Q2 2026 Enphase Energy Inc Earnings Call

July 28, 2026

Speaker #1: Good afternoon, everyone, and welcome to Enphase Energy's second quarter 2026 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Operator: Good afternoon, everyone, and welcome to Enphase Energy's Second Quarter 2026 Financial Results Conference Call. 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 and then one on your touch-tone phones. To withdraw your questions, you may press star and two. Please also note this event is being recorded. At this time, I'd like to turn the floor over to Zach Freedman with Enphase. Please go ahead.

Speaker #1: This is an opportunity to ask questions. To ask a question, you may press star, then one, on your touchtone phones. To withdraw your question, you may press star, then two.

Speaker #1: Please also note this event is being recorded. At this time, I'd like to turn the floor over to Zachary Freedman with Enphase. Please go ahead.

Speaker #2: Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's second quarter 2026 results. On today's call are Badrinarayanan Kothandaraman, our president and chief executive officer; Mandy Yang, our chief financial officer; and Raghu Baloor, our chief products officer.

Zach Freedman: Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's Q2 2026 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 Q2 ended 30 June 2026. 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, 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.

Speaker #2: After the market closed today, Enphase issued a press release announcing the results for its second quarter ended June 30, 2026. 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; 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.

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.

Zach Freedman: These forward-looking statements involve significant risks and uncertainties, 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. 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.

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 in expectations.

Speaker #2: 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: 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.

Speaker #2: Now, I'd like to introduce Badrinarayanan Kothandaraman, our President and Chief Executive Officer. Bhadri?

Zach Freedman: Now I'd like to introduce Badri Kothandaraman, our President and Chief Executive Officer. Badri.

Speaker #3: Good afternoon, and thank you for joining us today to discuss our second quarter 2026 financial results. We reported quarterly revenue of $291.9 million, shipped 1.59 million microinverters and 113.8 megawatt-hours of batteries, and generated free cash flow of $25.9 million.

Badri Kothandaraman: Good afternoon. Thank you for joining us today to discuss our Q2 2026 financial results. We reported quarterly revenue of $291.9 million, shipped 1.59 million microinverters and 113.8 megawatt hours of batteries, generated free cash flow of $25.9 million. Our Q2 revenue included $84.3 million of safe harbor revenue. We exited the quarter with channel inventory normal for batteries and slightly elevated for microinverters. On a GAAP basis, we delivered gross margin of 60%, operating expense of 42.3%, and operating income of 17.7%, all as a percentage of revenue. On a non-GAAP basis, we delivered gross margin of 46.8%, operating expense of 27.3%, and operating income of 19.4%, all as a percentage of revenue. Mandy will cover the financials later in the call. Our global customer service NPS was 80% in Q2 as compared to 82% in Q1.

Speaker #3: Our Q2 revenue included $84.3 million of safe harbor revenue. We exited the quarter with channel inventory normal for batteries and slightly elevated for microinverters.

Speaker #3: On a GAAP basis, we delivered gross margin of 60%, operating expense of 42.3%, and operating income of 17.7%, all as a percentage of revenue.

Speaker #3: On a non-GAAP basis, we delivered gross margin of 46.8%, operating expense of 27.3%, and operating income of 19.4%, all as a percentage of revenue.

Speaker #3: Mandy will cover the financials later in the call. Our global customer service NPS was 80% in the second quarter, compared to 82% in the first quarter.

Speaker #3: Our average call wait time remained approximately two minutes. We also made our AI assistant available to 1.5 million homeowners worldwide. This gives our customers faster access to personalized, system-specific support and makes their energy systems easier to understand and manage.

Badri Kothandaraman: Our average call wait time remained approximately 2 minutes. We also made our AI assistant available to 1.5 million homeowners worldwide. This gives our customers faster access to personalized system-specific support, making their energy systems easier to understand and manage, ultimately reducing the number of calls. Let's cover operations. In Q2, we shipped approximately 1.58 million US-made microinverters and battery inverters from our Texas and South Carolina manufacturing facilities and booked the associated 45X Production Tax Credits. We also shipped 43 megawatt hours of IQ Batteries from our Texas facility in Q2. We offer IQ Batteries that meet domestic content and FEOC requirements, helping lease and PPA customers qualify for ITC bonuses. Let's now cover revenue and regional performance. Our global Q2 revenue increased 3% compared to Q1.

Badri Kothandaraman: Our average call wait time remained approximately two minutes. We also made our AI assistant available to 1.5 million homeowners worldwide. This gives our customers faster access to personalized system-specific support, making their energy systems easier to understand and manage, ultimately reducing the number of calls. Let's cover operations. In Q2, we shipped approximately 1.58 million US-made microinverters and battery inverters from our Texas and South Carolina manufacturing facilities and booked the associated 45X Production Tax Credits. We also shipped 43 megawatt hours of IQ Batteries from our Texas facility in Q2. We offer IQ Batteries that meet domestic content and FEOC requirements, helping lease and PPA customers qualify for ITC bonuses. Let's now cover revenue and regional performance. Our global Q2 revenue increased 3% compared to Q1.

Speaker #3: Ultimately, reducing the number of calls. Let's cover operations. In the second quarter, we shipped approximately 1.58 million U.S.-made microinverters and battery inverters from our Texas and South Carolina manufacturing facilities, and booked the associated 45X production tax credits.

Speaker #3: We also shipped 43 megawatt-hours of IQ Batteries from our Texas facility in the second quarter. We offer IQ Batteries that meet domestic content and FEAT requirements, helping lease and PPA customers qualify for ITC bonuses.

Speaker #3: Let's now cover revenue and regional performance. Our global Q2 revenue increased 3% compared to Q1. Our global sell-through was approximately flat as compared to Q1, as growth in Europe offset the softness in the US.

Badri Kothandaraman: Our global sell-through was approximately flat as compared to Q1, as growth in Europe offset the softness in the US. Our revenue mix was 78% from the US and 22% from international markets. In the US, revenue declined 3% sequentially. Safe harbor revenue increased to $84.3 million in Q2 as compared to $34.5 million in Q1. Excluding safe harbor revenue, the US revenue declined primarily due to us undershipping into the channel. Our US sell-through in Q2 decreased 7% as compared to Q1. Excluding one-time orders in Q1 that did not recur in Q2, the sell-through was approximately flat sequentially. Our Q2 2026 sell-through declined 34% as compared to one year ago in Q2 2025, reflecting continued pressure from higher interest rates and transition following the expiration of the Section 25D tax credit.

Speaker #3: Our revenue mix was 78% from the U.S. and 22% from international markets. In the U.S., revenue declined 3% sequentially. Safe harbor revenue increased to $84.3 million in Q2, compared to $34.5 million in Q1.

Speaker #3: Excluding safe harbor revenue, the U.S. revenue declined primarily due to us undershipping into the channel. Our U.S. sell-through in Q2 decreased 7% as compared to Q1.

Speaker #3: Excluding one-time orders in Q1 that did not recur in Q2, the sell-through was approximately flat sequentially. Our Q2 '26 sell-through declined 34% as compared to one year ago, in Q2 '25, reflecting continued pressure from higher interest rates and transition following the expiration of the 25D tax credit.

Speaker #3: Third-party market reports suggest that the broader U.S. residential solar market has stabilized, with industry-wide permits in June increasing 4% from May, and upstream sales activity rising 5%.

Badri Kothandaraman: Third-party market reports suggest that the broader US residential solar market has stabilized with the industry-wide permits in June, increasing 4% from May, upstream sales activity rising 5%. Both remain about 30% below prior year levels. Higher electricity cost markets are performing better while several Sun Belt states remain under pressure. The stronger industry-wide signals are for storage and commercial solar. National residential battery attachment remains near 40%, with materially higher levels in key markets. While the US commercial solar permit activity increased 36% year-on-year in June. Taken together, these third-party data points suggest that the next phase of US market growth will be shaped by storage economics, commercial demand, financial availability, and utility rates. In Europe, our revenue increased 35% sequentially in Q2, while sell-through grew 30% with strong performance across both solar and batteries in multiple markets.

Speaker #3: Both remain about 30% below prior-year levels. Higher electricity cost markets are performing better, while several Sun Belt states remain under pressure. The stronger industry-wide signals are for storage and commercial solar.

Speaker #3: National residential battery attachment remains near 40%, with materially higher levels in key markets. Meanwhile, U.S. commercial solar permit activity increased 36% year-on-year in June.

Speaker #3: Taken together, these third-party data points suggest that the next phase of U.S. market growth will be shaped by storage economics, commercial demand, financial availability, and utility rates.

Speaker #3: In Europe, our revenue increased 35% sequentially in the second quarter, while sell-through grew 30%, with strong performance across both solar and batteries in multiple markets.

Speaker #3: The growth was supported by higher power prices, as well as accelerating battery adoption. As we have discussed, Europe is increasingly becoming a battery-led market.

Badri Kothandaraman: The growth was supported by higher power prices as well as accelerating battery adoption. As we have discussed, Europe is increasingly becoming a battery-led market. As self-consumption, dynamic tariffs, and VPPs gain importance, the company that owns the battery relationship is well-positioned to expand over time into the broader home energy system, including solar, EV charging, and VPP. In the Netherlands, our battery activations increased approximately 102% from Q1, as rising export penalties and the planned phase-out of net metering at the end of 2026 strengthened self-consumption. In France, lower feed-in tariffs are similarly shifting the market towards self-consumption and driving greater interest in batteries, particularly with new solar installations. The battery activations in France increased approximately 34% sequentially. In Germany, the growth was broad-based, with both microinverter and battery activations increasing approximately by 35% and 27%, respectively.

Speaker #3: As self-consumption, dynamic tariffs, and VPPs gain importance, the company that owns the battery relationship is well-positioned to expand over time into the broader home energy systems, including solar, EV charging, and VPP.

Speaker #3: In the Netherlands, our battery activations increased approximately 102% from the first quarter, as rising export penalties and the planned phase-out of net metering at the end of 2026 strengthen self-consumption.

Speaker #3: In France, lower feed-in tariffs are similarly shifting the market toward self-consumption and driving greater interest in batteries, particularly with new solar installations. The battery activations in France increased approximately 34% sequentially.

Speaker #3: In Germany, the growth was broad-based, with both microinverter and battery activations increasing by approximately 35% and 27%, respectively. We are intensifying our focus on battery retrofits in both the Netherlands and France, where we have a combined install base of nearly 900,000 Enphase customers.

Badri Kothandaraman: We are intensifying our focus on battery retrofits in both Netherlands and France, where we have a combined installed base of nearly 900,000 Enphase customers. Building on the success of our initial programs, we have increased the cadence of homeowner events and direct marketing campaigns. Our newly established inside sales team, supported by an improved lead management platform, is helping convert this demand into revenue. We also showcased our fifth-generation battery at Intersolar Munich, where customer feedback was positive, and we expect initial shipments before the end of this year. Let's now discuss our outlook for Q3. We expect revenue of $290 to $320 million, representing approximately 5% growth at the midpoint. Our Q3 revenue guidance includes approximately $75 million of safe harbor revenue. We are currently over 70% booked to the midpoint of our guidance.

Speaker #3: Building on the success of our initial programs, we have increased the cadence of homeowner events and direct marketing campaigns. Our newly established Inside Sales team, supported by an improved lead management platform, is helping convert this demand into revenue.

Speaker #3: We also showcased our fifth-generation battery at Intersolar Munich, where customer feedback was positive, and we expect initial shipments before the end of this year. Let's now discuss our outlook for the third quarter.

Speaker #3: We expect revenue of $290 to $320 million, representing approximately 5% growth at the midpoint. Our Q3 revenue guidance includes approximately $75 million of safe harbor revenue.

Speaker #3: We are currently over 70% booked to the midpoint of our guidance. We expect global sell-through in Q3 to increase 10% compared to Q2.

Badri Kothandaraman: We expect global sell-through in Q3 to increase 10% as compared to Q2. Distributors remain cautious amid broader macroeconomic uncertainty, including interest rates, and our guidance assumes modest undershipment relative to sell-through. For batteries, we expect shipments between 130 to 150 megawatt-hours as momentum continues to build in both US and Europe. As reciprocal tariffs have moderated somewhat, we reduced battery pricing in late March, and we expect to take further targeted pricing actions as necessary to improve system economics and support demand. Turning to safe harbor, we have executed year-to-date agreements with third-party owners totaling approximately $1.1 billion, $202 million under the 5% ITC safe harbor method, and $878.6 million under the physical work test beginning of construction method. These agreements provide two important benefits. They secure meaningful multi-year volume for our microinverter and accessory business.

