Q4 2022 Enphase Energy Inc Earnings Call
Good afternoon, and welcome to the Enphase energy fourth quarter 2022 financial results Conference call.
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Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's fourth quarter 2022, or so on todays call are Patrick with under armour, as our President and Chief Executive Officer, Mandy Yang, Our Chief Financial Officer, and Michael Miller, Our Chief products Officer. After the market close today and issued a press release announcing that.
Results for its fourth quarter ended December 31st 2022.
During this conference call 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 installers, our operations, 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 uncertainties. Please see our most recent Form 10-K, and 10-Qs filed with the SEC, we caution you not to place any undue reliance.
Forward looking statements and undertakes no duty or obligation to update any forward looking statement as a result of new information future events or changes in 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.
We have provided a reconciliation of these non-GAAP financial measures to GAAP financial measures in our earnings release furnished with the SEC form 8-K, and which can also be found in the Investor Relations section of our website now I would like to introduce battery Katanga Robbins, President and Chief Executive Officer of Enphase Energy Badri.
Good afternoon, and thank you for joining us today to discuss our fourth quarter 2022 financial results. We had a good quarter, we reported record quarterly revenue of $724 $7 million shipped approximately four points 90 million micro Inverters and 122 megawatt hour battery.
<unk> generated free cash flow of 237 $3 million approximately 55% of Q4 micro inverter ship management IQ week.
The fourth quarter at 44% gross margin, 12% operating expenses.
And 32% operating income all as a percentage of revenue on a non-GAAP basis Mandy will go into our financials later in the call.
Let's now discuss how we are servicing customers. Our Q4 net promoter score was 71% compared to 70% in Q3.
Our North American net promoter score was 74% compared to 71% in Q3.
Our average call wait time was quite down to 1.6 minutes.
Back to full 0.8 minutes in Q3, we stopped our teams focused on root cause fix itself customer issues and improved business processes.
Let's talk about micro inverter manufacturing.
The overall supply environment remains quite stable and gender.
There are issues that crop up from time to time, our teams are staying on top of that.
Quarterly capacity was 5 million micro inverters exiting Q4.
We are on track to begin manufacturing at flex, Romania, starting this quarter.
Enabling us to service Europe better.
This will enable a total quarterly capacity up six mainly in micro inverters exiting Q1.
We are going to increase that capacity, even more with U S manufacturing, let's cover that now.
As we discussed last quarter, we are pleased that the I O D.
Bring back high Tech manufacturing in the U S.
Stimulate the economy through the creation of jobs, you got excited to service the U S customers better with local manufacturing we plan to begin U S manufacturing of micro Inverters in the second quarter of 'twenty to 'twenty three with the new contract manufacturing partner.
And in the second half of 2023 without two existing contract manufacturing partners. We plan to open six manufacturing line by the end of this year, adding a quarterly capacity a full point 5 million micro inverters, bringing total quarterly capacity to more than.
10 million micro Inverters as we exit 'twenty to 'twenty three we continue to await the details of our implementation from the U S Department of Treasury.
Let's come to the region.
In the U S and international revenue mix for Q4 was 71% and 29% respectively.
In the U S. Our revenue increased 15% sequentially and 59% year on year, we had record quarterly revenue and record quarterly sell through for our micro Inverters and record quarterly total comp in the fourth quarter.
Micro Inverters channel inventory was quite healthy.
At the end of the fourth quarter, while our students channel inventory was a little elevated.
Going to more details about our battery later in the call.
Europe , our revenue increased 21% sequentially and more than 130% year on year led by strong demand in the Netherlands, France, Germany, Belgium, Spain, Portugal, and the U K, we had record sell through and record installed at the counter in Q4.
As we continue to grow out a business, we started shipping our IQ eight micro inverters into Netherlands, and France in Q4.
We are working hard to introduce IQ eight into other European countries Sharkey.
Also we are currently shipping IQ batteries into Germany, and Belgium.
Expect to start shipping IQ batteries into Austria, France, Netherlands, and Spain in the first half of this year.
Our dream come networks acquisition, which closed in the fourth quarter helps to integrate enphase micro inverters and batteries with third party EV Chargers and heat pumps, enabling homeowners to control their devices from one app, which is the other fees that we are integrating the green come off.
With the Enphase ecosystem and expect to make it available to other European installers shortly.
Now I'll provide some color on Latin America, Australia and Brazil.
In Latin America, our revenue doubling year on year.
We had steady growth in our solar plus storage business in Puerto Rico during 2020.
In Australia, the solar market continue to recover in Q4.
After a weak first half of the year, we expect to introduce IQ batteries in Australia, along with IQ eight micro inverters in the second quarter of 2003.
As for Brazil, we experienced significant quarter over quarter revenue growth as we saw increased deployment of our IQ seven family of micro Inverters then.
Solar market in Brazil continues to grow rapidly we have a very strong team in place and we are excited about our future growth in the country.
The emerging residential markets in Brazil.
Mexico, Spain, and India are all moving to high wattage panels.
In order to service them better we plan to introduce a high powered for 80 Watt AC micro inverter and the second quarter.
Let's discuss our overall company outlook for Q1.
We expect our Q1 revenue for the company to be within a range of $775 million.
We are fully booked for Q1 right now let.
Let me provide some additional information on the key regions first about Europe than about the U S.
Our Europe business is doing very is very strong as I noted.
Note that we also doubled our revenue from 'twenty to 'twenty, two 2021 and more than doubled the game from 'twenty one to 'twenty two.
We have a strong team in place and are quite bullish about 2023.
We expect to introduce IQ batteries in HOA micro inverters into many more countries in Europe as we progress through the year.
Our value proposition is a differentiator at home energy management systems, combined with high quality and great customer experience.
As for Q1, we expect healthy growth compared to Q4 consistent with the overall growth in the European market.
Let's now cover the U S.
We expect our U S business to be slightly down in Q1, compared to Q4, primarily driven by seasonality and the macroeconomic environment.
We are seeing that our distributor and installer partners are a little more cautious in booking orders.
Normally you have a six month order visibility and that has been somewhat but I do just have partners what their spending closely.
On the sell through of our micro Inverters, while there's somebody was quite strong for us we saw a more pronounced seasonality in January than normal.
There are a couple of interesting observations I thought I will share with you even with the pronounced seasonality in <unk>.
Sell through in January .
We'd like to point out that our activations that are holding up.
The second point, you also noted that and conversations with other installers and distributor partners. They have started to see originations pick up in January .
When compared to December although the data we have is limited these two points make us cautiously optimistic about Q2.
We have also seen some analyst reports about a possible shift from loans to PPA.
Due to the higher prevailing interest rates.
