GlobeNewswire Inc | Jul 27, 2021 04:05PM EDT

July 27, 2021

FREMONT, Calif., July 27, 2021 (GLOBE NEWSWIRE) -- Enphase Energy, Inc. (NASDAQ: ENPH), a global energy management technology company and the worlds leading supplier of microinverter-based solar-plus-storage systems, announced today financial results for the second quarter of2021, which included the summary below from its President and CEO, Badri Kothandaraman.

We reported quarterly revenue of $316.1million in the second quarter of 2021, along with 40.8% for non-GAAP gross margin. We shipped approximately 2,362,401 microinverters, or 796 megawatts DC, and 43 megawatt hours of Enphase Storage systems.

Financial highlights for the second quarter of 2021 are listed below.

-- Revenue of $316.1million -- GAAP gross margin of 40.4%; non-GAAP gross margin of 40.8% -- GAAP operating income of $59.4million; non-GAAP operating income of $77.2million -- GAAP net income of $39.4million, non-GAAP net income of $74.7million -- GAAP diluted earnings per share of $0.28; non-GAAP diluted earnings per share of $0.53 -- Cash flow from operations of $65.6million -- Ending cash balance of $1.3 billion, net of $200.0 million of common stock repurchases in May 2021

Our revenue and earnings for the second quarter of 2021 are provided below, compared with those of the prior quarter and the year ago quarter:

(In thousands, except per share data and percentages)

GAAP Non-GAAP Q2 2021 Q1 2021 Q2 2020 Q2 2021 Q1 2021 Q2 2020Revenue $ 316,057 $ 301,754 $ 125,538 $ 316,057 $ 301,754 $ 125,538 Gross margin 40.4 % 40.7 % 38.5 % 40.8 % 41.1 % 39.6 %Operating $ 68,401 $ 61,563 $ 37,533 $ 51,696 $ 43,699 $ 26,024 expensesOperating $ 59,400 $ 61,386 $ 10,854 $ 77,165 $ 80,232 $ 23,700 incomeNet income $ 39,351 $ 31,698 $ (47,294 ) $ 74,676 $ 78,702 $ 23,549 (loss)Basic EPS $ 0.29 $ 0.24 $ (0.38 ) $ 0.55 $ 0.60 $ 0.19 Diluted EPS $ 0.28 $ 0.22 $ (0.38 ) $ 0.53 $ 0.56 $ 0.17

Total revenue increased 5% compared to the first quarter of 2021. Demand for our microinverter systems remained well ahead of supply in the second quarter of 2021, as component availability continued to be constrained. Our operations team did an excellent job of navigating these component supply constraints to best service our customer demand, while our sales team focused on managing the channel and working closely with our installers and distributors.

Our non-GAAP gross margin was 40.8% in the second quarter of 2021, compared to 41.1% in the first quarter of 2021, as higher logistics and expedite costs were partially offset by disciplined pricing and favorable product mix. Non-GAAP operating expenses increased to $51.7million in the second quarter of 2021, compared to $43.7million in the prior quarter, primarily due to additional investment in R&D and marketing programs, the first full quarter of consolidation of our two recent acquisitions, and increased hiring. Non-GAAP operating income was $77.2million in the second quarter of 2021, compared to $80.2million in the first quarter of 2021.

We exited the second quarter of 2021 with $1.3 billion in cash and generated $65.6million in cash flow from operations. We repurchased approximately 1.7 million shares of common stock for a total amount of $200.0 million on the open market in May 2021. Capital expenditures were $16.4million in the second quarter of 2021, compared to $9.9million in the first quarter of 2021. The sequential increase was due to the expansion of manufacturing capacity at our Mexico and India facilities, along with investment in IT and cloud infrastructure.

Strong demand for our microinverter systems across all regions continued in the second quarter of 2021. We introduced our Load Control feature for our Enphase Storage systems in late May, which provides homeowners the ability to conserve their energy consumption by shedding non-essential loads during an outage and thereby extending the backup duration. We optimized our storage pricing for installers and continued to improve the installer experience by simplifying the commissioning process and reducing installation times. As a result, since June we have seen accelerating demand for our Enphase Storage systems.