Speaker #3: Distributors remain cautious amid broader macroeconomic uncertainty, including interest rates, and our guidance assumes modest undershipment relative to sell-through. For batteries, we expect shipments between 130 to 150 megawatt-hours as momentum continues to build in both the US and Europe.

Speaker #3: As reciprocal tariffs have moderated somewhat, we reduced battery pricing in late March, and we expect to take further targeted pricing actions as necessary to improve system economics and support demand.

Speaker #3: Turning to safe harbor, we have executed year-to-date agreements with third-party owners totaling approximately $1.1 billion—$202 million under the 5% ITC safe harbor method, and $878.6 million under the physical work test beginning of construction method.

Speaker #3: These agreements provide two important benefits. They secure meaningful multi-year volume for our microinverter and accessory business. Second, they create a strong foundation for future battery attach opportunities as these systems are installed from 2028 through 2030.

Badri Kothandaraman: Second, they create a strong foundation for future battery attach opportunities as these systems are installed from 2028 through 2030. Moving to financing. Propel is entering a new phase of growth. Just to remind you, Propel is a TPO offering from SolSource Solutions that combines Enphase equipment, financing, loan financing provided by TriBeam Financial through the Concert Finance platform, and national distribution through Greentech Renewables. Purpose-built for the long tail of installers, Propel has expanded from 4 states to 6 states with recent launches in Pennsylvania and Colorado, and plans to reach a total of 12 states during Q3. Installer participation has grown to about 290. The Propel originations are running at approximately 200 per week, with battery attachment at roughly 75%. We expect this will begin to grow again as installers in new states start to ramp up.

Speaker #3: Moving to financing, Propel is entering a new phase of growth. Just to remind you, Propel is a TPO offering from Sole Source Solutions.

Speaker #3: That combines Enphase equipment, loan financing provided by Tribeam Financial through the Concert Finance platform, and national distribution through Green Tech Renewables. Purpose-built for the long tail of installers, Propel has expanded from four states to six states with recent launches in Pennsylvania and Colorado.

Speaker #3: We plan to reach a total of 12 states during the third quarter. Installer participation has grown to about 290. Propel originations are running at approximately 200 per week, with battery attachment at roughly 75%.

Speaker #3: We expect this will begin to grow again as installers in new states start to ramp up. Sole Source is targeting 500 originations per week by the end of the year and scaling by securing sufficient warehousing capacity and tax credit buyers.

Badri Kothandaraman: SolSource is targeting 500 originations per week by the end of the year and scaling by securing sufficient warehousing capacity and tax credit buyers. In today's higher interest rate environment, Propel offers homeowners and installers a compelling alternative to conventional solar loans and can help restore a meaningful portion of the cash and loan market affected by the 25B expiry. Let's talk about products, starting with IQ Batteries. We showcased our fifth generation IQ Battery, G5, at Intersolar Munich in June, where it received a strong response. Built from stackable AC-coupled 5 kilowatt-hour modules that can scale up to 30 kilowatt-hours in one stack, the G5 uses 100 ampere-hour prismatic cells and is designed to deliver 50% higher energy density than our fourth generation battery at roughly 40% lower cost per kilowatt-hour.

Speaker #3: In today's higher interest rate environment, Propel offers homeowners and installers a compelling alternative to conventional solar loans and can help restore a meaningful portion of the cash and loan market affected by the 25-day expiry.

Speaker #3: Let's talk about products, starting with IQ batteries. We showcased our fifth-generation IQ Battery, G5, at Intersolar Munich in June, where it received a strong response.

Speaker #3: Built from stackable, AC-coupled 5-kilowatt-hour modules that can scale up to 30 kilowatt-hours in one stack, the G5 uses 100-ampere-hour prismatic cells and is designed to deliver 50% higher energy density than our fourth-generation battery at roughly 40% lower cost per kilowatt-hour.

Speaker #3: When shipments begin in the fourth quarter of 2026, we believe the IQ Battery G5 will stand out as one of the few truly stackable AC-coupled battery platforms in the market.

Badri Kothandaraman: When shipments begin in Q4 2026, we believe the IQ Battery G5 will stand out as one of the few truly stackable AC-coupled battery platforms in the market. Its combination of lower cost, flexible sizing, strong performance, high quality, high serviceability should make it highly competitive across the US, Europe, and Australia. We are also making good progress on our commercial battery called IQ Volt, targeted for both 3-phase 208 and 480 volt market. The first product, called IQ Volt 80, is an 80 kilowatt-hour battery. Again, 3-phase, 480 and 208 volts with 40 kilowatts of continuous power. Basically, it is a 2-hour battery. Each outdoor cabinet uses 5 field-serviceable 16 kilowatt-hour LFP modules built with 314 ampere-hour prismatic cells, and up to 25 cabinets can scale the system to 2 megawatt-hours.

Speaker #3: Its combination of lower cost, flexible sizing, strong performance, high quality, and high serviceability should make it highly competitive across the US, Europe, and Australia. We are also making good progress on our commercial battery called IQ Volt, targeted for both the three-phase 208- and 480-volt markets.

Speaker #3: The first product, called IQ Volt 80, is an 80 kilowatt-hour battery. Again, it's three-phase, 480 and 208 volts, with 40 kilowatts of continuous power. Basically, it is a two-hour battery.

Speaker #3: Each outdoor cabinet uses five field-serviceable, 16 kilowatt-hour LFP modules built with 314 ampere-hour prismatic cells, and up to 25 cabinets can scale the system to 2 megawatt-hours.

Speaker #3: The 480-volt three-phase configuration is designed for larger commercial buildings, while the 208-volt three-phase configuration will address small commercial and multifamily properties, including applicable California projects driven by Title 24 requirements.

Badri Kothandaraman: The 480-volt 3-phase configuration is designed for larger commercial building, while the 208-volt 3-phase configuration will address small commercial and multifamily properties, including applicable California projects driven by Title 24 requirements. The distributed architecture provides module-level fire suppression and is designed for self-consumption, peak shaving, time of use, VPP, and backup. We have completed the functional system demonstration in the last quarter, and we expect to open pre-orders soon, with initial shipments planned for Q1 2027. Turning to microinverters. We launched our GaN-based IQ9N residential microinverter across the US and key European markets in June, followed by Australia and New Zealand earlier this month. We are also gaining traction in the US commercial market with several promising national opportunities advancing with large retail customers. During Q2, we began shipping the IQ9S-3P microinverter, our highest power microinverter till date, 548 watts, based on Gallium Nitride, GaN, for 480-volt systems.

Speaker #3: The distributed architecture provides module-level fire suppression and is designed for self-consumption, peak shaving, time-of-use, VPP, and backup. We completed the functional system demonstration in the last quarter, and we expect to open pre-orders soon, with initial shipments planned for Q1 2027.

Speaker #3: Turning to microinverters, we launched our GaN-based IQ 9N residential microinverter across the U.S. and key European markets in June, followed by Australia and New Zealand earlier this month.

Speaker #3: We are also gaining traction in the U.S. commercial market, with several promising national opportunities advancing with large retail customers. During the second quarter, we began shipping the IQ 9S 3P microinverter—our highest power microinverter to date, at 548 watts, based on gallium nitride (GaN), for 480-volt systems.

Speaker #3: This is designed to support solar panels up to 770 watts. With US manufacturing, domestic content eligibility, and FIAT-compliant products, we believe our commercial business is well positioned for continued growth.

Badri Kothandaraman: This is designed to support solar panels up to 770 watts. With US manufacturing, domestic content eligibility, and FEOC-compliant products, we believe our commercial business is well-positioned for continued growth. We recently opened pre-orders for our smart thermostat, a new control point for the Enphase Energy System. By bringing HVAC into the system, Enphase can optimize one of the home's largest energy loads alongside solar, battery, and home power to improve savings, preserve backup capacity, and support VPP. The integrated display on the device also give homeowners a simple way to view their solar, battery, and home power live from inside the home. We expect shipments next month. Moving on to EV charging. We are making strong progress on the DC-based IQ Bidirectional EV Charger, which we showcased at Intersolar Munich.

Speaker #3: We recently opened pre-orders for our smart thermostat, a new control point for the Enphase Energy system. By bringing HVAC into the system, Enphase can optimize one of the home's largest energy loads alongside solar and batteries to improve savings, preserve backup capacity, and support VPP.

Speaker #3: The integrated display on the device also gives homeowners a simple way to view their solar, battery, and home power live from inside the home.

Speaker #3: We expect shipments next month. Moving on to EV charging, we are making strong progress on the DC-based IQ bidirectional EV charger, which we showcased at Intersolar Munich.

Speaker #3: Built on our GaN power platform, this is designed to support both 400-volt DC and 800-volt DC EV architectures, and deliver up to 11.5 kilowatts of bidirectional power.

Badri Kothandaraman: Built on our GaN power platform, this is designed to support both 400 volt DC and 800 volt DC EV architectures and deliver up to 11.5 kW of bidirectional power. ISO standard 15118-20 enables standardized communication between the vehicle and the charger, while our expertise in utility interconnection, grid code compliance, and distributed energy management supports V2H backup, V2G, and use cases like green charging. We are collaborating with three leading automotive OEMs in the US and one in Europe, with additional engagements underway. Subject to the successful completion of applicable compliance testing, we expect to begin pilot shipments in Q4, alongside vehicle launches from one US OEM and one European OEM. Finally, let me provide a more detailed update on our IQ Solid-State Transformer or IQ SST.

Speaker #3: ISO standard 15118-20 enables standardized communication between the vehicle and the charger, while our expertise in utility interconnection, grid code compliance, and distributed energy management supports V2H backup, V2G, and use cases like green charging.

Speaker #3: We are collaborating with three leading automotive OEMs in the US and one in Europe. With additional engagements underway, subject to the successful completion of applicable compliance testing, we expect to begin pilot shipments in the fourth quarter, alongside vehicle launches from one US OEM and one European OEM.

Speaker #3: Finally, let me provide a more detailed update on our IQ solid-state transformer, or IQ SST. The rapid build-out of AI infrastructure is reshaping data center power architecture as rack densities rise from approximately 150 kilowatts today towards 1 megawatt and beyond.

Badri Kothandaraman: The rapid build-out of AI infrastructure is reshaping data center power architecture as rack densities rise from approximately 150 kW today towards 1 MW and beyond. Delivering power at that scale will require a fundamentally more efficient, responsive, and reliable way to move medium voltage power directly to the compute rack. IQ SST is designed to meet that need by converting 13.8 kV or 34.5 kV medium voltage AC directly to 800 volt DC through a modular single-stage architecture. At the core of the platform is our IQ SST power module, which utilizes our predictive control enabled by the custom silicon, GaN, which enables high-frequency switching, and innovation in medium voltage transformer design. Built on more than 20 years experience in distributed power electronics, we are targeting approximately 98.5% efficiency, five nines reliability, and sub-millisecond response time. That response time is a key differentiator.

Speaker #3: Delivering power at that scale will require a more fundamental will require a fundamentally more efficient responsive and reliable way to move medium voltage power directly to the compute rack.

Speaker #3: IQ SST is designed to meet that need by converting 13 kV, 13.8 kV, or 34.5 kV medium voltage AC directly to 800-volt DC through a modular, single-stage architecture.

Speaker #3: At the core of the platform is our IQ SST power module, which utilizes our predictive control enabled by the custom silicon. GaN enables high-frequency switching, along with innovation in medium-voltage transformer design.

Speaker #3: Built on more than 20 years of experience in distributed power electronics, we are targeting approximately 98.5% efficiency, "five nines" reliability, and sub-millisecond response time. That response time is a key differentiator.

Speaker #3: AI workloads can create rapid swings in power demand, and IQ SST is designed to respond in real time to help stabilize the load as seen by the data center power system.

Badri Kothandaraman: AI workloads can create rapid swings in power demand, and IQ SST is designed to respond in real time to help stabilize the load as seen by the data center power system. This could allow most of the energy storage to be centralized in a BESS located in the data center's black space rather than placed beside every compute rack, freeing up valuable white space. This configuration would utilize a second SST for the BESS, effectively doubling our data center opportunity. For customers that still require storage near the rack, the same platform can also support a DC-DC configuration that charges and discharges a local high C-rate battery to help manage dynamic AI loads. US manufacturing and a FIOC compliance supply chain add another important layer of differentiation. They give customers greater confidence in supply continuity, product traceability, and the ability to deploy at scale without relying on restricted foreign entities.