With thousands of installing those every quarter.
Installed base is very diverse.
Both small and large installers adolfo cash loans and PPA options to homeowners.
Any shift from one type of financing to another.
Only at the.
Minor impact to our business almost negligible.
No matter what the conditions are.
Our approach and then phased it does not change.
We manage for the long term.
The basic thesis ongoing solar and storage remains intact aided by a few factors.
First the utility rates, which are rising in many states across the U S. Second the 30% ITC tax credit, which has been extended for 10 years with Iot and third their desire for energy independence in tackling climate change.
And then phase we will continue to make best in class home energy systems with a laser focus on product innovation quality and customer experience.
Let's switch to talking about batteries.
We shipped 122 megawatt hours of IQ batteries in Q4.
We have now certified approximately 2300 installers worldwide since the introduction of Ecu batteries into North America, Germany and Belgium.
Our installers in North America experienced a median commissioning time of 91 minutes lifting Q4 compared to 119 in Q3, we made significant software changes improved communication transitions and commissioning time and I'm quite happy with the performance.
Of the team.
As a result, we saw slightly higher sell through of our batteries in Q4.
Since Q3.
I also got a number of our feedback from the installers about the fact.
Improved performance in terms of commissioning.
We plan to ship 100 to 120 megawatt hours of IQ batteries in Q1.
We also expect to start ramping our third generation ICU battery in North America, and Australia in the second quarter.
This battery that's got five kilowatt hour modularity to access the power comparator at existing battery and 30 minutes commissioning time in addition to being easier to install and service.
We expect the higher charge discharge debate as well as the five kilowatt hour modularity to be uniquely beneficial to the homeowners under the upcoming name three the auto tariffs in California.
With the significant changes, we are making to our IQ battery, we are confident that storage installations will become as efficient as micro inverters and as a result, the profitability for installers, who would get better we expect our battery business to perform well in the second half of the year.
Due to our third generation battery as well as named three adoption in California.
Let's now talk about our product for the small commercial solar market in the U S.
We are on track to pilot the IQ eight PV product and release it to production in the second half of the year.
And it's not a panel power continues to increase rapidly we are increasing the power of the micro inverter by 50% from 320 Watts to 40 do you watch E C. While sticking to the single panel architecture. This product as well as the food 80 watt residential micro inverter for emerging markets share the same does.
Fine.
That's just because EV chargers.
We shipped approximately 7600 EV Chargers in Q4.
As compared to 6370 Chargers in Q3.
We began manufacturing enphase branded EV Chargers at our contract manufacturing facility in Mexico, this quarter, helping us to increase capacity and reduce costs.
We expect to introduce IQ smart EV Chargers to customers in the U S. In the second quarter. These chargers will provide connectivity and control, enabling use cases like green charging and allow homeowners visibility into the operation of their enphase solar plus storage plus EV charging system.
Yeah.
We recently demonstrated our bi directional EV charger technology, combining maybe go into a home, making the grid and green charging functionality.
This new bidirectional EV charger, along with emphasis solar.
And battery storage can all be controlled from the enphase that empowering homeowners to make us safer and sell their own power.
We are working with the standards organization EV manufacturers and regulators to bring this technology to market in 2024.
Let me give you a quick update on our Enphase installer network or the yeah. Yeah. We have now on boarded more than 1300 installers to other young worldwide through a highly selective process focused on install quality and exceptional experience for homeowners across the globe.
That's just because the installer platform.
Made several updates to the solar graph design and proposal software during the fourth quarter, incorporating battery design and proposal document management consumption modeling and several other improvements as requested by our installer partners. In addition, we made significant strides in automating the creation of <unk>.
Land search with solar graft software.
Now have over a thousand installers using solar graphs up.
Next I'd like to comment on NIM, three not only in California.
The CPUC has finalized its decision on NIM three data in Q4.
While we wish the export rates had been stepped down a little more gradually the policy is generally in the right direction for incentivising homeowners to adopt storage.
The next step is for installers to educate homeowners to increase adoption of memory and companies like Enphase Mi to help in making this transition possible.
That's right. So a lot of graphic design and proposal engine comes and installers will be able to use solar graphs to provide homeowners with a proposal that optimizes their bills under name three tenants to minimize payback and maximize Ottawa.
The advantage with Toyota graph is that the underlying guarded amused by Xinjiang it'll be the same as what is used in the actual operation of the Enphase home energy system.
As a system complexity increases with solar batteries, EV Chargers and dynamic rate structures, such as an entry to the tight coupling up so a lot of grass and actual product operation.
We'll maximize value to homeowners.
In summary, we are quite pleased with our performance.
As a reminder, our strategy is to bring the best in class home energy systems and delivered them to homeowners through our installer and distributor partners enabled by the installer platform. We have many new products that are coming out in 2020 three that we'll increase our served available market and positively country.
To the top line.
We look forward to introducing IQ eight micro inverters worldwide.
Producing IQ batteries into more countries in Europe .
<unk>, our third generation battery in North America, and Australia, as well as introducing our highest power what do you mean, what IQ eight PV micro inverter for both the U S small commercial and emerging residential markets.
I'm, so excited about the upcoming sort of graph functionality, especially the named Thrill auto functionality and finally the work we are doing to bring both smart EV Chargers as well as by Directionally recharging capabilities to the market with that I will now turn the call. It the mandate for a review of it.
And you Mandy.
Battery and good afternoon, everyone.
I will provide more details related to our fourth quarter of 'twenty financial financial results as well as our business outlook for the first quarter of 'twenty to 'twenty. Three we have provided reconciliations of these non-GAAP to GAAP financial measures.
Posted today.
And all that would be fine.
Along with that.
Total revenue for Q4 was 700 and I'm talking for 27 million.
This is an.
Increased 14% sequentially and of course, then you right that you shouldn't have passed 91950 2.4 megawatts DC, all Michaeline brothers and $122 one megawatt hours of actual battery in a quarter.
non-GAAP gross margin for Q4 was 43, 8% compared to 42, 9% in two or three.
Thank you Amy pardon me, yes.
Gross margin was 42, 9% for Q4.
non-GAAP operating expenses were $87.7 million for Q4 compared to $78 $6 million okay.
The increase was driven by international customer survey and R&D.
Yeah about parity pricing for $153 $7 million.
As for Q4.
$132.5 million okay.
Operating expenses for Q4 in court at $59 $4 million of stock based compensation and.
$4 $9 million on acquisition.
And in the.
For acquired intangible assets and one point I mean anybody that's all restructuring and asset impairment charges.
Hmm.
Income from operations for Q4 was $299 $4 million compared to $194 million okay.
Okay.
Come from operations was $157 million for Q4 compared to $135.4 million for Q3.
