Enphase (ENPH $4.90) posted second quarter results that indicate the company is moving along toward profitability. Revenues of $55.7 million were up 88% over $20.6 million in the second quarter of 2011, and were up 31% sequentially, from $42.6 million. Revenues for the first half of 2012 totaled $98.3 million, up 106% over $47.7 million in the same period in 2011. Loss per share was $.23. Gross margins improved to 24.4% for the quarter, up from 21.8% in Q1. Most of the increase is attributable to Enphase’s ongoing cost reductions.
Despite the improvements, investors look wary. The stock price fell from $6.70 to $4.90 the day after earnings were reported. Enphase suggested guidance for the third quarter that looks soft. Couple this with the company’s announcement that CFO Sanjeev Kumar is stepping down at the end of the year, and there is reason for some skepticism.
The company’s market-leading microinverters continue to win favor among solar installers. The majority of the sales were made within the U.S., but Enphase is seeing increased interest in Europe. France and the Benelux region were the primary buyers, with a few sales to Italy. However, the looming regulatory adjustments in Europe will likely keep sales there scarce until the picture becomes clearer. Enphase recently opened an office in London though, and the company sees a similarity between European interest for the microinverters and the way American companies reacted when the product was first introduced, which is a good sign. An even better sign: Enphase’s microinverters were a hit at the Intersolar Europe trade show in Germany this past June.
Sales to Canada dwindled as a result of regulations. In 2011, Canada represented 11% of sales; this past quarter the country accounted for only “low single digits.” The Ontario Power Authority is currently accepting applications for its “microFIT 2.0” program, which will award 50 MW of tariff savings to small installations (under 500 kW or less). The feed-in-tariff program for larger, commercial level installations has yet to be announced. Enphase believes it should see increased sales once the OPA resumes the tariffs. The U.S., where tariff programs and government assistance are still strong, remains Enphase’s primary focus in the short term.
Enphase announced several new offerings that will improve system integration. The Array Gun syncs up with the company’s Enlighten software to help installers and owners easily manage solar arrays. The Bluetooth-enabled device scans the barcodes on microinverters, sending the serial number and position in the array to the software. Users will know which microinverter is where, and how each is performing. The Enlighten software has also been upgraded. Energy collection output readings are now more precise both for individual panels and for the system as a whole. Also, the program records historical data for comparative use.
Third quarter revenue might not reach its potential due to the downturns in Europe and Canada. Enphase suggests Q3 revenue between $59 million and $63 million. For the year, we think a loss per share of $1.10 is still reasonable (Note: $5.01 loss in Q1 used pre-IPO share count).
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