Enphase has been a visionary in the global solar industry, as a pioneer and leader in the microinverter space, as well as the first company to launch an AC-wired home battery solution.
However, like many innovative companies in the PV and energy storage space Enphase, or rather its investors and former employees, have paid a price for the company being a leader. Enphase has struggled to with hold its own against other power electronics makers with competing and less expensive solutions, and has not turned a profit in a year and a half.
However, Enphase’s Q4 2016 financial results show that the company is moving back towards a stronger position. During the quarter Enphase increased revenue 38% year-over-year to $91 million, while shipping 194 MW-AC of microinverters, bringing it to a record 726 MW-AC shipped over the full year 2016.
And while Enphase is still dripping red ink, the company’s margins are recovering. Enphase brought its operating margin to -11% during the quarter, up from -20% in the prior quarter, and narrowed losses to $12 million.
Enphase has been on a precarious path since making a decision to cut prices to reduce market share in late 2015, which was followed by significant restructuring beginning in 2016, including repeatedly reducing staff and off-loading its residential O&M arm.
As dangerous as it is to dive into negative margins to pursue market share gains, these measures appear to be yielding fruit. “We saw the effectiveness of our lower pricing strategy with new customer wins and an increasing share with existing customers,” said Enphase CEO Paul Nahi on the company’s results call. “During the second half of 2016, we had significant market share growth in almost every geography in which we participate.”
Enphase estimates that its market share in the United States grew 50% from Q1 to Q4 of 2016, and additionally claims market share leadership in Mexico, Puerto Rico, France and New Zealand, and says that it is gaining share in the Netherlands, Switzerland and Australia.
And while the restructuring clearly is helping its bottom line, the numbers are less clear. Enphase estimates that Q3 restructuring measures saved the company $20 million during Q4, but did not offer a number for savings on a GAAP basis.
As can be expected, these trying circumstances have put Enphase in a difficult cash position. Enphase dropped to only $17.8 million in cash by the end of Q4, but since the beginning of the year has received bailouts from institutional investors, including finalizing a $50 million extension of a long-term loan facility two weeks ago.
And while the company struggles to return to profitability, Enphase has not slowed on getting its products out to new markets. During the fourth quarter Enphase launched its AC battery storage solution in Europe and the United States, after making it available in Australia and New Zealand in the third quarter.
Additionally, during since the beginning of 2017 the company launched its Enphase Home Energy Solution with IQ, an integrated solar, storage and energy management offering, and expects to begin deliveries in March.
The Enphase Home Energy System features the company’s sixth-generation microinverter, which has been incorporated into PV modules by LG, SolarWorld and JinkoSolar, which Enphase says provides a simpler warranty process, one-stop technical support and other advantages. Enphase plans to introduce its seventh-generation microinverter in the first quarter of 2018.
As for financials, Enphase expects $60-65 million in revenues in the first quarter of 2017. The mid-point of this is slightly below its results from a year ago, which Enphase blames on unfavorable weather for installation in its prime market, California.
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