Oh, okay.
Net income for Q4 was 200 and tough point for me about it compared to $175.5 million okay.
There's nothing no guest other that any share of $1.51 for Q4 compared to $1 25 for Q3.
Net income for two for $153.8 million compared to net income of $114.8 million okay.
This means that they can get diluted earnings per share of $1.06 for Q4 compared to Q3.
We actually thought Q4 with total cash cash equivalents and marketable securities balance of $1 six once you didn't bother them.
Compared to $1.42 billion at the end of Q3.
Q4, we generated $253.7 million in cash flow from operations.
$237.3 million in free cash flow.
No I think I tried was $16 $4 million for Q4 compared to $8 $9 million for Q3.
The increase was primarily due to investment in additional 10 manufacturing sites and R&D equipment has always been a trend for the full year of 2022 was $46 $4 million.
Now, let's discuss our outlook for the first quarter of 2022 at least.
We saw revenue for the first quarter of 'twenty to 'twenty two it will be within a range of $700 million to $740 million, which includes shipments of 100 to 120 megawatt hours to battery.
They get gross margin to be within a range of 40% to 43% and.
non-GAAP gross margin to be within a range of 41% to 44% what did your east coast stock based compensation.
Acquisition related amortization.
Some are conservative you real S accelerating our Q1 guidance and we don't need that kind of impact while financials from saturation thing right.
Our cash operating expenses to be within a range of $177 million to $181 million.
Coding approximately $77 million, that's a matter for stock based compensation okay.
Kathryn charges for site consolidation acquisition related expenses and amortization at.
At least that our non-GAAP operating expenses to be within a range of $100 million to $104 million.
Moving to tax season, we have utilized most of our net operating loss and research tax credit carryforwards.
Two we all know that when you have a kind of U S cash taxpayer.
Thank God and non-GAAP annualized effective tax rate for 2023 to be at 22% plus or minus 2% before any impact.
In closing we are pleased with our 2022 financial performance.
We grew our revenue by 16, 9% year over year why are you spending on non-GAAP gross margin to 42, 6% in 'twenty to 'twenty two.
We increased non-GAAP diluted earnings per share by 92% to $4 62 per share in 'twenty to 'twenty, two and generally make us free cash flow of $698 $4 million more than double from 'twenty to 'twenty one.
With that I'll now open the line for questions.
Yeah.
I will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
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We ask that you please limit yourself to one question and one follow up.
If you have further questions you may reenter the question queue.
At this time I will pause momentarily to assemble the roster.
And our first question will come from Colin Rusch Oppenheimer. Please go ahead.
Thanks, So much guys you know and I appreciate all the detail here can you talk about what your how your pricing strategy is evolving here you know as you move into different configurations for the for the devices and you continue to try to monetize the value here are there areas, where you can increase price a little bit are you trying to hold it.
Flat just talk to us about how that's evolving here.
Yeah, the pricing in general right now is very stable.
We do value based pricing when you look at.
Pricing what is the next best alternative.
And we usually.
Look at what value do we add in comparison to that ultimate.
And typically the things we focus on for micro Inverters.
Uh huh.
How is our quality compared to competition I always thought of customer experience compared to competition. How is our ease of use compared to competition is the product a lot more easier to install and.
And that matters to the installers and they.
One stay installed they do not want to come back to that site again.
So they need excellent excellent support so we look at all of these puts and takes.
And we look at it versus the next best alternative we price our products. We are extremely disciplined there. We also have a segmentation strategy, which means that you know we look at different flavors of power.
And we price it according to the value.
Those those provide you know in batteries and our strategy has been has been similar.
With the first.
To product generation.
First generation and second generation batteries, we felt a little bit short.
In terms of the differentiating features.
And now with the third generation I think we are we are going to be quite unique we have a.
Modularity of five kilowatt hour, we will double the power.
Back to the prior generation, which means a five kilowatt hour battery will have 3.84 kilowatts of continuous power and 7.68 kilowatts of peak power, which is amazing power.
And then in addition, that's gonna have 30 minutes commissioning time, the thing that we didn't get right on the first two generations.
So so with batteries, we are back into the value space again, and we will price those products accordingly.
The short answer to your question pricing is quite stable now.
Okay excellent and then if you look at making a bigger push into the commercial rooftop market could you talk a little bit about the preparation in the channel in terms of education and training on the product. What are you seeing already in terms of sell through with some of the legacy products as you prepare to to really get into full swing by the the middle or latter part of the year.
I mean this product you know we had originally.
Three years ago, we started with introducing the IQ eight deep product and.
And that that at that time was a good idea. It was 641 C C.
And that micro inverter covered two patents.
And we got excited by that we worked on it and that product. It took us some time to work on it because normally we have to get the micro inverted right we have to get the entire to change right.
Is it micro inverter you know performance the gateway performance most important the software performance and then we needed a proper design and proposal engine like solar graph. So.
Took us quite a bit of time and then we realized a few months ago.
Yes, we can come with that product, we're going to leave that product, but that product is going to fall short in terms of power because.
The panel of power and in the commercial.
You know business as move to let's say greater than 500 watts. So two panels would be a thousand words.
And over the six party the D C at the ratio of more than 1.5.
1.5 is not acceptable in this business are the right numbers between one two and 1.25. So then we regrouped.
The installers were going to make a quick change.
Going back to the single paneled single micro architecture, we are increasing the power leveraging what we did on like you a b. So it was not lost we increased we use that architecture.
And we basically are introducing now a product that has a 40 watt AC product and that will take care of up to 650 watch.
Pat on the power so and also accompanied by that product we need the entire platform.
What I talked about and then startup platform with just starting from lead generation and qualification because this is a design win business, it's not like the residential business that has some cycle time.
To capture opportunities properly you spend a lot of time in understanding analyzing the auto white the tools need to be excellent for that and then you need to help the installers.
<unk>.
Through that entire process.
And so I think we are finally.
Almost ready that we we are looking to introduce.
You know beta test with installers in the second quarter using the entire flow.
Then we are planning to release to the.
You know it relieves it start ramping.
In the third quarter, and it's going to take us.
A few quarters to ramp because like what I said this is not like the residential business. It's a design win business and so we have to work with customers for an extended period of time, and then convince them of the value proposition and will start winning but what are the basic pieces. There is the same.
You know product innovation.
Great quality.
And support customers, well, which is customer experience.
Great. Thanks, so much guys.
Thank you.
The next question comes from Philip Shen of Roth Capital Partners. Please go ahead.
Everyone. Thanks for taking my questions.
Congrats on the strong Q4, and Q1, Oh, sorry, what one thing that I noted in your prepared remarks was that you talked about how some of your customers are experiencing a more caution or they're a little bit more cautious in booking orders normally you have a six month order visibility.