Speaker #3: This could allow most of the energy storage to be centralized in a BESS located in the data center's black space, rather than placed beside every compute rack, freeing up valuable white space.

Speaker #3: This configuration would utilize a second SST for the BESS, effectively doubling our data center opportunity. For customers that still require storage near the rack, the same platform can also support a DC/DC configuration that charges and discharges a local high C-rate battery to help manage dynamic AI loads.

Badri Kothandaraman: This configuration would utilize a second SST for the BESS, effectively doubling our data center opportunity. For customers that still require storage near the rack, the same platform can also support a DC-DC configuration that charges and discharges a local high C-rate battery to help manage dynamic AI loads. US manufacturing and a FIOC compliance supply chain add another important layer of differentiation. They give customers greater confidence in supply continuity, product traceability, and the ability to deploy at scale without relying on restricted foreign entities.

Speaker #3: US manufacturing and a fully compliant supply chain add another important layer of differentiation. They give customers greater confidence in supply continuity, product traceability, and the ability to deploy at scale without relying on restricted foreign entities.

Speaker #3: For hyperscalers and data center operators making long-lived infrastructure decisions, we believe domestic manufacturing, resilient sourcing, and a clear path to high-volume production can be as important as product performance.

Badri Kothandaraman: For hyperscalers and data center operators making long-lived infra decisions, we believe domestic manufacturing, resilient sourcing, and a clear path to high volume production can be as important as product performance. Our new and existing customer engagements continue to deepen. We have advanced a few of these opportunities to the RFI and RFP stages, representing potential demand totaling multiple GW. These engagements are directly shaping our roadmap across power level, input voltage, footprint, cooling, battery connectivity, and serviceability. Importantly, we have been able to address evolving customer requirements without changing the fundamental IQ SST power module, underscoring the flexibility of our platform. We have also made substantial technical progress over the last three months towards a fully working system later this year. Our team has now grown to about 120 people.

Speaker #3: Our new and existing customer engagements continue to deepen. We have advanced a few of these opportunities to the RFI and RFP stages, representing potential demand totaling multiple gigawatts.

Speaker #3: These engagements are directly shaping our roadmap across power level, input voltage, footprint, cooling, battery connectivity, and serviceability. Importantly, we have been able to address evolving customer requirements without changing the fundamental IQ SST power module, underscoring the flexibility of our platform.

Speaker #3: We have also made substantial technical progress over the last three months towards a fully working system later this year. Our team has now grown to about 120 people.

Speaker #3: We have begun testing the second revision of the IQ SST power module, and the results give us confidence that the next revision can become our production candidate.

Badri Kothandaraman: We have begun testing the second revision of the IQ SST power module, and the results give us confidence that the next revision can become our production candidate. We have completed the build-out of our medium voltage lab, and validated the medium voltage transformer design. We are now optimizing it for manufacturability and cost. This work has already generated meaningful IP, particularly around the transformer. At the system level, our power modules are connected in series on the medium voltage input side and in parallel on the regulated 800-volt DC output side. Managing stability and balancing power across the series stack are mission critical. Through modeling and hardware experimentation, we have demonstrated that our proprietary droop control architecture can robustly manage the series stack and maintain balanced power across modules.

Speaker #3: We have completed the build-out of our medium voltage lab and validated the medium voltage transformer design. We are now optimizing it for manufacturability and cost.

Speaker #3: This work has already generated meaningful IP, particularly around the transformer. At the system level, our power modules are connected in series on the medium voltage input side and in parallel on the regulated 800-volt DC output side.

Speaker #3: Managing stability and balancing power across the series stack are mission critical. Through modeling and hardware experimentation, we have demonstrated that our proprietary DRUK control architecture can robustly manage the series stack and maintain balanced power across the modules.

Speaker #3: Specifically, we have demonstrated 15 IQ SST power modules operating in series, and are now advancing the complete first-generation system, including the thermal architecture, rack-level controls, and mechanical design.

Badri Kothandaraman: Specifically, we have demonstrated 15 IQ SST power modules operating in series and are now advancing the complete first-generation system, including the thermal architecture, rack level controls, and mechanical design. The first-generation platform is designed to scale from 1.25 MW to 2.5 MW across 13.8 kV and 34.5 kV configurations. We remain on track for a fully working system later this year, customer pilots beginning in 2027, and commercial shipments in 2028. Beyond AI data centers, we are evaluating the broader applicability of the IQ SST platform across utility scale solar, storage, and DC fast charging. In each of these markets, we believe IQ SST can connect directly to medium voltage AC, eliminating the need for a conventional transformer and simplifying the overall power architecture.

Speaker #3: The first-generation platform is designed to scale from 1.25 megawatts to 2.5 megawatts across 13.8 kV and 34.5 kV configurations. We remain on track for a fully working system later this year, with customer pilots beginning in 2027 and commercial shipments in 2028.

Speaker #3: Beyond AI data centers, we are evaluating the broader applicability of the IQ SST platform across utility-scale solar, storage, and DC fast charging. In each of these markets, we believe IQ SST can connect directly to medium-voltage AC, eliminating the need for a conventional transformer and simplifying the overall power architecture.

Speaker #3: This can reduce the number of stages, system complexity, footprint, and cost, while preserving the same core advantages of high efficiency, fast control, and modular redundancy.

Badri Kothandaraman: This can reduce the number of stages, system complexity, footprint, and cost, while preserving the same core advantages of high efficiency, fast control, and modular redundancy. While these applications are at an earlier stage, we believe that the same underlying platform can ultimately support a much broader set of power conversion markets. Let me conclude. Our next phase of growth starts with residential energy systems. Across the US and Europe, IQ9 microinverters, our upcoming fifth generation battery, and the IQ Bidirectional EV Charger significantly expand the value of the Enphase home. Together, they position us to win new battery-led systems, deepen engagement with our install base, and address standalone bidirectional EV charging. In the US, prepaid lease programs like Propel add an important financing lever to support that growth. Beyond residential, we are expanding into small commercial energy systems.

Speaker #3: While these applications are at an earlier stage, we believe that the same underlying platform can ultimately support a much broader set of power conversion markets.

Speaker #3: Let me conclude. Our next phase of growth starts with residential energy systems. Across the US and Europe, IQ9 microinverters, our upcoming fifth-generation battery, and the IQ bidirectional EV charger significantly expand the value of the Enphase home.

Speaker #3: Together, they position us to win new battery-led systems, deepen engagement with our install base, and address standalone bidirectional EV charging. In the U.S., prepaid lease programs like Propel add an important financing lever to support that growth.

Speaker #3: Beyond residential, we are expanding into small commercial energy systems. Our three-phase microinverter portfolio now spans both 208-volt and 480-volt applications. The IQ, bought with the 80-kilowatt-hour battery, adds commercial storage, and our EV charging portfolio broadens the opportunity further.

Badri Kothandaraman: Our three-phase microinverter portfolio now spans both 208 volts and 480 volts applications. The IQ BART with the 80 kWh battery adds commercial storage, and our EV charging portfolio broadens the opportunity further. Together, these products give us the foundation for an integrated small commercial energy system spanning solar, batteries, EV charging, controls, and energy management. The next frontier is data center infrastructure that we talked about with IQ SST, and the same architecture can extend into utility scale solar, battery, and high power DC fast charging. These markets require the same fundamental capabilities, direct medium voltage connectivity, high efficiency, fast controls, modular redundancy, compact design, and competitive system cost. Our expansion from residential to commercial to data centers and ultimately to utility scale is built on the same core technology foundation. Single stage power conversion, custom silicon-enabled control, high frequency GaN switching, and innovation in transformer design.

Speaker #3: Together, these products give us the foundation for an integrated small commercial energy system spanning solar, batteries, EV charging, controls, and energy management. The next frontier is data center infrastructure that we talked about with IQ SST.

Speaker #3: And the same architecture can extend into utility-scale solar, battery, and high-power DC fast charging. These markets require the same fundamental capabilities: direct medium voltage connectivity, high efficiency, fast control, modular redundancy, compact design, and competitive system cost.

Speaker #3: Our expansion from residential to commercial to data centers, and ultimately to utility scale, is built on the same core technology foundation: single-stage power conversion, custom silicon-enabled control, high-frequency GaN switching, and innovation in transformer design.

Speaker #3: We believe this positions Enphase to compound growth across progressively larger markets, while leveraging the same differentiated architecture, technology, and execution capabilities that established our leadership in residential energy systems.

Badri Kothandaraman: We believe this positions Enphase to compound growth across progressively larger markets while leveraging the same differentiated architecture, technology, and execution capabilities that established our leadership in residential energy systems. With that, I will turn the call over to Mandy for her review of our financial results. Mandy?

Speaker #3: With that, I will turn the call over to Mandy for her review of our financial results. Mandy. Thanks, Badri, and good afternoon, everyone. I will provide more details related to our second quarter 2026 financial results.

Mandy Yang: Thanks, Badri. Good afternoon, everyone. I will provide more details related to our Q2 2026 financial results, as well as our business outlook for Q3 2026. We have provided reconciliations of these 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 Q2 was $291.9 million. We ship approximately 725.2 MW DC of microinverters and 113.8 MWh of IQ Batteries, above the high end of our Battery guidance. Q2 revenue included $84.3 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. Non-GAAP gross margin was 46.8% in Q2, compared to 43.9% in Q1. GAAP gross margin was 60% in Q2, compared to 35.5% in Q1.

Speaker #3: As well as our business outlook for the third quarter of 2026, we have provided reconciliations of these non-GAAP to GAAP financial measures in our earnings release posted today.

Speaker #3: Which can also be found in the IR section of our website. Total revenue for Q2 was $291.9 million. We shipped approximately 725.2 megawatts DC of microinverters and 113.8 megawatt hours of IQ Batteries.

Speaker #3: Above the high end of our battery guidance. Q2 revenue included $84.3 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 #3: Non-GAAP gross margin was 46.8% in Q2, compared to 43.9% in Q1. GAAP gross margin was 60% in Q2, compared to 35.5% in Q1. GAAP gross margin was positively impacted by 15.6 percentage points for the IEPA tariff refunds received.

Mandy Yang: GAAP gross margin was positively impacted by 15.6 percentage points for the IEEPA tariff refunds received. Reciprocal tariff negatively impacted gross margin by 2 percentage points in Q2. Non-GAAP operating expenses were $79.8 million for Q2 compared to $77 million for Q1. The increase was driven by higher investment in R&D spending. GAAP operating expenses were $123.5 million for Q2 compared to $130 million for Q1. GAAP operating expenses for Q2 included $39.7 million of stock-based compensation expenses and $4 million of acquisition-related expenses and amortization, restructuring, and asset impairment charges. On a non-GAAP basis, income from operations for Q2 was $56.7 million compared to $47.3 million for Q1. On a GAAP basis, income from operations was $51.5 million for Q2 compared to loss from operations of $29.6 million for Q1. On a non-GAAP basis, net income for Q2 was $61.5 million compared to $62.3 million for Q1.

Speaker #3: Reciprocal tariff negatively impacted gross margin by 2 percentage points in Q2. Non-GAAP operating expenses were $79.8 million for Q2, compared to $77 million for Q1.

Speaker #3: The increase was driven by higher investment in R&D spending. GAAP operating expenses were $123.5 million for Q2, compared to $130 million for Q1.

Speaker #3: GAAP operating expenses for Q2 included $39.7 million of stock-based compensation expenses and $4 million of acquisition-related expenses, amortization, restructuring, and asset impairment charges.

Speaker #3: On a non-GAAP basis, income from operations for Q2 was $56.7 million, compared to $47.3 million for Q1. On a GAAP basis, income from operations was $51.5 million for Q2, compared to a loss from operations of $29.6 million for Q1.

Speaker #3: On a non-GAAP basis, net income for Q2 was $61.5 million, compared to $62.3 million for Q1. This resulted in non-GAAP diluted earnings per share of $0.46 for Q2, compared to $0.47 for Q1.

Mandy Yang: This resulted in non-GAAP diluted earnings per share of $0.46 for Q2 compared to $0.47 for Q1. GAAP net income for Q2 was $36.1 million compared to GAAP net loss of $7.4 million for Q1. This resulted in GAAP diluted earnings per share of $0.27 for Q2 compared to diluted loss per share of $0.06 for Q1. We ended Q2 with a total cash equivalents, and marketable securities balance of $937.7 million compared to $930.6 million at the end of Q1. In Q2, we generated $40.3 million in cash flow from operations and $25.9 million in free cash flow. Capital expenditure was $14.4 million for Q2 compared to $19.9 million for Q1. As of 30 June 2026, after monetizing the PTCs generated in 2025 and Q1 2026, we had approximately $193.5 million of PTCs on our balance sheet.

