needs to be connected.
So.
Our sector coupling is basically the intersection of the renewable energy sector.
The mobility sector and the heating sector.
Therefore, it mean and.
And how does the management solution that we provide.
Needs too.
Talk to these seamlessly.
This is why we bought a home energy management software company.
Called Dream come networks.
All they do is to efficiently met work third party EV Chargers and heat pumps.
<unk>.
Our solar meaning enphase solar and storage.
So that we can we can address.
We can help in the full home electrification trend that is happening in Germany. So that's a big deal.
Big deal and it is accelerated due to the energy crisis.
That's slowly spreading to the other regions as well and I think eventually although Europe is ahead.
Surely it will come down it will come to the U S and other regions.
Yeah.
So that's big for Us and we're excited to have an engineering center.
In Germany now to cater to customers.
We're also introducing you know as far as IQ eights are concerned.
We are introducing IQ eight's too.
All countries in Europe .
As well as Australia.
We are introducing the Netherlands, and France in Q4.
And we will introduce a more countries in Europe .
By the first half of 'twenty three.
As far as batteries or concern today, Germany.
In Belgium.
Or where do we sell a lot of batteries to we are going to add those three up pretty soon in Australia by the way very interesting market I think it is.
It is 800.
You know megawatts of solar and with a very healthy attach rate almost greater than 80%. So very interesting market will be playing there pretty soon I talked about coal and already we are making plans.
So lots of things happening there and because we started off from a small revenue base in Europe , we've been.
Growing quite nicely with double Europe revenue from.
'twenty 'twenty to 2021.
We are going to once again double the revenue from 2020, one to 2020 two.
And we expect very healthy high double digit growth from <unk>.
2022 to 2020 three.
Okay.
Great great. Thanks for the for all the color and for taking the questions.
The next question is from Phil Shen with Roth Capital Partners. Please go ahead.
Hey, guys. Thanks for taking my questions first one is on storage was wondering if you could.
Talk through what are your expectations for battery sales might be for next year or two now.
Should we think about the growth trajectory of storage as we get through 2023, I know you haven't given official guidance, but I was wondering if you might be able to just give a little bit of color on what the expectations might be now.
Yeah, we usually do not guide for more than one quarter and we already told you the number for Q4 and 120 to $1 35.
We are doing the right things for the business.
We you know based on our conversation with the installers They love using the product we need to fix a few things like what we talked about.
We are going to be introducing our third generation battery pretty shortly.
We are incredibly optimistic on our storage volumes, we expect storage volumes to continue.
Continuously improve.
Through 2020 three Europe is another good story as well.
On storage and the volumes are low right now, but they're starting to ramp up and be meaningful so between the fixes that we did.
The third generation coming out of Europe , starting to ramp up heavily on batteries I'm very very optimistic on 2023.
Great.
Great color. Thanks, Badri as it relates to 2023 again, but just for the journal and microwave business.
I know, there's not official guidance, but I was wondering if you could talk through you know how does a potential recession.
Maybe some potential for demand slowing in 'twenty three for resi solar.
In the U S. How could that how are you thinking about that are you seeing any initial signs of that at all and.
Uh huh.
You know I think you saw the 70% a year of your growth in Europe .
This quarter, what kind of sequential growth, we see in Europe as we get through next year for the micro inverter business. Thanks.
Thanks.
Yeah, I mean the.
It was just do we see any slowdown we don't.
Our demand is very strong.
As we see it it's of course too early to talk about Q1.
But even Q1 bookings are right now quite healthy.
So that's what we see today.
There are a few factors that are in favor for us.
Yes.
The utility rates are continuing to decline.
So that.
Accelerates out of business via Yardy inflation reduction Act and the D C extensions for both.
Our I D C, 30% ITC for solar and storage.
Fantastic so though.
<unk> also provided.
A nice a nice lunch.
And then for us.
You know this is not true in the U S. But I know you know the energy crisis in Europe with the accelerating their neighbors big time so.
<unk>.
These are the three things, where we are seeing a lot of tailwind.
From these three things and our demand.
It's strong.
Great. Thanks Moshe.
The next question is from Steve Fleishman with Wolfe Research. Please go ahead.
Yeah, Hi, good afternoon. Thanks.
Badri just in thinking about U S manufacturing could you give us any color on.
What the cost difference might be in the U S and how much of the 11th.
That could offset in terms of just manufacturing cost here.
Yeah, I mean, it's it's too early to talk about it Steve.
But again.