And that has been somewhat reduced as your partners watch their spending closely can you expand on that a little bit and help us understand that.
When do you expect to get back to your six months visibility you've talked about originations.
Originations improving in January .
But based on some of the conversations we're having in the industry. It seems like there was a fair amount of molten challenge out there with no trade credit being pulled back in some bankruptcies and just some challenges out there. So how how do you expect to navigate that overall and you know perhaps a share gain is one sources.
Strength, but just wanted to understand.
I understand you know as we look through the rest of the year beyond Q1.
How do you expect the figure to develop thanks.
Yeah, I mean look.
Seasonality has always existed in the solar industry.
From Q4 to Q1.
And you know historically I would say that that seasonality is a 15% number.
That means in general the sell through in in Q1 is usually 15% zone.
Compared to the sell through in Q4, no right now and I'm, giving you a lot of data from January and that's the data we have on Q4 was very strong.
December .
January we started to experience a little more than 15%, that's why I said more pronounced seasonality.
And of course, you know we think it is it is due to the macroeconomic environment and but what we see are what what we saw interestingly was.
The Activations remain the same.
I mean, approximately the same they were little bit down they didn't have that much of a seasonality. So that's basically it.
Was somewhat good because the customer demand.
<unk>.
Whatever we thought was I mean did not get that much affected but having said that I think the installers are quite cautious there.
Therefore.
They basically you know odd only buying what they need from their distributors, which is talk different from 'twenty to 'twenty, two where they would focus we don't supply they were focused on maximizing what they had in their warehouse now is that they are worried about their spend.
More.
That that'd be originations, whether they're improving or not this is the data we worked with thousands of installers.
We have a very strong sample set.
We talk to a lot of distributors some of our distributors service.
Hundreds of lung team and stars.
So.
We you know we don't see originations ourselves.
We only you know what I reported use anecdotal information.
But we hear that you know originations and especially originations in California.
Ah back to being strong in January .
That's what we're here.
And I think that is you know that's why I said that plus the fact that.
We have not seen that much of a drink an activation.
Finds me too.
Cautiously optimistic Q2 verses Q1.
Okay, great. Thanks Bye.
Shifting gears to they are a historical I think on the last call you were talking about the ability to get.
The majority of that credit.
Was wondering if you could comment on the latest you see in terms of the Microinverter credits.
Do you expect to get the vast majority of that and then in terms of the timing of the section 45 X.
Or manufacturing P. T C guidelines.
Some of our check suggests this could be released much later than originally expected maybe.
A year later Ah just curious if if that impacts your plans at all and if you can talk about capex required for the facilities and factors Ah that would be great. Thanks.
Yeah. So I've answered the question in reverse Capex required basically.
[noise] onto a line roughly 750000 units and auto line costs.
Including test et cetera anywhere from $8 million to $10 million per line.
So if we have to loose explains that any red you know.
Close to.
$60 million $50 million to $60 million, so that that's that's the capex.
You know spending now.
Any other question do we expect to get the vast majority, yes, we do.
And then that's the announcement of the tragedy you know in the <unk>.
Jason change our plans no it does not.
We are going to start manufacturing in the second quarter.
And we are going to ramp up a couple of lines with a new contract manufacturer.
And the second word.
And then we're going to start the remaining lines. It's a totally we will have six manufacturing lines.
By the end of 2023 with three contract manufacturing partners.
Great. Thanks, very much for color bedroom astronauts.
Thank you.
The next question comes from Brian Lee Goldman Sachs.
Please go ahead.
Hey, guys. Good afternoon. Thanks for taking the question some kudos on the solid execution.
First question I had was just surround them three point O I you know I think.
There's there's different.
Locations of that policy uncertainty near term and medium term from what we're hearing so so maybe you just wanted to get your thoughts.
Near term you know some.
He was out there that maybe there's a pull forward on demand in California would be curious you know what you're seeing with respect to that and then you know kind of in the medium term. We're hearing the industry is still maybe trying to figure out how to navigate. This so you know curious how you specifically are thinking about the second half of 2023 and the U S are you kind of.
[noise] base case in California to be down significantly.
And then how do you see yourself navigating that if that's the case you know are you driving more product to other states focusing more on Europe just curious.
How you'd be thinking about you know planning into that period of higher policy uncertainty in the back half of them had a follow up.
Yeah on on them three we haven't really seen.
And he fought in world right now.
But.
In talks with a few installers in California on both.
Both big and small.
What I said the originations are up strongly.
They are all quite optimistic.
And you know maybe we will see something soon that's that's why I talked about an optimistic you too so far we haven't seen any pull forward demand yet now.
On talking about 932 in general.
And emptied out who is going to be incredibly positive for us.
Because ah named three dot, though I mean, just just so everybody gets it and I'll talk about ma'am named read out all of the features of memory Dot though.
Basically.
You know the.
Previously the import and export right where are the same.
So therefore.
When you exported electrons.
With the solar system didn't really matter.
As long as you're exported it gone directly subtracted from what your input.
Right. This card net metering and that was net metering to Donald.
With named three Dot O.
It matters when you explore these electrons.
So you have to.
24 hours a day.
365 days a year.
So basically 8000.
8760 data points and that is an export rate for each of those data points.
Each of those hours that as an export export right.
And.
But what it works out to be.
Is if you are interested in a few solar system.
Your payback.
Drops you know understandably from.
Let's say five years, it increases actually do something like seven or seven and a half years.
With the pewter solar system.
But the moment you add batteries.
You can add batteries and steps a five kilowatt hour 10 kilowatt hours.
Kilowatt hour the moment that you add batteries.
That feedback comes right back in.
Ooh that five to six year time does that five to six year period.
That is the stark difference with named two daughters with named Bruno though.
The great ones the battery.
Battery is didn't have in Ottawa.
Because batteries were primarily for S. Williams only.
With named read out of batteries are gonna be.
Financially attractive.
Battery does it is it is complex ma'am $3 definitely complex so the installers need to demystify it for the homeowners.
And that's where an engine like solar grass.
And other engines come in.
Well, if we are able to show this to the homeowner we think it is a no brainer the homeowners with long waists bake.
Will always speak solar plus storage now.
Do I have some some motivating into it.
Germany for example, if you look at Germany.
Exactly what happened they call it is.
They call it as a feed in tariffs.
Yeah.
So that is not 8760 different differ.
Different rates for those hours, but they have one right, which is a much reduced rate.
And therefore self consumption becomes the norm in Germany, no one thinks about exporting solar.
Right.
And.
Batteries have an 80% attach that.
This is going in the same direction.