Speaker #3: GAAP net income for Q2 was $36.1 million, compared to a GAAP net loss of $7.4 million for Q1. This resulted in GAAP diluted earnings per share of $0.27 for Q2, compared to a diluted loss per share of $0.06 for Q1.

Speaker #3: We exited Q2 with a total cash, cash equivalents, and marketable securities balance of $937.7 million, compared to $930.6 million at the end of Q1.

Speaker #3: In Q2, we generated $40.3 million in cash flow from operations and $25.9 million in free cash flow. Capital expenditure was $14.4 million for Q2, compared to $19.9 million for Q1.

Speaker #3: As of June 30, 2026, after monetizing the PDCs generated in 2025 and Q1 2026, we had approximately $193.5 million of PDCs on our balance sheet.

Speaker #3: This included $108.3 million related to US-made microinverters shipped to customers in 2024, and $85.2 million related to shipments in the first half of 2026.

Mandy Yang: This included $108.3 million related to U.S.-made microinverters shipped to customers in 2024, and $85.2 million related to shipments in the H1 of 2026. We elected direct pay for the 2024 PTCs, which are expected to be refunded through our 2024 tax return filed in April 2025. However, we have limited visibility into the timing of receipt of the $108.3 million due to IRS processing. As a reminder, in March 2026, we revoked our direct pay election. Going forward, we plan to sell PTCs on a regular basis to better align cash inflows with expenses. We expect these sales to be part of our normal course of business, and the impact of this approach is included in our quarterly gross margin guidance.

Speaker #3: We elected direct pay for the 2024 PDCs, which are expected to be refunded through our 2024 tax return filed in April 2025. However, we have limited visibility into the timing of receipt of the $108.3 million due to IRS processing.

Speaker #3: As a reminder, in March 2026, we revoked our direct pay election. Going forward, we plan to sell PDCs on a regular basis to better align cash inflows with expenses.

Speaker #3: We expect these sales to be part of our normal course of business, and the impact of this approach is included in our quarterly gross margin.

Speaker #3: Guidance. We announced a test credit transfer agreement to sell $150 million of PDCs generated in 2026 to a leading financial institution, with four quarterly payments from April 2026 to January 2027.

Mandy Yang: We announced a tax credit transfer agreement to sell $150 million of PTCs generated in 2026 to a leading financial institution, with four quarterly payments from April 2026 to January 2027. We received tariff refunds of approximately $41 million from U.S. Customs and Border Protection, or CBP, in Q2, with another $11 million received after the quarter end. Q2 GAAP results were impacted by $52 million, of which $45.4 million was recognized as an increase to GAAP gross profit. $1.6 million was recognized as GAAP interest income, and $5 million was capitalized as a cost of inventory as of 30 June 2026. We have submitted additional refund claims that remain subject to CBP's review and validation. Now let's discuss our outlook for Q3 of 2026.

Speaker #3: We received heavy refunds of approximately $41 million from U.S. Customs and Border Protection, or CBP, in the second quarter, with another $11 million received after the quarter end.

Speaker #3: Second quarter GAAP results were impacted by 52 million dollars, of which 45.4 million dollars was recognized as an increase to GAAP gross profit, 1.6 million dollars was recognized as GAAP interest income, and 5 million dollars was capitalized as a cost of inventory as of June 30, 2026.

Speaker #3: We have submitted additional refund claims that remain subject to CBP's review and validation. Now, let's discuss our outlook for the third quarter of 2026.

Speaker #3: We expect Q3 revenue to be in the range of 290 to 320 million dollars, including shipments of 130 to 150 megawatt hours of IQ batteries.

Mandy Yang: We expect Q3 revenue to be in the range of $290 to $320 million, including shipments of 130 to 150 megawatt hours of IQ Batteries. For the remainder of 2026, we anticipate recognizing $136.2 million of step-up revenue, with $75 million in Q3 and $61.2 million in Q4. We expect GAAP gross margin to be within a range of 42% to 45%, including approximately two percentage points of reciprocal tariff impact. We expect non-GAAP gross margin to be within a range of 44% to 47%, including approximately two percentage points of reciprocal tariff impact. Non-GAAP gross margin excludes stock-based compensation expenses and acquisition-related amortization. We expect our GAAP operating expenses to be within a range of $120 to $124 million, including approximately $44 million estimated for stock-based compensation expenses, acquisition-related amortization, and restructuring and asset impairment charges.

Speaker #3: For the remainder of 2026, we anticipate recognizing $136.2 million of safe harbor revenue, with $75 million in Q3 and $61.2 million in Q4.

Speaker #3: We expect GAAP gross margin to be within the range of 42% to 45%, including approximately 2 percentage points of reciprocal tariff impact. We expect non-GAAP gross margin to be within the range of 44% to 47%, including approximately 2 percentage points of reciprocal tariff impact.

Speaker #3: Non-GAAP gross margin excludes stock-based compensation expenses and acquisition-related amortization. We expect our GAAP operating expenses to be within the range of $120 million to $124 million, including estimates for stock-based compensation expenses, acquisition-related amortization, and restructuring and asset impairment charges.

Speaker #3: We expect our non-GAAP operating expenses to be within the range of $76 million to $80 million. With that, I'll open the line for questions.

Mandy Yang: We expect our non-GAAP operating expenses to be within a range of $76 to $80 million. With that, I'll open the line for questions.

Speaker #1: Ladies and gentlemen, at this time, we will begin the question and answer session. To ask a question, you may press star and then one on a touch-tone telephone.

Operator: Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one on a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys. We do ask that you please limit yourselves to a single question and one follow-up. To withdraw your questions, you may press star and two. Again, that is star and then one to join the question queue. At this time, we will pause momentarily to assemble the roster. Our first question today comes from Praneeth Satish from Wells Fargo. Please go ahead with your question.

Speaker #1: If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys. We also ask that you please limit yourselves to a single question and one follow-up.

Speaker #1: To withdraw your question, you may press star then two. Again, that is star, then one to join the question queue. At this time, we'll pause momentarily to assemble the roster.

Speaker #1: Our first question today comes from Praneeth Satish from Wells Fargo. Please go ahead with your question.

Speaker #2: Okay, thanks. Good afternoon, everyone. Maybe on SST—recognizing it's early—but just conceptually, how are you thinking about balancing margin capture versus market share adoption?

Praneeth Satish: Okay, thanks. Good afternoon, everyone. Maybe on IQ SST, recognizing it's early, just conceptually, how are you thinking about balancing a margin capture versus market share adoption? I guess based on our understanding, if you include 45X credits, the IQ SSTs could potentially support very high gross margins. On the other hand, you've talked about, in your prepared remarks, ultimately selling the product into other markets like utility scale, solar, which presumably would imply setting maybe a more competitive ASP. Just trying to understand at a high level how you plan on navigating that.

Speaker #2: I guess based on our understanding, if you include 45X credits, the SSTs could potentially support very, very high gross margins. But then, on the other hand, you've talked about in your prepared remarks ultimately selling the product into other markets like utility-scale solar, which presumably would imply setting maybe a more competitive ASP.

Speaker #2: So, just trying to understand at a high level how you plan on navigating that.

Speaker #4: Yeah. We're not going to give you actual numbers, but we are going to tell you how we are thinking about it. We are going to be extremely competitive.

Badri Kothandaraman: We're not going to give you actual numbers, but we are going to tell you how we are thinking about it. We are going to be extremely competitive. We are going to clearly focus on our value drivers. There are a lot of competitors also developing IQ SST. Therefore, the focus for us is what does Enphase do different and better compared to the competition? Our value drivers are, like what we stated, fast response times. Because the IQ SST can respond within sub-millisecond, we think the battery storage can move to the facility space, which is called the data center black space. That will be a key differentiator for our solution. In addition, our modularity, our redundancy, reliability, US manufacturing are all other value drivers. Like what I said, I'm not going to give out numbers, but I just told you how we are thinking about it.

Speaker #4: But we are going to clearly focus on our value drivers. There are a lot of competitors also developing SST, so therefore, the focus for us is: what does Enphase do differently and better compared to the competition?

Speaker #4: Our value drivers are, like we stated, fast response times. And because the SST can respond within sub-millisecond, we think the battery storage can move to the facility space, which is called the data center black space.

Speaker #4: That will be a key differentiator for our solution. In addition, our modularity, our redundancy, reliability, and US manufacturing are all other value drivers. So, like I said, I'm not going to give out numbers, but I just told you how we are thinking about it.

Speaker #4: Plus, you are correct on the 45X PTC. We are finalizing those details, but that will also help us to be highly profitable.

Badri Kothandaraman: Plus, you are correct on the 45X PTC. We are finalizing those details, but that will also help us to be highly profitable.

Speaker #2: Got it. And then maybe just shifting gears on Propel. So last quarter, if I remember correctly, you said originations were running at roughly 200 per week, and then it sounds like they're still tracking at around that same level today.

Praneeth Satish: Got it. Maybe just shifting gears on Propel. Last quarter, if I remember correctly, you said originations were running at roughly 200 per week, then it sounds like they're still tracking at around that same level today. Should we interpret the relatively flat sequential trend there as a function of financing capacity or are there supply-side constraints? I guess what's going to be the driver there that gets you to 500 originations a week by year-end? Is that based on demand increasing or just based on your partners increasing financing capacity? Thank you.

Speaker #2: So, should we interpret the relatively flat sequential trend there as a function of financing capacity, or are there supply-side constraints? And I guess, what's going to be the driver there that gets you to 500 originations a week by year-end? Is that based on demand increasing, or just based on your partners increasing financing capacity?

Speaker #2: Thank you.

Speaker #4: Yeah, I think we were clear. We said Propel is running its pilot. We started with four states; we were conservative. And Soul Source is basically responsible in what they do.

Badri Kothandaraman: Yeah, I think we were clear. We said Propel is running its pilot. We started with four states. We were conservative. SolSource is basically responsible in what they do. They are in the process of securing financing so that they can scale every phase deliberately, properly. It is simply a function of how many states we are in. For example, if I look at the first four weeks of this month, would say the numbers are running a little bit higher than the 200. What we are going to do is to scale it to 12 states. Today, Propel is in six states right now. SolSource is going to scale it to 12 states by the end of Q3. We expect a more aggressive ramp in Q4. Their target is to exit the year with 500 originations per week.

Speaker #4: They are in the process of securing financing so that they can scale every phase deliberately—properly. So, it is simply a function of how many states we are in.

Speaker #4: For example, if I look at the first four weeks of this month, would say the numbers are running a little bit higher than the 200.

Speaker #4: So, what we are going to do is scale to 12 states. Today, Propel is in six states right now, and SoulSource is going to scale it to 12 states by the end of Q3.

Speaker #4: And we expect a more aggressive ramp in Q4, and their target is to exit the year with 500 originations per week.

Speaker #2: Got it. Thank you.

Praneeth Satish: Got it. Thank you.

Speaker #1: Our next question comes from Brian Lee from Goldman Sachs. Please go ahead with your question.

Operator: Our next question comes from Brian Lee from Goldman Sachs. Please go ahead with your question.

Speaker #5: Hey, everyone. Good afternoon. Thanks for taking the questions. I guess, Badri, for you, I'm curious—the Safe Harbor revenue is pretty significant both in the third quarter, and I appreciate you giving us the fourth-quarter number as well.

Brian Lee: Hey, everyone. Good afternoon. Thanks for taking the questions. I guess, Badri, for you, I'm curious. The safe harbor revenue, it's pretty significant both in Q3 and appreciate you giving us the Q4 number as well. It seems to be tracking higher than you've been guiding to. Is this market share gain amongst TPOs? Or maybe can you speak to what's driving that momentum? Then, I had a follow-up.

Speaker #5: And it seems to be tracking higher than you've been guiding to. So is this market share gain amongst TPOs, or maybe can you speak to what's driving that momentum?

Speaker #5: And then I had a follow-up.

Speaker #4: Yeah. I think we have like what we said, we are always I mean, we are strong relationships with a lot of our TPO partners.

