Enphase Energy Q4 2025 Enphase Energy Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Enphase Energy Inc Earnings Call
Speaker #1: Good day, and welcome to Enphase Energy's fourth quarter 2025 financial results. 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.
Operator: Good day, and welcome to the Enphase Energy's Q4 2025 financial results. All participants will be in a 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 will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Zach Freedman. Please go ahead, sir.
Operator: Good day, and welcome to the Enphase Energy's Q4 2025 financial results. All participants will be in a 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 will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Zach Freedman. Please go ahead, sir.
Speaker #1: will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone After today's presentation, there phone.
Speaker #1: To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Zach Freedman.
Speaker #1: Please go ahead,
Speaker #1: sir. Good
Zachary Freedman: Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's Q4 2025 results. On today's call are Badri Kothandaraman, our President and Chief Executive Officer; Mandy Yang, our Chief Financial Officer; and Raghu Belur, our Chief Products Officer. After the market closed today, Enphase issued a press release announcing the results for its Q4 ended 31 December 2025. During this conference call, Enphase management will make forward-looking statements, including but not limited to, statements related to our expected future financial performance, market trends, the capabilities of our technology and products, and the benefits to homeowners and installers.
Zach Freedman: Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's Q4 2025 results. On today's call are Badri Kothandaraman, our President and Chief Executive Officer; Mandy Yang, our Chief Financial Officer; and Raghu Belur, our Chief Products Officer. After the market closed today, Enphase issued a press release announcing the results for its Q4 ended 31 December 2025. During this conference call, Enphase management will make forward-looking statements, including but not limited to, statements related to our expected future financial performance, market trends, the capabilities of our technology and products, and the benefits to homeowners and installers.
Speaker #2: Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's fourth quarter 2025 results. On today's call are Badrin Kothandaraman, our President and Chief Executive Officer; Mandy Yang, our Chief Financial Officer; and Raghu Belur, our Chief Products Officer.
Speaker #2: After the market closed today, Enphase issued a press release announcing the results of its fourth quarter ended December 31, 2025. During this conference call, Enphase management will make forward-looking statements, including, but not limited to, statements related to our expected future financial performance, market trends, the capabilities of our technology and products, and the benefits to homeowners and installers.
Speaker #2: Our operations, including manufacturing, customer service, and supply and demand, anticipated growth in existing and new timing of new product introductions and enhancements, markets including the TPO market, enhancements to existing products, and regulatory, tax, tariff, and supply chain matters.
Zachary Freedman: Our operations, including manufacturing, customer service, and supply and demand, anticipated growth in existing and new markets, including the TPO market, the timing of new product introductions and enhancements to existing products, and regulatory tax, tariff, and supply chain 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 on forward-looking statements and undertake 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, unless otherwise noted, and have been adjusted to exclude certain charges....
Zach Freedman: Our operations, including manufacturing, customer service, and supply and demand, anticipated growth in existing and new markets, including the TPO market, the timing of new product introductions and enhancements to existing products, and regulatory tax, tariff, and supply chain 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 on forward-looking statements and undertake 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, unless otherwise noted, and have been adjusted to exclude certain charges....
Speaker #2: 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.
Speaker #2: We caution you not to place any undue reliance on forward-looking statements, and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes. Financial measures used on this call are expressed on expectations.
Speaker #2: Also, please note that a non-GAAP basis unless otherwise noted, and that 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.
Zachary Freedman: 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 Badri Kothandaraman, our President and Chief Executive Officer. Badri?
Zach Freedman: 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 Badri Kothandaraman, our President and Chief Executive Officer. Badri?
Speaker #2: Which can also be found in the Investor Relations section of our website. Now, I'd like to introduce Badrinarayanan Kothandaraman, our President and Chief Executive Officer.
Speaker #2: Badrin,
Badrinarayanan Kothandaraman: Good afternoon, and thanks for joining us today to discuss our Q4 2025 financial results. We had a good quarter. We reported quarterly revenue of $343.3 million, shipped 1.55 million microinverters and 150 MWh of batteries, and generated free cash flow of $37.8 million. Our Q4 revenue included $2.3 million of safe harbor revenue. US consumers pulled forward purchases ahead of the Section 25D tax credit deadline, helping us exit 2025 with a lean channel. For Q4, we delivered 46% gross margin above the high end of our guidance range, 23% operating expenses, and 23% operating income, all as a percentage of revenue on a non-GAAP basis. Mandy will go into our financials later in the call.
Badri Kothandaraman: Good afternoon, and thanks for joining us today to discuss our Q4 2025 financial results. We had a good quarter. We reported quarterly revenue of $343.3 million, shipped 1.55 million microinverters and 150 MWh of batteries, and generated free cash flow of $37.8 million. Our Q4 revenue included $2.3 million of safe harbor revenue. US consumers pulled forward purchases ahead of the Section 25D tax credit deadline, helping us exit 2025 with a lean channel. For Q4, we delivered 46% gross margin above the high end of our guidance range, 23% operating expenses, and 23% operating income, all as a percentage of revenue on a non-GAAP basis. Mandy will go into our financials later in the call.
Speaker #3: Good afternoon, and thanks for joining us today to discuss our fourth quarter 2025 financial results. We had a good quarter. We reported quarterly revenue of $343.3 million, shipped 1.55 million microinverters, and 150 megawatt-hours of batteries.
Speaker #3: And generated free cash flow of $37.8 million. Our Q4 revenue included $2.3 million of safe harbor revenue. U.S. consumers pulled forward purchases ahead of the Section 25D tax credit deadline, 2025, with a lean channel.
Speaker #3: For Q4, we delivered a 46% gross margin, above the high end of our guidance range; 23% operating expenses; and 23% operating income, all as a percentage of revenue on a non-GAAP basis.
Speaker #3: Mandy will go into our financials later in the call. Our global customer service NPS was 79% in Q4, compared to 77% in Q3. Average call wait time was 1.6 minutes.
Badrinarayanan Kothandaraman: Our global customer service NPS was 79% in Q4, compared to 77 in Q3. Average call wait time was 1.6 minutes. We piloted an AI assistant in the Enphase App in Q4 and plan to roll it out in Q1 to help customers manage their systems intuitively. We also plan to pilot an AI assistant for installers in Q1 to help them manage their fleet and identify upgrade opportunities. Let's talk about operations. In Q4, we shipped approximately 1.31 million microinverters from our Texas and South Carolina manufacturing facilities and booked associated Section 45X production tax credits. These domestically made microinverters help residential lease and PPA providers, as well as commercial asset owners, qualify for the 10% domestic content ITC adders.
Badri Kothandaraman: Our global customer service NPS was 79% in Q4, compared to 77 in Q3. Average call wait time was 1.6 minutes. We piloted an AI assistant in the Enphase App in Q4 and plan to roll it out in Q1 to help customers manage their systems intuitively. We also plan to pilot an AI assistant for installers in Q1 to help them manage their fleet and identify upgrade opportunities. Let's talk about operations. In Q4, we shipped approximately 1.31 million microinverters from our Texas and South Carolina manufacturing facilities and booked associated Section 45X production tax credits. These domestically made microinverters help residential lease and PPA providers, as well as commercial asset owners, qualify for the 10% domestic content ITC adders.
Speaker #3: We piloted an AI assistant in the Enphase app in Q4, and plan to roll it out in Q1 to help customers manage their systems intuitively.
Speaker #3: We also plan to pilot an AI assistant for installers in Q1 to help them manage their fleet and identify upgrade opportunities. Let's talk about operations.
Speaker #3: In Q4, we shipped approximately 1.31 million microinverters from our Texas and South Carolina manufacturing facilities, and booked associated Section 45X production tax credits. These domestically made microinverters help providers, as well as commercial asset owners, qualify for the 10% add-up.
Speaker #3: In Q4, we shipped 51.1 megawatt-hours of domestic content ITC-eligible IQ batteries from our Texas manufacturing facility, meeting applicable domestic content requirements and helping lease PPA customers qualify for ITC bonuses.
Badrinarayanan Kothandaraman: In Q4, we shipped 51.1 MWh of IQ Batteries from our Texas manufacturing facility, meeting applicable domestic content requirements and helping lease PPA customers qualify for ITC bonuses. We continue to differentiate through our ability to deliver domestic content and meet FIOC requirements as regulatory standards tighten. Also, we expect to receive our first non-China battery cells in Q1 and remain on track to scale non-China cell supply into battery production in the first half of 2026. Let's now cover the regions. Our US and international revenue mix for Q4 was 89% and 11%, respectively. In the US, our revenue decreased 13% in Q4 compared to Q3, primarily due to safe harbor revenue of $20.3 million compared to $70.9 million in Q3.
Badri Kothandaraman: In Q4, we shipped 51.1 MWh of IQ Batteries from our Texas manufacturing facility, meeting applicable domestic content requirements and helping lease PPA customers qualify for ITC bonuses. We continue to differentiate through our ability to deliver domestic content and meet FIOC requirements as regulatory standards tighten. Also, we expect to receive our first non-China battery cells in Q1 and remain on track to scale non-China cell supply into battery production in the first half of 2026. Let's now cover the regions. Our US and international revenue mix for Q4 was 89% and 11%, respectively. In the US, our revenue decreased 13% in Q4 compared to Q3, primarily due to safe harbor revenue of $20.3 million compared to $70.9 million in Q3.
Speaker #3: We continue to differentiate through our ability to deliver domestic content and meet FIOC requirements as regulatory standards tighten. Also, we expect to receive our first non-China battery cells in Q1, and remain on track to scale non-China cell supply into battery production in the course of 2026.
Speaker #3: Let's now cover the regions. Our US and international revenue mix respectively. In the US, our revenue decreased 13% in 89% and 11% Q4, compared to Q3, primarily due to safe harbor revenue of 20.3 million dollars, compared to 70.9 million dollars in Q3.
Speaker #3: The overall sell-through of our products increased 21% in Q4, compared to Q3, to the highest level in more than two years. The strong demand trends that we saw at the beginning of Q4 continued until the end of the year, driven by increased solar and battery installations ahead of the expiring Section 25D tax credit.
Badrinarayanan Kothandaraman: The overall sell-through of our products increased 21% in Q4 compared to Q3, to the highest level in more than two years. The strong demand trends that we saw at the beginning of Q4 continued till the end of the year, driven by increased solar and battery installations ahead of the expiring Section 25D tax credit. In Europe, our revenue decreased by 29% in Q4 compared to Q3, while our sell-through decreased by 23%. The overall business environment across the region is still challenging. We are staying disciplined in managing the channel and focusing on targeted growth areas for 2026. I will provide some additional color on the key markets in Europe. In the Netherlands, solar demand remained soft in Q4, but we are making steady progress towards a large battery retrofit opportunity, driven by structural changes in the market.
Badri Kothandaraman: The overall sell-through of our products increased 21% in Q4 compared to Q3, to the highest level in more than two years. The strong demand trends that we saw at the beginning of Q4 continued till the end of the year, driven by increased solar and battery installations ahead of the expiring Section 25D tax credit. In Europe, our revenue decreased by 29% in Q4 compared to Q3, while our sell-through decreased by 23%. The overall business environment across the region is still challenging. We are staying disciplined in managing the channel and focusing on targeted growth areas for 2026. I will provide some additional color on the key markets in Europe. In the Netherlands, solar demand remained soft in Q4, but we are making steady progress towards a large battery retrofit opportunity, driven by structural changes in the market.
Speaker #3: In Europe, our revenue decreased by 29% in Q4 compared to Q3, while our sell-through decreased by 23%. The overall business decreased, and the environment across the region is still challenging. We are staying disciplined in managing the channel and focusing on targeted growth areas for 2026.
Speaker #3: I will provide some additional color on the key markets in Europe. In the Netherlands, solar demand remained soft in Q4, but we are making steady progress toward a large battery retrofit opportunity driven by structural changes in the market.
Speaker #3: Rising solar export penalties and the planned phase-out of net metering by the end of 2026 are shifting economics decisively towards self-consumption, strengthening the case for batteries.
Badrinarayanan Kothandaraman: Rising solar export penalties and the planned phase-out of net metering by the end of 2026 are shifting economics decisively towards self-consumption, strengthening the case for batteries. With an installed base of approximately 475,000 Enphase residential solar systems, we estimate a total opportunity of roughly $2 billion for batteries. We are seeing early traction from targeted homeowner outreach, including homeowner events and direct marketing, and are expanding partnerships with retail energy providers that offer compelling VPP economics. With continued rollout of software capabilities like PowerMatch and the launch of our fifth-generation battery later this year, we believe we are very well positioned to lead the battery transition in Netherlands. In France, reduction in feed-in tariffs are shifting residential solar economics towards self-consumption, increasing the interest in batteries, particularly for new installations.
Badri Kothandaraman: Rising solar export penalties and the planned phase-out of net metering by the end of 2026 are shifting economics decisively towards self-consumption, strengthening the case for batteries. With an installed base of approximately 475,000 Enphase residential solar systems, we estimate a total opportunity of roughly $2 billion for batteries. We are seeing early traction from targeted homeowner outreach, including homeowner events and direct marketing, and are expanding partnerships with retail energy providers that offer compelling VPP economics. With continued rollout of software capabilities like PowerMatch and the launch of our fifth-generation battery later this year, we believe we are very well positioned to lead the battery transition in Netherlands. In France, reduction in feed-in tariffs are shifting residential solar economics towards self-consumption, increasing the interest in batteries, particularly for new installations.
Speaker #3: With an installed base of approximately 475,000 Enphase residential solar systems, we estimate a total opportunity of roughly $2 billion for batteries. We are seeing early traction for targeted homeowner outreach, including homeowner events and direct marketing, and are expanding partnerships with retail and energy providers that offer compelling VPP economics.
Speaker #3: With continued rollout of PowerMatch and the launch of our fifth-generation battery later this year, we believe we are very well positioned to lead the battery transition in the Netherlands.
Speaker #3: In France, reductions in feed-in tariffs are shifting residential solar economics towards self-consumption, increasing the interest in batteries, particularly for new installations. With approximately 375,000 Enphase residential solar systems installed in France, the retrofit opportunity is more modest than in the Netherlands due to fixed energy contracts, but overall battery adoption is still gaining traction.
Badrinarayanan Kothandaraman: With approximately 375,000 Enphase residential solar systems installed in France, the retrofit opportunity is more modest than in the Netherlands due to fixed energy contracts, but overall battery adoption is still gaining traction. New business models, including battery leasing, are emerging, and we expect the battery demand in France to build steadily through the year, supported by anticipated increases in utility rates and evolving dynamic tariffs. Across Europe, competition remains intense and pricing pressure is high as installers adapt to a tougher demand environment. We are responding by controlling costs within our current products and aligning pricing to market realities, including our microinverter price reductions, which we implemented across Europe in November. At the same time, we are investing in next-generation products very strongly, both IQ Nine microinverters and our fifth-generation battery platform.
Badri Kothandaraman: With approximately 375,000 Enphase residential solar systems installed in France, the retrofit opportunity is more modest than in the Netherlands due to fixed energy contracts, but overall battery adoption is still gaining traction. New business models, including battery leasing, are emerging, and we expect the battery demand in France to build steadily through the year, supported by anticipated increases in utility rates and evolving dynamic tariffs. Across Europe, competition remains intense and pricing pressure is high as installers adapt to a tougher demand environment. We are responding by controlling costs within our current products and aligning pricing to market realities, including our microinverter price reductions, which we implemented across Europe in November. At the same time, we are investing in next-generation products very strongly, both IQ Nine microinverters and our fifth-generation battery platform.
Speaker #3: New business models, including battery leasing, are emerging, and we expect the battery demand in France to build steadily through the year, supported by anticipated increases in utility rates and evolving dynamic tariffs.
Speaker #3: Across Europe, competition remains intense, and pricing pressure is high, as installers adapt to a tougher demand environment. We are responding by controlling costs within our current products and aligning pricing to market realities, including our implemented microinverter price reductions across Europe, which we did in November.
Speaker #3: At the same time, we are investing in next-generation products very strongly, both at Q9 microinverters and our fifth-generation battery platform. We expect to deliver structural cost improvements in these products, which enable attractive pricing and sustained, healthy gross margins.
Badrinarayanan Kothandaraman: We expect to deliver structural cost improvements in these products, which enable attractive pricing and sustain healthy gross margins. Our focus remains on supporting our installers and competing effectively as the market evolves. In Australia, we see a meaningful battery growth opportunity, supported by a mature rooftop solar base and accelerating customer interest in self-consumption, resilience, and VPP. The market is installing larger, more capable storage systems to take advantage of current incentives, and installers are increasingly asking for solutions that are simple to size, expand, and commission. With our fifth-generation system expected later this year, we believe our stackable, scalable AC-coupled architecture is well aligned with what installers want and what homeowners increasingly value: flexible capacity today with the ability to add more over time. Let's now discuss Q1 outlook.
Badri Kothandaraman: We expect to deliver structural cost improvements in these products, which enable attractive pricing and sustain healthy gross margins. Our focus remains on supporting our installers and competing effectively as the market evolves. In Australia, we see a meaningful battery growth opportunity, supported by a mature rooftop solar base and accelerating customer interest in self-consumption, resilience, and VPP. The market is installing larger, more capable storage systems to take advantage of current incentives, and installers are increasingly asking for solutions that are simple to size, expand, and commission. With our fifth-generation system expected later this year, we believe our stackable, scalable AC-coupled architecture is well aligned with what installers want and what homeowners increasingly value: flexible capacity today with the ability to add more over time. Let's now discuss Q1 outlook.
Speaker #3: Our focus remains on supporting our installers and competing effectively as the market evolves. In Australia, we see a meaningful battery growth opportunity supported by a mature rooftop solar base and accelerating customer interest in self-consumption, resilience, and VPP.
Speaker #3: The market is installing larger, more capable storage systems to take advantage of current incentives, and installers are increasingly asking for solutions that are simple to size, expand, and commission.
Speaker #3: With our fifth-generation system expected later this year, we believe our stackable, scalable, AC-coupled architecture is well aligned with what installers want, and what homeowners increasingly value.
Speaker #3: Flexible capacity today, with the ability to add more over time. Let's now discuss the Q1 outlook. During last quarter's call, we shared a view of Q1 revenue to be around $250 million.
Badrinarayanan Kothandaraman: During last quarter's call, we shared a view of Q1 revenue to be around $250 million. Today, we are providing Q1 revenue guidance of $270 to 300 million. We are approximately 90% booked to the midpoint of our revenue guidance. We continue to believe Q1 marks the low point for underlying demand, with improvement expected through 2026, particularly in the second half. Installer sentiment is also improving as higher utility rates strengthen the customer value proposition, including in several Northeast and Midwest markets that have seen double-digit residential electricity price increases over the last year. The feedback on prepaid lease offerings is also encouraging, giving installers yet another effective tool to drive solar and battery adoption this year. Let's talk about financing. Enphase is well positioned to support all major TPOs today.
Badri Kothandaraman: During last quarter's call, we shared a view of Q1 revenue to be around $250 million. Today, we are providing Q1 revenue guidance of $270 to 300 million. We are approximately 90% booked to the midpoint of our revenue guidance. We continue to believe Q1 marks the low point for underlying demand, with improvement expected through 2026, particularly in the second half. Installer sentiment is also improving as higher utility rates strengthen the customer value proposition, including in several Northeast and Midwest markets that have seen double-digit residential electricity price increases over the last year. The feedback on prepaid lease offerings is also encouraging, giving installers yet another effective tool to drive solar and battery adoption this year. Let's talk about financing. Enphase is well positioned to support all major TPOs today.
Speaker #3: Today, we are providing Q1 revenue guidance of $270 to $300 million. We are approximately 90% booked to the midpoint of our revenue guidance.
Speaker #3: We continue to believe Q1 marks the low point for underlying demand, with improvement expected through 2026, particularly in the second half. Installers' sentiment is also improving, as higher utility rates strengthen the customer value proposition, including in several Northeast and Midwest markets that have seen double-digit residential electricity price increases over the last year.
Speaker #3: The feedback on prepaid lease offerings is also encouraging, giving installers yet another effective tool to drive solar and battery adoption this year. Let's talk about financing.
Speaker #3: Enphase is well positioned to support all major TPOs today. In Q4, we announced two TPO orders totaling $123 million, including $55 million under the 5% safe harbor method and $68 million under the physical work test method.
Badrinarayanan Kothandaraman: In Q4, we announced two TPO orders totaling $123 million, including $55 million under the 5% safe harbor method and $68 million under the physical work test method. We collaborate with TPOs on tax equity support, domestic content, and FIOC-compliant offerings, O&M services through Enphase Care, and an integrated workflow through Solargraf for design, proposal, and permitting, while also partnering on innovative financing structures. We continue to see prepaid leases as an attractive option, which give homeowners a lower upfront cost today and the option to own the system after 5 years. In this structure, the TPO owns the system initially and claims the 48 tax credit, then share that value with the homeowner through a prepaid lease or low monthly payments when paired with the loan.
