Enphase shows turnaround in Q4 results

As recently as last summer, Enphase was in deep trouble. The company was continuing to lose money despite restructuring measures, and in late June was threatened with de-listing from the NASDAQ due to low stock prices.

Only eight months later, Enphase has shown a remarkable turnaround. Under new CEO Badri Kothandaraman the company has substantially narrowed expenses and losses, unveiled new products and expanded into the fast-growing Indian market.

Q4 2017 revenues were still down 12% year-over-year to US$79.7 million, but the more critical metrics of profitability have improved. Enphase is still losing money, but has brought its operating loss from -7.6% in Q3 to only -2.6%, with a net loss of less than $3 million. This is particularly significant because Enphase has shown several quarters of consistent improvement.

Kothandaraman says the improved profitability comes in part from the switch over to its IQ6 microinverter product. “Margin improvement came from the IQ 6 transition, supply chain optimization and pricing management,” stated Kothanadaraman on the company’s results call.

However, he also noted broader shifts in the company.

“We went through a major cultural transformation and developed systematic business processes for achieving world class costs with cross functional teams spanning the entire company,” Kothandaraman said.

This was marked in the company’s financial results, which show significant year-over-year declines in sales and marketing expenses, but also in research and development, which has traditionally been a big part of the company’s budget.

The improved profitability has boosted investor confidence, and earlier this month, the company raised $20 million in a private follow-on offering. The company’s stock has also rebounded, trading at $3.09 per share this morning, after spending four months last spring and summer at less than $1 per share.

Enphase’s product development has moved beyond the IQ6, and a month ago the company unveiled its IQ7, which weighs less and is more powerful than the IQ6. Enphase has begun shipping the IQ7 in the United States, but says that it will roll it out globally during Q2.

But even as the United States remains Enphase’s main market, the company is growing internationally. On Enphase’s quarterly results call, Kothanadaraman noted that revenues in the Asia-Pacific region increased 51% during Q4, as Enphase makes inroads into the high-growth Asian market.

The company also opened an R&D center in Bangalore, India, during Q4 2017.

For the first quarter of 2018, Enphase is expecting $65-$70 million in revenues, with similar margins and operating expenses to Q4 2017. The company is aiming for a 10% operating margin in by the fourth quarter of 2018.