Badri Kothandaraman: Yeah, I think we have, like what you said, we have strong relationships with a lot of our TPO partners. Some of our TPO partners are healthy. They are supported by a strong balance sheet in their parent companies. There are some new TPO partners as well who I'm sure you will see. They're going to show up. Basically, it's just the confidence that they have in either pursuing a 5% safe harbor strategy or a PWT, which is the physical work test safe harbor strategy. For us, I think we said approximately $1.1 billion is the agreements that we have executed till date. Of that, the $202 million under the 5% method and $878.6 million under the physical work test. It's just we have strong relationship with the TPO guys.

Speaker #4: And some of our TPO partners are healthy—they are supported by a strong balance sheet in their parent companies. There are some new TPO partners as well, who I’m sure you will see are going to show up.

Speaker #4: So basically, it's just the confidence that they have in either pursuing a 5% Safe Harbor strategy or a PWT, which is the physical work test Safe Harbor strategy.

Speaker #4: And for us, I think we said approximately $1.1 billion is the agreements that we have executed to date. Of that, $202 million is under the 5% method and $878.6 million is under the physical work test.

Speaker #4: So, it's just that we have a strong relationship with the TPO guys.

Speaker #5: All right, fair enough. And then maybe just related to that, you sounded a little bit more positive on kind of a return to growth and readiness.

Brian Lee: All right. Fair enough. Then, maybe just related to that. You sounded a little bit more positive on kind of a return of growth in resi, even in the near term. If we adjust for the undershipping in Q2 and exclude safe harbor, you're implying flat revenue from Q2 to Q3. You're still undershipping, you said. I guess why undership in Q3 when demand is seemingly improving, based on some of your comments? Then how should we think about also Q4 seasonality? Do you expect to still be undershipping into Q4? Should Q4 revenue, including safe harbor, be higher than Q3, including safe harbor all in? Thank you.

Speaker #5: Even in the near term, if we adjust for the undershipping in Q2 and exclude Safe Harbor, you're implying flat revenue from Q2 to Q3. You're still undershipping, you said.

Speaker #5: So, I guess, why under-ship in Q3 when demand is seemingly improving based on some of your comments? And then, how should we think about seasonality for Q4 as well?

Speaker #5: Do you expect to still be undershipping in Q4? Should Q4 revenue, including Safe Harbor, be higher than Q3, including Safe Harbor, all in?

Speaker #5: Thank you.

Speaker #4: Yeah, so basically, just to break it down, our Q3 guidance at the midpoint is about $305 million. Out of that, $75 million is Safe Harbor, so core revenue is $230 million.

Badri Kothandaraman: Yeah. Basically, just to break it, our Q3 guidance at the midpoint is about $305 million. Out of that, $75 million safe harbor. Core revenue of $230 million. Let's say I expect sell-through to be 10% higher in Q3. We are talking about a sell-through approximately in the $245 million range, and we are talking about a modest undershipment of about $15 million. We are just cautious, and we'd like to make sure we have a healthy channel inventory. We focused Q2 on getting healthier in the channel. That's why we said we are fine on batteries and slightly elevated on micros, and we're going to bring that down. If you look at apples to apples, the core revenue. If you say the core revenue from Q2 to Q3 excluding safe harbor, that is increasing by approximately 10+%.

Speaker #4: Let's say I expect sell-through to be 10% higher in Q3. We are talking about sell-through approximately in the $245 million range. And we are talking about a modest undershipment of about $15 million.

Speaker #4: We are just cautious, and we'd like to make sure we have healthy channel inventory. Like, we focused Q2 on getting healthier in the channel.

Speaker #4: That's why we said we are fine on batteries and slightly elevated on micros, and we're going to bring that down. But if you look at apples to apples, the core revenue—if you say the core revenue from Q2 to Q3, excluding Safe Harbor—that is increasing by approximately 10-plus percent.

Speaker #4: And in Europe, as you know, Q3 is usually the summer holidays. Despite that, we think we'll be flat from Q2 to Q3 in Europe.

Badri Kothandaraman: In Europe, as you know, Q3 is usually the summer holidays. Despite that, we think we'll be flat Q2 to Q3 in Europe. All of that growth is coming from the US. I also told you about third-party reports, talking about an increase of 5% on the permit side. We talked about that. In addition, as a company, we have a platform called Solargraf, as you know. Solargraf basically also monitors all of the proposals for both solar as well as storage. We are able to see an increase in proposals in Q2 as compared to Q1. That will reflect as installations in Q3. Triangulating all of these, with the third-party reports, with our own internal data, and what we see on a sell-through basis, plus what we have on Propel, we think we will grow by approximately 10% in Q3.

Speaker #4: So all of that growth is coming from the US. Then I also told you about third-party reports talking about an increase in of 5% on the permit side so we talked about that.

Speaker #4: In addition, as a company, we have a platform called Solar Graph, as you know. Solar Graph basically also monitors all of the proposals—for both solar as well as storage.

Speaker #4: And we are able to see an increase in proposals in Q2 as compared to Q1. That will reflect as installations in Q3. So, triangulating all of these—we think, with the third-party reports, with our own internal data, what we see on a sell-through basis, plus what we have on Propel—we think we will grow by approximately 10% in Q3.

Speaker #1: Our next question comes from Phil Shen from Roth Capital Partners. Please go ahead with your question.

Operator: Our next question comes from Phil Shen from Roth Capital Partners. Please go ahead with your question.

Speaker #6: Hey, everyone. Thanks for taking my questions. First one is very topical. Just when you're release hit for Q2 results, the FCC announced that they're working on a plan to ban Chinese inverters.

Phil Shen: Everyone, thanks for taking my questions. First one is very topical. Just when your release hit for Q2 results, the FCC announced that they're working on a plan to ban Chinese inverters in the US. Wanted to check in with you on your views on this. It doesn't really impact your resi segments too much, given the limited exposure or mix of Chinese inverters. Was curious, how much share do you think you could take in your commercial business as a result of this? Of course, you have been addressing just a limited portion, and now you're going to expand that to a larger portion of the C&I market. How much Chinese inverters do you see out there? How much do you think you could grab of that? Thanks.

Speaker #6: In the U.S., and so wanted to check in with you on your views on this. It doesn't really impact your RESI segment too much, given the limited exposure or mix of Chinese inverters.

Speaker #6: But I was curious—how much share do you think you could take in your commercial business as a result of this? Of course, you have been addressing just the limited portion, and now you're going to expand that to a larger portion of the C&I market.

Speaker #6: And so, how many Chinese inverters do you see out there? And then, how much do you think you could grab of that? Thanks.

Speaker #4: Yeah, I think there are two opportunities for us. One is, like you rightly pointed out, the residential is not really there. Not an issue because of fiat, etc.

Badri Kothandaraman: Yeah, I think there are two opportunities for us. One is, like you rightly pointed out, the residential is not really there. Not an issue because of FIOC, et cetera. The two topics are small commercial as well as utility scale solar. I'll focus on small commercial for now because we haven't yet introduced any products for utility scale. In the small commercial, basically, we are seeing lots of opportunities, especially with big retail providers, both in terms of small size installations as well as big size installations. Our revenue that I expect in Q3 for small commercial in the US is approximately $10 million. I expect that number to grow from strength to strength as we advance through the year. We have introduced two products in the last six-month period. We introduced one product in December. That is the IQ9N with GaN.

Speaker #4: So the two topics are small commercial as well as utility scale. Solar. So I'll focus on small commercial for now because we haven't yet introduced any products for utility scale.

Speaker #4: In the small commercial space, basically, we are seeing lots of opportunities, especially with big retail providers, both in terms of small-size installations as well as large-size installations.

Speaker #4: Our revenue that I expect in Q3 for small commercial in the US is approximately $10 million. And I expect that number to grow from strength to strength.

Speaker #4: As we advance through the year. We have introduced two products in the last six-month period. We introduced one product in December. That is the IQ-9N with GAN.

Speaker #4: It's a three-phase, 480-volt—it addresses the three-phase, 480-volt market. And that's got a power of 427 watts. That can go up to, let's say, approximately 600-watt panels.

Badri Kothandaraman: It addresses the three-phase 480 volt market, that's got a power of 427 watts that can go up to, let's say, approximately 600 watt panels. We just introduced in June an IQ9S-3P product that is 548 watts, that will be able to go up to 700 watts. From a product portfolio, we are fully covered. We are having the right discussions with everybody. In addition, I talked a little bit about small commercial storage. Small commercial storage is a fantastic opportunity for us. The market is a little tough to estimate. It is anywhere from 1 gigawatt hour to 2 gigawatt hour. It's a very diverse set of installations in small businesses. You can say, schools, hospitals, churches, gas stations, and retail shops. The product we are introducing is ideal for that.

Speaker #4: We just introduced in June an IQ-9S three-phase product that is 548 watts. That will be able to go up to 700 watts. So, from a product portfolio, we are fully covered.

Speaker #4: We are having the right discussions with everybody. In addition, I talked a little bit about small commercial storage. Small commercial storage is a fantastic opportunity for us.

Speaker #4: The market is a little tough to estimate. It is anywhere from one gigawatt-hour to two gigawatt-hours. It's a very diverse set of installations in small businesses.

Speaker #4: You can say schools, hospitals, churches, gas stations, retail, shops. The product we are introducing is ideal for that. 80 kilowatt hour, 80 kilowatt hour cabinet can be scaled 25 of these can go to a site.

Badri Kothandaraman: 80 kilowatt hour cabinet can be scaled, 25 of these can go to a site, can do 2 megawatt hours. For example, in the building that we are in in Fremont, we are going to have a megawatt hour of storage very shortly, comprised of 12 80 kilowatt hour cabinets. There, for example, same concept, FEOC compliant, domestic content, and U.S. manufacturing. We have the portfolio. We have both small commercial solar, we have small commercial storage, and we expect to be ramping, not only this year, but 2027 could be big there.

Speaker #4: Can do two megawatt-hours. Yeah. For example, in the building that we are in, in Fremont, we are going to have a megawatt-hour of storage very shortly.

Speaker #4: Comprised of twelve 80-kilowatt-hour cabinets. So there, for example, same concept: FIAT compliant, domestic content, and U.S. manufacturing. So we have the portfolio.

Speaker #4: We have both small commercial solar and small commercial storage, and we expect to be ramping not only this year, but 2027 could be big there.

Speaker #6: Okay. Thanks, Badri. Shifting over to the core U.S. residential solar market, the challenge that I see here—the root cause—is weak capital flows.

Phil Shen: Okay. Thanks, Badri. Shifting over to the core U.S. resi solar market. The challenge that I see here, the root cause is weak capital flows and some challenges with the TPOs. In turn, they're slowing down the amount that they're investing in. The root cause of that is driven by tax equity and their caution with the FEOC and effective control guidance that Treasury has still not issued. We published back in March that it could be by end of the year. They're waiting to see how different Chinese companies are adjusting their corporate structures as well as their IP, they may want to close those loopholes. We wrote recently that it might not come out till H1 2027.

Speaker #6: And some challenges with the TPOs. In turn, they're slowing down the amount that they're investing in. So, the root cause of that is driven by tax equity and their caution with the FIAT and effective control guidance that Treasury has still not issued.

Speaker #6: We published back in March that it could be by the end of the year. They're waiting to see how different Chinese companies are adjusting their corporate structures, as well as their IP.

Speaker #6: And then they may want to close those loopholes and then we wrote recently that it could not that it might not come out till the first half of 2027.

Speaker #6: So, is there a scenario where the US RESI outlook could still be challenged, even as we get through a bunch of '27? And how do you guys manage through that?

Phil Shen: Is there a scenario where the U.S. resi outlook could still be challenged even as we get through a bunch of 2027, how do you guys manage through that? Thanks.

Speaker #6: Thanks.

Speaker #4: Yeah, it is a good question. Like you said, I mean, there is limited visibility on the Treasury guidance, but the market is adjusting. The fiat guidelines, etc., are reasonable.

Badri Kothandaraman: It is a good question. Like you said, there is limited visibility on the Treasury guidance, but the market is adjusting. The FEOC guidelines, et cetera, are reasonable. Our TPO partners are becoming a lot more mature. Yes, there have been some hiccups, but those hiccups are being solved. We are hearing that tax equity, although it is tight, we are hearing it is likely to improve. For us, our opportunity is a few things here. Our opportunity is, I talked about SolSource and Propel. That's a fantastic opportunity for us because it basically makes the 25B loan market, which was getting approximately a 30% ITC, now has a chance to be replaced with the prepaid lease. That one. That's a big opportunity for us. The second big opportunity for us is, we are getting a lot better on batteries.