Badri Kothandaraman: In Q4, we announced two TPO orders totaling $123 million, including $55 million under the 5% safe harbor method and $68 million under the physical work test method. We collaborate with TPOs on tax equity support, domestic content, and FIOC-compliant offerings, O&M services through Enphase Care, and an integrated workflow through Solargraf for design, proposal, and permitting, while also partnering on innovative financing structures. We continue to see prepaid leases as an attractive option, which give homeowners a lower upfront cost today and the option to own the system after 5 years. In this structure, the TPO owns the system initially and claims the 48 tax credit, then share that value with the homeowner through a prepaid lease or low monthly payments when paired with the loan.
Speaker #3: We collaborate with TPOs on tax equity support, domestic content and FIAT-compliant offerings, O&M services through EnphaseCare, and an integrated workflow through SolarGraph for design, proposal, and permitting.
Speaker #3: While also partnering on innovative financing structures, we continue to see prepaid leases as an attractive option, which give homeowners a lower upfront cost today and the option to own the system after five years.
Speaker #3: In this structure, the TPO owns the system initially and claims the 48% tax credit, then shares that value with the homeowner through a prepaid lease or low monthly payments when paired with the loan.
Speaker #3: The result is a lower effective cost for the homeowner, and economics that look much closer to what customers were used to when the 30% Section 25(d) tax credit was available.
Badrinarayanan Kothandaraman: The result is a lower effective cost for the homeowner and economics that look much closer to what customers were used to when the 30% Section 25D tax credit was available. We are supporting a TPO-led prepaid lease program that is being field-tested with a loan partner as well as a distribution partner. The program, which uses Enphase equipment, is currently in pilot across four states with approximately 40 installers. We expect a broader rollout to happen upon completing the pilot successfully and validating the customer experience, installer execution, and financing performance at scale. We expect to share more as the program matures in the coming months. Let's cover products, starting with IQ Batteries. Our fourth-generation IQ Battery 10C continues to ramp in the US, delivering a smaller footprint, higher energy density, and a simpler installation process enabled by the IQ Meter Collar.
Badri Kothandaraman: The result is a lower effective cost for the homeowner and economics that look much closer to what customers were used to when the 30% Section 25D tax credit was available. We are supporting a TPO-led prepaid lease program that is being field-tested with a loan partner as well as a distribution partner. The program, which uses Enphase equipment, is currently in pilot across four states with approximately 40 installers. We expect a broader rollout to happen upon completing the pilot successfully and validating the customer experience, installer execution, and financing performance at scale. We expect to share more as the program matures in the coming months. Let's cover products, starting with IQ Batteries. Our fourth-generation IQ Battery 10C continues to ramp in the US, delivering a smaller footprint, higher energy density, and a simpler installation process enabled by the IQ Meter Collar.
Speaker #3: We are supporting a TPO-led prepaid lease program that is being field-tested with the loan partner as well as a distribution partner. The program, which uses Enphase equipment, is currently in pilot across four states, with approximately 40 installers.
Speaker #3: We expect a broader rollout to happen upon completing the pilot successfully and validating the customer experience, installer execution, and financing performance at scale. We expect to share more as the program matures in the coming months.
Speaker #3: Let's cover products, starting with IQ batteries. Our fourth-generation IQ Battery 10C continues to ramp in the U.S., delivering a smaller footprint, higher energy density, and a simpler installation process enabled by the IQ Meter Column.
Speaker #3: The column is now approved by 52 U.S. utilities and growing, serving approximately 30 million customer accounts. We believe this represents the broadest utility approval footprint of any major battery provider today.
Badrinarayanan Kothandaraman: The collar is now approved by 52 US utilities and growing, serving approximately 30 million customer accounts. We believe this represents the broadest utility approval footprint of any major battery provider today. In California, the meter collar is approved by all three major investor-owned utilities. We also launched PowerMatch in Q4, a software-enabled technology that dynamically matches the IQ battery output to real-time home demand, increasing usable energy, extending battery life, and improving performance by up to 40%. Unlike hybrid systems that push all power through a single large inverter, PowerMatch activates only the microinverters that are needed, reducing the losses at low power consumption, so customers get more usable energy from the same battery capacity. Let's now cover our fifth-generation battery. We are making significant progress on this battery.
Badri Kothandaraman: The collar is now approved by 52 US utilities and growing, serving approximately 30 million customer accounts. We believe this represents the broadest utility approval footprint of any major battery provider today. In California, the meter collar is approved by all three major investor-owned utilities. We also launched PowerMatch in Q4, a software-enabled technology that dynamically matches the IQ battery output to real-time home demand, increasing usable energy, extending battery life, and improving performance by up to 40%. Unlike hybrid systems that push all power through a single large inverter, PowerMatch activates only the microinverters that are needed, reducing the losses at low power consumption, so customers get more usable energy from the same battery capacity. Let's now cover our fifth-generation battery. We are making significant progress on this battery.
Speaker #3: In California, the meter column is approved by all three major investor-owned utilities. We also launched Power Match in Q4, a software-enabled technology that dynamically matches the IQ Battery output to real-time home demand.
Speaker #3: Increasing usable energy, extending battery life, and improving performance by up to 40%. Unlike hybrid systems that push all power through a single large inverter, Power Match activates only the microinverters that are needed.
Speaker #3: Reducing the losses at low power consumption, so customers get more usable energy from the same battery capacity. Let's now cover our fifth-generation battery. We are making significant progress on this battery.
Speaker #3: It is built from stackable 5-kilowatt-hour modular blocks and will scale up to 20 kilowatt-hours in the US and up to 30 kilowatt-hours in other regions.
Badrinarayanan Kothandaraman: It is built from stackable 5 kWh modular blocks and will scale up to 20 kWh in the US and up to 30 kWh in other regions. The design targets roughly 50% higher energy density than the fourth-generation battery at about 40% lower cost. When paired with PowerMatch, we believe this platform will offer a compelling combination of performance, flexibility, and value for installers and homeowners. We expect to start pilots in Q3 2026 and start shipping in Q4 2026. We are making strong progress in partnering with retail energy providers and VPP operators across the globe that are seeking flexible distributed capacity. Through these programs, homeowners can earn attractive incentives from their energy provider for installing and enrolling in Enphase batteries.
Badri Kothandaraman: It is built from stackable 5 kWh modular blocks and will scale up to 20 kWh in the US and up to 30 kWh in other regions. The design targets roughly 50% higher energy density than the fourth-generation battery at about 40% lower cost. When paired with PowerMatch, we believe this platform will offer a compelling combination of performance, flexibility, and value for installers and homeowners. We expect to start pilots in Q3 2026 and start shipping in Q4 2026. We are making strong progress in partnering with retail energy providers and VPP operators across the globe that are seeking flexible distributed capacity. Through these programs, homeowners can earn attractive incentives from their energy provider for installing and enrolling in Enphase batteries.
Speaker #3: The design targets roughly 50% higher energy density than the fourth-generation battery, at about 40% lower cost. When paired with Power Match, we believe this platform will offer a compelling combination of performance, flexibility, and value for installers and homeowners.
Speaker #3: We expect to start pilots in the third quarter of 2026 and start shipping in the fourth quarter. We are making strong progress in partnering with retail energy providers and VPP operators across the globe that are seeking flexible, distributed capacity.
Speaker #3: Through these programs, homeowners can earn attractive incentives from their energy provider for installing and enrolling Enphase batteries. In Q4, we added several programs, the notable ones being a home battery leasing program with GMP in Vermont and eligibility under the San Diego Community Power Solar Battery Savings Program.
Badrinarayanan Kothandaraman: In Q4, we added several programs, the notable being a home battery leasing program with GMP in Vermont and eligibility under San Diego Community Power Solar Battery Savings Program. These partnerships can drive meaningful battery volumes, and we are targeting many more additional VPP partnerships this year. Let's come to microinverters. In December, we began shipping the IQ9 3P commercial microinverter, built on our GaN-based power conversion architecture. IQ9 is a major step forward for Enphase, expanding us into 480V, three-phase commercial systems in the US for the first time, and represents an approximately $400 million total addressable market. The demand is encouraging, with more than 50,000 microinverters ordered for Q1, and early feedback confirms the market need for reliability, CEOC compliance, and domestic content that IQ9 delivers.
Badri Kothandaraman: In Q4, we added several programs, the notable being a home battery leasing program with GMP in Vermont and eligibility under San Diego Community Power Solar Battery Savings Program. These partnerships can drive meaningful battery volumes, and we are targeting many more additional VPP partnerships this year. Let's come to microinverters. In December, we began shipping the IQ9 3P commercial microinverter, built on our GaN-based power conversion architecture. IQ9 is a major step forward for Enphase, expanding us into 480V, three-phase commercial systems in the US for the first time, and represents an approximately $400 million total addressable market. The demand is encouraging, with more than 50,000 microinverters ordered for Q1, and early feedback confirms the market need for reliability, CEOC compliance, and domestic content that IQ9 delivers.
Speaker #3: Meaningful battery volumes, and we are targeting many more additional VPP partnerships this year. Let's come to microinverters. In December, we began shipping the IQ9.3P commercial microinverter, built on our GaN-based power conversion architecture.
Speaker #3: IQ9 is a major step forward for Enphase, expanding us into 480-volt three-phase commercial systems in the U.S. for the first time, and represents an approximately $400 million total addressable market.
Speaker #3: The demand is encouraging, with more than 50,000 microinverters ordered for Q1, and early feedback confirms the market need for reliability, fiat compliance, and domestic content that IQ9 delivers.
Speaker #3: We expect to introduce IQ9 for the global residential markets in the first quarter of 2026, and the higher-powered 48-watt version for both residential and commercial markets in the third quarter.
Badrinarayanan Kothandaraman: We expect to introduce the IQ9 for the global residential markets in Q1 2026, and the higher powered 548-watt version for both residential and commercial markets in Q3. More broadly, our IQ, our GaN-based microinverter platform, gives us a step change in speed, efficiency, and controllability, capabilities that matter as the grid and large electrified loads increasingly demand fast response times and load shaping. We are increasing our R&D investment in these areas to extend our core capabilities to address these demanding use cases. More to come here as we make progress. Let's cover EV charging. In December, we began shipping our new IQ EV Charger 2 to customers across the US.
Badri Kothandaraman: We expect to introduce the IQ9 for the global residential markets in Q1 2026, and the higher powered 548-watt version for both residential and commercial markets in Q3. More broadly, our IQ, our GaN-based microinverter platform, gives us a step change in speed, efficiency, and controllability, capabilities that matter as the grid and large electrified loads increasingly demand fast response times and load shaping. We are increasing our R&D investment in these areas to extend our core capabilities to address these demanding use cases. More to come here as we make progress. Let's cover EV charging. In December, we began shipping our new IQ EV Charger 2 to customers across the US.
Speaker #3: More broadly, our IQ, our GaN-based microinverter platform, gives us a step change in speeds, efficiency, and controllability—capabilities that matter as the grid and large electrified loads increasingly demand fast response times and load shaping.
Speaker #3: We are increasing our R&D investment in these areas to extend our core capabilities to address these demanding use cases. More to come here as we make progress.
Speaker #3: Let's cover EV charging. In December, we began shipping our new IQ EV Charger 2 to customers across the U.S. This charger supports fast Level 2 charging up to 19.2 kilowatts on 240-volt service, and up to 22.1 kilowatts where 277 volts is available.
Badrinarayanan Kothandaraman: This charger supports fast Level 2 charging up to 19.2 kW on 240-volt service and up to 22.1 kW where 277 volts is available. It also works as a standalone charger or fully integrated with Enphase solar and battery systems. The charger is also available in Europe, Australia, New Zealand, and Canada, with additional availability plans for 2026. Let me share an update on our IQ Bidirectional EV Charger built on our GaN power platform, engineered to work seamlessly with modern 800-volt DC EV architectures. It is a concrete example of our ability to move power efficiently between grid-facing AC and 800-volt DC backbone, and to do so bidirectionally with tight control and protection.
Badri Kothandaraman: This charger supports fast Level 2 charging up to 19.2 kW on 240-volt service and up to 22.1 kW where 277 volts is available. It also works as a standalone charger or fully integrated with Enphase solar and battery systems. The charger is also available in Europe, Australia, New Zealand, and Canada, with additional availability plans for 2026. Let me share an update on our IQ Bidirectional EV Charger built on our GaN power platform, engineered to work seamlessly with modern 800-volt DC EV architectures. It is a concrete example of our ability to move power efficiently between grid-facing AC and 800-volt DC backbone, and to do so bidirectionally with tight control and protection.
Speaker #3: It also works as a standalone charger or fully integrated with Enphase solar and battery systems. The charger is also available in Europe, Australia, New Zealand, and Canada, with additional availability plans for 2026.
Speaker #3: Let me share an update on our IQ bidirectional EV charger, built on our GaN power platform. Engineered to work seamlessly with modern 800-volt DC EV architectures.
Speaker #3: It is a concrete example of our ability to move power efficiently between grid-facing AC and 800-volt DC backbone, and to do so bidirectionally with tight control and protection.
Speaker #3: We continue to target initial availability in the fourth quarter of 2026, starting with limited deployments as we complete required certifications, utility coordination, and vehicle compatibility validation.
Badrinarayanan Kothandaraman: We continue to target initial availability in the fourth quarter of 2026, starting with limited deployments as we complete required certifications, utility coordination, and vehicle compatibility validation. The product is compelling because it pairs simply with the IQ Meter Collar in the US and a backup switch in Europe to enable a streamlined configuration for seamless home backup, which is V2H, and VPP participation, which is V2G. We are also in active discussions with multiple auto OEMs on partnerships and will share more as those discussions mature. Let's cover Solargraf, our all-in-one design and proposal platform built for installers. We continue to deliver meaningful upgrades, including fully customizable proposals with in-line editing, battery-only proposals, and racking integration to generate a complete bill of materials. We are also expanding AI capabilities, including one-touch design and automation, and lighting integration to help installers reduce operational overhead.
Badri Kothandaraman: We continue to target initial availability in the fourth quarter of 2026, starting with limited deployments as we complete required certifications, utility coordination, and vehicle compatibility validation. The product is compelling because it pairs simply with the IQ Meter Collar in the US and a backup switch in Europe to enable a streamlined configuration for seamless home backup, which is V2H, and VPP participation, which is V2G. We are also in active discussions with multiple auto OEMs on partnerships and will share more as those discussions mature. Let's cover Solargraf, our all-in-one design and proposal platform built for installers. We continue to deliver meaningful upgrades, including fully customizable proposals with in-line editing, battery-only proposals, and racking integration to generate a complete bill of materials. We are also expanding AI capabilities, including one-touch design and automation, and lighting integration to help installers reduce operational overhead.
Speaker #3: The product is compelling because it pairs simply with the IQ Meter column in the U.S. and a backup switch in Europe, to enable a streamlined configuration for seamless home backup, which is V2H, and VPP participation, which is V2G.
Speaker #3: We are also in active discussions with multiple auto OEMs on partnerships and will share more as those discussions mature. Let's cover SolarGraph, our all-in-one design and proposal platform built for installers.
Speaker #3: We continue to deliver meaningful upgrades, including fully customizable proposals with inline editing, battery-only proposals, and racking integration to generate a complete bill of materials.
Speaker #3: We are also expanding AI capabilities, including one-touch design and automation. Enlighten integration will help installers reduce operational overhead. Looking ahead, we are adding support for commercial system designs to align with our expanding commercial products.
Badrinarayanan Kothandaraman: Looking ahead, we are adding support for commercial system designs to align with our expanding commercial products. Solargraf remains a core installer enablement tool, especially as TPO integration accelerates. Let me conclude. We are executing well through a challenging period, and our focus on innovation, quality, and customer service continues to support healthy margins and good market share in US residential solar. We are now extending these strengths into commercial solar, where we believe we can build a meaningful business. We expect the underlying demand to stabilize from current levels, with improvements developing as several tailwinds build. Rising electricity costs are making energy affordability a priority for households. New financing options are expanding how consumers can buy solar, and easing interest rates can further improve affordability.
Badri Kothandaraman: Looking ahead, we are adding support for commercial system designs to align with our expanding commercial products. Solargraf remains a core installer enablement tool, especially as TPO integration accelerates. Let me conclude. We are executing well through a challenging period, and our focus on innovation, quality, and customer service continues to support healthy margins and good market share in US residential solar. We are now extending these strengths into commercial solar, where we believe we can build a meaningful business. We expect the underlying demand to stabilize from current levels, with improvements developing as several tailwinds build. Rising electricity costs are making energy affordability a priority for households. New financing options are expanding how consumers can buy solar, and easing interest rates can further improve affordability.
Speaker #3: Solar Graph remains a core installer enablement tool, especially as TPO integration accelerates. Let me conclude. We are executing well through a challenging period, and our focus on innovation, quality, and customer service continues to support healthy margins and good market share in U.S. residential solar.
Speaker #3: We are now extending these strengths into commercial solar, where we believe we can build a meaningful business. We expect the underlying demand to stabilize from current levels, with improvements developing as several tailwinds build.
Speaker #3: Rising electricity costs are making energy affordability a priority for households. New financing options are expanding how consumers can buy solar, and easing interest rates can further improve affordability.
Speaker #3: In 2026, we are continuing to evolve from a single-product and end-market company into a broader technology platform that can apply our power electronics and energy management strength to significantly larger markets.
Badrinarayanan Kothandaraman: In 2026, we are continuing to evolve from a single product and end market company into a broader technology platform that can apply our power electronics and energy management strength to significantly larger markets. The transition began 5 years ago with our entry into residential batteries, and is now accelerating with our expansion into commercial solar and our planned entry into commercial batteries, bidirectional EV charging, and additional adjacencies in the year ahead. As the world's power needs grow larger and more complex, we believe Enphase brings a differentiated, best-in-class power management foundation to meet them.... We remain laser focused on the near-term revenue levers that we can control. Number one, accelerating IQ Battery tenancy growth. Number two, scaling IQ9 GaN microinverters to expand our 480V three-phase commercial footprint. Number three, unlocking battery retrofits across Netherlands and France.
Badri Kothandaraman: In 2026, we are continuing to evolve from a single product and end market company into a broader technology platform that can apply our power electronics and energy management strength to significantly larger markets. The transition began 5 years ago with our entry into residential batteries, and is now accelerating with our expansion into commercial solar and our planned entry into commercial batteries, bidirectional EV charging, and additional adjacencies in the year ahead. As the world's power needs grow larger and more complex, we believe Enphase brings a differentiated, best-in-class power management foundation to meet them.... We remain laser focused on the near-term revenue levers that we can control. Number one, accelerating IQ Battery tenancy growth. Number two, scaling IQ9 GaN microinverters to expand our 480V three-phase commercial footprint. Number three, unlocking battery retrofits across Netherlands and France.
Speaker #3: The transition began five years ago with our entry into residential batteries and is now accelerating with our expansion into commercial solar and our planned entry into commercial batteries bidirectional EV charging and additional adjacencies in the year ahead.
Speaker #3: As the world's power needs grow larger and more complex, we believe Enphase brings a differentiated, best-in-class power management foundation to meet them. We remain laser-focused on the near-term revenue levers that we can control.
Speaker #3: Number one, accelerating IQ Battery tendency growth. Number two, scaling IQ9 GaN microinverters to expand our 480-volt, three-phase commercial footprint. Number three, unlocking battery retrofits across the Netherlands and France.
Speaker #3: Number four, ramping IQ EV charger 2 while preparing for bidirectional EV charging later in 2026. Number five, launching our fifth-generation residential battery along with IQ9 microinverters to materially lower system costs and strengthen solar economics.
Badrinarayanan Kothandaraman: Number four, ramping IQ EV Charger 2, while preparing for bidirectional EV charging later in 2026. Number five, launching our fifth generation residential battery, along with IQ9 microinverters, to materially lower system costs and strengthen solar economics. With that, I will turn the call over to Mandy for her review of our financials. Mandy?
Badri Kothandaraman: Number four, ramping IQ EV Charger 2, while preparing for bidirectional EV charging later in 2026. Number five, launching our fifth generation residential battery, along with IQ9 microinverters, to materially lower system costs and strengthen solar economics. With that, I will turn the call over to Mandy for her review of our financials. Mandy?
Speaker #3: With that, I will turn the call over to Mandy for her review of our financials. Mandy.
Mandy Yang: Thanks, Badri, and good afternoon, everyone. I will provide more details related to our fourth quarter of 2025 financial results, as well as our business outlook for the first quarter of 2026. We have provided reconciliations of this non-GAAP to GAAP financial measures in our earnings release posted today, which can also be found in the IR section of our website. Total revenue for Q4 was $343.3 million. We shipped approximately 682.6 MW DC of microinverters, and 150.1 MWh of IQ Batteries in the quarter. Q4 revenue included $20.3 million of safe harbor revenue. As a reminder, we define safe harbor revenue as any sales made to customers who plan to install the inventory over more than a year.