The 11th and with what is a big number if you do the economics, you see let's say a shift a inverted with 384 lots of V C Elevens, Enzo what means $43.
Right and.
The manufacturing cost that you know of course, we have the total manufacturing cost, which is the love materials plus.
Plus value added manufacturing.
The bill of materials, it will roughly stay the same regardless.
All of the you know the there may be some small changes, but if.
The content is not required the bill of materials will.
Likely stayed the same so therefore to be variable in the year as value added manufacturing.
And how we are finishing the contract manufacturers.
Can set up the factories what level of automation.
They can have how can we help them in them achieving greater levels of automation.
That's the question those are the discussions we are having right now.
But we see a very clear the benefit at the end of the day, which is very meaningful but that's right.
We are going to go ahead and plan for this but having said that we do need clarification on the flu.
The point that I already said the domestic content the farms of credit the way they'd be given et cetera. So we are going to iron out those details hopefully in the next three months and things will be a lot clearer but for now.
We are investing in it like what I've said many times already.
We are already you know.
Our growth we have.
We are growing sequentially quarter on quarter. So therefore.
We need to be additional capacity anyway, regardless of the location for our investment.
Well not.
We'll not be redundant or will not do it.
And just in terms of the U S. The relative competitive position.
And you see it because I believe the screen converter credit is more like six do you see whatever the cost is a kind of a relative.
Physician improvement.
And U S.
Yeah, Hi, this is Robert.
You know it really what it is is our <unk>.
From a priced if this year I mean, I assume you're it's more like a pricing question them. Then then when you say competitive, but we'll always price to value right no matter, what and so what that means is that putting the pip.
The cost issues aside regardless of where we manufacture or if you're manufacturing in the U S and whatever else such that we get from the production based tax credit.
Pricing, we're always going to do a price rise in today are we are you know our competitive position is very strong with a current pricing where it is and we will never change that strategy of pricing there.
We are not chasing market share by lowering prices, we are chasing market share by adding value and so that doesn't change I hope I answered your question I Eh.
It took a slightly different route.
No. That's helpful last very quick question just on you Roger you mentioned these.
Positive drivers for demand utility rates I all right.
Europe energy crisis.
The one negative might be higher.
Financing cost how much if at all are you hearing that as a cause.
Churn from your.
Lora network.
It's like what I said, I mean, we haven't seen any slowdown in demand.
Our backlog remains strong.
Q1 bookings remain healthy so yeah, I can only react to the data point and sexy.
I just thought I would certainly say.
Bear in mind ITC has also gone up in the U S.
So what would have been 22% ITC.
Next year, there's no back up to 30% so that is an offset as well.
That's right.
Sure.
The next question is from Julien Dumoulin Smith with Bank of America. Please go ahead.
Excellent Hey, good afternoon, Bob and team, Thank you and congratulations again.
So just on the cost side of this equation right I mean, I just want make sure I heard you right on the U S manufacturing I mean, how much of an incremental cost stand or incremental need from U S content as they require just trying to understand the relative.
Cost side of the ledger versus the 11th sense of what they were talking about I guess that you guys hold onto them and says I'm just trying to understand what the offsets would be especially considering the fact that you still have a pretty good line of sight on U S growth and therefore being able to just serve U S demand from U S manufacturing and avoiding logistics at the same time, so the net debt.
Of the two of those as best you understand it today, obviously, considering IRS are still pending.
So like what I said, maybe maybe you did not hear what I said.
Is the production base tax credit is 11 cents spray seawater is.
If we take a 380 food what micro inverter that is $43 of credit now when we look at when we look at that micro inverter you have they love materials and then do you have.
Well you added manufacturing costs.
And then you have overhead which is warranty expenses and you know all of those so if you see.
All of those constitute the cost of the product now.
The bill of materials, assuming there are no restrictions on domestic content expect the bill of materials to be roughly staying the same.
The value added manufacturing cost is.
He is the one that's the variable cost depending on the country.
And then the warranty expense and in the logistics freight et cetera, largely the same because now it is local lender.
One the cost of shipping materials to the U S may increase.
The cost to ship to customers will decrease so.
That is a wash so really if you consider those three components, we need to look at.
One portion of that which is value added manufacturing now a contract it needs to be economical for our contract manufacturers as well they they also need to make.
Danny they also need to be profitable.
It's not going to happen if they do not make any money. So therefore, we.
We are working on finalizing.
You know the agreements we do have letters of intent, which we think are reasonable comp perhaps.
And bottom line is with the contracts we have in mind provided they are implementation is approved.
I think you know.
The money to be made are the you know the credit that we can get it.