Speaker #4: The TPO partners are becoming a lot more mature. Yes, there have been some hiccups, but those hiccups are being solved. We are hearing that tax equity although it is tight, but we are hearing it is likely to improve.

Speaker #4: For us, our opportunity is a few things here. Our opportunity, as I talked about, is sole source and Propel. That's a fantastic opportunity for us because it basically makes the 25D loan market, which was getting approximately a 30% ITC, now have a chance to be replaced with the prepaid lease.

Speaker #4: That one. So that's the big opportunity for us. The second big opportunity for us is we are getting a lot better on batteries. So we are going to be introducing the fifth-generation product in Q4 into the U.S., and that will be at a much reduced cost structure.

Badri Kothandaraman: We are going to be introducing the fifth-generation product in Q4 into the US, and that will be at a much-reduced cost structure. While we will make good gross margins, it'll enable us to help installers. With the positive reduction in tariffs that we got, we took the opportunity to make more pricing adjustments, in order to drive volumes with our fourth-generation product. Our fourth-generation product is also ramping from strength to strength. The IQ Meter Collar is now qualified at 69 utilities, including Canada. It is by far the highest of any supplier. We expect the same to continue, meaning, with our fifth-generation battery, all of these 69 can be reused. They are also going to be a big differentiator for a standalone bidi, because a standalone bidirectional charger consists of the IQ Bidirectional EV Charger which has got 11.5 kW inverter. That's what we have.

Speaker #4: So, while we will make good gross margins, that will help—it'll enable us to help installers. With the positive reduction in tariffs that we got, we took the opportunity to make more pricing adjustments in order to drive volumes with our fourth-generation product. Our fourth-generation product is also ramping from strength to strength.

Speaker #4: We are now qualified at the meter. Caller is now qualified at 69 utilities, including Canada. It is by far the highest of many suppliers.

Speaker #4: So, and we expect the same to continue, meaning with our fifth generation battery, all of these 69 can be reused. And they are also going to be a big differentiator for a standalone bidirectional charger, because a standalone bidirectional charger can consist of the bidirectional EV charger, your charger, which has got an 11.5 kilowatt inverter.

Speaker #4: That's what we have. In addition to that, we have a meter collar—just two components—which will enable V2H and V2G in a seamless manner.

Badri Kothandaraman: In addition to that, we have an IQ Meter Collar. Just two components, which will enable V2H, V2G in a seamless manner. For us, we are not stopping and waiting. We are not waiting for things to improve. We are taking matters into our own hands. It is about innovative financing. It is about innovative new products. It is about extending our range into commercial. Of course, the big one is data centers.

Speaker #4: So, for us, we are not stopping and waiting. We are not waiting for things to improve. We are taking matters into our own hands.

Speaker #4: It is about innovative financing. It is about innovative new products. It is about extending our range into commercial. And, of course, the big one is data centers.

Speaker #6: Great, thanks, Badri. I'll pass it on.

Phil Shen: Great. Thanks, Badri. I'll pass it on.

Speaker #4: Thank you.

Badri Kothandaraman: Thank you.

Speaker #1: Our next question comes from Colin Rusch from Oppenheimer. Please go ahead with your question.

Operator: Our next question comes from Colin Rusch from Oppenheimer. Please go ahead with your question.

Speaker #7: Thanks so much. Badri, can you talk a little bit about the elasticity of demand on the batteries? You talked about dropping prices a little bit.

Colin Rusch: Thanks so much. Bhavya, can you talk a little bit about the elasticity of demand on the batteries? You talked about drop in prices a little bit. Just want to get a sense of how much volume you feel like you can start driving as you make those pricing adjustments.

Speaker #7: I just want to get a sense of how much volume you feel like you can start driving as you make those pricing adjustments.

Speaker #4: Yeah. I mean, what we are doing is basically—just to give you some background here—there are two actions that we specifically do.

Raghu Belur: Yeah. What we are doing is basically just to tell you some background here. There are two actions that we specifically took. One was in Europe where we were high-priced. There is no question. We were high-priced relative to the value we were generating. That was clear to us. Earlier in the year, we did a pricing adjustment in Europe. In addition, in Europe, what we are extremely excited about is a business model change that we are driving. In addition to the B2B sales, which is Enphase selling to installers through distributors, we are actually generating organic battery demand from our own install base. We are doing that in Netherlands, we are doing that in France. We are doing right now, you guys may not believe, six homeowner events a week in Netherlands. Each homeowner event is attended by approximately 150 sites or 150 families.

Speaker #4: One was in Europe, where we were high-priced—there is no question. And we were high-priced relative to the value we were generating.

Speaker #4: And that was clear to us. So earlier in the year, we did a pricing adjustment in Europe. In addition, in Europe, what we are extremely excited about is a business model change that we are driving.

Speaker #4: In addition to the B2B sales, which is Enphase selling to installers through distributors, we are actually generating organic demand from our own install base for batteries.

Speaker #4: And we are doing that in the Netherlands. We are doing that in France. We are doing, right now— you guys may not believe—six homeowner events a week in the Netherlands.

Speaker #4: Each homeowner event is attended by approximately 150—150 sites or 150 families. And the yield on these is quite good, of the order of 50%.

Raghu Belur: The yield on these is quite good, of the order of 50%. What we are able to do is we are able to close these very quickly and then pass the leads to our installers. Of course, that requires sophisticated lead management to make sure the installers, after taking the lead, do not do any funny business and install only Enphase product. We are doing that, and we are seeing a lot of success in Europe, both in Netherlands and France. To answer your question, the actions in Europe are not just due to pricing, but what we are doing to generate organic demand. While the actions in the US, very similar. Pricing is only part of the equation. Product stuff, for example, the Meter Collar, which I said, we are qualified at 69 utilities. The other big one is Propel.

Speaker #4: So what we are able to do is we are able to close these very quickly and then pass the leads to our installers. And, of course, that requires sophisticated lead management to make sure the installers, after taking the lead, do not do any funny business and install only Enphase product.

Speaker #4: So, we are doing that, and we are seeing a lot of success in Europe, both in the Netherlands and France. So to answer your question, the actions in Europe are not just due to pricing, but also due to what we are doing to generate organic demand.

Speaker #4: While the actions in the US are very similar, pricing is only part of the equation. Product stuff—for example, the meter caller, which I mentioned—we are qualified at 69 utilities.

Speaker #4: The other big one is Propel. Propel, by definition, has got—there we have a 75% battery attached in Propel. So we expect that to be driving more and more battery volumes.

Raghu Belur: Propel, by definition, there we have a 75% battery attach in Propel. We expect that to be driving more and more battery volumes. That is why in Q3, we expect shipments between 130 to 150. Then the big ramp will come from G5. The fifth-generation product has got 50% energy density. What does that mean for you? It is if you compare, for example, our third-generation product and the fifth-generation product. Why third generation? Because that's the one in Europe. The fifth-generation product will be roughly 40% in height as compared to the third-generation product. Similarly, it is also a 50% higher, more energy density compared to the fourth-generation product. All of these improvements are going in. The fifth-generation product we expect will start to drive even more demand, especially with the same Meter Collar qualifications, et cetera.

Speaker #4: So that is why in Q3, we expect shipments between 130 to 150. And then the big ramp will come from G5. The fifth-generation product has got 50% more energy density.

Speaker #4: What does that mean for you? It is if you compare, for example, our third-generation product and the fifth-generation product. Why third generation?

Speaker #4: Because that's the one in Europe. The fifth-generation product will be roughly 40% higher in height as compared to the third-generation product.

Speaker #4: And similarly, it is also 50% higher energy density compared to the fourth-generation product. So all of these improvements are going into the fifth-generation product.

Speaker #4: We expect this will start to drive even more demand, especially with the same meter, caller qualifications, etc. So, not just pricing action, but pricing plus a few other actions to drive demand.

Badri Kothandaraman: Not just pricing action, but pricing plus a few other actions to drive demand.

Brian Lee: Not just pricing action, but pricing plus a few other actions to drive demand.

Speaker #7: Thanks so much, that's super helpful. And then looking at the data center opportunity, it sounds like you're making a meaningful impact. On the actual design of the facilities, I'm just curious how mature pricing conversations are at this point and how mature some of those designs really are that would embed the Enphase solution.

Colin Rusch: Thanks so much. That's super helpful. Then looking at the data center opportunity, it sounds like you're making a meaningful impact on the actual design of the facilities. I'm just curious how mature pricing conversations are at this point and how mature some of those designs really are that would embed the Enphase solution.

Speaker #4: Yeah, so just to give a quick, complete overview, we're making very strong internal progress in our data center development, meaning IQSST development for data centers.

Badri Kothandaraman: Just to give a quick complete overview, we are making very strong internal progress in our data center development, meaning IQ SST development for data centers, I mean. Our team now, we have about 120 full-time engineers. We are building the power module, and we are finalizing the design there. Interestingly, we demonstrated a 4.16 kV AC series stack. What does that mean? We can stack 15 power modules in series. 15 times 277, approximately 4 kilovolts AC. We demonstrated proof of concept there. Importantly, we have achieved significant milestone on the feasibility of the medium voltage transformer. That's on the technical side. We are making a lot of great progress there. On the active engagements there, we are engaged in conversations with hyperscalers, neo clouds, colos, EPCs, and the full ecosystem.

Speaker #4: I mean, our team now—we have about 120 full-time engineers. We are building the power module, and we are finalizing the design there. Interestingly, we demonstrated a 4.16 kV AC series stack.

Speaker #4: What does that mean? We can stack 15 power modules in series—so 15 times 277, approximately 4 kilovolts AC. We demonstrated proof of concept there.

Speaker #4: And importantly, we have achieved a significant milestone on the feasibility of the medium voltage transformer. So that's on the technical side. We are making a lot of great progress there.

Speaker #4: On the active engagements there, we are engaged in conversations with hyperscalers, NeoClouds, colos, EPCs—the full ecosystem. We are engaged in a few RFIs and RFPs; in fact, some of the learning that we got on the product was from those RFPs.

Badri Kothandaraman: We are engaged in a few RFI, RFPs. In fact, some of the learning that we got on the product were from those RFPs. It was massive learning for us. We realized how powerful our platform was, because we were able to get the product requirements, understand the product requirements from these customers, and then we were able to quickly rework our plan without any changes to the power module, because ours is a modular structure. For example, we were able to quickly adapt. We talked about supporting 2 kinds of storage. 1 kind of storage, which is where your question value proposition comes in, is because our SST is super fast in terms of response time, sub-millisecond response times, we envision the storage can be in the facility space or in the black space.

Speaker #4: I mean, it was a massive learning for us. But then we realized how powerful our platform was because we were able to get the product requirements—understand the product requirements—from these customers, and then we were able to quickly rework our plan without any changes to the power module.

Speaker #4: Because ours is a modular structure. And for example, we were able to quickly adapt. We talked about supporting two kinds of storage. One kind of storage – which is where your question and value proposition comes in – is because our SST is super fast in terms of response time, sub-millisecond response times. We envision the storage can be in the facility space or in the black space.

Speaker #4: But there are people who have a current architecture who might not be willing to deviate from that, who would want to put high C-rate batteries closer to the rack.

Badri Kothandaraman: There are people who have a current architecture who might not be willing to deviate from that, who would want to put high C-rate batteries closer to the rack. For those hyperscalers, we enabled a DC/DC product in conjunction with the SST, and we were able to repurpose the same SST, the same power module in order to get that DC/DC product as well, in addition to the SST. Our architecture is very flexible. We are learning a lot. We are adapting a lot. We understand what our value drivers are very clearly. Like what I said, it is the fast response time, it is the power module flexibility, it is the high reliability, which is yet to be proven. It is US manufacturing. What is the next big milestone? The next big milestone is to build a full product.

Speaker #4: And for those hyperscalers, we enabled a DC-DC product in conjunction with the SST, and we were able to repurpose the same SST, the same power module, in order to get that DC-DC product as well.

Speaker #4: In addition to the SST. So our architecture is very flexible. We are learning a lot, we are adapting a lot, and we understand what our value drivers are very clearly. Like I said, it is the fast response time, the power module flexibility, and the high reliability—which is yet to be proven.

Speaker #4: It is U.S. manufacturing. What is the next big milestone? The next big milestone is to build a full product. Building a full product by approximately the end of the year, likely November, and showing it to some of these customers will open the gates for much bigger conversations.

Badri Kothandaraman: Building a full product by approximately end of the year, likely November, and showing it to some of these customers will open the gates for much bigger conversation and pilots. We are looking forward to that. Right now as I see here, we are on track to getting that done.