Going in the same direction in Germany, you have great tiny the batteries because power doesn't go out there much.
It goes out maybe once a year yeah.
Yeah, great tight batteries.
Good tied batteries means.
You know the installation is simpler.
And it is cheaper.
I'm not sure whether California will go in that direction time will tell because we do have some power.
We do have a resilience issues as well but.
I'm sure the markets will evolve a little in that direction too.
So.
So bottom line, you're incredibly optimistic we got the right battery is for it with the third generation battery, we got the modularity, which I think will start becoming popular grid tied may become popular but will be ready to do either the grid type are.
Are you know I'm glad I'm good at all.
With backup mm.
So things are looking you know we liked men $3 to of course, we didn't like the fact.
The step-down happened you know right away, but I think in the long term.
It's an okay decision.
No I appreciate it.
One more make one more comment to what police are obviously the battery is but the the third generation of a battery is uniquely valuable for in this in this nimbly environment, but in addition.
It's also the optimization engine that we will be running right. The engine has two in near real time every hour make a decision on whether it is charging the battery discharging the battery.
Managing the load et cetera, all of that energy management engine becomes extremely valuable and extremely critical it all begins with the design engine itself.
We mentioned this is but he mentioned it in a script Ah design Indian the engine that you run in order to design. The system is actually the same engine that you'd want to actually operate the system and so bringing those two pieces together.
Extremely critical and extremely valuable and that's what we are spending a lot of time, optimizing our engine and and in building up the design as well as the operation and it starts with a battery in it the software is becoming extremely critical.
Yeah, No I appreciate the call maybe maybe too quick follow up so.
You know the the longterm thesis I get I guess I'm not sure that a medium term basis as you mentioned badri the the changes immediate.
And you know the industry still trying to figure it out. So are you I guess what are you hearing from installers are are they ready to to convert customers.
Upsell customers to battery starting as early as the second half are we gonna have pretty meaningful friction here until you know the market.
The new rules and I get some of the macro uncertainty, which you even alluded to earlier kind of settles out and then secondly, if I just look at your numbers you know battery volumes per your shipment guidance in Q1 will be down year on year for the first time since you guys started breaking that out so.
Battery is all of a sudden don't look like that growing for you what should we be thinking about for the next few quarters into the back half dozen M. Three point out drive growth again or or is this a sort of more uncertain period of battery gross that we used it in the next couple of quarters until I get in the market kind of figured it out.
We think you should you should think that <unk> that was gonna be great for us.
We are going to be growing.
Growing with them, you know along with them $3 to.
We're gonna be growing in addition, we are going to be growing outside California on too because you know I'm not sure whether you cut the color and what I said the.
We are working on the battery transition right now and the second generation product is gonna give away to the third generation.
And we have fixed.
All of our issues and.
And you know all of the software performance.
And.
Is quite stable right now and we are getting ready for the transition of the third generation battery.
The third generation battery pointed to you on the benefits power.
30 minutes commissioning time.
And modularity.
So rethink.
We think that you.
Starting in the second half of the year, we think mentally daughter will be a huge catalyst for this in California. In addition, we expect you'll also seem very healthy growth outside California. Your other question.
We we we talked to a number of installers all the time, we recently talked to a bunch of California installers on exactly this weather are they ready.
And most of them are quite optimistic about increasing their battery attach.
Because for the first time.
You know with the batteries the payback will be you know a very good payback between five and six years.
And I think many.
Installers and of course.
Are worried about.
The customer is adding to shell out a little bit more upfront, but with the I T. C 30 per cent tax credit and with an incredible payback.
They think the sale will be more easier than what you think.
So.
Yeah.
Now we've got a quite bullish about nine three daughters, and especially our third generation battery in that context.
Alright, that's great best of luck guys I'll pass it on.
[noise]. The next question comes from like Strauss.
Please go ahead.
Great. Thanks, very much for taking my questions [laughter]. So a lot of focus on the the U S market spurred I I just wanted to go back to your comments about Europe . So that's obviously been very strong last couple of years kind of doubling each year.
I I know you don't get to annually, but just kind of how should we think about that market. In 2023 do you think the approximate doubling is kind of the base case that we should be expecting from here.
Well you said, we do not guide dragging me you know something annually, but.
European market is growing.
At least our internal reports talk about.
Served available solar market off about 13 gigawatt Gigawatts one three in 2023.
The markets to really.
You know the market that are really driving or Netherlands, Germany.
Fame.
France, Italy.
And you know, even even actually Austria, Poland, etc.
They're all becoming quite significant mortgage and ambition.
Attached you know battery attaches also.
Growing like what I stated in the prior question you know entering the prior question.
Attach rate on batteries in Germany is.
80%.
So solar plus storage is growing healthily.
And the.
The geopolitical situation accelerated it last year.
That's continuing.
What do you know what our position is we have a very differentiated products.
We have microinverters on the roof, which are very high quality easy to install.
We have a huge customer service.
No operation there in France, and in Germany, and we take care of customers well.
On batteries were just starting to rhyme.
And we haven't been produced batteries in two countries, Germany as well as Belgium, we expect to introduce.
So many more countries this year and that will happen every quarter.
And so we expect to add a lot more battery revenue there.
And I forgot to mention Ikea weights will be introducing IQ eights into every country in Germany, I mean every country in Europe shortly.
So.
And then on top of it we bought.
This company Guard Green come networks.
Their job is to make it work.
Third party Evie Chargers.
And.
Third party heat pumps.
To the Unfaced solar and storage system, and therefore homeowners.
You know can't operate can optimize their system from.
One that can see everything that is happening.
So.
To answer your question.
The market is growing.
The market is growing really significantly.
That's what I told you 13, Gigawatts, we are well positioned you to a differentiating value proposition.
And we recently bought a company dream come networks that is even going to make the situation better.
We provide a complete home energy management system throughout and stars.
Okay, and then may be buttered gives you a little bit of a break Mandy can I ask him. If we're all doing the math on the the domestic Ah manufacturing tax credits, but I mean is there any color that you can share yet as far as kind of the the upside from the the the tax credit the the potential downside from.
Higher input costs, just kind of blended average the the appropriate way to be thinking about that that U S manufacturing from here.
Yeah, I mean, <unk> I, we expect a net benefit of.
You know between 20 and $30 a unit.
I'm, giving you a wide range right now because we do have some puts and takes and we will define it as we go.
Okay. Thank you very much.
The next question comes from Steve sanction for free Church.
Yeah. Thank you.
Just your growing your production capacity you're dumping it from.
From $5 million a quarter to 10 million you said I think my.
Your end of 20.
23, just cause you can give us a sense of your conviction that.