We are making good progress on digital transformation. Both of our recent acquisitions are fully integrated and exceeded our expectations with record revenue and installer counts in Q2. The Montreal team, which provides design and proposal software, added a significant number of new installers, while the Noida team, which provides proposal and permitting services, also experienced a significant increase in new requests. Both teams plan to release new products that will improve the customer experience and enable our installer base to leverage them as soon as possible.

Our Enphase Storage customers in Connecticut, Massachusetts and Rhode Island can now participate and earn money through the ConnectedSolutions program, a utility-run incentive program to reduce electrical demand during high-use periods. Customers cansign-up, monitor, and control participation in the programusing our Enlighten mobile app. We are excited to participate in a grid services program for the first time and expect to do more in the future.

BUSINESS HIGHLIGHTS

On April 19, 2021, Enphase Energy announced that Transdev, a multinational transit operator, selected Enphase microinverters for the first public transport depot inAustraliato feature a fully solar-powered bus.Transdevplans to electrify the public transport network inAustraliato show that it is more economical both financially and environmentally to transition to solar-powered electrical vehicle (EV) buses.

On May 25, 2021, Enphase Energy announced Load Control, a new feature for its Enphase Storage system. Load Control enables a homeowner to designate four loads and prioritize them for what gets power in the event of a grid outage. All of this is done through the Enlighten mobile app, providing homeowners more control over their energy consumption while driving an improved installer experience.

On June 29, 2021, Enphase Energy announced the launch of its Encharge storage system inGermany, the products first expansion into a market outside ofthe U.S. The Encharge storage system offers configurations ranging from 3.5kWh to 42kWh, along with the option to upgrade and expand through the lifetime of the system. Homeowners can also use the Enphase Enlighten mobile app to intelligently manage their solar energy in self-consumption mode to minimize the use of electricity from the grid, which saves on energy bills.

THIRD QUARTER 2021 FINANCIAL OUTLOOK

For the third quarter of 2021, Enphase Energy estimates both GAAP and non-GAAP financial results as follows:

-- Revenue to be within a range of $335.0 million to $355.0 million, which includes shipments of 60 to 70 megawatt hours of Enphase Storage systems -- GAAP gross margin to be within a range of 37.0% to 40.0%; non-GAAP gross margin to be within a range of 38.0% to 41.0%, excluding stock-based compensation expenses -- GAAP operating expenses to be within a range of $105.0million to $108.0million, including $48.0million estimated for stock-based compensation expenses and acquisition related costs and amortization -- Non-GAAP operating expenses to be within a range of $57.0million to $60.0million, excluding $48.0million estimated for stock-based compensation expenses and acquisition related costs and amortization. The non-GAAP estimates include increased investments in new products, software, and marketing, and a $3.4 million accrual for post combination expenses from prior acquisition

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Use of Non-GAAP Financial Measures

The Company has presented certain non-GAAP financial measures in this press release. To view a description of non-GAAP financial measures used and the non-GAAP reconciliation schedule for the periods presented,click here.

Conference Call Information

Enphase Energy will host a conference call for analysts and investors to discuss its second quarter 2021 results and third quarter 2021 business outlook today at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time). The call is open to the public by dialing (877) 644-1284; participant passcode 5415938. A live webcast of the conference call will also be accessible from the Investor Relations section of the Companys website at investor.enphase.com. Following the webcast, an archived version will be available on the website for approximately one year. In addition, an audio replay of the conference call will be available by calling (855)859-2056; participant passcode5415938, beginning approximately one hour after the call.

Forward-Looking Statements

This press release contains forward-looking statements, including statements related to Enphase Energys expectations as to future financial performance, expense levels, liquidity sources, the capabilities, advantages, features and performance of our technology and products, including the ability to simplify and reduce installation time, our business strategies and anticipated demand for our products, the capabilities and performance of our partners, and the impact to homeowners. These forward-looking statements are based on the Companys current expectations and inherently involve significant risks and uncertainties. Enphase Energys actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of certain risks and uncertainties including those risks described in more detail in the Companys most recent Annual Report on Form 10-K and other documents on file with the SEC and available on the SECs website at www.sec.gov. Enphase Energy undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in its expectations, except as required by law.