Speaker #4: And pilots. So we are looking forward to that. And right now, as I see here, we are on track to getting that done.

Speaker #1: Our next question comes from Eric Stein from Craig-Hallum. Please go ahead with your question.

Operator: Our next question comes from Eric Stine from Craig-Hallum. Please go ahead with your question.

Speaker #5: Hey, Badri. Just wondering, can you talk a little bit about your thoughts on Europe, or expand on that? I know last quarter you had some cautious optimism that there were some green shoots.

Eric Stine: Hey, Badri. Just wondering, can you just talk a little bit about your thoughts on Europe or expand on that? I know last quarter you had some cautious optimism that there were some green shoots. Clearly you're more optimistic here coming off of Q2, and I know that that's really going to be more of a battery driven market. How do you view that? It sounds like Q3 flat, even with taking into account seasonality. Is that still kind of driven by a few markets? Is that something that you think it's becoming more widespread? Just how are you thinking about that here, I guess, over the remainder of 2026 and going forward?

Speaker #5: I mean, clearly you're more optimistic here, coming off of Q2. And I know that that's really going to be more of a battery-driven market.

Speaker #5: But I mean, how do you view that? It sounds like Q3 flat, even with taking into account seasonality. Is that still kind of driven by a few markets?

Speaker #5: Is that something that you think is becoming more widespread? How are you thinking about that here over the remainder of '26 and going forward?

Speaker #4: Yeah. So, just to recap, in Europe, we increased revenue by approximately 35% in the second quarter. More importantly, our sell-through grew 30% with strong performance.

Badri Kothandaraman: Yeah. Just to recap, in Europe, we increased revenue by approximately 35% in Q2. More importantly, our sell-through grew 30% with strong performance across both solar as well as batteries. What markets am I excited about in Europe? Three markets, which is basically Netherlands, France, and Germany. In Netherlands, as you know, because net metering is expiring at the end of 2026, there is a huge interest in batteries and that is starting to materialize. Our activations basically increased by about 100% in Q2 compared to Q1, that increased by 100%. We have staffed our internal sales representative team, about 10 people and 10 sales folks who manage leads that come from the homeowner events. These homeowner events we haven't done before, but we are now ramping up on those. We started them nine months ago.

Speaker #4: Across both solar as well as batteries, what markets am I excited about in Europe? Three markets, which are basically the Netherlands, France, and Germany. And in the Netherlands, as you know, because…

Speaker #4: Net metering is expiring at the end of 2026. There is a huge interest in batteries, and that is starting to materialize. Our activations basically increased by about 100%—I mean, the activations in Q2 compared to Q1.

Speaker #4: That increased by 100%. We have staffed our internal sales representative team with about 10 people, and 10 sales folks who manage leads that come from the homeowner events.

Speaker #4: These homeowner events—we haven't done them before, but we are now ramping up on those. We started them nine months ago, and we are now ramping up on those in a systematic fashion.

Badri Kothandaraman: We are now ramping up on those in a systematic fashion. We are talking six homeowner events a week, which is approximately something like 75 to 80 a quarter, 78 a quarter. That is generating a lot of interest, and it is a flywheel because once we help installers are likely to reciprocate. There, I think the inflection can be very big because the deadline is approaching. NEM is going to go away. The only way that customers, consumers can be protected is if they have self-consumption, which is solar plus storage. Now, coming over to France. Okay, one more thing which I left out in Netherlands. We have a base of half a million solar homes there. That is how we are able to do the homeowner events.

Speaker #4: We are talking about six homeowner events a week, which is approximately 75 to 80 a quarter—78 a quarter. So that is generating a lot of interest, and it is a flywheel because, once we help installers, installers are likely to reciprocate.

Speaker #4: So there, I think the inflection curve—I mean, the inflection can be very big because the deadline is approaching. NEM is going to go away.

Speaker #4: And the only way that customers, consumers, can be protected is if they have self-consumption, which is solar plus storage. Now, coming over to France—okay, one more thing which I left out in the Netherlands.

Speaker #4: We have a base of half a million solar homes there. So, that is how we are able to do the homeowner events. That is how we are able to generate the battery leads, which we will continue to do.

Badri Kothandaraman: That is how we are able to generate the battery leads, which we will continue to do. In the case of France, we have about 400,000 solar base in France. This is Enphase homes. In France, the economics are slightly different. In France, feed-in tariff is quite small for new installations. For existing installations, they are still grandfathering net meter. However, there is high sensitivity, maybe because of the war, I'm not sure, but high sensitivity on energy independence. In France, we find that it is almost to the same level as Netherlands, if not higher. We have exactly the same model there too. We are driving both demand organically from homeowners as well as working with our installers. That's going fine. Those are the two most exciting things that generate a lot of results. In the case of Germany, very attractive market.

Speaker #4: In the case of France, we have about 400,000 solar bases in France. This is Enphase homes. And in France, the economics are slightly different.

Speaker #4: In France, the feed-in tariff is quite small for new installations, but for existing installations, they are still grandfathering net metering. However, there is high sensitivity, maybe because of the war.

Speaker #4: I'm not sure, but there's high sensitivity to energy independence. So, in France, we find that it is almost at the same level as the Netherlands, if not higher.

Speaker #4: And we have exactly the same model there, too. We are driving both demand organically from homeowners, as well as working with our installers. And that's going fine.

Speaker #4: So those are the two most exciting things that generate a lot of results. In the case of Germany, very attractive market. I should say we have not yet exploited that to our fullest potential.

Badri Kothandaraman: I should say, we have not yet exploited that to our fullest potential. Of course, we do have some fantastic partners there who are helping us, and I think we are going to grow from strength to strength there, with our fifth-generation battery, which is going to help us everywhere. We are quite bullish. The last one, I have an excellent management team in Europe. We put an Enphase veteran in there. He understands how to work with the internal teams to get products as well as understands customers very well. Part of our performance is attributed due to him in addition to his sales team as well. We are extremely bullish about Europe.

Speaker #4: Of course, we do have some fantastic partners there who are helping us, and I think we are going to grow from strength to strength there with our fifth-generation battery, which is going to help us everywhere.

Speaker #4: So, we are quite bullish. And the last one: I have an excellent management team. In Europe, we put an Enphase veteran in there, and he understands how to work with the internal teams to get products, as well as understands customers very well.

Speaker #4: So part of our performance is attributed to him, in addition to his sales team as well. So we are extremely bullish about Europe.

Speaker #5: All right. Thank you.

Eric Stine: All right. Thank you.

Speaker #1: Our next question comes from Dylan Nisano from Wolfe Research. Please go ahead with your question.

Operator: Our next question comes from Dylan Nassano from Wolfe Research. Please go ahead with your question.

Speaker #5: Yeah, hi. Thanks for taking my question. I just wanted to check if you had any updated views on the shape of the cash flows from that $880 million physical work test backlog.

Dylan Nassano: Yeah. Hi. Thanks. Take my question. I just wanted to check if you had any updated views on the kind of shape of the cash flows from that $880 million physical work test backlog. Just for modeling purposes, should we be amortizing that over the next couple of years? Is it more back-end weighted? How much, if you could, in the forward guidance for Q3 and Q4, how much of that is 5% rule versus physical work tests?

Speaker #5: Just for modeling purposes, should we be amortizing that over the next couple of years? Is it more back-end weighted? And then how much if you could, in the forward guidance for 3Q and 4Q, how much of that is 5% rule versus physical work tests?

Speaker #4: We already said—we already told you that—but let me repeat. So, the 5% physical work test, essentially, just to give you full context: in Q1 '26, we did approximately $34 million.

Badri Kothandaraman: We already told you that, but let me repeat. The 5% physical work test, essentially, just to give you a full context. In Q1 2026, we did approximately $34 million. In Q2 2026, we did approximately $84 million. In Q3 2026, we are guiding to $75 million. In Q4, we already gave you a number that it is about $61 million of safe harbor. That is the 5%, and the 5% is done. The more exciting thing is physical work test. In physical work test, according to what we said, we have about $878.6 million is what we have signed this year, plus we signed one agreement last year, too. We haven't recognized any revenue from any of the physical work test shipments yet. Any of the physical work test that is signed this year, we haven't recognized any revenue yet.

Speaker #4: In Q2 '26, we did approximately $84 million. In Q3 '26, we are guiding to $75 million, and in Q4 we already gave you a number of about $61 million.

Speaker #4: Of Safe Harbor. So that is the 5%. And the 5% is done. Then the more exciting thing is the physical work test. Physical work test, according to what we said, we have about $878.6 million is what we have signed this year, plus we signed one agreement last year too.

Speaker #4: We haven't recognized any revenue from any of the physical work test shipments yet. For any of the physical work tests that are signed this year, we haven't recognized any revenue yet.

Speaker #4: When will that revenue be recognized? In my view, it's likely to begin in 2028, because that's the whole point of Safe Harbor. The tax credits remain open until the end of 2027.

Badri Kothandaraman: That revenue, when will it be recognized? According to me, likely beginning 2028, because that is the whole point of safe harbor. The tax credits remain open till the end of 2027. From 2028, they would have to utilize this PWT inventory, physical work test inventory. They would ask us to make microinverters with that physical work test product. We will see normal microinverter run rate. We will see accessory run rate. We will see battery run rate if they decide to attach batteries. It's a long answer. It's quite difficult for us to predict. However, we think it'll be linear. We think it'll start 2028.

Speaker #4: And from 2028, they would have to utilize this PWT inventory—Physical Work Test inventory—and they would order, they would ask us to make microinverters with that Physical Work Test product.

Speaker #4: So we will see normal micro inverter run rate. We will see accessory run rate. We will see battery run rate if they decide to do attach if they decide to attach batteries.

Speaker #4: So, it's a long answer. It's quite difficult for us to predict. However, we think it will be linear. We think it will start in 2028.

Speaker #1: Okay, great. Thanks for clarifying that. And then just a quick follow-up on the tariff impacts in the guidance, specifically for batteries. So, I know in the past you had talked about kind of shifting your cell supply.

Dylan Nassano: Okay. Great. Thanks for clarifying that. Just quick follow-up on the tariff impacts in the guidance, specifically for batteries. I know in the past you had talked about kind of shifting your cell supply. Can you just update us? Have you completed that? Is there any more cells that you're getting from China? Yeah, thanks.

Speaker #1: Can you just update us? Have you completed that? Are there any more cells that you're getting from China? Yeah, thanks.

Speaker #4: Yeah. In general, the tariffs have come down under control. We talked about how we had base tariffs. Let's say, approximately a year ago, we had base tariffs, and then we had this reciprocal tariff that was introduced by this administration.

Badri Kothandaraman: Yeah. In general, the tariffs have come down under control. We had base tariffs, let's say approximately a year ago. We had this reciprocal tariff that was introduced by this administration. We said because of reciprocal tariffs, we had approximately 5% gross margin impact. Our gross margins came down to the mid-40s. With the recent rulings, that impact, the reciprocal tariff impact, has reduced from 5% to 2%, which is quite positive for us. What we have done, again, we are taking our own actions. Our microinverter supply chain has diversified quite nicely. If there is any further tariff, for example, in a region, we can always move to another one.

Speaker #4: We said, because of reciprocal tariffs, we had approximately a 5% gross margin impact. So, our gross margins came down to the mid-40s. But then, with the recent rulings, that impact—the reciprocal tariff impact—has reduced from 5% to 2%, which is quite positive for us.

Speaker #4: What we have done, again, is we are taking our own actions. Our microinverter supply chain has diversified quite nicely. So if there is any further tariff, for example in a region, we can always move to another one.

Speaker #4: To answer your question, yes, we have other than China, we have a non-China cell source as well which we are able to leverage in the event it is in the event the Chinese batteries have a much higher tariffs, we can always leverage that.

Badri Kothandaraman: To answer your question, yes, other than China, we have a non-China cell source as well, which we are able to leverage in the event the Chinese batteries have much higher tariffs. We can always leverage that. We bought that into production. As we go more, we are looking very hard at US sources as well. As we get into more commercial battery, as we get into our 5th generation and 6th generation battery, we are also looking at US-made cells. We have a lot of suppliers there who want our business.

Speaker #4: So that is we bought that into production. And as we go more, we are looking at we are looking very hard at US sources as well as we get into more commercial battery, as we get into the our fifth-generation and sixth-generation battery, we are also looking at US-made cells.

Speaker #4: And we have a lot of suppliers there who want our business.

