Enphase Energy, Inc. Q3 FY2025 earnings call

• Revenue for Q3 was $410.4 million, the highest in 2 years, with $70.9 million of safe harbor revenue.
• Shipped 1.77 million microinverters and 195 megawatt hours of batteries. Generated free cash flow of $5.9 million.
• Q3 gross margin was 49% non-GAAP, above guidance range. Customer service NPS was 77% with average call wait time of 2 minutes.
• Operations: Shipped ~1.53 million microinverters from U.S. facilities, booking 45X production tax credits. Grew U.S. battery production, shipping 67.5 megawatt hours in Q3. Building fourth-generation battery in U.S. with domestic components.
• Regionally: U.S. revenue increased 29% Q3 vs Q2; Europe revenue decreased 38% Q3 vs Q2. Discussed market conditions in various European countries (Netherlands, France, Germany, U.K., Australia) and their impacts.
• Products: IQ Batteries fourth-generation launched, with smaller footprint, enhanced features. IQ9N Commercial Microinverter to be shipped in December. IQ EV chargers shipping in Europe, Australia, and U.S. Solargraf platform enhancements for installers.

Enphase Energy reported quarterly revenue of $410.4 million in the third quarter of 2025. The U.S. and international revenue mix was 85% and 15% respectively. In terms of product segments, approximately 1.77 million microinverters were shipped, and a record 195 megawatt hours of batteries were shipped. The microinverter segment contributed significantly to revenue, with approximately 1.53 million shipped from U.S. facilities in Q3. The battery segment saw growth, with 195 megawatt hours shipped in Q3, and the fourth-generation IQ Battery 10C began shipping in August from U.S. facilities.

• Q4 revenue expected to be in range of $310 million to $350 million, with shipments of 140-160 megawatt hours of IQ Batteries. Safe harbor revenue not included in Q4 guidance but presents upside opportunity.
• Q1 2026 revenue anticipated to be $250 million, with expectations of improvement through the rest of 2026. External drivers like rising power prices, declining interest rates, and new financing solutions could support recovery.
• TPO market poised to grow in 2026, with Enphase supporting through safe harbor, tax equity, and O&M services.
• Product ramps: IQ Battery 10C shipping, IQ9N Commercial Microinverter ramping in 2026, fifth-generation battery and IQ9 residential microinverter to reduce system costs.

• Tariffs and supply chain uncertainties, though transitioning away from China to reduce exposure.
• Challenging market conditions in Europe, especially in countries like France, Germany, and Netherlands with policy changes and soft demand.
• Uncertainty around the full impact of the loss of the 25D tax credit on Q1 2026 results.

Q: Can you talk a little bit about the dynamics going into the first quarter next year in terms of the amount of inventory that you feel like is appropriate?

A: We anticipate an overall sell-through for the company to be between $350 million to $400 million in Q4, but we are only guiding Q4 revenue from $310 million to $350 million. We want 2026 to have a very healthy setup in the channel with a rule of thumb of 8 to 10 weeks of inventory. Also, about $70 million of safe harbor was pulled in from Q4 to Q3 as customers wanted the product before U.S. Treasury guidance in Q3.

Q: With the new battery, can you talk about pricing dynamics?

A: We are not raising any prices. Our gross margins are already healthy. The fourth-generation battery captures share, and the fifth-generation battery will take costs down significantly with higher energy density and improved form factor.

Q: I wanted to ask if we could get some more color around the safe harbor approach using the physical work test.

A: We are in very active discussions with all our TPO partners. The physical work test involves custom products with higher performance and custom components not in normal inventory. It reflects a more linear revenue stream for both Enphase and TPO partners.

Q: Maybe just starting on the Q1 '26 outlook of $250 million. Can you provide any more detail on how you're sizing the expected decline in the U.S. post 25D?

A: We thought we will give you a preliminary look of $250 million for Q1 2026. Our forecasting process involves a rolling 6 quarter forecasting and monthly reviews of sales trends, but we can't give exact numbers on the decline post 25D.

Q: I appreciate the early look into 1Q '26. Are you expecting to have to take any further actions to reduce OpEx heading into that?

A: We are laser-focused on operating income and operational excellence. Our run rate today is $80 million a quarter non-GAAP. We will look to trim expenses to track revenue without compromising innovation or customer impact.

Q: Appreciate it. Look, maybe to follow up on this $250 million. Obviously, you guys are speaking to the year-over-year trends here. How do you think about that annualizing?

A: We see 3 general market drivers (rising power prices, declining interest rates, new financing solutions like PPL) and several Enphase specific drivers (fourth-generation battery, entry into 480 volt commercial market, strategic partnerships in Netherlands, IQ EV chargers, fifth-generation battery) that could enable a recovery in the second half of 2026.