A copy of this press release can be found on the investor relations page of Enphase Energys website at investor.enphase.com.

About Enphase Energy, Inc.

Enphase Energy, a global energy technology company, delivers smart, easy-to-use solutions that manage solar generation, storage and communication on one intelligent platform. The Company revolutionized the solar industry with its microinverter-based technology and produces a fully integrated solar-plus-storage solution. Enphase has shipped more than 36million microinverters, and over 1.5millionEnphase-based systems have been deployed in more than 130countries. For more information, visit www.enphase.com.

Enphase Energy, Enphase, the E logo, Enlighten, Encharge, and other trademarks or service names are the trademarks of Enphase Energy, Inc.

Contact:Adam HinckleyEnphase Energy, Inc.Investor Relationsir@enphaseenergy.com

ENPHASE ENERGY, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)(Unaudited)

Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020Net revenues $ 316,057 $ 301,754 $ 125,538 $ 617,811 $ 331,083 Cost of 188,256 178,805 77,151 367,061 202,021 revenuesGross profit 127,801 122,949 48,387 250,750 129,062 Operating expenses:Research and 22,708 21,818 13,192 44,526 25,068 developmentSales and 25,586 19,622 12,371 45,208 24,143 marketingGeneral and 20,107 20,123 11,970 40,230 24,285 administrativeTotaloperating 68,401 61,563 37,533 129,964 73,496 expensesIncome from 59,400 61,386 10,854 120,786 55,566 operationsOther income (expense), netInterest 98 73 282 171 1,373 incomeInterest (12,506 ) (7,329 ) (5,952 ) (19,835 ) (9,107 )expenseOther income (633 ) 573 653 (60 ) (271 )(expense), netLoss onpartialsettlement of (13 ) (56,369 ) ? (56,382 ) ? convertiblenotes (1)Change in fairvalue of ? ? (59,692 ) ? (44,348 )derivatives(2)Total other (13,054 ) (63,052 ) (64,709 ) (76,106 ) (52,353 )expense, netIncome (loss)before income 46,346 (1,666 ) (53,855 ) 44,680 3,213 taxesIncome taxbenefit (6,995 ) 33,364 6,561 26,369 18,429 (provision)Net income $ 39,351 $ 31,698 $ (47,294 ) $ 71,049 $ 21,642 (loss)Net income(loss) per share:Basic $ 0.29 $ 0.24 $ (0.38 ) $ 0.53 $ 0.17 Diluted $ 0.28 $ 0.22 $ (0.38 ) $ 0.49 $ 0.16 Shares used inper share calculation:Basic 135,094 131,303 125,603 133,209 124,567 Diluted 141,533 146,442 125,603 144,022 138,910

(1) Loss on partial settlement of convertible notes of less than $0.1 million for the three months ended June 30, 2021, primarily relates to the non-cash loss on partial settlement of $0.1 million aggregate principal amount of the Notes due 2025. Loss on partial settlement of convertible notes of $56.4 million for the six months ended June 30, 2021 primarily relates to the $9.5 million non-cash loss on partial settlement of $87.1 million aggregate principal amount of the Notes due 2024, $9.5 million non-cash loss on partial settlement of $217.8 million aggregate principal amount of the Notes due 2025 and $37.5 million non-cash inducement loss incurred on repurchase of Notes due 2025.

(2) Change in fair value of derivatives of $59.7 million and $44.3 million for the three and six months ended June 30, 2020, respectively, represents changes in fair value of the conversion option in the Notes due 2025, as well as the convertible note hedge and warrant transactions. Initially, conversion of the Notes due 2025 would be settled solely in cash as a result of the Company not having the necessary number of authorized but unissued shares of its common stock available to settle the conversion option of the Notes due 2025 in shares; therefore, the conversion option, convertible note hedge and warrant transactions were classified as derivatives that required marked-to-market accounting. On May 20, 2020, at the Companys annual meeting of stockholders, the stockholders approved an amendment to its certificate of incorporation to increase the number of authorized shares of the Companys common stock. As a result, the Company will now be able to settle the Notes due 2025, convertible notes hedge and warrants through payment or delivery, as the case may be, of cash, shares of its common stock or a combination thereof, at the Companys election. Accordingly, on May 20, 2020, the conversion option, convertible note hedge and warrant transactions were remeasured at fair value and were then reclassified to additional paid-in-capital in the condensed consolidated balance sheet in the second quarter of 2020 and are no longer remeasured as long as they continue to meet the conditions for equity classification.