Mandy Yang: Thanks, Badri, and good afternoon, everyone. I will provide more details related to our fourth quarter of 2025 financial results, as well as our business outlook for the first quarter of 2026. We have provided reconciliations of this non-GAAP to GAAP financial measures in our earnings release posted today, which can also be found in the IR section of our website. Total revenue for Q4 was $343.3 million. We shipped approximately 682.6 MW DC of microinverters, and 150.1 MWh of IQ Batteries in the quarter. Q4 revenue included $20.3 million of safe harbor revenue. As a reminder, we define safe harbor revenue as any sales made to customers who plan to install the inventory over more than a year.
Speaker #2: Thanks, Badri and Qulib. Turn on, everyone. I will provide more details related to our fourth quarter 2025 financial results, as well as our business outlook for the first quarter of 2026.
Speaker #2: We have provided a reconciliation of this non-GAAP to GAAP financial measures in our earnings release posted today, which can also be found in the IR section of our website.
Speaker #2: Total revenue for Q4 was $343.3 million. We shipped approximately 682.6 megawatts DC of microinverters and 150.1 megawatt-hours of IQ Batteries in the quarter.
Speaker #2: Q4 revenue included $20.3 million of SIP hybrid revenue. As a reminder, we define SIP hybrid revenue as any sales made to customers who plan to install the inventory over more than a year.
Speaker #2: Non-GAAP gross margin for Q4 was 46.1%, compared to 49.2% in Q3. GAAP gross margin was 44.3% for Q4, compared to 47.8% in Q3. Reciprocal tariffs impacted our gross margins by 5.1% in Q4.
Mandy Yang: Non-GAAP gross margin for Q4 was 46.1%, compared to 49.2% in Q3. GAAP gross margin was 44.3% for Q4, compared to 47.8% in Q3. Reciprocal tariffs impacted our gross margins by 5.1% in Q4. Non-GAAP operating expenses were $78.8 million for Q4, compared to $78.5 million for Q3. GAAP operating expenses were $129.6 million for Q4, compared to $130.1 million for Q3. GAAP operating expenses for Q4 included $48.6 million of stock-based compensation expenses and $2.9 million of acquisition-related amortization, offset by $600,000 of restructuring and estate impairment benefit.
Mandy Yang: Non-GAAP gross margin for Q4 was 46.1%, compared to 49.2% in Q3. GAAP gross margin was 44.3% for Q4, compared to 47.8% in Q3. Reciprocal tariffs impacted our gross margins by 5.1% in Q4. Non-GAAP operating expenses were $78.8 million for Q4, compared to $78.5 million for Q3. GAAP operating expenses were $129.6 million for Q4, compared to $130.1 million for Q3. GAAP operating expenses for Q4 included $48.6 million of stock-based compensation expenses and $2.9 million of acquisition-related amortization, offset by $600,000 of restructuring and estate impairment benefit.
Speaker #2: Non-GAAP operating expenses were $78.8 million for Q4, compared to $78.5 million for Q3. GAAP operating expenses were $129.6 million for Q4.
Speaker #2: Compared to $130.1 million for Q3, GAAP operating expenses for Q4 included $48.6 million of stock-based compensation expenses and $2.9 million of acquisition-related amortization, offset by $600,000 of restructuring and asset impairment benefit.
Speaker #2: On a non-GAAP basis, income from operations for Q4 was $79.4 million, compared to $123.4 million for Q3. On a GAAP basis, income from operations was $22.4 million for Q4.
Mandy Yang: On a non-GAAP basis, income from operations for Q4 was $79.4 million, compared to $123.4 million for Q3. On a GAAP basis, income from operations was $22.4 million for Q4, compared to $66.2 million for Q3. On a non-GAAP basis, net income for Q4 was $93.4 million, compared to $117.3 million for Q3. This resulted in non-GAAP diluted earnings per share of $0.71 for Q4, compared to $0.90 for Q3. GAAP net income for Q4 was $38.7 million, compared to $66.6 million for Q3. This resulted in GAAP diluted earnings per share of $0.29 for Q4, compared to $0.50 for Q3.
Mandy Yang: On a non-GAAP basis, income from operations for Q4 was $79.4 million, compared to $123.4 million for Q3. On a GAAP basis, income from operations was $22.4 million for Q4, compared to $66.2 million for Q3. On a non-GAAP basis, net income for Q4 was $93.4 million, compared to $117.3 million for Q3. This resulted in non-GAAP diluted earnings per share of $0.71 for Q4, compared to $0.90 for Q3. GAAP net income for Q4 was $38.7 million, compared to $66.6 million for Q3. This resulted in GAAP diluted earnings per share of $0.29 for Q4, compared to $0.50 for Q3.
Speaker #2: Compared to $66.2 million for Q3. On a non-GAAP basis, net income for Q4 was $93.4 million, compared to $117.3 million for Q3.
Speaker #2: This resulted in non-GAAP diluted earnings per share of $0.71 for Q4, compared to $0.90 for Q3. GAAP net income for Q4 was $38.7 million.
Speaker #2: Compared to $66.6 million for Q3. This resulted in GAAP diluted earnings per share of $0.29 for Q4, compared to $0.50 for Q3.
Speaker #2: We exited Q4 with a total cash, equivalents, and marketable securities balance of $1.51 billion, compared to $1.48 billion at the end of Q3.
Mandy Yang: We exited Q4 with a total cash, cash equivalents, and marketable securities balance of $1.51 billion, compared to $1.48 billion at the end of Q3. The five-year convertible notes we raised in 2021 are coming due on 1 March 2026, and we expect to settle the principal amount of $632.5 million in maturity with our cash on hand. As of 31 December 2025, we have approximately $337 million of production tax credits, or PTC, receivable on our balance sheet, net of income taxes payable. $109 million is related to US-made microinverters shipped to customers in 2024, and $228 million is for shipments made in 2025.
Mandy Yang: We exited Q4 with a total cash, cash equivalents, and marketable securities balance of $1.51 billion, compared to $1.48 billion at the end of Q3. The five-year convertible notes we raised in 2021 are coming due on 1 March 2026, and we expect to settle the principal amount of $632.5 million in maturity with our cash on hand. As of 31 December 2025, we have approximately $337 million of production tax credits, or PTC, receivable on our balance sheet, net of income taxes payable. $109 million is related to US-made microinverters shipped to customers in 2024, and $228 million is for shipments made in 2025.
Speaker #2: The five-year convertible note we raised in 2021 is coming due on March 1, 2026. And we expect to settle the principal amount of $632.5 million at maturity with our cash on hand.
Speaker #2: As of December 31, 2025, we have approximately $337 million of production tax credit, or PTC, receivable on our balance sheet, net of income taxes payable.
Speaker #2: 109 million dollars is related to US-made microinverters shipped to customers in 2024. And 228 million dollars is for shipments made in 2025. As we elected direct pay for 2024, the net PTC would be refunded by the IRS through our completed 2024 tax return.
Mandy Yang: As we elected direct pay for 2024, the net PTC will be refunded by the IRS through our completed 2024 tax return. We have limited visibility to when we will receive 2024's $109 million refund from the IRS due to its extended processing timelines. We are evaluating our options to get paid sooner for our 2025 PTC. As part of our anti-dilution plan, we spent approximately $1.4 million by withholding shares to cover taxes for employee stock vesting in Q4. That reduced the diluted shares by 41,767 shares.
Mandy Yang: As we elected direct pay for 2024, the net PTC will be refunded by the IRS through our completed 2024 tax return. We have limited visibility to when we will receive 2024's $109 million refund from the IRS due to its extended processing timelines. We are evaluating our options to get paid sooner for our 2025 PTC. As part of our anti-dilution plan, we spent approximately $1.4 million by withholding shares to cover taxes for employee stock vesting in Q4. That reduced the diluted shares by 41,767 shares.
Speaker #2: We have limited visibility to when we will receive 2024's $109 million refund from the IRS due to its extended processing timelines. We are evaluating our options to get paid sooner for our 2025 PTC.
Speaker #2: As part of our anti-dilution plan, we spent approximately $1.4 million by withholding shares to cover taxes for employee stock vesting in Q4. That reduced the diluted shares by 41,767 shares.
Speaker #2: We did not repurchase our common stock in the quarter because we are prioritizing the most disciplined use of our cash, including preparing for the $632.5 million of debt maturing next month.
Mandy Yang: We did not repurchase our common stock in the quarter because we are prioritizing the most disciplined use of our cash, including preparing for the $632.5 million of debt maturing next month, and preserving flexibility for strategic investments and potential acquisition opportunities. We have approximately $269 million remaining under our share repurchase authorization, and we remain confident in our long-term business outlook. In Q4, we generated $47.6 million in cash flow from operations, and $37.8 million in free cash flow. Capital expenditure was $9.7 million for Q4, compared to $8 million for Q3. This increase was primarily due to continued investment in our US manufacturing and R&D equipment.... Now let's discuss our outlook for the first quarter of 2026.
Mandy Yang: We did not repurchase our common stock in the quarter because we are prioritizing the most disciplined use of our cash, including preparing for the $632.5 million of debt maturing next month, and preserving flexibility for strategic investments and potential acquisition opportunities. We have approximately $269 million remaining under our share repurchase authorization, and we remain confident in our long-term business outlook. In Q4, we generated $47.6 million in cash flow from operations, and $37.8 million in free cash flow. Capital expenditure was $9.7 million for Q4, compared to $8 million for Q3. This increase was primarily due to continued investment in our US manufacturing and R&D equipment.... Now let's discuss our outlook for the first quarter of 2026.
Speaker #2: And preserving flexibility for strategic investments and potential acquisition opportunities. We have approximately 269 million dollars remaining under our share repurchase authorization. And we remain confident in our long-term business outlook.
Speaker #2: In Q4, we generated $47.6 million in cash flow from operations and $37.8 million in free cash flow. Capital expenditure was $9.7 million for Q4.
Speaker #2: Compared to $8 million for Q3. This increase was primarily due to continued investment in our US manufacturing and R&D equipment. Now, let's discuss our outlook for the first quarter of 2026.
Speaker #2: We expect our revenue for Q1 to be within a range of $270 million to $300 million. This includes shipments of 100 to 120 megawatt-hours of IQ batteries.
Mandy Yang: We expect our revenue for Q1 to be within a range of $270 to 300 million, which includes shipments of 100 to 120 MWh of IQ batteries. The revenue guidance includes approximately $35 million of safe harbor revenue. We expect GAAP gross margin to be within a range of 40 to 43%, including approximately five percentage points of reciprocal tariff impact. We expect non-GAAP gross margin to be within a range of 42 to 45%, including the reciprocal tariff impact. Non-GAAP gross margin excludes stock-based compensation expense and acquisition-related amortization. We expect our GAAP operating expenses to be within a range of $137 to 141 million, including approximately $60 million estimated for stock-based compensation expense, acquisition-related expenses and amortization, and restructuring and asset impairment charges.
Mandy Yang: We expect our revenue for Q1 to be within a range of $270 to 300 million, which includes shipments of 100 to 120 MWh of IQ batteries. The revenue guidance includes approximately $35 million of safe harbor revenue. We expect GAAP gross margin to be within a range of 40 to 43%, including approximately five percentage points of reciprocal tariff impact. We expect non-GAAP gross margin to be within a range of 42 to 45%, including the reciprocal tariff impact. Non-GAAP gross margin excludes stock-based compensation expense and acquisition-related amortization. We expect our GAAP operating expenses to be within a range of $137 to 141 million, including approximately $60 million estimated for stock-based compensation expense, acquisition-related expenses and amortization, and restructuring and asset impairment charges.
Speaker #2: The revenue guidance includes approximately $35 million of SIP hybrid revenue. We expect GAAP gross margin to be within a range of 40% to 43%.
Speaker #2: Including approximately 5 percentage points of reciprocal tariff impact, we expect non-GAAP gross margin to be within a range of 42% to 45%, including the reciprocal tariff impact.
Speaker #2: Non-GAAP gross margin excludes stock-based compensation expense and acquisition-related amortization. We expect our GAAP operating expenses to be within a range of $137 million to $141 million.
Speaker #2: Including approximately $60 million estimated for stock-based compensation expense, acquisition-related expenses and amortization, and restructuring and asset impairment charges. We expect our non-GAAP operating expenses to be within a range of $77 to $81 million.
Mandy Yang: We expect our non-GAAP operating expenses to be within a range of $77 to 81 million. As part of our efforts to better align our workforce and cost structure with Enphase's business needs, strategic priorities, and ongoing commitment to profitable growth, we recently reduced headcount by around 6%. We expect, we expect to reduce our non-GAAP operating expenses to be in the range of $70 to 75 million a quarter, starting from Q3 2026. In closing, we managed well with our financial discipline through a difficult global environment in 2025. We maintained profitability and strong growth margins. In addition, in 2025, we generated approximately $95.9 million of free cash flow and approximately $228 million of net PTC receivable.
Mandy Yang: We expect our non-GAAP operating expenses to be within a range of $77 to 81 million. As part of our efforts to better align our workforce and cost structure with Enphase's business needs, strategic priorities, and ongoing commitment to profitable growth, we recently reduced headcount by around 6%. We expect, we expect to reduce our non-GAAP operating expenses to be in the range of $70 to 75 million a quarter, starting from Q3 2026. In closing, we managed well with our financial discipline through a difficult global environment in 2025. We maintained profitability and strong growth margins. In addition, in 2025, we generated approximately $95.9 million of free cash flow and approximately $228 million of net PTC receivable.
Speaker #2: As part of our efforts to better align our workforce and cost structure with emphasis on business needs, strategic priorities, and our ongoing commitment to profitable growth, we recently reduced headcount by around 6%.
Speaker #2: We expect to reduce our non-GAAP operating expenses to be in a range of $70 to $75 million a quarter, starting from the third quarter of 2026.
Speaker #2: In closing, we managed well with our financial discipline through a difficult global environment in 2025. We maintained profitability and strong gross margins. In addition, in 2025, we generated approximately $95.9 million of free cash flow.
Speaker #2: And approximately $228 million of net PTC receivable. We exited the year with $1.51 billion in cash, equivalents, and marketable securities, while repurchasing 2.3 million shares of our common stock for approximately $130 million.
Mandy Yang: We exited the year with $1.51 billion in cash, cash equivalents, and marketable securities, while repurchasing 2.3 million shares of our common stock for approximately $130 million. With that, I'll open the line for questions.
Mandy Yang: We exited the year with $1.51 billion in cash, cash equivalents, and marketable securities, while repurchasing 2.3 million shares of our common stock for approximately $130 million. With that, I'll open the line for questions.
Speaker #2: With that, I will open the line for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone.
Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. In the interest of time, please limit yourself to one question and one follow-up. If you have additional questions, you may rejoin the queue. At this time, we will pause momentarily to assemble our roster. The first question will come from Phil Shen with Roth Capital Partners. Please go ahead.
Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. In the interest of time, please limit yourself to one question and one follow-up. If you have additional questions, you may rejoin the queue. At this time, we will pause momentarily to assemble our roster. The first question will come from Phil Shen with Roth Capital Partners. Please go ahead.
Speaker #2: If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.
Speaker #2: In the interest of time, please limit yourself to one question and one follow-up. If you have additional questions, you may rejoin the queue. At this time, we will pause momentarily to assemble our roster.
Speaker #2: And the first question will come from Phil Shen with Roth Capital Partners. Please go ahead.
Speaker #3: Hi, everyone. Thanks for taking my questions. First one is on the cadence for the year. I know you don't guide for other quarters, but was wondering if you could give us a little bit of color on what Q2 might look like.
Philip Shen: Hi, everyone. Thanks for taking my questions. First one is on the cadence for the year. I know you don't guide for other quarters, but was wondering if you could give us a little bit of color on what Q2 might look like. You talked about Q1 being the low point, and so should we expect Q2 to be flat or up or slightly down? And then from a margin standpoint, would you expect a little bit of expansion in Q2 or kind of similar levels to Q1? Thanks.
Philip Shen: Hi, everyone. Thanks for taking my questions. First one is on the cadence for the year. I know you don't guide for other quarters, but was wondering if you could give us a little bit of color on what Q2 might look like. You talked about Q1 being the low point, and so should we expect Q2 to be flat or up or slightly down? And then from a margin standpoint, would you expect a little bit of expansion in Q2 or kind of similar levels to Q1? Thanks.
Speaker #3: You talked about Q1 being the low point, so should we expect Q2 to be flat, up, or slightly down? And then from a margin standpoint, would you expect a little bit of expansion in Q2, or kind of similar levels to Q1?
Speaker #3: Thanks.
Speaker #4: Right. We expect Q2 to be up, but it's too early for us to talk about it. And like what I said in the prepared remarks, there are a few things which are which we believe as tailwinds for us.
Badrinarayanan Kothandaraman: Right. We expect Q2 to be up, but it's too early for us to, you know, talk about it. Like what I said in the prepared, you know, remarks, there are a few things which we believe are tailwinds for us, and there are a few things that Enphase is specifically doing. So the tailwinds are, you can see the utility rates. So the utility rates are going up everywhere in the US, and we see a lot of increases in the Northeast, in the Midwest, so I think that is going to be a definite tailwind for us. New financing options, such as the prepaid leases, are starting to sprout up, you know, not just the ones that we are involved in, but in general.
Badri Kothandaraman: Right. We expect Q2 to be up, but it's too early for us to, you know, talk about it. Like what I said in the prepared, you know, remarks, there are a few things which we believe are tailwinds for us, and there are a few things that Enphase is specifically doing. So the tailwinds are, you can see the utility rates. So the utility rates are going up everywhere in the US, and we see a lot of increases in the Northeast, in the Midwest, so I think that is going to be a definite tailwind for us. New financing options, such as the prepaid leases, are starting to sprout up, you know, not just the ones that we are involved in, but in general.
Speaker #4: And there are a few things that we're specifically doing. So the tailwinds are—you can see—the utility rates. The utility rates are going up everywhere in the US.
Speaker #4: And we see a lot of increases in the Northeast, in the Midwest, so I think that is going to be a definite tailwind for us.
Speaker #4: New financing options, such as the prepaid leases, are starting to sprout up—not just the ones that we general. So I think that would be an opportunity to are involved in, but essentially replace the loan demand, the loan TAM, prior to the 25D expiration.
Badrinarayanan Kothandaraman: So I think that would be an opportunity to essentially replace the loan demand, the loan TAM, prior to the 25D expiration, the tax credit expiration. And then the last one is, although the interest rates didn't come down in the recent announcement, I think we will see some easing interest rates through the year, and I think that will further improve affordability. So those are three strong tailwinds that we see. They should get better as the year progresses. What are we doing? We are just not sitting and watching. We are doing a few things, like what I listed, accelerating IQ Battery 10C. Now we are approved at all three IOUs in California, so there is no barrier for the meter collar.
Badri Kothandaraman: So I think that would be an opportunity to essentially replace the loan demand, the loan TAM, prior to the 25D expiration, the tax credit expiration. And then the last one is, although the interest rates didn't come down in the recent announcement, I think we will see some easing interest rates through the year, and I think that will further improve affordability. So those are three strong tailwinds that we see. They should get better as the year progresses. What are we doing? We are just not sitting and watching. We are doing a few things, like what I listed, accelerating IQ Battery 10C. Now we are approved at all three IOUs in California, so there is no barrier for the meter collar.
Speaker #4: The tax credit expiration. And then the last one is, although the interest rates didn't come down in the recent announcement, I think we will see some easing interest rates through the year, and I think that will further improve affordability.
Speaker #4: So those are three strong tailwinds that we see. They should get better as the year progresses. What are we doing? We are just not sitting and watching.
Speaker #4: few things. Like what I We are doing a listed, 10C. Now we are approved at accelerating IQ battery all three IOUs So there is no barrier for the meter color.
Speaker #4: We are approved at 52 utilities. And we expect to add 50 more utilities in 2026 overall. So that's going quite well. Also, 70% of our US battery shipments are now the IQ battery 10C.
Badrinarayanan Kothandaraman: We are approved at 52 utilities, so and we expect to add 50 more utilities in 2026 overall. So, that's going quite well. Also, 70% of our US battery shipments are now the IQ Battery 10C. We also expect the prepaid leases to help accelerate our battery volumes. In addition, we expect FIOC and domestic content to be a good value proposition that Enphase can offer, which should also increase the volume sequentially through the year. So, that's on the batteries. We are very excited about the IQ9 product, the IQ9N product. The IQ9 product addresses the 480V commercial market, which we have not played in before. We just started shipping the product in December.
Badri Kothandaraman: We are approved at 52 utilities, so and we expect to add 50 more utilities in 2026 overall. So, that's going quite well. Also, 70% of our US battery shipments are now the IQ Battery 10C. We also expect the prepaid leases to help accelerate our battery volumes. In addition, we expect FIOC and domestic content to be a good value proposition that Enphase can offer, which should also increase the volume sequentially through the year. So, that's on the batteries. We are very excited about the IQ9 product, the IQ9N product. The IQ9 product addresses the 480V commercial market, which we have not played in before. We just started shipping the product in December.