It wouldn't be significant and it will create a lot of jobs.
Which is really what we want.
Right I was just making sure I heard you right. It was a pretty bold and then perhaps the statements. So excellent and then just outside of that obviously opex trends heading well here of late can you comment at all not just I mean again.
The sustainability of the trends that you're seeing of late and he called.
From a perspective as you continue to scale here opex relative to revenue.
Opex you know we are growing so fast that it is impossible for opex, it's impossible for us to spend the money.
I spend a lot of money, but that doesn't mean, we are changing the model.
Our model is 15% of sales soon.
Sooner or later it'll settle down to that number we will not.
Come from mines on any investment on microphone birders batteries, EV Chargers home energy management system installed on the platform.
All of them are very important for us we will not compromise one bit on that.
Got it alright, thank you guys.
Yeah.
The next question is from Gus Richard with Northland. Please go ahead.
Yes, thanks for taking the question.
Just wondering you guys have been growing at 70%.
Can you sustain that level of growth in and I'm not asking for a forecast and it's.
If not where do you see the limits of growth coming in the store network is it availability of components.
Just discuss that a little bit would be helpful.
But when you when you're starting from a smaller base of course, the growth is going to be high.
In the end and then when you build it to some respectable numbers. After that the question is are we going to be able to sustain the growth we think.
We think there are great drivers.
Sustaining the growth, which as you know the utility rates even in Europe . For example, in Germany are quite tight.
In the energy crisis is accelerating.
Renewables in Europe . So all of those are external drivers there tailwind that that had been out of favor. So we think we.
We think we can sustain good double digit growth percentages in general.
But we do need to.
Maintain our focus on quality and customer experience.
And many many of the installers love the quality on microphone borders.
And.
On a market share gain that we have is based upon our quality plus the customer service that we provide.
On micro Inverters I talked about the you know some stumbling blocks in storage and we are working on.
We are working on them and we expect storage will be.
Also providing a similar customer experience, enabling us to unleash.
That opportunity as well in Europe .
So we're incredibly optimistic like what I said, you know we doubled from 'twenty to 'twenty to 2020 one.
Doubled again from 'twenty into 'twenty, one we will double again from 'twenty to 'twenty, one 2022.
And you know 2022 'twenty three.
It may not be possible to photos to double but we have 11.
Very healthy double digit high double digit growth percentage.
Got it thanks, so much.
Thank you.
The next question is from Joseph Osha with Guggenheim. Please go ahead.
Hello, Hello, two questions first.
You gave some very helpful sort of.
Rates have increased for your different geographies I'm wondering if you could just go to a very high level give us a sense as to how the U S versus you all of Europe versus everything else breaks down.
Yeah, I mean, we said in the prepared remarks, 71%.
All of our sales came from.
North America.
29% came from rest of the world.
And I'm, sorry to give you a hard time I was kind of after how about 29% might breakdown.
Yeah that the 29% breakdown most of it in Europe , you know right now.
Okay don't see most of you know most of it is in Europe . If you ask which are the regions that are stronger in Europe . They are the Netherlands, France, Germany.
And followed by Spain, Belgium, Portugal.
There was a little okay. No. Thank you I was just after the weighting of that 29% and that answers. The question. Thank you and then I'm going to completely shift gears for a second question, obviously, a wide band gap materials made great sense for that really high performance you know that that you're using the switch, but I was interested to hear you say that you.
We might see some wideband gap fell from the D. C side as well can you give us a little more sense as to what you're thinking about there.
It's the same thing.
The.
You know the the D C stages for Gan will also make the form factor of very efficient.
And the terminals pretty efficient. So you know sometimes you can you know today, we have four effects on the AC side. We began you can do interesting things like make those forfeits too.
Two facts, because we can combine two of them.
So gamma helps us to do.
A lot more things than in the same footprint as we have today.
Sure Yeah, just yeah typically in these applications you see people.
Using it in that application you just you just described which is.
High performance got them to switch but.
I'm just curious on the D C side.
Why does demanding and it's an expensive thing to do so I'm just wondering if you could talk a little bit about what you meant with that yeah.
Yeah. If you just start who if you look at the way the module power is increasing a one way is that's happening is you're seeing the format of the sales increase from 156 millimeters to 180 to 210.
And then they're moving to have cartels.
But the strength within the cell so what that's driving is that the the the current or the molecule is also going up.
Which means that we need to handle higher current on the input stage of our microphone burgers do you want to make that stage as efficient as possible as well because you don't want to compromise the efficiency of the input states you're already doing a good you know we're going to move to the gang fights on the Acs beside improve the efficiency on that side, but at.