ENPHASE ENERGY, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)(Unaudited)

June 30, December 31, 2021 2020ASSETS Current assets: Cash and cash equivalents $ 1,312,261 $ 679,379 Accounts receivable, net 281,154 182,165 Inventory 37,756 41,764 Prepaid expenses and other assets 34,748 29,756 Total current assets 1,665,919 933,064 Property and equipment, net 63,211 42,985 Operating lease, right of use asset, net 15,693 17,683 Intangible assets, net 45,409 28,808 Goodwill 61,321 24,783 Other assets 118,532 59,875 Deferred tax assets, net 130,571 92,904 Total assets $ 2,100,656 $ 1,200,102 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable $ 82,141 $ 72,609 Accrued liabilities 119,234 76,542 Deferred revenues, current 55,084 47,665 Warranty obligations, current 15,009 11,260 Debt, current 85,125 325,967 Total current liabilities 356,593 534,043 Long-term liabilities: Deferred revenues, noncurrent 165,645 125,473 Warranty obligations, noncurrent 44,929 34,653 Other liabilities 20,075 17,042 Debt, noncurrent 929,015 4,898 Total liabilities 1,516,257 716,109 Total stockholders? equity 584,399 483,993 Total liabilities and stockholders? equity $ 2,100,656 $ 1,200,102

ENPHASE ENERGY, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)

Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020Cash flowsfrom operating activities:Net income $ 39,351 $ 31,698 $ (47,294 ) $ 71,049 $ 21,642 (loss)Adjustments toreconcile netincome (loss)to net cash provided byoperatingactivities:Depreciationand 7,596 5,558 4,141 13,154 7,985 amortizationProvision fordoubtful 257 14 81 271 185 accountsLoss onpartialsettlement of 13 56,369 ? 56,382 ? convertiblesnotesDeemedrepayment ofconvertiblenotes (6 ) (15,579 ) ? (15,585 ) ? attributableto accreteddebt discountNon-cashinterest 12,307 7,156 5,372 19,463 8,094 expenseChange in fairvalue of debt (932 ) (1,437 ) ? (2,369 ) ? securitiesStock-based 15,312 14,844 12,300 30,156 19,815 compensationChange in fairvalue of ? ? 59,692 ? 44,348 derivativesDeferred 5,240 (35,367 ) (7,067 ) (30,127 ) (19,567 )income taxesChanges inoperating assets andliabilities:Accounts (44,812 ) (53,719 ) 6,529 (98,531 ) 56,166 receivableInventory (2,880 ) 6,888 3,430 4,008 870 Prepaidexpenses and (10,154 ) (5,040 ) (4,525 ) (15,194 ) (9,534 )other assetsAccountspayable,accrued and 10,514 36,376 (13,323 ) 46,890 (35,389 )otherliabilitiesWarranty 5,385 8,640 406 14,025 809 obligationsDeferred 28,469 19,440 5,689 47,909 (30,771 )revenuesNet cashprovided by 65,660 75,841 25,431 141,501 64,653 operatingactivitiesCash flowsfrom investing activities:Purchases ofproperty and (16,428 ) (9,940 ) (4,451 ) (26,368 ) (7,804 )equipmentInvestments inprivate (20,000 ) (25,000 ) ? (45,000 ) ? companiesBusinessacquisitions, ? (55,239 ) ? (55,239 ) ? net of cashacquiredNet cash usedin investing (36,428 ) (90,179 ) (4,451 ) (126,607 ) (7,804 )activitiesCash flowsfrom financing activities:Issuance ofconvertible (949 ) 1,189,388 (591 ) 1,188,439 312,420 notes, net ofissuance costsPurchase ofconvertible ? (286,235 ) ? (286,235 ) (89,056 )note hedgesSale of ? 220,800 ? 220,800 71,552 warrantsPrincipalpayments and (344 ) (1,078 ) (485 ) (1,422 ) (1,633 )financing feeson debtPartialrepurchase of (79 ) (289,233 ) ? (289,312 ) ? convertiblenotesRepurchase of (200,000 ) ? ? (200,000 ) ? common stockProceeds fromexercise ofequity awards 3,428 214 2,867 3,642 4,846 and employeestock purchaseplanPayment ofwithholdingtaxes related (7,813 ) (9,185 ) (9,385 ) (16,998 ) (43,652 )to net sharesettlement ofequity awardsNet cashprovided by(used in) (205,757 ) 824,671 (7,594 ) 618,914 254,477 financingactivitiesEffect ofexchange ratechanges on (224 ) (702 ) 24 (926 ) (181 )cash and cashequivalentsNet increase(decrease) incash, cash (176,749 ) 809,631 13,410 632,882 311,145 equivalentsand restrictedcashCash, cashequivalentsand restricted 1,489,010 679,379 593,844 679,379 296,109 cash?Beginningof periodCash, cashequivalentsand restricted $ 1,312,261 $ 1,489,010 $ 607,254 $ 1,312,261 $ 607,254 cash?End ofperiod