That the demand will be there to to meet that doubling of production.
Yeah.
Look if you look at the past growth rates you can see it we grew from.
Grew up I think 2021 too.
22.
He grew 50, 959%.
And at that time, I think end of 21, we were doing.
If I remember right around.
Three ish.
And the owner took water.
End of 22 now we.
We just reported five ish million units a quarter. So you can see you there.
That's the nice growth.
So.
Now our our long term thesis on solar is it's we are extremely bullish we.
You know, especially with countries like Europe , and with a strong physician in.
And the U S.
With.
You know a rapid rapid entry into other emerging markets.
You know we think it is the right call.
Basically invest.
Invest.
In the right manufacturing, especially given the I R a benefits so.
Even if we don't use all of 10 million units.
But a quarter, we will we will use it sooner or later.
And I think the the ottaway is well worth it, especially considering the.
Net benefit to us so our logic was was quite simple.
We were in the body.
We did a few back of the envelope calculations.
We started is the right thing for us too.
Invest in these lines and.
And Fortunately, we have a very strong.
And great contract manufacturing partners.
We'll need to do a lot of the heavy lifting all you know our our capital.
That reset out is quite limited.
They do a lot of the heavy lifting like what they're doing today and two of them are existing contract manufacturers will we ever deeper relationships.
And we are going to work with them.
In the long term.
So we thought that's the right decision for us to do.
And we basically accelerated that effort.
And once we make a decision it takes us a.
A few quarters in the past it has taken us four to six quarters to ramp up the lights.
So.
Ah pieces.
It's quite bullish on solar and we think.
That's what I call.
Okay.
No. That's so so ultimately expect.
Obviously significant <unk>.
Volume growth from that and then on margins you mentioned.
I mean, you've had the gross margin hold off well for me.
The 20 to $30 that you just mentioned is that a.
Hey, gross margin benefit and that of.
Cost.
That's the next you know the the I R. A gives you an incentive which is 11 cents a unit.
11 11 cents.
But eh see what.
Now every microinverter that we make.
Let's say.
Microinverter that we make 320 AC what.
320, and see what's multiplied by.
$11.
Right. So that number is roughly about $35.
$35 is the net benefit now it takes us it takes us.
Some incremental cost to manufacture in the U S vs manufacturing in Mexico.
Cause that is some delta.
Right. It also takes us.
You know.
We want to make sure our contract manufacturing partners about healthy as well.
So therefore, they shared a little bit.
Of that incentive.
Therefore, the mech benefit for us would be that thirty-five dollars minus the incremental cost add up minus the.
Benefit Vipassana contract manufacturing partners and that number is what I reported as 20 to $30 neck benefits per unit.
That's that's all incremental to what we have today.
Right I'll leave it there thank you.
The next question comes from Jeff.
Please go ahead.
Yeah. Good afternoon battery two quick ones. He touched a lot on Europe , but I was wondering if you could specifically drove down on the disability you have there in terms of Q1 and Q2.
Yeah Europe is actually the opposite we do we do have good visibility we do have.
Be strong daughters.
You know those are the installer partners distributor partners they rely on us for the supply.
Few of them even come to our headquarters.
Quite routinely that's something that we're starting to see and we also visit them quite a bit.
So I think we do have.
Decent visibility there.
Great to hear and then either for yourself or Mandy I didn't know if there's a way of doing sort of a gross margin walk between Q3 and Q4, certainly the IQ eight cycle is hoping but wasn't sure. If that's the complete story if there's a mix issue in terms of <unk> equipment or software battery sales that led to the strength and a quarter and then how do we think about the girl.
Margin walk to get to the high end of the range for next quarter.
It's it's it's mostly about accurate mix.
Yeah, I do eat mix is 55% in queue form that means if we are the 4.8 million microinverter that we ship worldwide.
55 per cent.
Are accurate.
So that's principally contributing to the gross monitored and that number is 55% was.
How much <unk> 47 per cent polyethylene, yeah 47 per cent in Q3 that number we expect that number to be a little greater than 60 per cent.
If you want.
Well that explains the mummy didn't say.
Well I appreciate that very very quick follow up as I Kuwait grows in Europe is that accretive or dilutive to the results that you just report it.
That will be will be at grid.
Got it. Thank you that's all I had.
The next question comes from underneath the car.
Capital markets.
Go ahead.
Good afternoon battery. Thanks for squeezing me and I, just I guess a follow up on that lost one of questioning but I think you guys are targeted to get to 90 per cent in terms of IQ eighth next by the end of the second quarter. I think he just said, 60% is kind of what state and for for the first quarter.
Are you guys running a little bit behind on that.
We are running a little behind I would say I would I'm going into our other we we are going to introduce like your agent Dissemble countries in Europe .
In the near term so.
And can you too will will probably be it you know maybe.
At a lower than 80% and I think in Q3, we should probably catch up to that 90 per cent.
Great. Thanks for that and then you know I think this time last year. We only have this call you be in and I'm, certainly Ah battery kind of uptake in California will increase in that might change things, but yeah. I think you guys said that like California's roughly 20 per cent of total revenues post the.
The initial and then three point O proposal Oh I was just wondering if you could kind of give us.
Ah kind of Ah refresh on on where 22 ended up in terms of California's up as a per cent of total revenue.
Those numbers are right Yeah, California.
The revenues approximately 20% of our total revenue that's correct.
And it's still 20 per cent and 22.
Yeah, that's right that'd be great. Thank you.
The next question comes from Julian Emeline Smith, I think of America. Please go ahead.
Hey, good afternoon, thanks to the time I appreciate it I'm just first I wanted to come back to the margin questions to talk a little bit more about structural margin expectations that are we talking about value pricing earlier can you elaborate a little bit of where you stand visa be your margin expectations to the course of this year, you talked about pricing pricing integrity, maybe there's a little bit of <unk>.
Your question between storage and the other products here, how do you think about the evolution of March margins here through the course of the year, especially if you think about mix and then also a little bit of a nuanced earlier, if I can't follow up on utilization, obviously, you're you're fully utilize today do you think about bringing all that capacity is earning margin impact from under utilization is you bring on.
Some of this you know give her the comments about the the the the backlog dynamic.
Right on the.
Be under monitoring question as we convert more of a mixed way to eight and a modern dance.
We'll get incrementally better and we will take care of it and are monitoring great.
Like what I have told you monitoring is not always about pricing it is about.
A lot of focus on costs and we have an initiative called world class cause and the company.
We had we continuously focus on every small knit.
Whether it's the capacitor with it or to register the good drivers.
The AC fat the parting plastics.
The cables connectors transform we have a large team working on the Transformers, we have a large team working on it and what you'll see is.