Speaker #1: Thank you. Our next question comes from Corinne Blanchard from Deutsche Bank. Please go ahead with your question.

Dylan Nassano: Thank you.

Operator: Our next question comes from Corinne Blanchard from Deutsche Bank. Please go ahead with your question.

Speaker #3: Hi. Good afternoon. Maybe just coming back to the SST and maybe this has been already a little bit addressed, but I wanted to come back on what has been the feedback you have received from customer and maybe if you can share some detail on which kind of customer relationship you're trying to look for and achieve.

Corinne Blanchard: Hi, good afternoon. Maybe just coming back to the SST, maybe this has been already a little bit addressed, but I wanted to come back on what has been the feedback you have received from customer. Maybe if you can share some detail on which kind of customer partnerships you are trying to look for and achieve. Then I would have a question on the European market after.

Speaker #3: And then I would have a question under the European market after.

Speaker #2: I think I have a struggle. I think, as Badrin mentioned, we are talking to the entire ecosystem of SST of the data center market, which includes, of course, the hyperscalers, the colos, the new clouds, EPCs, etc.

Raghu Belur: I think I have to struggle. I think as Badri mentioned, we are talking to the entire ecosystem of SST, of the data center market, which includes, of course, the hyperscalers, the colos, the neo clouds, EPCs, et cetera, all the way even down to some of the server providers as well. Because we want to make sure that the solution that we are providing is not just a product, it is an entire solution set, from medium voltage to rack, as Badri mentioned, is covered, that we are addressing of the entire issue. The feedback has been quite positive. We have a very unique solution relative to what others have done and what has been done in academia, is that we have a fully distributed architecture where we have hundreds of these power modules. Each power module is undersubscribed by about 10%.

Speaker #2: All the way, even down to some of the servers—server providers as well—because we want to make sure that the solution we are providing is not just a product; it's an entire solution set. From medium voltage to rack, as Badrin mentioned, we've covered that. We are addressing the entire issue.

Speaker #2: And the feedback has been quite positive. We have a very unique solution relative to what others have done, and what's been done in academia, in that we have a fully distributed architecture where we have hundreds of these power modules.

Speaker #2: And that brings—and each power module is under-subscribed by about 10%. So the key value proposition of reliability plays very well. Plus, we also point out our history of almost 90 million microinverters shipped to date with a 500 DPPM failure rate.

Raghu Belur: The key value proposition of reliability plays very well. Plus, we also point out our history of almost 90 million microinverters shipped to date with a 500 DPPM failure rate. The combination of historical performance plus this architecture, which is fully distributed, really resonates very well with a lot of the players in terms of reliability. Now, we also talked about, we have some intrinsic structural advantages in terms of cost, right? The components that we use in our products are all off-the-shelf, generally available parts or almost commodity parts, including GaN. We consider GaN to be any more commodity. That helps us a lot on cost. We do what is called soft switching. Soft switching enables us to have a very, very light EMI footprint. A light EMI footprint means that we can package this device, this power module, in an engineered plastic enclosure.

Speaker #2: So the combination of the historical performance, plus the new, plus this architecture—which is fully distributed—really resonates very well with a lot of the players in terms of reliability.

Speaker #2: Now, we also talked about—we have some intrinsic structural advantages in terms of cost, right? If you look at the products, the components that we use in our products, they’re all off-the-shelf, generally available parts, or almost commodity parts, including GaN.

Speaker #2: We consider GaN to be more of a commodity now, so that helps us a lot on cost. We do what's called soft switching, and soft switching enables us to have a very, very light EMI footprint.

Speaker #2: And a light EMI footprint means that we can package this device, this power module, in an engineered plastic enclosure. And that, again, drives cost.

Raghu Belur: That again drives cost. Since it is only 4 kilowatts and very, very efficient, thermal management is also very easy. Combine all of that with high volume manufacturing, that is a standard line that we use today to manufacture microinverters. We have some intrinsic cost advantage as well. The combination of the value drivers that we talked about in terms of reliability, in terms of response time, which is sub-millisecond response time that can help eliminate the need for that high C rate battery from the 800-volt section and rely on the BESS to do all of the work. Those are the things that are resonating very well. Of course, US manufacturing and a FEOC-compliant supply chain are all very positive feedbacks that we are getting.

Speaker #2: And since it's only 4 kilowatts and very, very efficient, thermal management is also very easy. Combine all of that with high-volume manufacturing, and that is a standard line that we use today to manufacture microinverters.

Speaker #2: We have some intrinsic cost advantage as well. So, the combination of the value drivers that we talked about, in terms of reliability, in terms of response time—which is sub-millisecond response time—can help eliminate the need for that high C-rate battery from the 800-volt section and rely on the BESS to do all of the work.

Speaker #2: Those are the things that are resonating very well. And of course, U.S. manufacturing and a FIAC-compliant supply chain are all very positive feedback that we are getting.

Speaker #1: All right. Thank you.

Corinne Blanchard: Great. Thank you. Maybe the second question. Can you talk about the European Cyber Act? We met with your team in Munich, in June, and there was a lot of focus during the Intersolar on the Cyber Act 2.0. Just wondering, what's your latest view and how do you think it could impact you?

Speaker #3: And maybe the second question: can you talk about the European Cyber Act? I think we met with your team in Munich in June, and I think there's a lot of focus during Intersolar on the Cyber Act 2.0.

Speaker #3: But just wondering, what's your latest view, and how do you think it could impact you?

Speaker #2: I think we are fully tuned in to all of the developments that are happening there. I think the key here is to make sure that we are ahead of any of the compliance requirements, and so far we are giving this an incredible amount of importance.

Badri Kothandaraman: We are fully tuned in to all of the developments that are happening there. The key here is to make sure that we are ahead of any of the compliance requirements. So far.

Raghu Belur: We are fully tuned in to all of the developments that are happening there. The key here is to make sure that we are ahead of any of the compliance requirements. So far.

Raghu Belur: We are giving this incredible amount of importance. We have a person there who's exclusively focused on all of these new requirements that are coming, and we have already met a number of the requirements. Any new requirements that are coming around cyber, we continue to meet both in Europe as well as in the US as well. We understand that both inverters, SSTs, et cetera, or anything what are called as inverter-based resources, are going to be classified as critical infrastructure. They will have an additional layer of scrutiny in terms of communication layer that each one of these devices have and how are they managed, and all of the other security requirements or cyber requirements that are needed. We feel like we are on top of it. We feel like we are ahead of the curve there in meeting all of the requirements.

Speaker #2: We have a person there who's exclusively focused on all of these new requirements that are coming and we already met a number of the requirements and any new requirements that are coming around cyber, we continue to meet both in Europe as well as in and as well as in the US as well.

Speaker #2: We understand that both inverters, SSTs, etc., or anything that are called inverter-based resources, are going to be classified as critical infrastructure. And so they will have an additional layer of scrutiny in terms of the communication layer that each one of these devices has, how they are managed, and all of the other security or cyber requirements that are needed.

Speaker #2: So we feel like we are on top of it. We feel like we are ahead of the curve there in meeting all of the requirements.

Speaker #3: Right. Thank you so much.

Corinne Blanchard: Right. Thank you so much.

Speaker #1: Once again, if you would like to ask a question, please press star, then one. To withdraw your question, you may press star, then two.

Operator: Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Our next question comes from Vikram Bagri from Citi. Please go ahead with your question.

Speaker #1: Our next question comes from Vikram Bagri from Citi. Please go ahead with your question.

Speaker #4: Hi, it's Ted on for Vic. Thanks for taking the questions. I wanted to just go back to the guidance, if we could maybe just touch on some of the assumptions there.

[Analyst] (Citi): Hi, it's Ted on for Vik. Thanks for taking the questions. I wanted to just go back to the guidance. If we could maybe just touch on some of the assumptions there. The Netherlands storage activations were over 100% this quarter. Could you share what the guidance assumes for activations in Q3? Just going back to the comment about undershipments, could you just elaborate on what the source for that caution is? Is it to do with EU demand? Is it a seasonal slowdown? Is it interest rate driven or is there anything else in there? I have a follow-up.

Speaker #4: The Netherlands storage activations were over 100% this quarter. Could you share what the guidance assumes for activations in Q3? And then, just going back to the comment about under-shipments, could you elaborate on what the source of that caution is?

Speaker #4: Is it to do with EU demand? Is it a seasonal slowdown? Is it interest rate-driven, or is there anything else in there? And then I have a follow-up.

Speaker #2: Yeah. So, typically in Q3, there is summer seasonality in Europe. So basically, we expect more or less flattish performance from Q2 to Q3. However, we think from Q4 onwards, particularly in regions like the Netherlands, which are seeing the expiration of net metering, there is going to be a big breakout on batteries.

Badri Kothandaraman: Typically in Q3 there is summer seasonality in Europe. Basically, we expect more or less flattish performance from Q2 to Q3. However, we think from Q4 onwards, particularly in regions like Netherlands, which are seeing the expiration of net metering, there is going to be a big breakout on batteries. We don't usually break out volumes by region. That's why we gave you a percentage. The moment it becomes big enough, we will start breaking that down. That's what we are the most excited about. Enphase has got half a million solar homes, and all of them are going to be scrambling.

Speaker #2: And we don't usually break out volumes by region; that's why we gave you a percentage. The moment it becomes big enough, we will start breaking that down.

Speaker #2: But that's what we are the most excited about. Enphase has got half a million solar homes, and all of them are going to be scrambling.

Speaker #2: I mean, many of them—or I should say a small fraction of them—have converted or added batteries, and many of them are going to be scrambling in between now and the end of the year.

Badri Kothandaraman: I mean, many of them, or I should say a small fraction of them, have converted or added batteries, and many of them are going to be scrambling between now and the end of the year so that they can be ready when net metering goes away.

Speaker #2: So that they can be ready when net metering goes away.

[Analyst] (Citi): Got it. Thank you.

Speaker #1: All right. Thank you.

Speaker #2: On your other question that you asked, in terms of the under-shipment—look, what I said, this question was asked before. What I said is our sell-through basically is approximately $245 million forecasted in Q3.

Badri Kothandaraman: As for other question that you asked in terms of the undershipment. Look, this question was asked before. What I said is our sell-through basically is approximately $245 million forecasted in Q3. And we have a modest undershipment there, of approximately $15 million. That's why our core number is 230 plus, say safe harbor is 75. That's how you get the 305. It assumes a modest level of undershipment, not a lot, and it's just out of caution, that's all.

Speaker #2: And we have a modest under-shipment there, so approximately $15 million. That's why our core number is $230 million, plus, say, fiber is $75 million. So that's how you get the $305 million.

Speaker #2: So, it just assumes a modest level of under-shipment—not a lot. And it's just out of caution, that's all.

Speaker #4: Got it. And then, in terms of the SST product line, is there any clarity on what you could recognize from a 45X standpoint?

[Analyst] (Citi): Then in terms of the SST product line, is there any clarity on what you could recognize from a 45X standpoint? Then just to clarify in terms of expected needs for that product, is that a 2027 or a 2028 event?

Speaker #4: And then just to clarify, in terms of expected ease for that product, is that a 2020 or a 2028 event?

Speaker #2: Yeah. As we have previously stated, we expect volume shipments in 2028 and pilots in 2027. With regard to 45X, we are working through the details, and once we have a good understanding, we will be able to share more information in the upcoming quarters.

Badri Kothandaraman: Yeah. We have previously said there's volume shipments in 2028 and pilots in 2027. Regarding 45X, we are working through the details, and once we have a good understanding, we will be able to share more information in the upcoming quarters.

Speaker #4: Got it. Thank you.

[Analyst] (Citi): Got it. Thank you.

Speaker #2: Thank you.

Badri Kothandaraman: Thank you.

Speaker #1: And once again, if you would like to ask a question, please press star one. And, seeing no additional questions, I’d like to turn the conference call back over to Badri Kothandaraman for any closing remarks.

Operator: Once again, if you would like to ask a question, please press star and one. It's showing no additional questions. I'd like to turn the conference call back over to Badrinarayanan Kothandaraman for any closing remarks.

Speaker #2: Yeah. Thank you all for joining us today and for your continued support of Enphase. We look forward to speaking with you again next quarter.

Badri Kothandaraman: Yeah. Thank you all for joining us today and for your continued support of Enphase. We look forward to speaking with you again next quarter. Bye.

Speaker #2: Bye.

Operator: The conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your lines.

Q2 2026 Enphase Energy Inc Earnings Call

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