ENPHASE ENERGY, INC.RECONCILIATION OF NON-GAAP FINANCIAL MEASURES(In thousands, except per share data and percentages)(Unaudited)

Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020Gross profit $ 127,801 $ 122,949 $ 48,387 $ 250,750 $ 129,062 (GAAP)Stock-based 1,060 982 1,337 2,042 1,943 compensationGross profit $ 128,861 $ 123,931 $ 49,724 $ 252,792 $ 131,005 (Non-GAAP) Gross margin 40.4 % 40.7 % 38.5 % 40.6 % 39.0 %(GAAP)Stock-based 0.4 % 0.4 % 1.1 % 0.3 % 0.6 %compensationGross margin 40.8 % 41.1 % 39.6 % 40.9 % 39.6 %(Non-GAAP) Operatingexpenses $ 68,401 $ 61,563 $ 37,533 $ 129,964 $ 73,496 (GAAP)Stock-basedcompensation (14,252 ) (13,862 ) (10,963 ) (28,114 ) (17,872 )(1)Acquisitionrelated (2,453 ) (4,002 ) (546 ) (6,455 ) (1,092 )expenses andamortizationOperatingexpenses $ 51,696 $ 43,699 $ 26,024 $ 95,395 $ 54,532 (Non-GAAP) ^(1) Includesstock-based compensationas follows:Research and $ 5,467 $ 5,749 $ 3,263 $ 11,216 $ 5,182 developmentSales and 5,335 3,537 3,610 8,872 5,552 marketingGeneral and 3,450 4,576 4,090 8,026 7,138 administrativeTotal $ 14,252 $ 13,862 $ 10,963 $ 28,114 $ 17,872 Income fromoperations $ 59,400 $ 61,386 $ 10,854 $ 120,786 $ 55,566 (GAAP)Stock-based 15,312 14,844 12,300 30,156 19,815 compensationAcquisitionrelated 2,453 4,002 546 6,455 1,092 expenses andamortizationIncome fromoperations $ 77,165 $ 80,232 $ 23,700 $ 157,397 $ 76,473 (Non-GAAP) Net income $ 39,351 $ 31,698 $ (47,294 ) $ 71,049 $ 21,642 (loss) (GAAP)Stock-based 15,312 14,844 12,300 30,156 19,815 compensationAcquisitionrelated 2,453 4,002 546 6,455 1,092 expenses andamortizationNon-cashinterest 12,307 7,156 5,372 19,463 8,094 expenseLoss onpartialsettlement of 13 56,369 ? 56,382 ? convertiblenotesChange in fairvalue of ? ? 59,692 ? 44,348 derivativesNon-GAAPincome tax 5,240 (35,367 ) (7,067 ) (30,127 ) (19,567 )adjustmentNet income $ 74,676 $ 78,702 $ 23,549 $ 153,378 $ 75,424 (Non-GAAP) Net income(loss) per $ 0.29 $ 0.24 $ (0.38 ) $ 0.53 $ 0.17 share, basic(GAAP)Stock-based 0.11 0.11 0.10 0.23 0.16 compensationAcquisitionrelated 0.02 0.03 ? 0.05 0.01 expenses andamortizationNon-cashinterest 0.09 0.05 0.05 0.15 0.07 expenseLoss onpartialsettlement of ? 0.43 ? 0.42 ? convertiblenotesChange in fairvalue of ? ? 0.48 ? 0.36 derivativesNon-GAAPincome tax 0.04 (0.26 ) (0.06 ) (0.23 ) (0.16 )adjustmentNet income pershare, basic $ 0.55 $ 0.60 $ 0.19 $ 1.15 $ 0.61 (Non-GAAP) Shares used inbasic pershare 135,094 131,303 125,603 133,209 124,567 calculationGAAP andNon-GAAP Net income(loss) per $ 0.28 $ 0.22 $ (0.38 ) $ 0.49 $ 0.16 share, diluted(GAAP)Stock-based 0.11 0.11 0.09 0.21 0.14 compensationAcquisitionrelated 0.02 0.03 ? 