Is a combination of good cost reduction efforts plus good.
Pricing efforts so.
Will you know.
If you if you had not has to be improved.
Oh, the non-GAAP gross margin guidance from the prior quarter by a per cent because.
Of the IQ IQ eight transition plus the progress, we're making on world class Cos and I have taught it before that batteries. We are not a second generation every generation, we will improve cost.
And we will not be in a business until we're convinced we can meet that.
You know our model.
The gross margin B the company operating model so.
Darn batteries were we are continuously working on it you.
Third generation battery will be better than the second generation battery, we already have a plan on the fourth generation battery.
The energy tend to be significantly so that would be even better.
So it's a continuous program.
And you.
Your second.
Okay utilization utilization is school first started a negligible impact.
That's those are the contracts that we have with our partners.
Got it alright, great stuff and they're just if you can come and just quickly I'll just I'll, obviously loan versus leaves the evolution, what's your ability to deviate and and press volumes into the least markets here. If you think about it that way versus just helping and enabling your your loan customer.
We do business with the number of.
Installers, who offer leasing.
And with some of those we have 100 per cent chat.
With some of those we have healthy share. It makes so overall, we are very valid position if you.
You have a significant shift shift between blown and myths I.
I don't think we will Miss a beat.
Got a great confidence thank you.
The next question comes from Eric Stein of Craig Hallum. Please call ahead.
Hi, everyone. Thanks, So sneaking me in here, so maybe just on the contract manufacturing coming back to the U S. Obviously with that with Romania coming on it's it's about the better servicing the customer and lead times, but I'm. Just curious I mean is there any merging benefit to that as well you've been <unk>.
<unk> global from <unk>.
Asia, and Mexico to this point any benefit from being closer to the customer.
Oh and that is the wash because if you think about it depends upon where the raw materials come from.
So if you have if you have manufacturing for example in Europe , unless you move all the raw material factories, who.
Who you know.
Well first daughter, you will not get.
That benefit so.
Basically you have to look at it as a full chain where your total cost is a function of how would you transport. The raw materials, then you make the product and then your ship the product.
Who your customers. So in the case of Romania, Yeah, we're closer to the customers, but you do need to get raw materials to the factor.
So I would say.
It is a wash.
It is a wash it it's not.
Significant enough to talk about.
But it will become significant.
If we are able to do exactly what I said, which is.
You know if we have a large enough.
And if you're able to convince them off out.
You know some other suppliers to moon factories.
To open up factories closer to the manufacturing area.
Definitely there is some cost to be taken off.
Any indication as to the need.
That is starting to happen that'd be more people coming to the U S.
And the tax credits and that sort of thing.
Yeah, you know you know as we as we get bigger and bigger those those will eventually happen you know right now. It is it is a process I can't tell you that it's an event it'll happen one fine day, but for example in Mexico. We have started to see that some of our players have setup.
Factories for inclusion for example, a for alpha.
Four connectors they have started to setup we are rare.
Realizing some game there, but it is a it is an evolution.
Okay. Thank you.
Thank you.
And next question comes from.
Mentally of credit Suisse.
Go ahead.
Hey, Thanks for squeezing me and this is David Benjamin on the line for me mentally I was wondering if you could give us a little insight into the mix for Europe in Q1.
We basically told you that the revenue makes.
Between the U S and international is 71 and 29% and.
Most of our international revenue is zero.
Okay. That's the same for Q1 is do you think that's gonna be perky, one as well.
We don't usually talk about that makes.
Four Q1, but I think it'll it'll be it'll be slightly better because you know Europe .
Is a little strong and do one compared to the U S.
Great. Thanks, and just to follow up on on batteries can you talk a little bit about what do you think with with a new third generation. If you think or what what do you think the retrofit opportunities gonna look like.
Yeah, Hi, I think retrofitted in general for storage is going to be.
Better than before because to recall the irony now has 30 per cent battery ITC stand alone battery or D. C, which means that you can be decoupled from solar can come in and add battery later on into the system and you still get your 30 per cent of our D C and that's.
For other entries, we have unique benefits because we are easy coupled we can very easily do that so if you have an existing system. Even if it's an order order generation solar system, you can come in and add an easy couple of battery and you can add it modularity a five kilowatt hours you can grow into her how many hours system you want to add you can add it over.
Time, all of those things are possible with our system and and and get access to the 30 per cent 90 C credit. So so definitely a benefit for retrofitting.
Great. Thanks very much.
The next question comes from Kashi Harrison paper Sandler. Please go ahead.
Good afternoon, and thank you for taking the questions Ah. So Ah Badri you know in your prepared remarks, you mentioned that distributors. Some of your distributors of sorry to see you a bit of recovery in January I was just wondering if you'd maybe share. Some details on you know what those distributors are now seen in terms of year on <unk>.
Your growth and maybe how that compares to what they had seen in prior quarters.
No. Those are those are not our our data. So we cannot chatter those all all I said is basically.
It's two things, which I said, we are seeing the distributor an installer partners little more cautious.
And looking at it normally we have a six month old visibility and that has been.
That is now somewhat reduced as they watched their spending and then I also talked about.
The fact that you know to sell through which is what the distributors sell to the installers or sell through was quite strong in December while we saw a little bit more seasonality.
Than normal in the month of January on the originations, which I talked about red.
Basically an anecdotal data points from the installers that.
A few of them have seen the originations pick up in January competitor December we also have.
Our.
So a lot of graph designing proposal in gym.
Also have another company Reebok cultural leapt factory.
You also.
Which also deals with salaries, you know selling leads to out installer partners.
That also seem very similar trends.
January is is is better when compared to December so although the data we have is limited.
And so I mentioned that these you know this this point.
Makes us.
Consciously optimistic for cute too.
Fair enough. Thanks, Thanks for the clarification there and this is my follow up question in.
In the event that you are the only major player that's able to capture the Microinverter credit.
Can you speak to your willingness to use the manufacturing credits as a tool to gain market share in other words, just you know passing on all those benefits the customer interest using that Gainshare and that's it for me. Thank you.
Yeah, I mean, we we normally.
Don't think like that we think.
You know we are yeah, we are quite disciplined the product must add value.
And it must add value compare it to the next best Ultimate that's the only way for us to.
When long-term.
So this one is an incremental benefit.
And we have to do a lot of work for that.
A lot of our N D.
A lot of work, we have to do and reliability.
And you know qualifying these factories and having.
You know the right operations running there of course, they talked about it the capital outlay et cetera, So all of those.
Are we are investing in all of those right now, but we are going to be extremely disciplined if not gonna use this as an opportunity to lose their discipline in price.
Thank you.
Next question comes from Penny.
Oh Wells Fargo. Please go ahead.