At the same time window to make sure that we also improved the efficiency of the D. C side at the modular train.
Changes towards higher current that's the other driver for driving towards using Gan on the D. C side as well so would that mean that overall those drive higher efficiency driving higher efficiency has the benefit itself off obviously.
Yeah.
Better yield, but more importantly, better reliability better thermals Para-thor-mone means you can reduce the size of the park and also obviously allows you to drive to higher frequency, which also shrinks are all of the all of the components such as Transformers common more jokes and doctors et cetera. So all in all it's.
So very positive trend when he moved again, both on the PC side as well.
Okay. Thanks to that point on the current very helpful. Thank you.
The next question is from Kashi Harrison with Piper Sandler. Please go ahead.
Good afternoon, and thanks for taking the questions.
So with respect to the line that you're adding in Romania could you share any thoughts on how long you think it may take for that facility to be producing at peak capacity, maybe just using historical line additions as a reference and then can you remind us if the cogs that youre going to be paying for flex is gonna be in U S D for that.
Somebody or is it going to be in euros.
Yeah, I mean, we're going to start producing in Romania from Q1, 'twenty three historically it has taken us.
Short term one to two quarters to ramp to full capacity.
We'll be able to do so and 50000 micro inverters a quarter so.
Bye.
By the first half should be by and large ramped up.
And mainly answered the question.
Yes.
Constantly pays less.
Oh I see.
Yeah.
Okay helpful. Thank you and then just just one quick clarification from just the general discussion on the small commercial product.
Are you implying that the small commercial product is effectively our Q nine given the discussion on gan or or is it or is it not IQ Tonight.
The small commercial product will start with what is called an IQ eight Pete.
Thank you H B product is IQ eight high power.
That will be 480 watts AC single panel single microbe.
And we are utilizing all of the work we did for the IQ eight D.
Basically a larger form factor.
With silicon.
<unk> fits.
And then what do we want to do with IQ and nine is to shrink that form factor to be identical to what we have today, yet achieved 40 watts of V. C. That's the power off again.
Got it thank you.
Yeah.
The next question is from Pablo <unk> with Raymond James. Please go ahead.
Thanks for taking the question two quick ones on M&A, you've done I think five deals in the past 12 months.
What was your organic topline growth rate be if you strip out the M&A.
[laughter], it's hard to answer but I'll.
I'll give you some color.
We are.
We started working on the installed on a digital platform on our first acquisition was.
Total graph.
We did that in our Q1 January 26th of 2021.
We did that with.
We then followed it.
And I actually did mean.
Let me backup solar graph.
Basically provides software to installers.
To provide a proposal to the homeowners.
It also has got connectivity to various financial partners Fintech partners.
So that's the first acquisition, we did a second acquisition we did was.
We bought a company in India.
Got it.
Yeah company called via yen.
And we bought them.
A portion of that company, which.
Main.
All of which create the permit planned sets.
For installers.
In the U S and turn them around.
In quick time.
So that's that's too.
And then the.
The third one.
It's basically three.
65 pronto.
365 pronto.
Is the two sided marketplace.
That brings service providers.
With customers and the customer that maybe.
And installer wanting to do something like you know, replacing a cellular modem.
At the homeowner site. So he doesn't have the labor.
The contract the labor from a labor market.
That's 365 pronged.
The first one is Clipper Creek, that's more straightforward we've already broken it out.
And that's E V Chargers and why we bought EV Chargers is because.
Because.
While we made the green Com acquisition tool. This is.
Evs are going to be ramping up.
You know it takes a lot of.
Power and energy to charter your electric vehicle.
And EV will accelerate solar and storage even more.
And the homeowners really need to be able to manage the E V. They want.
I mean, the way they want.
They should be able to say I wanted to charter the E b.
Through solar.
I wanted to charge the E V. At this particular time so it means.
Deep interaction with the solar plus storage system, that's why we bought that company.
Last one we bought was solar.
Lead factory.
And that is a game for providing installers needs.
Can we provide installers leads for an attractive price and the name of the game is leads are so high quality.
The probability of them converting to a final installation is a lot higher than competition.
So that was the first acquisition and then yes.
So it'd be six to one is the one I did.
Recently, which is green com networks in Europe .
Well.
Once again same concept in order to for full home electrification.
A new overlay energy must be connected to mobility as well as heating.
It's car sector coupling home energy management software is critical.
Green Com provides that software so that.