0.05 0.01 expenses andamortizationNon-cashinterest 0.09 0.05 0.04 0.14 0.06 expenseLoss onpartialsettlement of ? 0.40 ? 0.40 ? convertiblenotesChange in fairvalue of ? ? 0.48 0.01 $ 0.33 derivativesNon-GAAPincome tax 0.03 (0.25 ) (0.06 ) (0.21 ) (0.14 )adjustmentNet income pershare, diluted $ 0.53 $ 0.56 $ 0.17 $ 1.09 $ 0.56 (Non-GAAP) (2) Shares used indiluted pershare 141,533 146,442 125,603 144,022 138,910 calculationGAAPShares used indiluted pershare 140,931 141,746 135,770 141,379 135,557 calculationNon-GAAP (3) Net cashprovided byoperating $ 65,660 $ 75,841 $ 25,431 $ 141,501 $ 64,653 activities(GAAP)Purchases ofproperty and (16,428 ) (9,940 ) (4,451 ) (26,368 ) (7,804 )equipmentDeemedrepayment ofconvertiblenotes due 2024and notes due 6 15,579 ? 15,585 ? 2025attributableto accreteddebt discountFree cash flow $ 49,238 $ 81,480 $ 20,980 $ 130,718 $ 56,849 (Non-GAAP)

(2) Calculation of non-GAAP diluted net income per share for the three months ended June30, 2021, March31, 2021 and June30, 2020, as well as the six months ended June 30, 2021 and 2020, excludes convertible notes due 2023 interest expense, net of tax of less than $0.1million in each period from non-GAAP net income.

(3) Effect of dilutive in-the-money portion of convertible senior notes and warrants are included in the GAAP weighted-average diluted shares in periods where the Company has GAAP net income. The Company excluded the in-the-money portion of convertible notes due 2024 totaling 45 thousand shares, 2,984 thousand shares and 3,677 thousand shares in the three months ended June30, 2021, March31, 2021 and June30, 2020, respectively, and 1,506 thousand and 3,353 thousand shares for the six months ended June30, 2021, and 2020, respectively from non-GAAP weighted-average diluted shares as the Company entered into convertible note hedge transactions that reduce potential dilution to the Companys common stock upon any conversion of the notes due 2024. The Company excluded the in-the-money portion of convertible notes due 2025 totaling 557 thousand shares and 1,713 thousand shares in the three months ended June30, 2021 and March31, 2021, respectively, and 1,137 thousand shares for the six months ended June30, 2021, respectively, from non-GAAP weighted-average diluted shares as the Company entered into convertible note hedge transactions that reduce potential dilution to the Companys common stock upon any conversion of the notes due 2025.