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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