Speaker #4: We also expect the prepaid leases to help accelerate our battery volumes. In addition, we expect fiat and domestic content to be a good value proposition that enphase can offer, which should also increase the volume sequentially through the year.
Speaker #4: So that's on the batteries. We are very excited about the IQ 9N product, because the IQ 9 product addresses the 480-volt commercial market, which we have not played in before.
Speaker #4: We just started shipping the product in December. We 50,000 microinverters for already have a backlog of more than Q1. I think there we expect And to grow from strength to strength.
Badrinarayanan Kothandaraman: We already have a backlog of more than 50,000 microinverters for Q1. And I think there, we expect to grow from strength to strength. It's a new market. Of course, there's gonna be cycle of learning, but I think we bring some things unique, like reliability, quality, and domestic content, FIOC compliance, all of those, we bring. So that's very exciting. The third one, unlocking the battery retrofits across Netherlands and France. Big deal! We are doing something we have never done before. We are organizing homeowner events in Netherlands. We are organizing 2 homeowner events every week, and so we are talking about 100 homeowner events for the year. Every homeowner event will generate pre-orders. While it's too early for us to share those details, we believe it'll meaningfully change our battery demand in Netherlands.
Badri Kothandaraman: We already have a backlog of more than 50,000 microinverters for Q1. And I think there, we expect to grow from strength to strength. It's a new market. Of course, there's gonna be cycle of learning, but I think we bring some things unique, like reliability, quality, and domestic content, FIOC compliance, all of those, we bring. So that's very exciting. The third one, unlocking the battery retrofits across Netherlands and France. Big deal! We are doing something we have never done before. We are organizing homeowner events in Netherlands. We are organizing 2 homeowner events every week, and so we are talking about 100 homeowner events for the year. Every homeowner event will generate pre-orders. While it's too early for us to share those details, we believe it'll meaningfully change our battery demand in Netherlands.
Speaker #4: It's a new market. Of course, there's going to be a cycle of learning, but I think we bring some things unique, like reliability, quality, and domestic content.
Speaker #4: We are compliance, all of those we bring. So that's very exciting. The third retrofits across Netherlands and France, big deal. We one, unlocking the battery are doing something we have never done before.
Speaker #4: We are organizing homeowner events in Netherlands. We are organizing two homeowner events every week. And so we are talking about 100 homeowner events. For the year, every homeowner event will generate pre-orders.
Speaker #4: While it's too early for us to share those details, we believe it'll meaningfully change our battery demand in the Netherlands. So we are extremely excited about that one.
Badrinarayanan Kothandaraman: So we are extremely excited about that one. Same deal in France. Although in France, it is not like, you know. In Netherlands, the energy contracts aren't fixed for a very long time. They change every one to three years. But in France, they are fixed, so the retrofit opportunity isn't as compelling as Netherlands, but still people would like to own batteries for, you know, resilience and new installations. Certainly, self-consumption is required because the feed-in tariffs have dropped off a lot. So we are very excited there as well, both the opportunity to sell to our install base as well as new installations, new business models. So that's number three. Number four is we just introduced our IQ, latest and greatest IQ EV Charger into the US. It's a state-of-the-art one.
Badri Kothandaraman: So we are extremely excited about that one. Same deal in France. Although in France, it is not like, you know. In Netherlands, the energy contracts aren't fixed for a very long time. They change every one to three years. But in France, they are fixed, so the retrofit opportunity isn't as compelling as Netherlands, but still people would like to own batteries for, you know, resilience and new installations. Certainly, self-consumption is required because the feed-in tariffs have dropped off a lot. So we are very excited there as well, both the opportunity to sell to our install base as well as new installations, new business models. So that's number three. Number four is we just introduced our IQ, latest and greatest IQ EV Charger into the US. It's a state-of-the-art one.
Speaker #4: Same Although in France, the it is not Netherlands, the energy contract aren't fixed for a very long time. like in They change every one But in France, they are fixed.
Speaker #4: to three years. So the retrofit opportunity isn't as compelling as Netherlands, but still people would like to own batteries for resilience and new installations.
Speaker #4: Certainly, self-consumption is required because the fear and tariffs have dropped off a lot. So we are very excited there as well. Both the opportunity to sell to our install base, as well as new installations, new business models, so that's number three.
Speaker #4: Number four is we just introduced our IQ latest and greatest IQ EV charger into the US. It's a state-of-the-art one. It's a beautiful-looking product.
Badrinarayanan Kothandaraman: It's a beautiful looking product, and it's doing quite well in Europe. We expect it to do very well in the US. But the real exciting thing there is the bidirectional charger. The bidirectional charger is a demonstration of how powerful the inverter architecture is. We interface to 800V DC on the car side, and then to home AC, using the same single stage power conversion that Enphase is known for. So just with our bidirectional charger, which has got the inverters in it, grid forming inverters in it, plus the meter collar, that is enough to do both V to H and V to G. So we are excited about that one, which will come about in a production in Q4.
Badri Kothandaraman: It's a beautiful looking product, and it's doing quite well in Europe. We expect it to do very well in the US. But the real exciting thing there is the bidirectional charger. The bidirectional charger is a demonstration of how powerful the inverter architecture is. We interface to 800V DC on the car side, and then to home AC, using the same single stage power conversion that Enphase is known for. So just with our bidirectional charger, which has got the inverters in it, grid forming inverters in it, plus the meter collar, that is enough to do both V to H and V to G. So we are excited about that one, which will come about in a production in Q4.
Speaker #4: It's doing quite well in Europe. We expect it the US. But the to do very well in real exciting thing there is the bidirectional charger.
Speaker #4: The bidirectional chargers is a demonstration of how powerful the inverter architecture is. We interface to 800-volt DC on the core side, and then to home AC using the same single-stage power conversion that enphases known for.
Speaker #4: So just with our bidirectional charger, which has got the inverters in it, grid-forming inverters in it, plus the meter color, that is enough to do both V2H and V2G.
Speaker #4: So we are excited about that one, which will come about in a production in Q4. And the last one, we are already going to be preparing ourselves to launch IQ 9 residential microinverters in the first quarter, in a few weeks from now.
Badrinarayanan Kothandaraman: And the last one, we are already going to, you know, preparing ourselves to launch IQ9 residential microinverters in Q1, in a few weeks from now, both US as well as international. Then we expect to introduce our fifth generation battery. Fifth generation battery will have the energy density close to about 100 watt-hours per liter, which is best in class. The cost of that battery will be 40% down compared to the fourth generation battery. Therefore, it will allow us to basically, you know, reduce our end pricing for the consumer, which is necessary as battery adoption increases, and yet maintain our gross margins in line with the corporate gross margins.
Badri Kothandaraman: And the last one, we are already going to, you know, preparing ourselves to launch IQ9 residential microinverters in Q1, in a few weeks from now, both US as well as international. Then we expect to introduce our fifth generation battery. Fifth generation battery will have the energy density close to about 100 watt-hours per liter, which is best in class. The cost of that battery will be 40% down compared to the fourth generation battery. Therefore, it will allow us to basically, you know, reduce our end pricing for the consumer, which is necessary as battery adoption increases, and yet maintain our gross margins in line with the corporate gross margins.
Speaker #4: Both US as well as international. Then we expect to introduce our fifth-generation battery. Fifth-generation battery will have the energy density close to about 100 watt-hour per liter, which is best in class.
Speaker #4: The cost of that battery will be 40% down compared to the fourth-generation battery. Therefore, it will allow us to basically reduce our end pricing for the consumer, which is necessary as battery adoption increases.
Speaker #4: And yet, maintain our gross margins in line with the corporate gross margins. So those five levers are all entirely in our control, and we plan to make full use of them in addition to the three tailwinds I talked
Badrinarayanan Kothandaraman: So, those five levers are all entirely in our control, and we plan to make full use of them, in addition to the three tailwinds I talked about.
Badri Kothandaraman: So, those five levers are all entirely in our control, and we plan to make full use of them, in addition to the three tailwinds I talked about.
Speaker #4: about. Great, Badri.
Philip Shen: Great, Badri. Thank you for all that detail. I had a quick follow-up on the, you said Q2. I think you meant revenue would be up, but you don't know or can't quantify how much. Just wanna understand if that's versus the $285 million from Q1 with Safe Harbor, or is it versus the $250 million without Safe Harbor?
Philip Shen: Great, Badri. Thank you for all that detail. I had a quick follow-up on the, you said Q2. I think you meant revenue would be up, but you don't know or can't quantify how much. Just wanna understand if that's versus the $285 million from Q1 with Safe Harbor, or is it versus the $250 million without Safe Harbor?
Speaker #1: Thank you for all that detail. I had a quick follow-up on the you said Q2. I think you mentioned revenue. Would be up, but you don't know or can't quantify how much.
Speaker #1: Just want to understand if that's versus the $285 million from Q1 with Safe Harbor, or is it versus the $250 million without Safe Harbor?
Badrinarayanan Kothandaraman: We usually make the comments, uh, regarding, you know, with respect to the core revenue. But we also expect, you know, although we can never forecast Safe Harbor, we also expect healthy Safe Harbor in the second quarter, because it's natural. The reason is, TPO partners are going to formulate plans for 2028, meaning 2028, 2029, 2030. So there is going to be some Safe Harbor activity happening in both Q2, you know, and, and we'll have the time to ship it through Q3, I believe. So, yep.
Speaker #2: We usually make the comments regarding with respect to the core revenue, but we also expect although we can never forecast Safe Harbor, we also expect healthy Safe Harbor in the second quarter because it's natural reason is TPO partners are going to formulate plans for 28, meaning 2028, 2029, 2030.
Badri Kothandaraman: We usually make the comments, uh, regarding, you know, with respect to the core revenue. But we also expect, you know, although we can never forecast Safe Harbor, we also expect healthy Safe Harbor in the second quarter, because it's natural. The reason is, TPO partners are going to formulate plans for 2028, meaning 2028, 2029, 2030. So there is going to be some Safe Harbor activity happening in both Q2, you know, and, and we'll have the time to ship it through Q3, I believe. So, yep.
Speaker #2: So there is going to be some Safe Harbor activity happening in both Q2, and we'll have the time to ship it through Q3, I believe.
Speaker #2: So
Speaker #2: yep. Great.
Philip Shen: Great. And as for my follow-up here, in terms of the data center market and the 800-volt architecture and what you guys might be able to do for that. I know it's super early, but just insofar as you can kind of comment on, you know, how you could address that market, what the timing might be, that would be fantastic. But if you, if you can't talk about it, I get it. Just wanted to see if we might be able to get some color. Thanks.
Philip Shen: Great. And as for my follow-up here, in terms of the data center market and the 800-volt architecture and what you guys might be able to do for that. I know it's super early, but just insofar as you can kind of comment on, you know, how you could address that market, what the timing might be, that would be fantastic. But if you, if you can't talk about it, I get it. Just wanted to see if we might be able to get some color. Thanks.
Speaker #1: And as for my follow-up here, in terms of the data center market and the 800-volt architecture and what you guys might be able to do for that, I know it's super early, but just insofar as you can kind of comment on how you could address that market, what the timing might be, that would it, I get it.
Speaker #1: be a fantastic. But if you can't talk about
Speaker #1: Thanks. Sure.
Badrinarayanan Kothandaraman: Sure. We are very aware of the industry's trend going towards 800V DC for the data center. Where that actually intersects our expertise is in front-end power conversion. Specifically, how medium voltage AC, and we are talking about 13.8 kV and 34.5 kV AC, can be efficiently converted, you know, controlled and managed into 800V DC before the power reaches the AI rack. So having said that, we are evaluating multiple next generation power conversion architectures as part of our long-term R&D, but we are not in a position to discuss any specific products or timelines today.
Badri Kothandaraman: Sure. We are very aware of the industry's trend going towards 800V DC for the data center. Where that actually intersects our expertise is in front-end power conversion. Specifically, how medium voltage AC, and we are talking about 13.8 kV and 34.5 kV AC, can be efficiently converted, you know, controlled and managed into 800V DC before the power reaches the AI rack. So having said that, we are evaluating multiple next generation power conversion architectures as part of our long-term R&D, but we are not in a position to discuss any specific products or timelines today.
Speaker #2: We are very aware of the industry's trend going towards 800-volt DC for the data center. Where that actually intersects our expertise is that is in front-end power conversion.
Speaker #2: Specifically, how medium voltage AC and we are talking about 13.8 kV and 34.5 kV AC can be efficiently converted controlled and managed into 800-volt DC.
Speaker #2: Before the power reaches the AI rack. So having said that, we are evaluating multiple next-generation power conversion architectures as part of our long-term R&D.
Speaker #2: Any specifics, we are not in a position to discuss—be it products or timelines.
Speaker #2: today.
Speaker #1: The next question will come from
Operator: The next question will come from Brian Lee with Goldman Sachs. Please go ahead.
Operator: The next question will come from Brian Lee with Goldman Sachs. Please go ahead.
Speaker #1: Brian Lee with Goldman Sachs. Please go ahead.
Speaker #1: ahead. Hey, guys.
[Analyst] (Aiera): Hey, guys, good afternoon. Thanks for taking my questions. First one I had was just on margins, maybe for Mandy, maybe for Badri. I think the 5% reciprocal tariff impact; it seems to be stabilizing and peaking here. I think last year you talked about, you know, fully offsetting it by Q2 of 2026. So any updates there on the ability to, you know, offset the tariff impact? Is that still a Q2 target? Maybe if you can kind of quantify magnitude and cadence for us off this 5% level that you're still guiding to for Q1, and then I had follow-up.
Brian Lee: Hey, guys, good afternoon. Thanks for taking my questions. First one I had was just on margins, maybe for Mandy, maybe for Badri. I think the 5% reciprocal tariff impact; it seems to be stabilizing and peaking here. I think last year you talked about, you know, fully offsetting it by Q2 of 2026. So any updates there on the ability to, you know, offset the tariff impact? Is that still a Q2 target? Maybe if you can kind of quantify magnitude and cadence for us off this 5% level that you're still guiding to for Q1, and then I had follow-up.
Speaker #3: Good afternoon. Thanks for taking my questions. First one I had was just on margins, maybe for Mandy, maybe for Badri. I think that the 5% reciprocal tariff impact seems to be stabilizing and peaking here.
Speaker #3: I think last year you talked about fully offsetting it by two Q of 2026. So any updates there on the ability to offset the tariff impact?
Speaker #3: Is that still a two Q target, maybe if you can kind of quantify magnitude and cadence for us off this 5% level that you're still guiding to for Q1 and then ahead
Speaker #3: follow-up?
Speaker #2: Right.
Badrinarayanan Kothandaraman: Right. So Brian, if you remember the last time, what happened was the tariff, meaning approximately, let's say, 3 to 4 quarters ago, that was a tariff specifically with respect to China. And at that time, what we said is we are going to make plans to move into non-China manufacturing, which we are on track to do. And we would be able to avoid any significant tariffs by doing that. However, the situation now has changed, and every country now has got a tariff, including, you know, that is what is called as a reciprocal tariff. I have, if I go to Malaysia, there is a tariff. If I go to Vietnam, there is a tariff. Everywhere there is tariff.
Badri Kothandaraman: Right. So Brian, if you remember the last time, what happened was the tariff, meaning approximately, let's say, 3 to 4 quarters ago, that was a tariff specifically with respect to China. And at that time, what we said is we are going to make plans to move into non-China manufacturing, which we are on track to do. And we would be able to avoid any significant tariffs by doing that. However, the situation now has changed, and every country now has got a tariff, including, you know, that is what is called as a reciprocal tariff. I have, if I go to Malaysia, there is a tariff. If I go to Vietnam, there is a tariff. Everywhere there is tariff.
Speaker #2: So Brian, if you remember, the last time what happened was the tariff, meaning approximately, let's say 3 to 4 quarters ago, that was a tariff specifically with respect to China.
Speaker #2: And at that time, what we said is we are going to make plans to move into non-China manufacturing. Which we are on track to do.
Speaker #2: And we would be able to avoid any significant tariffs by doing that. However, the situation now has changed and every country now has got a tariff, including that is what is called as a reciprocal tariff.
Speaker #2: If I go to Malaysia, there is a tariff. If I go to Vietnam, there is a tariff. Everywhere, there is a tariff. And for us, the 5% tariff—just to give you more, across color—is distributed: 2% of the impact is on microinverters, 2% is on batteries, and 1% is on accessories.
Badrinarayanan Kothandaraman: And for us, the 5% tariff, just to give you more color, is distributed across, 2% of the impact is on microinverters, 2% is on batteries, 1% is on accessories. Why? For example, on microinverters, we will have to bring in raw materials into the US in order to make our microinverters into the US, in the US, so therefore, those get hit. So therefore, there is no safe place which has got no tariff. For us, what we believe, to answer your question, because that's still a valid question, what are you gonna – how are you gonna offset that 5% reciprocal tariff? For us, the answer is in innovation. The answer is in IQ Nine, the answer is in the fifth generation battery.
Badri Kothandaraman: And for us, the 5% tariff, just to give you more color, is distributed across, 2% of the impact is on microinverters, 2% is on batteries, 1% is on accessories. Why? For example, on microinverters, we will have to bring in raw materials into the US in order to make our microinverters into the US, in the US, so therefore, those get hit. So therefore, there is no safe place which has got no tariff. For us, what we believe, to answer your question, because that's still a valid question, what are you gonna – how are you gonna offset that 5% reciprocal tariff? For us, the answer is in innovation. The answer is in IQ Nine, the answer is in the fifth generation battery.
Speaker #2: Why? For example, on microinverters, we will have to bring in raw materials into the US. In order to make our microinverters into the US, in the US.
Speaker #2: So, therefore, those get hit. So, therefore, there is no safe—there is no safe place, which has got no tariff. For us, what we believe, to answer your question—because that's still a valid question—what are you going to, how are you going to offset that 5% reciprocal tariff?
Speaker #2: For us, the answer is in innovation. The answer is in IQ9. The answer is in the fifth-generation battery. Those are—IQ9, for example, is, despite the power going up by 10%, we are able to maintain a smaller form factor.
Badrinarayanan Kothandaraman: Those are IQ9, for example, is despite the power going up by 10%, we are able to maintain a smaller form factor, and we expect to take advantage of that in terms of higher gross margins with IQ9. As you can imagine, higher power products that produce higher power get more, you know, more production tax credit, $0.11 a watt. So naturally, we expect to make higher gross margins there. Then in addition, on the batteries, that's where the big lever for us is. We are rapidly getting close to releasing our fifth generation battery. The fifth generation battery uses very compact cells. These are prismatic cells, and therefore, we essentially are able to reduce that entire form factor of the full battery by a very significant amount. And we are able to do a stackable battery.
Badri Kothandaraman: Those are IQ9, for example, is despite the power going up by 10%, we are able to maintain a smaller form factor, and we expect to take advantage of that in terms of higher gross margins with IQ9. As you can imagine, higher power products that produce higher power get more, you know, more production tax credit, $0.11 a watt. So naturally, we expect to make higher gross margins there. Then in addition, on the batteries, that's where the big lever for us is. We are rapidly getting close to releasing our fifth generation battery. The fifth generation battery uses very compact cells. These are prismatic cells, and therefore, we essentially are able to reduce that entire form factor of the full battery by a very significant amount. And we are able to do a stackable battery.
Speaker #2: And we expect to take advantage of that in terms of higher gross margins with IQ9. As you can imagine, higher power get power products that produce higher more production tax credit, 11 cents a watt.
Speaker #2: naturally, we expect to make higher gross margins there. Then in addition, on the batteries, that's where So the big lever for us is. We are rapidly getting close to releasing our fifth generation battery.
Speaker #2: The fifth-generation battery uses very compact cells. These are prismatic cells, and therefore we are essentially able to reduce the entire form factor of the full battery by a very significant amount.
Speaker #2: And we are able to do a stackable battery. Hours will be unique. It will be an AC-coupled stackable battery, energy density—like what I said—50% higher than our current battery for generation.
Badrinarayanan Kothandaraman: Ours will be unique. It'll be an AC coupled stackable battery. Energy density, like what I said, 50% higher than our current battery fourth generation. Cost structure will be 40% lower. This will enable us to make good gross margins and overcome that 5% reciprocal tariff.
Badri Kothandaraman: Ours will be unique. It'll be an AC coupled stackable battery. Energy density, like what I said, 50% higher than our current battery fourth generation. Cost structure will be 40% lower. This will enable us to make good gross margins and overcome that 5% reciprocal tariff.
Speaker #2: Cost structure will be 40% lower. This will enable us to make good gross overcome that 5% reciprocal margins and tariff.
[Analyst] (Aiera): Thanks. Appreciate it. The follow-up would be on one of the specific products here. You talked a lot about the IQ9 commercial inverter, the $400 million TAM. If my math is right, it seems like the bookings activity, Badri, you mentioned maybe you're tracking the $5 to 10 million right out of the gate for that new product. One, is that right? And then two, kind of how do you see yourself scaling up this year against that $400 million TAM? Is this, you know, tens of millions of dollars of revenue by the second half of the year? Thank you, guys.