Thanks, when you look at the U S market I think you mentioned more than the typical 15% seasonal slowdown in January can you, maybe just unpack whether that's more concentrated in in states like California or is it more evenly distributed across the country.
Oh, I mean in California that is an added added complexity due to be due to the weather.
Can be first few weeks of January .
So I would say.
You know.
That's yeah, that's the only difference there. So once the weather is not malaise I think we have got to find.
It is equivalent.
Across the states.
Okay got it and then just switching gears I I wanted to ask on the the bi directional charged her and what you're working on there I guess you know how much the demand do you think there there'll be for this product you know down the road I think it's small now, but but down the road and then when you think about pricing I mean, how much value do you think you could describe.
To Ah Ah by directional charge are given all the opportunities it opens up.
Yeah, the struggle to begin with.
We shouldn't think about bi directional charger or something stand alone by itself, it's a god.
Hard off our energy management system Energy management system will include obviously solar stationary batteries are bidirectional you recharge yours grid management et cetera. So it is part of tactful solutions that we offer and within that full solution site energy management piece of software. That's you know.
February two how the energy should flow between all of these resources as well as into the house. So that's the way we think about it as far as.
You know.
On the first principles basis, it would be if you buy any V. You should buy professionally recharged. It it's really as simple as that in order to gain the most benefit out of it because if you think back as we said you'd it does both of those use cases, we talked about which is both break or the home as well as my uncle to grade when it comes to home means providing resiliency for the.
Home.
The resiliency that.
Right on the roof provides to residents Lindsay that are battery modular priority system provides resiliency now added resiliency or the car can also provide and when it comes to make her to grid. This is about the ability to leverage the energy that you have stored in your.
[noise] stored in your car to provide things my grid services.
And act like a virtual archive. So I think you bring a lot of value to it by being part of our energy system and really I would expect that anybody who buys a newbie would be naturally motivated to buy the entries energy system, which would include the solar battery and divide restaurant leave each archer.
Thank you.
The next question comes from <unk>.
The bank. Please go ahead.
Hi, Thank you for taking my question.
Well all of my questions have been answered maybe just one last one if I may.
So you're doubling your capacity and presumably the U S market will be <unk> corporate service by the minute action capacity in the U S right.
So is there any risk that these capacity conditions in the U S. Cannibalize some of your existence in a line outside of the U S. A mccarthy important here or it's international girl with that you're expecting so strong that basically you international capacity will just or outside of the U S. A man. Thank you.
Yeah, I mean, you know once again, we we are you know I clarified this actually before.
We are very disciplined we will not.
We are working with the same contract manufacturers.
So we can see the business in totality.
We are not going to basically shortchange them on.
You know their locations elsewhere.
So it has to be carefully done and we have be about castrated the right plan Fortunately.
You know for us out of business, it's healthy ramping up in Europe . Europe . For example, Israel is U S as well.
Quite strong usually.
And you know.
It takes us any way four to six quarters.
Graham such lengths.
So what what we will do is is a careful location process.
Make sure that you know all of the factories correctly.
That's what we'll do.
Thank you.
The next question comes from Karen.
Deutsche Bank. Please go ahead.
Hey, Thank you for taking my question I, just wanted to check back on the one two guidance and the range from seven to 714th how much on this toughness <unk> and then and then you come into their database.
She can't get any of them in a corner on what to expect and Californians temporary <unk>. Thank you.
Can you please repeat that one and we were not able to hear it properly.
Sure I just wanted to get more corner on the one two guidance and Cam off all much of the softness you'll have incorporated into the guidance and Daniels U for California market for February and March.
Yeah I mean.
Gave you a 700 to 740 number we told you clearly Europe it's.
Growing quite well, we expect it to grow healthy leaves you one compared to.
Q for and we also told you that the U S. A.
Business will be slightly down as compared to careful so that that's the color we gave you.
As for February and March I mean.
I don't have a crystal ball, but like what I told you it seems like.
The originations are starting to improve.
So we are optimistic things will get better.
Alright. Thank you that's it for me.
Thank you.
The next question comes from.
Charles.
Please go ahead.
Thanks for the question two quick ones about Europe now that European Union is talking about the net zero industrial plan.
Do you envision receiving any credits or other many factoring.
Subsidies for your operations in Romania.
Oh, no we have not heard about that about.
About that or any I mean about receiving any any additional subsidies for a client in Romania. However, you know there is active discussion going on in Europe about.
And about something analogous to the I R. A that's being done here aren't we are talking pretty closely and if that happens and there are some benefits for us will obviously aware of it but.
Other than that we are not hearing or anything else.
Okay, and then I.
I think other than Europe . Your main international exposure is Australia can we get a quick update on that.
Yeah, Australia basically at a week first half.
Of 22 <unk>.
And the fourth quarter is basically recovering back to original levels.
The exciting thing for Australia, as we are just about interviews.
Our third generation battery to Australia in the second quarter.
And in addition, we are also planning to introduce though right you eat microinverters. There. So they are going to have some brand new products and many Australian installers.
We meet with you.
Australia installers once a quarter in her own table.
And many of those Australian.
Installers Unexcited about third generation products, so that will be an incremental.
Revenue for us when it's released.
No one's really Lisa.
Wish I take the update on that date.
No. Thank you.
The next question comes Sean Milligan Ah Johnny.
Go ahead.
Good afternoon, guys. Thanks for taking my question.
Could you address or or help us understand what percentage of the battery storage sales are going internationally right now.
And then I know, you're introducing that and the number of new markets can you help us understand how the the pace of ramp up a new markets. What we should expect for that over this year.
Yeah, we we normally do not break out.
Battery is between.
U S and ER Europe , but I'll say this that.
Europe is getting started.
U S U S. A we we have introduced battery is known for the last.
You know since Q3 of 2020, so basically.
Two and a half years there.
Europe , guys are getting started but their rapidly.
Rapidly expanding we we have introduced the product and countries.
Germany and Belgium.
There are a lot more countries that we.
Introducing and for any twenty-three immediately we are going to introduce in four countries.
Basically, Austria, Netherlands, France, and I think Switzerland.
And and and the fifth one is relevant to Spain.
So we are going to steadily ramp up.
Yeah ramp up a megawatt out of state and when it becomes you know will actually look at it yeah between Mandy and me and see with it.
Start breaking it up.
For the for the future quarters.
Okay, great. Thanks.
[noise]. This concludes our question and answer session.
Like to turn the conference back.
Tried to call her on Friday closing remarks.
[noise] alright, thank you for joining us today and for your continued support of interface. We look forward to speaking with you again next book.
A conference about some crowded thank you for attending today's presentation.
That's correct.