Homeowners can I can see you are they want through one app one mobile app.
Not multiple multiple sources so.
All of these together we expect for example, green Com.
Two.
That home energy management system.
To accelerate.
The sales of our solar plus storage systems.
<unk> in Germany.
Because now they can.
Install it has got a career numerous story.
You can go to the homeowner and say that look I can connect solar and solar plus storage.
And I can connect it with your heat pumps I can connect it with you.
EV Chargers I can help you manage it from one app.
So he's got incredible story, we expect that to drive demand.
And so you can see even.
Even solar lead factory, where we helped.
Our installers with leads as tightly coupled to our business.
Same thing on solar graph that again is.
We have a large installed base.
And they know that we do things with high quality. So they start using that as a service that's a premise that's.
That's why we bought it and by offering installers, a one stop shop, having all of these services.
It just becomes easy for them to not even think just.
Buy from Us of course the.
The flip side is we have to make them highest quality.
If it doesn't come for free we have to work on it.
We have to make it the highest quality, but our strong belief if we do these right the organic meaning the core business solar plus storage will ramp.
Even more.
So it's hard for me to break.
Things out.
And we cannot say this you know this installer cheez it extra and murders because of this particular soft with hard to breakout.
But that's the rationale.
I mean, you're seeing some of the benefits you will start seeing especially the Europe ramp you'll start seeing some.
That's very helpful and as you know each of those deals it struck me how much more diversified you are.
Next is versus you know two years ago in that context will you start breaking out revenue by.
By product line.
Versus you're just getting a micro and burger in megawatts.
Well I mean, we don't plan to right now, but when things get meaningful and make you know Mandy will take a look at it.
Alright, thank you.
Thank you.
The next question is from Christine Cho with Barclays. Please go ahead.
Hi, Thank you for squeezing me in I'm on the battery side I know you mentioned, the install times as kind of being an impediment to them.
Here on the deployment, but it also just looks like attach rates are down across the board in the last not just for you but for other batteries that are supposedly easy to install and supply it doesn't seem like it's an issue. So is it possible that pricing is at a place where it's negatively impacting demand and customers are just waiting for.
Prices to come down.
And then kind of with that as a backdrop, how should we think about how battery prices will trend with your third generation battery.
Yeah, I don't think it's a pricing issue.
The demand remains strong we have a particular advantage as we do work with several thousands.
Of long tail installers, who we get direct feedback from them. They will you know they have limited time on their hands.
If they perceive storage as hard to do and not very profitable. They you know they have reduced their time towards solar where they know how to do it and they are profitable.
It's our job.
What a job and you know the other.
Other companies do.
But that's where we need to improve en face needs to improve.
I'm not talking about others enphase needs to improve we need to fix the installer experience, we need to make it easy.
The installed.
And we believe that pricing is not an issue we think the storage ITC provides.
And then autonomous.
Anonymous benefit we also think that.
You know the the power outages that are becoming more common and you know there's zillions is.
It is important for a bit so.
Demand is high.
Labor is limited.
We have to make we have to do a good job in face as you do a good job. If you know in order for us to improve the volume significantly.
Okay, and a 130 megawatt hours that you guys did this quarter is it possible to get a break of that across the U S, Germany and Belgium.
We don't usually break it out you know once again, we don't do that but you know mainly will take an action item to see if.
We will consider breaking out for the next year.
Okay.
And then quickly if I could just touch upon your euro exposure I think in the.
Prepared remarks, you said 70 bps on the currency deterioration I am not sure if I got that right and I think in the past you've potentially talked about evaluating hedges sometime in the future.
What are your thoughts here and especially as you continue to grow your up you've also said, there's I think a partial offset on the cost side I would assume that mostly labor but.
But arent care of raw materials, mostly dominated in U S. D. So if we could just get a little color on like you have a mismatch in currency yes.
Sure So first of all.
Most of our costs are in U S. P. I saw as Porsche really is on the cells that denominator.
And thank you all right.
Uh huh.
Does that provide us some color earlier right. Our FX exposure is still fairly limited but.
Well I think that most of ourselves and them and that are in USB right with that said, we are actually evaluating a hedging program right. We are watching the central bank's rate hike impulse regions right. When he makes sense, we would trigger that hedging against euro.
Revenue so.
That's yeah, that's what I.
I would put that.
This concludes our question and answer session I would like to turn the conference back over to Badri Cassandra Robin for any closing remarks.
Alright, Thank you for joining us today and for your continued support of Enphase. We look forward to speaking with you again next quarter.
But.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Okay.
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Okay.
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