Brian Lee: Thanks. Appreciate it. The follow-up would be on one of the specific products here. You talked a lot about the IQ9 commercial inverter, the $400 million TAM. If my math is right, it seems like the bookings activity, Badri, you mentioned maybe you're tracking the $5 to 10 million right out of the gate for that new product. One, is that right? And then two, kind of how do you see yourself scaling up this year against that $400 million TAM? Is this, you know, tens of millions of dollars of revenue by the second half of the year? Thank you, guys.
Speaker #3: then just to follow up would be on one of the specific Thanks. Appreciate it. And products here. You talked a lot about the IQ9 commercial inverter, the 400 million TAM.
Speaker #3: seems like the bookings activity, Badri, you mentioned maybe you're tracking to 5 to 10 million dollars right out of If my math is right, it the gate.
Speaker #3: For that new product, one, is that right? And then two, kind of how do you see yourself scaling up this year against that 400 million dollar TAM?
Speaker #3: revenue by the second half of the year? Thank you, Is this tens of millions of dollars of
Speaker #3: guys. Yeah,
Badrinarayanan Kothandaraman: Yeah, you're approximately right. It is between 5 and 10 for Q1. You should think about it the following way: I think what we are – this product is, it offers a compelling value proposition in terms of, you know, quality, reliability, FIOC compliance, domestic content. You know, customers haven't had such a choice before, so we are getting a lot of good traction. What we have shown in the residential market is that, over the long term, high quality, high serviceability wins, and we therefore expect to demonstrate the same in this small commercial market. We expect over a 3-year timeframe to get into the similar market share as what we have on the residential.
Badri Kothandaraman: Yeah, you're approximately right. It is between 5 and 10 for Q1. You should think about it the following way: I think what we are – this product is, it offers a compelling value proposition in terms of, you know, quality, reliability, FIOC compliance, domestic content. You know, customers haven't had such a choice before, so we are getting a lot of good traction. What we have shown in the residential market is that, over the long term, high quality, high serviceability wins, and we therefore expect to demonstrate the same in this small commercial market. We expect over a 3-year timeframe to get into the similar market share as what we have on the residential.
Speaker #2: You're approximately right. It is between 5 and 10 for the first quarter. And you should think about it the following way. I think what we are—this product—is it offers a compelling value proposition in terms of quality, reliability, FIAT compliance, and domestic content.
Speaker #2: Customers haven't had such a choice before, so we are getting a lot of good traction. And what we have shown in the residential market is that, over the long term, high quality and high serviceability win, and we therefore expect to demonstrate the same in this small commercial market.
Speaker #2: And we expect, over a three-year time frame, to get into a similar market share as what we have on the residential.
Speaker #3: The next question will come from Praneeth Satish with Wells Fargo. Please go ahead.
Operator: The next question will come from Praneet Satish with Wells Fargo. Please go ahead.
Operator: The next question will come from Praneet Satish with Wells Fargo. Please go ahead.
Speaker #4: Thanks. Good evening. I guess just maybe on the prepaid lease product, assuming the pilot performs well that you're doing, can you share any more details in terms of the timeline of when you would expand into additional states? And would it happen gradually, or more of kind of a larger push?
Praneeth Satish: Thanks. Good evening. I guess just maybe on the prepaid lease product, assuming the pilot performs well that you're doing, can you share any more details in terms of the timeline of when you would expand into additional states? And would it happen gradually or more of kind of a larger push? And can you get your coverage potentially nationwide by the end of 2026? And then just on prepaid leases in general, for the other prepaid lease offerings that are out there, how do you think about your market share with those programs, I guess, relative to your traditional cash and loan channels?
Praneeth Satish: Thanks. Good evening. I guess just maybe on the prepaid lease product, assuming the pilot performs well that you're doing, can you share any more details in terms of the timeline of when you would expand into additional states? And would it happen gradually or more of kind of a larger push? And can you get your coverage potentially nationwide by the end of 2026? And then just on prepaid leases in general, for the other prepaid lease offerings that are out there, how do you think about your market share with those programs, I guess, relative to your traditional cash and loan channels?
Speaker #4: And can you get your coverage potentially nationwide by the end of 2026? And then just on prepaid leases in general, for the other prepaid lease offerings that are being that are out there, how do you think about your market share with those programs?
Speaker #4: I guess relative to your traditional cash and loan channels?
Speaker #2: Yeah, I think those are good questions, but we are in very early stages. Right now, we are in pilots. Right now, we are, as I said, operational in four states.
Badrinarayanan Kothandaraman: Yeah, I think those are good questions, but we are in very early stages. Right now, we are in pilots. Right now, we are, as I said, operational in 4 states, and we have over 40 installers. We are starting to get reasonable originations, but what we want to do is to test out the entire cycle. That's why it's called as a pilot. And when we test out the entire cycle, then the kinks will be obvious to us, and then we can either expand rapidly or take a measured step going forward. Our desire is to do it sooner rather than later, and let me actually leave it at that right now.
Badri Kothandaraman: Yeah, I think those are good questions, but we are in very early stages. Right now, we are in pilots. Right now, we are, as I said, operational in 4 states, and we have over 40 installers. We are starting to get reasonable originations, but what we want to do is to test out the entire cycle. That's why it's called as a pilot. And when we test out the entire cycle, then the kinks will be obvious to us, and then we can either expand rapidly or take a measured step going forward. Our desire is to do it sooner rather than later, and let me actually leave it at that right now.
Speaker #2: And we have
Speaker #1: over Have 40 installers . We are starting to get starting to reasonable get originations , but we what want to do is to .
Speaker #1: what But want to is do the test out entire That's why to called as a pilot . And cycle . when we test out the entire we when cycle , then the kinks will obvious to be us .
Speaker #1: And then we can either rapidly expand or take a measured step going forward . Our desire is to do sooner it rather than later .
Speaker #1: And let me actually leave it at that right now .
Praneeth Satish: That, that's fine. And maybe shifting gears, if you can give us an update in terms of IQ Battery 10C battery sales, how that's shaping into Q1. Looking at the market share data, it did seem like it kind of ticked up a little bit in December. Has that momentum kind of carried over into Q1? And then what's been the feedback from installers in California now that the IQ Meter Collar's approved with all of the utilities? Do you think you can get your, I think your market share is, you know, roughly around 15 percent plus or minus. Do you think you can get that back up over 20 percent with the fourth gen battery?
Praneeth Satish: That, that's fine. And maybe shifting gears, if you can give us an update in terms of IQ Battery 10C battery sales, how that's shaping into Q1. Looking at the market share data, it did seem like it kind of ticked up a little bit in December. Has that momentum kind of carried over into Q1? And then what's been the feedback from installers in California now that the IQ Meter Collar's approved with all of the utilities?
Speaker #2: Okay . That's fine . And maybe shifting gears , if you can give us an update in terms of extensie battery sales , how that's shaping into Q1 market share data , it did seem of ticked like it kind up a little looking at the in December bit kind of .
Speaker #2: Q1 and and then what's been the feedback from installers in California now that the meter Has that callers approved with with all of the utilities , do you think you can get your I think market your shares , you know , roughly around 15% plus or minus .
Praneeth Satish: Do you think you can get your, I think your market share is, you know, roughly around 15 percent plus or minus. Do you think you can get that back up over 20 percent with the fourth gen battery? Or, do you think it's really the 5th-gen battery where you start to see a lot of market share recapture?
Speaker #2: Do you think you can get that back up over 20% with the fourth gen battery ? Or do you think it's really the where you start to a lot see of market share recapture ?
Praneeth Satish: Or, do you think it's really the 5th-gen battery where you start to see a lot of market share recapture?
Badrinarayanan Kothandaraman: Yeah, the, I think the fourth gen battery will do its bit, because it's got a very nice form factor. You know, the meter collar is now approved in 52 utilities. California IOUs, all of them, are now taking the meter collar. We had the last one come through in late part of Q4. So all of the barriers essentially are now removed. Installers, you asked me for installer feedback. We do roundtables with installers almost every week, and installers like the product, they like the installation, they like the commissioning times, which are under an hour. That's not to say that there are no problems at all. There are a few which we are rapidly taking care of.
Badri Kothandaraman: Yeah, the, I think the fourth gen battery will do its bit, because it's got a very nice form factor. You know, the meter collar is now approved in 52 utilities. California IOUs, all of them, are now taking the meter collar. We had the last one come through in late part of Q4. So all of the barriers essentially are now removed. Installers, you asked me for installer feedback. We do roundtables with installers almost every week, and installers like the product, they like the installation, they like the commissioning times, which are under an hour. That's not to say that there are no problems at all. There are a few which we are rapidly taking care of.
Speaker #1: Yeah , the I think the fourth gen battery will do its bit because it's got a very nice form factor . It's , you know , the meter collar is now approved in 52 utilities .
Speaker #1: California. You all use of them are now taking the meter collar. We had the last one come through in late part, so of Q4.
Speaker #1: All of the barriers essentially now are removed. Installers—you asked me for installer feedback. We do roundtables with installers almost every week.
Speaker #1: Installers like like the product they like the installation . They like the commissioning times , which are under an hour . That's not to say that there are no all .
Speaker #1: problems at There are a few , few which we are rapidly taking , taking care of . There is a couple of things that we are doing is releasing we are third party , third , third party solar compatibility for IQ , battery tenancy , which we expect that battery to be used with non-invasive installations too , so that will be a big deal .
Badrinarayanan Kothandaraman: There is a couple of things that we are doing, is, we are releasing a third-party, you know, third-party solar compatibility for IQ Battery 10C, which we expect that battery to be used with non-Enphase PV installations, too. So that will be a big deal. It's in very high demand by our installers, so we think that will profit, will increase our share more. In addition, like what I said, we'll start to see the effect of FIOC and domestic content. The December uptick was probably related to 25B, so I wouldn't read that much into it, although we'd like to take some credit for it. Yeah, and so we do expect progress with the fourth generation.
Badri Kothandaraman: There is a couple of things that we are doing, is, we are releasing a third-party, you know, third-party solar compatibility for IQ Battery 10C, which we expect that battery to be used with non-Enphase PV installations, too. So that will be a big deal. It's in very high demand by our installers, so we think that will profit, will increase our share more. In addition, like what I said, we'll start to see the effect of FIOC and domestic content. The December uptick was probably related to 25B, so I wouldn't read that much into it, although we'd like to take some credit for it. Yeah, and so we do expect progress with the fourth generation.
Speaker #1: It's in very high demand by our installers , so we think that that will , will will increase our share more . In addition , like what I said , we'll start to see the effect of Fiac and domestic content .
Speaker #1: The uptake was December probably to 25 . So related I wouldn't read that much into it , we'd like although to take some credit for it .
Speaker #1: Yeah , and so , so we so expect progress we do fourth generation on with the the , on the fifth Yes we generation .
Speaker #1: Yeah , and so , so we so expect progress we do fourth generation on with the the , on the fifth Yes we generation . do expect definitely definitely take a lot share there too of .
Badrinarayanan Kothandaraman: On the fifth generation, yes, we do expect to definitely take a lot of share there, too. In addition, simply because the battery will come with much more compelling economics. Even with all of the tariffs in place, I will be able to make-
Badri Kothandaraman: On the fifth generation, yes, we do expect to definitely take a lot of share there, too. In addition, simply because the battery will come with much more compelling economics. Even with all of the tariffs in place, I will be able to make... good gross margins as well as offer excellent consumer pricing. So we're excited about the fifth generation battery.
Speaker #1: In addition simply because the battery will come with much more compelling economics , even with all of the tariffs in place . I will be able to make good gross margins as well as offer excellent consumer So pricing .
[Company Representative] (Enphase Energy): ... good gross margins as well as offer excellent consumer pricing. So we're excited about the fifth generation battery.
Speaker #1: Excited about the battery. Fifth generation.
Eric Stine: Got it. Thank you.
Praneeth Satish: Got it. Thank you.
Speaker #2: Got it. Thank you.
Operator: The next question will come from Colin Rusch with Oppenheimer. Please go ahead.
Operator: The next question will come from Colin Rusch with Oppenheimer. Please go ahead.
Speaker #3: question will The Colin
Speaker #3: with Rusch come from ahead
Colin Rusch: Thanks so much, guys. You know, can you talk about where battery inventories are right now in the channel, particularly in Europe, as you look at some of the demand that's growing in, in both the Netherlands and France, and even in Australia? Just want to get a sense of how lean the channel is and, and if there's some, you know, some product that needs to move through before you start growing in Q2.
Colin Rusch: Thanks so much, guys. You know, can you talk about where battery inventories are right now in the channel, particularly in Europe, as you look at some of the demand that's growing in, in both the Netherlands and France, and even in Australia? Just want to get a sense of how lean the channel is and, and if there's some, you know, some product that needs to move through before you start growing in Q2.
Speaker #3: Please go
Speaker #4: , guys . Can
Speaker #4: you talk about Thanks where so much battery inventories are right now in the next we're , particularly in channel some of the you look at demand that's growing in both Netherlands and France , and even in Australia , just want to get a sense how lean the channel is .
Speaker #4: And if there's some product that needs to move through before you start growing in the second quarter.
[Company Representative] (Enphase Energy): In general, I would say our, we are very happy where we ended the channel in both the US as well as outside the US. In the past, I've told you what we considered normal is 8 to 10 weeks. And in the US, the channel is actually much more leaner. That means it's better than 8 to 10 weeks. While, you know, going forward, if you account for the demand, you know, reduction in 2026 versus 2025, I would say forward-looking weeks on hand is in the normal range. So, there isn't anything bloated in the channel. We are doing a good job. You know, channel management is ingrained in our DNA right now. We don't expect that to be a problem.
Badri Kothandaraman: In general, I would say our, we are very happy where we ended the channel in both the US as well as outside the US. In the past, I've told you what we considered normal is 8 to 10 weeks. And in the US, the channel is actually much more leaner. That means it's better than 8 to 10 weeks. While, you know, going forward, if you account for the demand, you know, reduction in 2026 versus 2025, I would say forward-looking weeks on hand is in the normal range. So, there isn't anything bloated in the channel. We are doing a good job. You know, channel management is ingrained in our DNA right now. We don't expect that to be a problem.
Speaker #1: , in general , I would say our we are very happy where we channel in both the US ended the as well as outside the US .
Speaker #1: Our in the past , I've told you what we considered normal is 8 to 10 weeks and in the US the channel is is actually much more leaner .
Speaker #1: it's That better than 8 to 10 weeks while , you know going if you for the account forward , demand , know , you reduction in 2026 versus 2025 , I say would forward looking weeks on hand is in the normal range .
Speaker #1: So There . anything bloated in the isn't channel . We are doing a channel job . You management is is ingrained in our DNA We don't expect that to be right now .
Speaker #1: problem .
Colin Rusch: Thanks so much. And then just thinking about VPPs and some of the capabilities of your system, you know, can you talk about some of your functionality around reactive power, voltage management, and your ability to serve some of those ancillary services markets that maybe differentiated versus some of your peers?
Colin Rusch: Thanks so much. And then just thinking about VPPs and some of the capabilities of your system, you know, can you talk about some of your functionality around reactive power, voltage management, and your ability to serve some of those ancillary services markets that maybe differentiated versus some of your peers?
Speaker #4: Thanks so much . And then about Vrp just think and some of the capabilities of your system . Can you some of talk about functionality around power reactive voltage ability to and your to those serve some of ancillary services markets that may be differentiated versus some of your peers ?
[Company Representative] (Enphase Energy): Yeah. Hi, this is Raghu. Yeah, I think we look at it, we look at it very broadly. We look at not just the battery as being the only flexible resource that's available. You can think about, you know, as we look at the EV charger today, that's a flex resource. As we think about bidirectional EV charging, that's again, a, a flex resource. Solar itself is also can be considered as a flex resource. Our view is much broader than just simply thinking about one element of it. So every product that we release, every new product that we release, we think about it in the context of its participation in VPP. So we make sure that we have best-in-class APIs available so people can then exercise all of those resources.
Raghu Belur: Yeah. Hi, this is Raghu. Yeah, I think we look at it, we look at it very broadly. We look at not just the battery as being the only flexible resource that's available. You can think about, you know, as we look at the EV charger today, that's a flex resource. As we think about bidirectional EV charging, that's again, a, a flex resource. Solar itself is also can be considered as a flex resource. Our view is much broader than just simply thinking about one element of it. So every product that we release, every new product that we release, we think about it in the context of its participation in VPP. So we make sure that we have best-in-class APIs available so people can then exercise all of those resources.
Speaker #5: Hi . This Yeah . is Raghu . Yeah . I think we look at it , we look at it very broadly . We look at not just the battery as being the only flexible resource that's available .
Speaker #5: can You think about . we look You know , as at the EV charger today , that's a flex resource as we think about bidirectional EV charging .
Speaker #5: That's again a flex Solar resource . itself is also can be considered as a flex resource . Our view is much broader than just simply thinking about one element of it .
Speaker #5: So every product we release, every new product that we release, we think about it in the context of its participation in VRP.
Speaker #5: we make So sure that we have best in class available . APIs So people can then exercise all of those resources because their value generating resources , they can help with the homeowners ROI .
[Company Representative] (Enphase Energy): And, you know, because they are value-generating resources, they can actually help with the homeowner's ROI. So all of the grid services that you mentioned, which is reactive power, voltage support, or, you know, just capacity, you know, resource adequacy, all of these functions are organically built into all of the products that we build because we expect they'll all be flexed as we see the VPP market evolving. So, so far, while the focus has been around batteries, our VPP participation has been very strong with a number of partners. We mentioned two of them in our prepared remarks with the San Diego Community Power, as well as Green Mountain Power. Those were the two examples that we provided, but it's much broader than that.
Raghu Belur: And, you know, because they are value-generating resources, they can actually help with the homeowner's ROI. So all of the grid services that you mentioned, which is reactive power, voltage support, or, you know, just capacity, you know, resource adequacy, all of these functions are organically built into all of the products that we build because we expect they'll all be flexed as we see the VPP market evolving. So, so far, while the focus has been around batteries, our VPP participation has been very strong with a number of partners. We mentioned two of them in our prepared remarks with the San Diego Community Power, as well as Green Mountain Power. Those were the two examples that we provided, but it's much broader than that.
Speaker #5: the grid services So all of that you mentioned , which is reactive power , voltage support or , you know , just capacity , you know , resource adequacy , all of these functions are are organically built into all of the products that built we expect they'll because we all be flexed as we see the Vrp market evolving .
Speaker #5: So and so far , while the focus has been around batteries , the our VP participation has been very strong with a number partners .
Speaker #5: We mentioned two of them in our prepared remarks with with the San Diego Community Power , as well as Green Mountain Power . Those were the two examples that we provided .
[Company Representative] (Enphase Energy): So we are pretty excited about all the work that we have done with our VPP. It's a metric that we track very closely in terms of availability of our VPP APIs, you know, how well our servers are working in order to service the demand. This is US, whereas what we are seeing is all of the VPP work that we are also doing in Europe, with particularly, you know, in the Netherlands, where we are providing capacity, imbalance, dynamic tariffs, others, where they're trading our batteries into the market, in some cases as often as a few seconds.
Raghu Belur: So we are pretty excited about all the work that we have done with our VPP. It's a metric that we track very closely in terms of availability of our VPP APIs, you know, how well our servers are working in order to service the demand. This is US, whereas what we are seeing is all of the VPP work that we are also doing in Europe, with particularly, you know, in the Netherlands, where we are providing capacity, imbalance, dynamic tariffs, others, where they're trading our batteries into the market, in some cases as often as a few seconds.
Speaker #5: But much its broader than that . So we are pretty excited about all the work that we have done with our BPP . We we it's a metric that we track very closely in terms of availability of our BPP APIs .
Speaker #5: You know how well our servers are working in order to service the demand . This is us . Whereas what we are seeing is all of the BPP work that we are also doing in Europe with particularly , you know , in the where we providing Netherlands , capacity dynamic tariffs where imbalance , they're trading batteries into their into the market in some cases , as , often as as a few seconds .
[Company Representative] (Enphase Energy): So we see this as a very critical evolution of of the business in general, because as you think about data center demand really overwhelming the grid, I think behind the meter resources will play a pretty big role in helping alleviate some of that pressure. And so aggregating all of these resources and participating in the market is very key, and we have seen that trend, and we are on top of it and really driving our products to make sure that it's best in class with regards to participation in the market.
Raghu Belur: So we see this as a very critical evolution of of the business in general, because as you think about data center demand really overwhelming the grid, I think behind the meter resources will play a pretty big role in helping alleviate some of that pressure. And so aggregating all of these resources and participating in the market is very key, and we have seen that trend, and we are on top of it and really driving our products to make sure that it's best in class with regards to participation in the market.
Speaker #5: So we see this as a very critical of of the business evolution in general , because as think you about data center demand , really overwhelming the grid , I think behind the meter resources will play a pretty role big in helping alleviate some of that pressure .
Speaker #5: And so aggregating all of these resources and participating in the market is very key . And we we have seen we have trend and we are we are on top of it .
Speaker #5: And and really driving driving our products to make sure that it's best in class with with that to participation in the .
Colin Rusch: Thanks so much, guys.
Colin Rusch: Thanks so much, guys.
Speaker #4: Thanks so guys much .
Operator: The next question will come from Eric Stein with Craig-Hallum. Please go ahead.
Operator: The next question will come from Eric Stine with Craig-Hallum. Please go ahead.
Speaker #3: The next question will come from Eric Stein with Craig-Hallum. Please go ahead.
Eric Stine: Hi, everyone. Just wondering if we can talk about Safe Harbor a little bit. So just the sort of confirmed $63 million in the order, and some of that coming in Q1, you've included that in your guide. So I guess a similar amount in Q2, you did mention that you think that you could recognize some revenue in Q3 for the out years. Being curious, do you expect, is there a magnitude, any indications you're getting from your partners, what those orders might look as you start to think about, as you called it, in 2028 and 2029, for Safe Harbor?
Eric Stine: Hi, everyone. Just wondering if we can talk about Safe Harbor a little bit. So just the sort of confirmed $63 million in the order, and some of that coming in Q1, you've included that in your guide. So I guess a similar amount in Q2, you did mention that you think that you could recognize some revenue in Q3 for the out years. Being curious, do you expect, is there a magnitude, any indications you're getting from your partners, what those orders might look as you start to think about, as you called it, in 2028 and 2029, for Safe Harbor?
Speaker #3: go
Speaker #6: Just wondering if we
Speaker #6: Can talk to everyone. Safe Harbor about bit. So just a little of sort, confirmed $63 million in the order, and some of that coming in Q1. You've included that in your guide.
Speaker #6: So I guess a similar amount in Q2 . You did mention that you think that you could recognize some in revenue Q3 for the out years .
Speaker #6: Mean curious . Do you is there a magnitude any indications you're from your getting those orders might look as you about , start to think called it , in 28 and 29 for Safe Harbor ?
[Company Representative] (Enphase Energy): No, it's too early for us to forecast any Safe Harbor orders. We don't really know right now. And they usually, you know, based upon the deadline that we see, TPO partners have until-
Badri Kothandaraman: No, it's too early for us to forecast any Safe Harbor orders. We don't really know right now. And they usually, you know, based upon the deadline that we see, TPO partners have until... approximately July first week to finalize their plans. And so we do expect a lot of frenzy, you know, activity in Q2. We did, you know, what we announced; we announced basically two transactions that we announced. One was, you know, in the 50s and another was in the 60s, and so one was Physical Work Test, and the other was a 5% Safe Harbor. We even expect, you know, some of those customers to do repeat Safe Harbor orders. But right now, it's too early for us to tell.
Speaker #1: No , it's too early for us to forecast any safe harbor orders . We we don't know really right now . And usually , you know , based upon the deadline that we see TPO partners have until approximately to July 1st week to finalize their plans .
Badrinarayanan Kothandaraman: ... approximately July first week to finalize their plans. And so we do expect a lot of frenzy, you know, activity in Q2. We did, you know, what we announced; we announced basically two transactions that we announced. One was, you know, in the 50s and another was in the 60s, and so one was Physical Work Test, and the other was a 5% Safe Harbor. We even expect, you know, some of those customers to do repeat Safe Harbor orders. But right now, it's too early for us to tell.
Speaker #1: And we do so expect a lot of frenzy , you know , activity Q2 in . We did you know what we announced .
Speaker #1: We announced . Basically 2 or 2 transactions that we we announced . One was , you know , I think I think in the 50s and another was in the 60s .
Speaker #1: And so one was physical test work other and the was a 5% safe harbor . We even expect some of those customers to do repeat safe harbor But orders .
Speaker #1: you know , right now it's it's too early for us to tell .
Eric Stine: Yep. Nope, understood. Appreciate that. And then I know you talked about share on the storage side, but just curious, as you think about the year, it seems that this would be a trough, you know, like you're thinking it is for the overall business. You know, what type of linearity or what trends do you see in storage based on timing of some of the product introductions, et cetera?
Eric Stine: Yep. Nope, understood. Appreciate that. And then I know you talked about share on the storage side, but just curious, as you think about the year, it seems that this would be a trough, you know, like you're thinking it is for the overall business. You know, what type of linearity or what trends do you see in storage based on timing of some of the product introductions, et cetera?
Speaker #7: .
Speaker #6: No . Understood . I Yep appreciate that . And then I know you talked about share storage side , but on the curious as you think about just the year seems that this would , it be a trough , you know , like like you're thinking it is for the overall business .
Speaker #6: You know , what type of what linearity or what trends do you see in on storage based timing of of some some of the product introductions , etc.
Badrinarayanan Kothandaraman: Yeah. In general, storage should be very positive because the tax credits are going to be valid for a much longer time. So batteries are in favor, I think till 2030 or 2031, I forget. So you know, storage market is going to definitely take off. You can see that almost every state, you know, my prediction, and this is only my prediction, is in the next coming years, every state will start to adopt battery storage. Solar plus storage will become the norm, because at some point, you know, uncontrollable export of solar is not desired. So California is ahead. We all didn't like NEM3 initially because of the way it was implemented, but the concept of NEM3 is right.
Badri Kothandaraman: Yeah. In general, storage should be very positive because the tax credits are going to be valid for a much longer time. So batteries are in favor, I think till 2030 or 2031, I forget. So you know, storage market is going to definitely take off. You can see that almost every state, you know, my prediction, and this is only my prediction, is in the next coming years, every state will start to adopt battery storage. Solar plus storage will become the norm, because at some point, you know, uncontrollable export of solar is not desired. So California is ahead. We all didn't like NEM3 initially because of the way it was implemented, but the concept of NEM3 is right.
Speaker #6: ?
Speaker #1: Yeah, in general, storage should be positive because the very tax credits are going to be valid for a much longer time.
Speaker #1: So batteries are favor . I think in till 2030 or 2031 . I forget . So know , storage you storage market is going to definitely take off .
Speaker #1: You can see that almost every state , you know , my prediction and this is this is only my prediction is in the next coming years .
Speaker #1: Every state will battery start to storage . Solar plus storage become the will norm because at some point , you know , uncontrollable export of solar is is not desired .
Speaker #1: So California is ahead. We all didn't like M3 initially because of the way it was implemented, concept of M3, but the idea is right.
Badrinarayanan Kothandaraman: And in fact, California is a solar plus battery market with a 100% attach now. It's got good economics, 6 to 8 years of payback. So my prediction is, every state, you know, in the next 10 years, will become solar plus storage. So solar storage is going to boom. It is going to actually... You know, batteries will pull solar. It's going to become the reverse. It is already like that in Europe. If you go look at Europe, you look at Germany, the attach rate is 80%. You look at Italy, the attach rate is also in the similar range. You look at Netherlands, that's now going to start moving in that direction.
Badri Kothandaraman: And in fact, California is a solar plus battery market with a 100% attach now. It's got good economics, 6 to 8 years of payback. So my prediction is, every state, you know, in the next 10 years, will become solar plus storage. So solar storage is going to boom. It is going to actually... You know, batteries will pull solar. It's going to become the reverse. It is already like that in Europe. If you go look at Europe, you look at Germany, the attach rate is 80%. You look at Italy, the attach rate is also in the similar range. You look at Netherlands, that's now going to start moving in that direction.
Speaker #1: And in fact , California is a solar plus battery market with 100% attach . Now it's got good economics 6 to 8 years of , payback .
Speaker #1: So my prediction is every state , you know , in the next ten years will , will , will become solar plus storage .
Speaker #1: So solar storage is going to boom . It going to actually , you know , batteries will pull solar . It's going to become reverse .
Speaker #1: It the is already like that in Europe . If you go look at Europe , at you look Germany . The rate You attach 80% .
Speaker #1: is look at Italy , attach rate is the the also in similar range . You look at Netherlands . That's now going to move in start that direction .
Badrinarayanan Kothandaraman: You look at France, the feed-in tariffs have dropped a lot, so there is, you know, solar plus storage will become the norm. So controllability, you know, VPPs, self-consumption, those are what, you know, they are going to drive the economics, and they're all in the direction of reducing the utility bill for the homeowner. So, yeah. Is there something you want to share, Raghu, on that?
Badri Kothandaraman: You look at France, the feed-in tariffs have dropped a lot, so there is, you know, solar plus storage will become the norm. So controllability, you know, VPPs, self-consumption, those are what, you know, they are going to drive the economics, and they're all in the direction of reducing the utility bill for the homeowner. So, yeah. Is there something you want to share, Raghu, on that?
Speaker #1: You look at France , the feed in tariffs have dropped a lot . So there is you know solar plus storage will norm the become .
Speaker #1: controllability you know So self . Those are what you know they're going to they're drive the and they're all in the direction of the utility bill reducing for homeowner .
Speaker #1: So the yeah . Is there something you Raghu . On that
[Company Representative] (Enphase Energy): No, I think you're seeing that even happening with NEM 3.0, where it's even beyond self-consumption. You're starting to see things where there's a pricing signal that you get, and based on the pricing signal, you charge or discharge your battery, you export to the grid because you get compensated for it. You know, in Europe, they do that as day-ahead pricing. It's a, and I think you'll see that things such as VPP, day-ahead pricing, dynamic tariffs, et cetera, are really going to be very compelling economics for the homeowner to adopt battery. And that's how you saw California evolve in that direction, and I agree that it's going to happen even maybe faster than 10 years, that you'll see traditional NEM will slowly sunset.
Raghu Belur: No, I think you're seeing that even happening with NEM 3.0, where it's even beyond self-consumption. You're starting to see things where there's a pricing signal that you get, and based on the pricing signal, you charge or discharge your battery, you export to the grid because you get compensated for it. You know, in Europe, they do that as day-ahead pricing. It's a, and I think you'll see that things such as VPP, day-ahead pricing, dynamic tariffs, et cetera, are really going to be very compelling economics for the homeowner to adopt battery. And that's how you saw California evolve in that direction, and I agree that it's going to happen even maybe faster than 10 years, that you'll see traditional NEM will slowly sunset.
Speaker #1: .
Speaker #5: No you're seeing that I think happening with M3 where it's even beyond self-consumption . see You're things starting to you . There's a pricing signal get and based on the that you pricing signal , you discharge grid battery , you export to the your compensated it Europe they do that for in day ahead It's a pricing .
Speaker #5: And I think you'll see that things such as VPP, Ahead Pricing, dynamic tariffs, really going to be very, etc., are compelling economics for the homeowner to adopt battery.
Speaker #5: And that's how you saw California evolve in that — and I direction. I agree it's going to happen even maybe faster than ten years, that your NEM will slowly sunset, see.
Speaker #5: traditional
Eric Stine: Got it. Thank you.
Eric Stine: Got it. Thank you.
Speaker #6: Got it . you Thank .
Operator: The next question will come from Julian Dumoulin-Smith with Jefferies. Please go ahead.
Operator: The next question will come from Julien Dumoulin-Smith with Jefferies. Please go ahead.
Speaker #3: Next, the question will come from Julien Dumoulin-Smith with Jefferies. Please go ahead.
Julian Dumoulin-Smith: Badri and team, nicely done on the continued progress here. Just wanted to come back to a couple things that were mentioned. First off, where do you think batteries go to the corporate average here? I mean, you gave us a little diatribe about the outlook here. How do you think about margins evolving there and normalizing upwards? And again, I get that can be byproduct here in the evolution. And then separately, can you talk back again about the market evolution here as it pertains to, you know, prepaid lease adoption? And ultimately, as you say, this is essentially offsetting the impacts of 25D going away.
Julien Dumoulin-Smith: Badri and team, nicely done on the continued progress here. Just wanted to come back to a couple things that were mentioned. First off, where do you think batteries go to the corporate average here? I mean, you gave us a little diatribe about the outlook here. How do you think about margins evolving there and normalizing upwards?
Speaker #8: team , nicely done Padre and continued progress on the here . Just come back to wanted to a couple of mentioned . things that were First off .
Speaker #8: batteries go to What do you the corporate think made you gave I mean , you just us a little diatribe about average here ?
Speaker #8: the outlook here . How do you think about margins there ? evolving again , I guess normalizing that can And upwards ? be by product here in the And .
Julien Dumoulin-Smith: And again, I get that can be byproduct here in the evolution. And then separately, can you talk back again about the market evolution here as it pertains to, you know, prepaid lease adoption? And ultimately, as you say, this is essentially offsetting the impacts of 25D going away. Can you talk about the cadence of that happening, you know, both your own PPL piece of it, and then separately, your commentary about essentially offsetting 25D? Is that market wide, and how do you think that playing out, just timeline-wise?
Speaker #8: separately , can you evolution talk back And then the again about market evolution as here it pertains to prepaid lease adoption and say , this ultimately , as you essentially offsetting the impacts of 25 D going away .
Julian Dumoulin-Smith: Can you talk about the cadence of that happening, you know, both your own PPL piece of it, and then separately, your commentary about essentially offsetting 25D? Is that market wide, and how do you think that playing out, just timeline-wise?
Speaker #8: about the Can you talk cadence that . You know , both of your own piece of it . people happening then your commentary essentially about 25 D is offsetting separately , wide ?
Speaker #8: That is that, think that, playing out in the market. Just, and how wise timeline?
Badrinarayanan Kothandaraman: Yeah. On the batteries and gross margins, especially with the tariffs now, the gross margins on batteries are slightly below corporate average, and what we'd like to do is to bring it above, and that's what I extensively talked about. It is, you know, today, we are, I mean, we have 45% tariff on the cell packs that we get from China. And that is a tough number to work with in terms of margins. Plus we have tariffs on other raw materials that are coming in to the US, so we get hit many ways. We have recognized that the best way for us to counter that is with innovation. So that's why I talked extensively about the fifth-generation battery.
Badri Kothandaraman: Yeah. On the batteries and gross margins, especially with the tariffs now, the gross margins on batteries are slightly below corporate average, and what we'd like to do is to bring it above, and that's what I extensively talked about. It is, you know, today, we are, I mean, we have 45% tariff on the cell packs that we get from China. And that is a tough number to work with in terms of margins. Plus we have tariffs on other raw materials that are coming in to the US, so we get hit many ways. We have recognized that the best way for us to counter that is with innovation. So that's why I talked extensively about the fifth-generation battery.
Speaker #1: On
Speaker #1: on the ? Yeah . batteries and margins , especially with the tariffs now , margins gross on the on batteries are , are slightly corporate average what .
Speaker #1: like to below we'd And do is to bring it , bring it above and that's what I extensively about . It is talked , you know , we , we are we , I mean , we have 45% the tariff on that get from cell we is that .
Speaker #1: tough a And we of have Plus we tariffs on other raw materials number in to the US . So we get hit . Many ways .
Speaker #1: We have that the best way for us to counter, recognized with innovation. So that's talked extensively why I—about the fifth generation battery or cost structure will be radically so different.
Badrinarayanan Kothandaraman: Our cost structure will be radically different. So even with these tariffs, I can comfortably make even above corporate gross margins on my batteries. We are not stopping there. We are already thinking about our sixth generation battery, so we'll share more as soon as the fifth generation battery is out. So it's gonna be a nice cadence for us. We have got to be, I mean, we've got to bring out approximately every generation of battery, you know, every generation in 18 months. That's what we'd like to do. So next question, on the PPA timeline, I mean, it's early for us to share any, you know, timelines, given that we are in the process of pilots. But the dream is that it is to replace the pre-25B loan TAM with prepaid lease.
Badri Kothandaraman: Our cost structure will be radically different. So even with these tariffs, I can comfortably make even above corporate gross margins on my batteries. We are not stopping there. We are already thinking about our sixth generation battery, so we'll share more as soon as the fifth generation battery is out. So it's gonna be a nice cadence for us. We have got to be, I mean, we've got to bring out approximately every generation of battery, you know, every generation in 18 months. That's what we'd like to do. So next question, on the PPA timeline, I mean, it's early for us to share any, you know, timelines, given that we are in the process of pilots. But the dream is that it is to replace the pre-25B loan TAM with prepaid lease.
Speaker #1: Even with these tariffs, I can make even above corporate gross margins on my batteries. We are not stopping there. We are already thinking about our battery.
Speaker #1: we'll So share more as soon as fifth generation battery is out the . So it's going to nice be a cadence for us .
Speaker #1: are going to be We I mean , we're going out to bring approximately every generation of know , You every battery . generation in 18 months .
Speaker #1: That's what we'd like to do . So next question on the people timeline . I mean , it's it's early for us to for us to share any , timelines , we are in given that the in the process of pilots .
Speaker #1: But the dream is that it is it is to replace the pre 25 D with tam prepaid lease lone . And there is still several have to things that be ironed out .
Badrinarayanan Kothandaraman: There is still several things that have to be ironed out. That's what the pilots are doing. Operational issues, ease of doing business, customer consumer confidence in installer, you know, installer performance, financing, all of those we are trying to solve with the pilots. And we are running in 4 states. So far, the installers, you know, installer feedback is very positive. They like the Xtra. They like this, you know, prepaid lease as a tool that helps them, that helps them counter the TAM loss due to loan. So we like what we see so far. I think in the next 3 to 6 months, we will know, we will know everything. And, you know, we are confident that we'll be able to expand to a lot more states in that time frame.
Badri Kothandaraman: There is still several things that have to be ironed out. That's what the pilots are doing. Operational issues, ease of doing business, customer consumer confidence in installer, you know, installer performance, financing, all of those we are trying to solve with the pilots. And we are running in 4 states. So far, the installers, you know, installer feedback is very positive. They like the Xtra. They like this, you know, prepaid lease as a tool that helps them, that helps them counter the TAM loss due to loan. So we like what we see so far. I think in the next 3 to 6 months, we will know, we will know everything. And, you know, we are confident that we'll be able to expand to a lot more states in that time frame.
Speaker #1: That's what the pilots are doing . Operational ease of doing business , customer consumer issues , confidence in installer . You know installer performance financing , all of are those .
Speaker #1: trying to We solve with the pilots . are running in And we four states . So far the installers , you know , installer feedback is very positive .
Speaker #1: They like extra they like the this , you know prepaid lease as a tool that helps them , that them counter helps the the time lost due to loan .
Speaker #1: So we like what we see so far . think I in the next 3 to 6 months we will know . We will know everything and you know we are confident that we'll be able to expand to a lot more states in that time frame .
Moses Sutton: And your comment assumes you gain market share, or is that more about just the market overall?
Julien Dumoulin-Smith: And your comment assumes you gain market share, or is that more about just the market overall?
Speaker #8: Your comment assumes you gain market share, or is that more about just the market overall?
Badrinarayanan Kothandaraman: We do expect to gain market share. Yes.
Badri Kothandaraman: We do expect to gain market share. Yes.
Speaker #1: do We to gain expect market share .
Moses Sutton: Okay, excellent. Thanks for clarifying everything. I appreciate it.
Julien Dumoulin-Smith: Okay, excellent. Thanks for clarifying everything. I appreciate it.
Speaker #7: Okay . Yes . Excellent .
Speaker #8: Thanks for everything. I appreciate it.
Operator: The next question will come from Moses Sutton with BNP Paribas. Please go ahead.
Operator: The next question will come from Moses Sutton with BNP Paribas. Please go ahead.
Speaker #3: The question will come from next Moses BNP Paribas . Please Sutton with go ahead .
Moses Sutton: Thanks for squeezing me in. Badri, how many well-capitalized prepaid lease competitor programs are you seeing out there? And by competitor, I mean that as a broader good thing, as it would help stimulate the market, as Julian was noting. And then also on the IQ9 residential, do you expect a significantly slower uptake relative to the IQ7 to IQ8, considering its benefits rely on the larger panel format and the market is averaging still smaller panel sizes, and they have to, like, sort of grow into the larger panels?
Moses Sutton: Thanks for squeezing me in. Badri, how many well-capitalized prepaid lease competitor programs are you seeing out there? And by competitor, I mean that as a broader good thing, as it would help stimulate the market, as Julian was noting. And then also on the IQ9 residential, do you expect a significantly slower uptake relative to the IQ7 to IQ8, considering its benefits rely on the larger panel format and the market is averaging still smaller panel sizes, and they have to, like, sort of grow into the larger panels?
Speaker #9: programs are you seeing out there ? And by competitor I mean that as good thing as it would a broader help stimulate demand .
Speaker #9: In the market as as Julian was noting and then also on the IC nine residential , do you have do you expect a significantly slower uptake relative to the ICU ?
Speaker #9: 7 to 8, considering its benefits rely on the larger panel format market and the average of smaller panel sizes, and they have to sort of grow into the larger panels still.
Badrinarayanan Kothandaraman: Good questions. On the prepaid lease, it is still early days. We see, you know, I don't know the details personally about the remaining players, but I've heard their names. I've heard that some of them do a good job, but time will tell. On IQ Nine, IQ Nine addresses one more thing. It not only addresses higher power, 427 watts, it also addresses panels that operate at 16 amperes. So if you look at it in Europe, Europe is already starting to operate at 16 amperes right now. So, you know, IQ Eight had the capability to go up to 14 amperes, and IQ Nine will extend that capability to 16 and even 18 amperes.
Badri Kothandaraman: Good questions. On the prepaid lease, it is still early days. We see, you know, I don't know the details personally about the remaining players, but I've heard their names. I've heard that some of them do a good job, but time will tell. On IQ Nine, IQ Nine addresses one more thing. It not only addresses higher power, 427 watts, it also addresses panels that operate at 16 amperes. So if you look at it in Europe, Europe is already starting to operate at 16 amperes right now. So, you know, IQ Eight had the capability to go up to 14 amperes, and IQ Nine will extend that capability to 16 and even 18 amperes.
Speaker #1: Good on the prepaid lease questions . It is still early days . We we see we I you know , don't know the details personally about about remaining the players , but I've heard their names , I've heard of them that some do a good job .
Speaker #1: But time will tell on Ic9 and Ic9 addresses one more thing . Not only addresses higher power for 27W , it also addresses panels that panels that operate at 16A .
Speaker #1: So if you look at it in Europe , Europe is already starting to operate 16A . at Right now . So , you know , equate had the capability to go up to 14A .
Speaker #1: And IQ nine will extend that capability to 16 . And even 18A . The IQ that will nine product be coming in the third quarter will extend it up So to we believe Europe will will 18A .
Badrinarayanan Kothandaraman: The IQ9 S product that will be coming in Q3 will extend it up to 18A. So we believe, Europe will be the first to ramp, along with Australia and the international. You know, US is a little behind in terms of panel tech there. And so we expect in the US, you know, IQ9 to ramp a little more slowly. However, in the commercial space, IQ9 is the only option. IQ9, 480V. There, the panels are at 595W to 640W.
Badri Kothandaraman: The IQ9 S product that will be coming in Q3 will extend it up to 18A. So we believe, Europe will be the first to ramp, along with Australia and the international. You know, US is a little behind in terms of panel tech there. And so we expect in the US, you know, IQ9 to ramp a little more slowly. However, in the commercial space, IQ9 is the only option. IQ9, 480V. There, the panels are at 595W to 640W. So there, IQ9 is the only option, and there we are going, not only the 427W can service the 480V market, the 548 that we will be introducing in the Q2 or Q3, that will also help a lot, including Safe Harbor.
Speaker #1: The first to ramp along with Australia and the international. You know, US is a little behind in terms of panel tech.
Speaker #1: There . And so we expect in the US , you know , IQ nine to ramp a little more slowly . However , in the commercial space IQ nine is the only option .
Speaker #1: IQ nine for 80V . They're the panels are at five 95W to 640W . So they're IQ nine is the only option . And there we are going not only the full 27W can can service the 40 volt market .
Badrinarayanan Kothandaraman: So there, IQ9 is the only option, and there we are going, not only the 427W can service the 480V market, the 548 that we will be introducing in the Q2 or Q3, that will also help a lot, including Safe Harbor.
Speaker #1: The 548 that we will be introducing in the in the in the second or third quarter . That will also help a lot , including safe harbor .
Moses Sutton: Thank you, very helpful. And maybe if I could squeeze one in on the Netherlands. Is there potential for actually material pre-demand ahead of the loss of the grandfathering of the net metering? Basically, most assume that that story kicks off next year, but are you seeing that there's a significant amount of customers that don't want to see a gap in their solar system's value next year, so they want to self-consume early, and therefore they'd have to move this year?
Moses Sutton: Thank you, very helpful. And maybe if I could squeeze one in on the Netherlands. Is there potential for actually material pre-demand ahead of the loss of the grandfathering of the net metering? Basically, most assume that that story kicks off next year, but are you seeing that there's a significant amount of customers that don't want to see a gap in their solar system's value next year, so they want to self-consume early, and therefore they'd have to move this year?
Speaker #9: Thank you . Very helpful . And maybe if I could squeeze one in on the Netherlands there potential , is material pre demand ahead of the loss of the grandfather of the of the net metering most assume .
Speaker #9: Basically that that story kicks off year . But next are you seeing that there's a significant amount of customers that don't want to see a gap in their systems value next year , so solar they want to consume early , and therefore move they'd have to this year ?
Badrinarayanan Kothandaraman: ... Yes, there is two, there is yes, yes to that, and I'll tell you why. You know, first of all, if they have batteries now, they won't have to pay a penalty, one. Also, there is a nuance to it, that there are several customers whose energy contracts will be expiring right now because they all have limited, you know, 1- to 3-year contract. So when they are going to sign a new contract for the next 2 years, they are going to know the full picture. The utility is going to give them the full picture of how the next 2 years are going to be. And in order for them to, you know, for them to really get low rate, the only option they will have is to buy a battery. So, I think, I think the education is happening now.
Badri Kothandaraman: Yes, there is two, there is yes, yes to that, and I'll tell you why. You know, first of all, if they have batteries now, they won't have to pay a penalty, one. Also, there is a nuance to it, that there are several customers whose energy contracts will be expiring right now because they all have limited, you know, 1- to 3-year contract. So when they are going to sign a new contract for the next 2 years, they are going to know the full picture. The utility is going to give them the full picture of how the next 2 years are going to be. And in order for them to, you know, for them to really get low rate, the only option they will have is to buy a battery. So, I think, I think the education is happening now.
Speaker #1: Yes , that is , there is yes , yes to that . And I'll tell you why . You know , first of all , if they have batteries now , they won't have to pay penalty .
Speaker #1: One . is a nuance Also , there to it that there are several customers whose energy be contracts will expiring right now because they all have limited , you know , 1 to 3 year contracts .
Speaker #1: So, when they are going to sign a new contract for the next two years, they are going to know the full picture.
Speaker #1: utility The is going to give them the full picture of how the next two years are going be to , and in order for them to , you know , for them to really get low rates , the only option they will is to buy a battery .
Speaker #1: I So have think , I think the happening now just to elaborate a little more , what we are doing , and I'm not sure whether whether whether you heard my comments before , we are we have not done this before , as in we are homeowner holding events .
Badrinarayanan Kothandaraman: Just to elaborate a little more, what we are doing, and I'm not sure whether you heard my comments before, we are. We have not done this before as Enphase. We are holding homeowner events. Every homeowner event is attended by approximately 200 to 300 people. And let's say from a family, 2 people show up, so approximately 150 families. And they basically get education, and there is a lot of interest in ordering batteries. Pre-orders are usually quite high from such an event. Of course, 10 events is not representative of what is going to happen in the year.
Badri Kothandaraman: Just to elaborate a little more, what we are doing, and I'm not sure whether you heard my comments before, we are. We have not done this before as Enphase. We are holding homeowner events. Every homeowner event is attended by approximately 200 to 300 people. And let's say from a family, 2 people show up, so approximately 150 families. And they basically get education, and there is a lot of interest in ordering batteries. Pre-orders are usually quite high from such an event. Of course, 10 events is not representative of what is going to happen in the year.
Speaker #1: Every homeowner event is attended by approximately 200 to 300 people. And let's say, from a family, two people show up.
Speaker #1: So, approximately 150 families, and they basically get education. And there is a lot of interest in ordering batteries. Pre-orders are quite usual from such a high event.
Speaker #1: Of course , ten events is not representative of what is going to happen in the year . We plan to hold at least 100 events in 2026 , and we plan to basically quantify every event generate an should average , let's say x x x kilowatt hours or , you know , let's say something like 0.5MW hours per event or one megawatt hour per event .
Badrinarayanan Kothandaraman: We plan to hold at least 100 events in 2026, and we plan to basically quantify every event should generate an average, let's say, X, X, X kWh, or, you know, let's say something like 0.5 MWh per event or 1 MWh per event. That's how we are thinking. We are thinking that, you know, the first step that we have to do is actually education. So in that process, we are helping our installers. We are starting to do that. It's getting fantastic reception. In fact, our partners are also coming to us. Distributors are now happy that we are doing an organic thing for lead generation instead of depending on only the installers.
Badri Kothandaraman: We plan to hold at least 100 events in 2026, and we plan to basically quantify every event should generate an average, let's say, X, X, X kWh, or, you know, let's say something like 0.5 MWh per event or 1 MWh per event. That's how we are thinking. We are thinking that, you know, the first step that we have to do is actually education. So in that process, we are helping our installers. We are starting to do that. It's getting fantastic reception. In fact, our partners are also coming to us. Distributors are now happy that we are doing an organic thing for lead generation instead of depending on only the installers. And the installers are happy because they are getting leads that they didn't plan on before. So, yeah.
Speaker #1: And so that's how we are thinking . We are we are thinking that , you know , the first step that we have to do is to is actually education .
Speaker #1: So in that process , we are helping our installers . We are we are starting to do that . It's it's it's getting fantastic reception .
Speaker #1: our In fact , partners are also coming , coming to us . Distributors are are now happy that we are doing an organic thing for lead generation instead of depending on only the And then installers .
Badrinarayanan Kothandaraman: And the installers are happy because they are getting leads that they didn't plan on before. So, yeah.
Speaker #1: Installers are happy because they are getting leads that they didn't plan on before. So, yeah.
Operator: The next question will come from Vikram Bagri with Citi. Please go ahead.
Operator: The next question will come from Vikram Bagri with Citi. Please go ahead.
Speaker #3: The next question will come from Vikram Bagri with Citi. Please go ahead.
Speaker #3: .
Vikram Bagri: Good evening, everyone. Badri, you mentioned TPO partners have until 4 July to Safe Harbor. Could you share what the lead time to Safe Harbor is that you've seen recently? I imagine a month or more to Safe Harbor, which would mean TPOs have less time to decide than the deadline. And then wondering when should we expect the frenzy to begin based on that lead time? Related to that, based on what you've seen, is the Safe Harboring so far being done by the TPO partners? Is that being done expecting growth in forward years, given all the drivers that you've mentioned, rates, electricity price increases, policies, et cetera? Or the TPO partners are conservatively just Safe Harbor in current volumes for multiple years so far?
Vikram Bagri: Good evening, everyone. Badri, you mentioned TPO partners have until 4 July to Safe Harbor. Could you share what the lead time to Safe Harbor is that you've seen recently? I imagine a month or more to Safe Harbor, which would mean TPOs have less time to decide than the deadline. And then wondering when should we expect the frenzy to begin based on that lead time? Related to that, based on what you've seen, is the Safe Harboring so far being done by the TPO partners? Is that being done expecting growth in forward years, given all the drivers that you've mentioned, rates, electricity price increases, policies, et cetera? Or the TPO partners are conservatively just Safe Harbor in current volumes for multiple years so far?
Speaker #10: Good evening everyone
Speaker #10: You mentioned to your partners they have until July 4th to do Safe Harbour. Could you share what the lead time to Safe Harbour is that you've seen recently?
Speaker #10: imagine a I month or more to say harbour , which would mean tpos have less time to decide than the deadline . And then wondering when should we frenzy expect a to begin based on that lead time related to that , based on what you've seen , is the safe harbor so far by the being done TPO partners ?
Speaker #10: Is that being done ? Expecting growth in forward years , given all the drivers that you've mentioned , , electricity rates price increases , policies , etc.
Speaker #10: The, or TPO partners, are conservatively just safe harbor in current volumes or years. So, far multiple.
Badrinarayanan Kothandaraman: It's a question for the TPOs, which we cannot answer everything for them, but I'll just give you my opinion based on what we are seeing. For example, if they do the 5% method, let's say they got their order in December, you know, let's say the last week of December 2025, we would have approximately 105 days from that date to ship that product. That's how it works. They still get all of the benefits, because they place the order within the year, within the end of the year, and, you know, they have to prepay. They have to prepay us with the 5% method.
Badri Kothandaraman: It's a question for the TPOs, which we cannot answer everything for them, but I'll just give you my opinion based on what we are seeing. For example, if they do the 5% method, let's say they got their order in December, you know, let's say the last week of December 2025, we would have approximately 105 days from that date to ship that product. That's how it works. They still get all of the benefits, because they place the order within the year, within the end of the year, and, you know, they have to prepay. They have to prepay us with the 5% method.
Speaker #1: a It's question for the TPO , which we we cannot answer everything for them , but I'll just give you my opinion based on what what we are seeing example , if .
Speaker #1: they do For the 5% method , let's say they got their order in in December , you know , let's say the last week of December 2025 , we would have approximately 105 days from that date to ship that product .
Speaker #1: That's how it works. And they still get all of the benefits because they place the order within the year, within the end of the year.
Speaker #1: And you know , they have to prepay . They have to prepay us with the 5% method , with the physical test , it , work it is it is similar , but there is a nuance in terms of custom component , etc.
Badrinarayanan Kothandaraman: With the Physical Work Test, it's similar, but there is a nuance in terms of a custom component, et cetera, which you already know. The question on are consumers taking into account future demand increases? I don't know. It is hard for them to take that into account. No one really knows, so it's a real question for them. My thought right now is, I don't think that it's happening, but that's just my guess.
Badri Kothandaraman: With the Physical Work Test, it's similar, but there is a nuance in terms of a custom component, et cetera, which you already know. The question on are consumers taking into account future demand increases? I don't know. It is hard for them to take that into account. No one really knows, so it's a real question for them. My thought right now is, I don't think that it's happening, but that's just my guess.
Speaker #1: , which you already know . The question on are consumers taking into account future demand increases ? I don't know , it is hard for them to take that into account .
Speaker #1: Not no one really knows . real So it's a question for them . My my thought right now is I don't think that is happening , but that's just my guess .
Vikram Bagri: Thanks, Badri. As a follow-up, a quick housekeeping question on inventory. You mentioned healthy inventory exiting Q4. Is that trailing 13 or 52 weeks? I ask because looking back, the inventory, the channel may be normal, but accounting for a drop in revenues in Q1, it seems like the channel could be higher than, like, 10 weeks of inventory that you, that you typically sort of, like, keep. Is the inventory comment made on Q1 revenues excluding Safe Harbor, or the inventory comment is backward looking 13 or 52 weeks? Thank you.
Vikram Bagri: Thanks, Badri. As a follow-up, a quick housekeeping question on inventory. You mentioned healthy inventory exiting Q4. Is that trailing 13 or 52 weeks? I ask because looking back, the inventory, the channel may be normal, but accounting for a drop in revenues in Q1, it seems like the channel could be higher than, like, 10 weeks of inventory that you, that you typically sort of, like, keep. Is the inventory comment made on Q1 revenues excluding Safe Harbor, or the inventory comment is backward looking 13 or 52 weeks? Thank you.
Speaker #10: And as a follow-up, a quick housekeeping question on inventory — you mentioned healthy exiting inventory fourth quarter. Is that trailing 13 or 52 weeks?
Speaker #10: I ask because looking back , inventory , the channel may be normal , but accounting for a drop in revenues in first quarter , it seems like the be could channel higher than like ten weeks of you that inventory you that typically sort of like keep is the inventory comment made on first quarter revenues , safe excluding harbor or the inventory comment is backward looking , backward looking 13 or 52 weeks .
Badrinarayanan Kothandaraman: ... Yeah, if you calculate the inventory in terms of backward-looking, then we are very, very lean. If you calculate the inventory based on forward-looking demand, we are normal. That's the way you should look at it.
Badri Kothandaraman: ... Yeah, if you calculate the inventory in terms of backward-looking, then we are very, very lean. If you calculate the inventory based on forward-looking demand, we are normal. That's the way you should look at it.
Speaker #10: Thank you .
Speaker #1: Yeah . If you calculate the inventory terms of in backward looking , then we are very , very lean . If you calculate the inventory based on forward looking demand , we are normal .
Speaker #1: That's the way you should look at it.
Maheep Mandloi: All right. Thank you.
Maheep Mandloi: All right. Thank you.
Speaker #11: Thank you Sorry . .
Operator: The next question will come from Christine Cho with Barclays. Please go ahead.
Operator: The next question will come from Christine Cho with Barclays. Please go ahead.
Speaker #3: Next question will come from Christine Cho with Barclays. Please go ahead.
Christine Cho: Thank you for squeezing me in. You know, last quarter, you kind of said that you anticipated sell-through in Q4 to be 350 to 400. Just curious if you can sort of confirm that you landed there, and then if you would be, you know, able to give us the split between MIs and storage. And then also, if you could give sort of that split for what you're expecting for Q1, the safe harbor revenue.
Christine Cho: Thank you for squeezing me in. You know, last quarter, you kind of said that you anticipated sell-through in Q4 to be 350 to 400. Just curious if you can sort of confirm that you landed there, and then if you would be, you know, able to give us the split between MIs and storage. And then also, if you could give sort of that split for what you're expecting for Q1, the safe harbor revenue.
Speaker #12: Thank you for squeezing me in know . You , last quarter you kind of said that you anticipated sell through in four Q to be 350 to 400 .
Speaker #12: Just curious if you can sort of confirm that you landed there and give you know , then if be , you us the split mice and between storage and then also , if you sort of could give that split for what you're expecting 1QX , the safe harbor revenue .
Badrinarayanan Kothandaraman: Yeah, we landed right at the midpoint there between 350 and 375. I mean, 350 and 400 sell-through. So that's good. And then, just on the split up, in fact, our sell-through on batteries was higher, 27%, and the sell-through on microinverters was, I think, approximately-
Badri Kothandaraman: Yeah, we landed right at the midpoint there between 350 and 375. I mean, 350 and 400 sell-through. So that's good. And then, just on the split up, in fact, our sell-through on batteries was higher, 27%, and the sell-through on microinverters was, I think, approximately-
Speaker #1: Yeah . The we landed right at the midpoint there between 350 and 375 . I mean , 350 and 400 sell through . So that's good .
Speaker #1: And then just on split up , in fact , our the sell through on , on batteries was higher was 27% . And the sell through on Microinverters was I think approximately 21 , around 20 ish percent .
Maheep Mandloi: Twenty-one.
Raghu Belur: Twenty-one.
Badrinarayanan Kothandaraman: Around 20-ish percent, basically.
Badri Kothandaraman: Around 20-ish percent, basically.
Christine Cho: I'm sorry, those percentages are up quarter-over-quarter?
Christine Cho: I'm sorry, those percentages are up quarter-over-quarter?
Speaker #1: Basically . .
Speaker #12: I'm sorry, those percentages are up quarter over quarter.
Badrinarayanan Kothandaraman: Yes, 27% up. The sell-through in Q4 in the US, 27% up on batteries with respect to Q3, and sell-through of microinverters in the US, up approximately 20% with respect to Q3.
Badri Kothandaraman: Yes, 27% up. The sell-through in Q4 in the US, 27% up on batteries with respect to Q3, and sell-through of microinverters in the US, up approximately 20% with respect to Q3.
Speaker #1: Yes , 27% up the sell through in Q4 in the US , 27% up on batteries . With respect to Q3 and sell through of Microinverters in the up US , approximately 20% with respect to Q3 .
Christine Cho: The split for 1 Q?
Christine Cho: The split for Q1?
Speaker #12: And then the split for one Q.
Badrinarayanan Kothandaraman: Split for one Q, we do not know right now.
Badri Kothandaraman: Split for one Q1, we do not know right now.
Speaker #1: Q, we read for one did not know. Right now.
Christine Cho: What about your sell-through expectations for Q1? Just given-
Christine Cho: What about your sell-through expectations for Q1? Just given-
Speaker #12: But what about your sell-through expectations for Q1? Just given.
Badrinarayanan Kothandaraman: Yes, and we are not going to break that out right now.
Badri Kothandaraman: Yes, and we are not going to break that out right now.
Speaker #1: And we are not going to break that out right now.
Christine Cho: Okay. And just sort of on the prepaid leases, I guess when we do, like, you know, with the deadline for Safe Harbor coming up, are you getting a sense of, you know, at least with your partners, if they're leaning towards 5% or Physical Work Test? And I guess, why, do you have any sense of why they wouldn't lean more towards the Physical Work Test, just given it's easier on the balance sheet?
Christine Cho: Okay. And just sort of on the prepaid leases, I guess when we do, like, you know, with the deadline for Safe Harbor coming up, are you getting a sense of, you know, at least with your partners, if they're leaning towards 5% or Physical Work Test? And I guess, why, do you have any sense of why they wouldn't lean more towards the Physical Work Test, just given it's easier on the balance sheet?
Speaker #12: Okay . And just sort of on the prepaid leases , I guess we when do , you know , with the deadline for safe Harbor coming up , are you getting a sense know , at least of , you with your partners , if they're leaning towards 5% or physical work test I ?
Speaker #12: Guess why. And do you have any sense of why they wouldn't lean more towards physical work tests, just given it's easier on the balance sheet?
Badrinarayanan Kothandaraman: That's right. I mean, I asked the same question, too, but it depends upon how comfortable they are with respect to they and their tax partners are. So, yes, I mean, the Physical Work Test, if, gives them a legally good mechanism, to take care of themselves for 2028, 2029, 2030. But what we are seeing is, we are seeing, a mix of both. We are seeing, in some cases, we are seeing some TPO partners adopt a mix. That is, they do a portion Physical Work Test, they do a portion 5% Safe Harbor. Some TPO partners only rely on Physical Work Test. It's a mix. There is no general trend. We are capable of providing either. Wait, whatever the TPO wants, we are here to provide that. There was a misconception that Enphase cannot do Physical Work Test. Not true.
Badri Kothandaraman: That's right. I mean, I asked the same question, too, but it depends upon how comfortable they are with respect to they and their tax partners are. So, yes, I mean, the Physical Work Test, if, gives them a legally good mechanism, to take care of themselves for 2028, 2029, 2030. But what we are seeing is, we are seeing, a mix of both. We are seeing, in some cases, we are seeing some TPO partners adopt a mix.
Speaker #1: That's right . I mean , I asked the same question too , but it depends upon how comfortable they are with respect to and their they tax partners are so yes , I mean , the test , physical work if them a legally good mechanism to take care of themselves 29 , for 28 , 30 but what we are seeing is we are seeing a mix of both are seeing in some cases , we are seeing TPO some partners adopt a mix .
Badri Kothandaraman: That is, they do a portion Physical Work Test, they do a portion 5% Safe Harbor. Some TPO partners only rely on Physical Work Test. It's a mix. There is no general trend. We are capable of providing either. Wait, whatever the TPO wants, we are here to provide that. There was a misconception that Enphase cannot do Physical Work Test. Not true. We do physical work test, and we are engaged with the multiple TPO providers on that.
Speaker #1: That is , they do a portion physical work test , they do a portion 5% . They Farber some TPO partners only rely on physical work , test .
Speaker #1: It's a mix . There is no general trend . We are capable of providing . Either way . Whatever the TPO wants , we are here to provide them .
Speaker #1: There was a misconception that Enphase cannot do physical work , test . Not true . We do physical work test and we are engaged with the multiple TPO providers on that .
Badrinarayanan Kothandaraman: We do physical work test, and we are engaged with the multiple TPO providers on that.
Operator: Again, if you have a question, please press Star, then One. The next question will come from Chris Dendrinos with RBC Capital Markets. Please go ahead.
Operator: Again, if you have a question, please press Star, then One. The next question will come from Chris Dendrinos with RBC Capital Markets. Please go ahead.
Speaker #3: you have a Again , if question , please press star then one . The next question will come from Chris Dendrinos with RBC Capital Markets .
Chris Dendrinos: Yeah, good evening. I wanted to follow up on the commentary about trimming some price in Europe in response to the competitive dynamic there. Can you maybe just comment on the demand impact from that? Are you seeing, I guess, any type of benefit there? Thanks.
Chris Dendrinos: Yeah, good evening. I wanted to follow up on the commentary about trimming some price in Europe in response to the competitive dynamic there. Can you maybe just comment on the demand impact from that? Are you seeing, I guess, any type of benefit there? Thanks.
Speaker #3: Please go ahead .
Speaker #13: Yeah, good evening. I wanted to follow up on the commentary about trimming some price in Europe in response to the dynamic.
Speaker #13: competitive There . Can you maybe just comment demand impact from that ? Are you are you on the I guess , any type of any type of benefit there ?
Badrinarayanan Kothandaraman: We expect to see some benefit there. We reduced the list prices at distributors by approximately 20% on our microinverters.
Speaker #13: Thanks .
Badri Kothandaraman: We expect to see some benefit there. We reduced the list prices at distributors by approximately 20% on our microinverters.
Speaker #1: We expect to see some benefit there. We reduced the list distributor prices by approximately 20% on our microinverters.
Chris Dendrinos: Got it. And then maybe as you think about the US, I mean, is that a consideration in the US to potentially cut prices as well? And I apologize, I know let's get that every quarter. Thanks.
Chris Dendrinos: Got it. And then maybe as you think about the US, I mean, is that a consideration in the US to potentially cut prices as well? And I apologize, I know let's get that every quarter. Thanks.
Speaker #13: Got it. Then maybe as you think about the US, I mean, is that a consideration in the US to potentially cut price as well?
Speaker #13: And I apologize, this gets asked every quarter. Thanks.
Badrinarayanan Kothandaraman: Yeah, I mean, it is. We are always looking at it, and, you know, right now is the best time for us to help our installers, so we are always looking at it. We do installer roundtables every week. We are, you know, carefully evaluating it, and when we think it is appropriate, we will do that, and we will inform you.
Badri Kothandaraman: Yeah, I mean, it is. We are always looking at it, and, you know, right now is the best time for us to help our installers, so we are always looking at it. We do installer roundtables every week. We are, you know, carefully evaluating it, and when we think it is appropriate, we will do that, and we will inform you.
Speaker #1: Yeah. I mean, the way we are looking at it is always, it... And you know, right now is the best for us to help our installers.
Speaker #1: So, we are always looking at it. We do install round tables every week. We are, you know, we are carefully evaluating it.
Speaker #1: And when we think it is appropriate , we will we will do that and we we will will , inform you .
Chris Dendrinos: Thank you.
Chris Dendrinos: Thank you.
Speaker #13: Thank you .
Operator: The next question will come from Maheep Mandloi with Mizuho. Please go ahead.
Operator: The next question will come from Maheep Mandloi with Mizuho. Please go ahead.
Speaker #3: The next question will come from Manley with Maheep Mizuho. Please go ahead.
Maheep Mandloi: Hey, thanks for squeezing me in as well. Maybe you talked about access to non-China battery supplier. Can you just talk about, like, the pricing environment you're seeing over there, with more supply coming, are you seeing costs come down over there, or it seems kind of stable for the next year or two there? Thanks.
Maheep Mandloi: Hey, thanks for squeezing me in as well. Maybe you talked about access to non-China battery supplier. Can you just talk about, like, the pricing environment you're seeing over there, with more supply coming, are you seeing costs come down over there, or it seems kind of stable for the next year or two there? Thanks.
Speaker #10: Hey, thanks for squeezing me in as well. You talked about access to non-China battery suppliers. Can you talk about, like, the pricing—just talk about the environment you're seeing over there with more supply coming?
Speaker #10: Are we seeing costs come down over there, or are things kind of stable for the next year or two? Over there? Thanks.
Badrinarayanan Kothandaraman: Yeah, in general, I think, I think the battery suppliers are having some pressure on their costs. So, you know, I would say we aren't seeing huge price decreases. They are kind of flat. When we move from China to non-China, we would expect about anywhere about 20% increase in the cell pack, in the cell pack pricing to us, 20 to 25%. So for example, if there is a 45% tariff on product from China and there's 0% for, from a non-China country, it would make sense. So that's what we took into account, and we are working with the battery cell supplier that will enable us in the non-China market or in the non-China battery manufacturing.
Badri Kothandaraman: Yeah, in general, I think, I think the battery suppliers are having some pressure on their costs. So, you know, I would say we aren't seeing huge price decreases. They are kind of flat. When we move from China to non-China, we would expect about anywhere about 20% increase in the cell pack, in the cell pack pricing to us, 20 to 25%. So for example, if there is a 45% tariff on product from China and there's 0% for, from a non-China country, it would make sense. So that's what we took into account, and we are working with the battery cell supplier that will enable us in the non-China market or in the non-China battery manufacturing. We expect to start ramping that in Q2.
Speaker #1: Yeah . In general I think I think the battery are , are suppliers having some costs . on pressure their , you know , I would say So aren't we seeing huge decreases price they are .
Speaker #1: They are flat kind of when we move from China to Non-china . We would expect about anywhere about 20% increase in the cell pack in the cell pack pricing to us 20 to 25% .
Speaker #1: So, for example, if there is a 45% tariff on a product from China and there is a 0% tariff for a non-China country, it would make sense.
Speaker #1: So that's that's what we took into account . And we are we are working with with a with a battery cell supplier that will enable us in the non-china or in the market non Non-china battery manufacturing .
Badrinarayanan Kothandaraman: We expect to start ramping that in Q2.
Speaker #1: And we expect to start ramping in the second quarter.
Gus Richard: Thank you.
Maheep Mandloi: Thank you.
Speaker #10: you Thank .
Operator: Once again, if you have a question, please press star then one. The next question will come from Gus Richard with Northland. Please go ahead.
Operator: Once again, if you have a question, please press star then one. The next question will come from Gus Richard with Northland. Please go ahead.
Speaker #3: Once again, if you have a question, please press star then one. The next question will come from Gus Richard with Northland. Please go ahead.
Gus Richard: Yes, thanks for taking the question. Inventory on the balance sheet was up $99 million sequentially, quite a bit. Days of inventory went up quite a bit, and I'm just wondering if you could walk me through why that happened.
Gus Richard: Yes, thanks for taking the question. Inventory on the balance sheet was up $99 million sequentially, quite a bit. Days of inventory went up quite a bit, and I'm just wondering if you could walk me through why that happened.
Speaker #14: Yes, thanks. Taking the question on the inventory, balance sheet was up $99 million sequentially. Quite a bit of inventory went up quite a bit.
Speaker #14: And I'm just wondering if you could walk me through why that happened.
Badrinarayanan Kothandaraman: Yeah, what we did was we basically, you know, in order to ensure FIOC compliance, we took ownership of the inventory from a contract manufacturer, and so everything was clean. And so we did that in Q4. That factory exists for us. We are managing the factory, and you know, it was a little high, like what you state, $100 million more, but we expect to continuously bring that down. Our, you know, operations head and me, we are laser focused on inventory, and we have clear plans to get that down.
Badri Kothandaraman: Yeah, what we did was we basically, you know, in order to ensure FIOC compliance, we took ownership of the inventory from a contract manufacturer, and so everything was clean. And so we did that in Q4. That factory exists for us. We are managing the factory, and you know, it was a little high, like what you state, $100 million more, but we expect to continuously bring that down. Our, you know, operations head and me, we are laser focused on inventory, and we have clear plans to get that down.
Speaker #1: Yeah . The what what we did was we basically know , in , you in order to ensure fiat compliance , we , we took we took ownership of the from our contract manufacturer .
Speaker #1: And so everything was clean . And so we did that in the fourth quarter . That factory exists for us . We are managing the factory and we know , , you it was a little high , like what you state $100 million more .
Speaker #1: But we expect to continuously bring that down . Our , our , you know , operations head and me , we we are we are laser on inventory .
Speaker #1: And we have clear plans to get that done.
Gus Richard: Okay, got it. And then on the fourth generation battery, I understand that the tear loss is relatively high as what it is with your competitors. I'm just wondering if you're going to address that in the Gen Five battery and, you know, is that a concern with your customers?
Gus Richard: Okay, got it. And then on the fourth generation battery, I understand that the tear loss is relatively high as what it is with your competitors. I'm just wondering if you're going to address that in the Gen Five battery and, you know, is that a concern with your customers?
Speaker #14: Okay . Got it . And then on the fourth generation battery , I understand that the tear loss is relatively high . As with it is with your competitors .
Speaker #14: And I'm just wondering if you're going to address that Gen 5 in the battery. And is that a concern with your customers?
Badrinarayanan Kothandaraman: It is a general concern with all batteries, and the tear loss is something important just for the benefit of everybody. A tear loss is, how much of power the circuitry inside the battery, you know, consumes. Not what is supplied or not, not what is provided to the loads in the home. So it is, a tear loss is a wasted energy, is what we call it. It's unusable energy. So we recognize that. We have introduced a new feature called as PowerMatch. PowerMatch is a technology, software-enabled technology, that dynamically matches the output of the battery to real-time home demand. What does that mean? Is, only whatever microinverters are necessary to be on are on. The rest of the microinverters are switched off. So battery life improves, usable energy improves.
Badri Kothandaraman: It is a general concern with all batteries, and the tear loss is something important just for the benefit of everybody. A tear loss is, how much of power the circuitry inside the battery, you know, consumes. Not what is supplied or not, not what is provided to the loads in the home. So it is, a tear loss is a wasted energy, is what we call it. It's unusable energy. So we recognize that. We have introduced a new feature called as PowerMatch. PowerMatch is a technology, software-enabled technology, that dynamically matches the output of the battery to real-time home demand. What does that mean? Is, only whatever microinverters are necessary to be on are on. The rest of the microinverters are switched off. So battery life improves, usable energy improves.
Speaker #1: It is a general concern with all batteries, and tear loss is something important, just for the benefit of everybody. That 'hair loss' is how much of the power inside your battery.
Speaker #1: The know, consumes, not what is supplied or not. Not what is provided to the loads in the home. So it is a tear loss, it is a wasted energy, is what we call it.
Speaker #1: Is unusable energy . So we recognize that we have introduced a new feature called as Power Match . Power match is a technology software enabled technology that dynamically matches the output of the battery to real time home demand .
Speaker #1: What does that mean? Is it only whatever microinverters are necessary that need to be on, or are the rest of the microinverters switched off?
Speaker #1: So battery life improves . Usable energy improves if you compare contrast and it , contrast towards hybrid inverters or hybrid systems . Hybrid systems have single a large inverter , so especially when the when the customer is operating with a very low consumption that burns a lot of unnecessary power or wastes a lot of power .
Badrinarayanan Kothandaraman: If you contrast it, compare and contrast towards hybrid inverters or hybrid systems, hybrid systems have a single large inverter. So especially when the customer is operating with very low consumption, that burns a lot of unnecessary power or wastes a lot of power. While in the case of an Enphase battery, PowerMatch basically activates only the microinverters that are necessary. For example, if the home is consuming 500W, we are not going to burn a 10kW inverter. We are only going to turn on, let's say, 1kW worth of an inverter that we have, and the rest of the inverters are going to be off. Similarly, if there are multiple batteries which are not required to be on, they will all be off.
Badri Kothandaraman: If you contrast it, compare and contrast towards hybrid inverters or hybrid systems, hybrid systems have a single large inverter. So especially when the customer is operating with very low consumption, that burns a lot of unnecessary power or wastes a lot of power. While in the case of an Enphase battery, PowerMatch basically activates only the microinverters that are necessary. For example, if the home is consuming 500W, we are not going to burn a 10kW inverter. We are only going to turn on, let's say, 1kW worth of an inverter that we have, and the rest of the inverters are going to be off. Similarly, if there are multiple batteries which are not required to be on, they will all be off.
Speaker #1: In the case of an Enphase battery, Power Match basically activates only the microinverters that are necessary. For example, if the home is consuming 500 W, we are not going to turn on a ten-kilowatt inverter.
Speaker #1: We are only going to turn on, let's say, a kilowatt worth of an inverter that we have, and the rest of the inverters are going to be off.
Speaker #1: Similarly , if there are multiple batteries which are not required to be they will on , all be off . So power match in helps reducing losses at low loads .
Badrinarayanan Kothandaraman: So PowerMatch helps in reducing losses at low loads, and we have found, approximately, you know, a 40% improvement compared to competition. So we issued a press release, I think late in Q4, very nice video on PowerMatch that explains exactly how it works. And, you know, PowerMatch will, is a big integral part of the fifth generation battery as well. And, the microinverter architecture has got an intrinsic advantage here. So if I may, the modularity is not just for right-sizing the battery to a home. You can now use that, leverage the modularity to right-size how much power you're using in real time.
Badri Kothandaraman: So PowerMatch helps in reducing losses at low loads, and we have found, approximately, you know, a 40% improvement compared to competition. So we issued a press release, I think late in Q4, very nice video on PowerMatch that explains exactly how it works. And, you know, PowerMatch will, is a big integral part of the fifth generation battery as well. And, the microinverter architecture has got an intrinsic advantage here. So if I may, the modularity is not just for right-sizing the battery to a home. You can now use that, leverage the modularity to right-size how much power you're using in real time.
Speaker #1: have And we found approximately , you know , 40% improvement compared to competition . So we issued a press release , I think late in Q4 .
Speaker #1: Very nice video on Power Match . That explains exactly how it works . And Power Match will is a big , integral part of the fifth generation battery as well .
Speaker #1: And the microinverter architecture has got an intrinsic advantage here.
Speaker #5: So if I may , the modularity is not just for right sizing the battery to a home . can You now use that leverage the modularity to right size .
Speaker #5: How much your power your using in real time . So it's an incredible advantage that a decentralized or a architecture . Like distributed what Enphase has to the table brings to make sure that you your power is delivery of very done , very not efficiently .
Badrinarayanan Kothandaraman: So it's an incredible advantage that a decentralized or a distributed architecture, like what Enphase has, brings to the table to make sure that your delivery of power is done very efficiently, and you're not wasting power because you have a tear loss, and a large inverter is just running all the time, even though the demand on the house may be a tenth of what the capacity of that large inverter is.
Badri Kothandaraman: So it's an incredible advantage that a decentralized or a distributed architecture, like what Enphase has, brings to the table to make sure that your delivery of power is done very efficiently, and you're not wasting power because you have a tear loss, and a large inverter is just running all the time, even though the demand on the house may be a tenth of what the capacity of that large inverter is.
Speaker #5: You're wasting power because you have a tare loss in a large inverter just running all the time, even though the demand on the house may be a tenth of what the capacity of that large inverter is.
Moses Sutton: ...Got it. All right. Thank you so much.
Gus Richard: ...Got it. All right. Thank you so much.
Speaker #14: Got it. All right. Thank you so much.
Badrinarayanan Kothandaraman: Thank you.
Badri Kothandaraman: Thank you.
Operator: Again, if you have a question, please press star, then one. Please stand by as we poll for questions. We have one more question with Dimple Gosalia with Bank of America. Please go ahead.
Operator: Again, if you have a question, please press star, then one. Please stand by as we poll for questions. We have one more question with Dimple Gosai with Bank of America. Please go ahead.
Speaker #1: Thank you .
Speaker #3: Again . If you have a question , please press star then one , please stand by as we pull for questions . And we have one more question with dimple Gosalia with Bank of America .
Dimple Gosalia: Hi there. Good evening. Thanks for getting me in here. One question as it relates to the prepaid leases, what is the attach rate for batteries, in your opinion, and how does that kind of compare to the cash and loan channels? And just as a follow-up, what kind of changes attach rate most? Do you think it's more about like payment structure or the system sizing or maybe even the utility tariff design? Any views on that?
Dimple Gosai: Hi there. Good evening. Thanks for getting me in here. One question as it relates to the prepaid leases, what is the attach rate for batteries, in your opinion, and how does that kind of compare to the cash and loan channels? And just as a follow-up, what kind of changes attach rate most? Do you think it's more about like payment structure or the system sizing or maybe even the utility tariff design? Any views on that?
Speaker #3: Please go ahead .
Speaker #15: Good Hi . evening . Thanks for getting me in here . One question as it relates to the prepaid leases . What is the attach rate for batteries , in your opinion , that kind compare to the and how does cash and loan channels .
Speaker #15: Good Hi . evening . Thanks for getting me in here . One question as it relates to the prepaid leases . What is the attach rate for batteries , in your opinion , that kind compare to the and how does cash and loan channels . and And just as a follow up , what kind of changes the attach rate most ?
Speaker #15: Do you think it's more about the payment structure, or the system sizing, or maybe even the utility tariff design? Any views on that?
Badrinarayanan Kothandaraman: Sorry, it's just too early for us to answer, but I mean, the obvious answer in California is, we expect it to be 100%, you know, attached in California. We don't have enough representation or enough statistics from other states to tell you meaningfully. So hopefully in another three months, we'll be able to share a lot more.
Badri Kothandaraman: Sorry, it's just too early for us to answer, but I mean, the obvious answer in California is, we expect it to be 100%, you know, attached in California. We don't have enough representation or enough statistics from other states to tell you meaningfully. So hopefully in another three months, we'll be able to share a lot more.
Speaker #1: Sorry , it's just too early for us to answer . But I mean , the obvious answer in California is we expect it to be 100% , you know , attach in California , we don't have enough representation or enough statistics from other states to to tell meaningfully .
Speaker #1: So, hopefully, in another three months, we'll be able to share a lot more.
Dimple Gosalia: Thank you.
Dimple Gosai: Thank you.
Speaker #15: Thank you .
Operator: This concludes our question and answer session. I would like to turn the conference back over to Badri Kothandaraman for any closing remarks.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Badri Kothandaraman for any closing remarks.
Speaker #3: This concludes our question and answer session. I would like to turn the conference back over to Badri. Any closing remarks, Rahman?
Badrinarayanan Kothandaraman: Thank you for joining us today and for your continued support of Enphase. We look forward to speaking with you again next quarter. Bye.
Badri Kothandaraman: Thank you for joining us today and for your continued support of Enphase. We look forward to speaking with you again next quarter. Bye.
Speaker #1: Thank you for joining us today and for your continued support of Enphase. We look forward to speaking with you again next quarter.
Speaker #1: Bye .
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
