Dive Brief:
- Enphase Energy reported quarterly revenue of $303.5 million in the second quarter of 2024, up from $263.3 million in Q1 2024 but down from $711.1 million in Q2 2023, the solar-and-storage company said Tuesday.
- Enphase’s battery business surged during the quarter, with global shipments rising from 75.5 MWh in Q1 2024 to 120 MWh in Q2 and further growth expected in Q3. The growth was due in part to California’s shift to a net billing tariff that incentivizes battery attachments on residential solar systems, Enphase President and CEO Badrinarayanan Kothandaraman said on a Tuesday earnings call.
- But the company’s U.S. operations suffered due to high interest rates tamping down customer demand; high product inventories resulting in fewer sales to distributors; and California’s new NEM 3.0 net billing tariff, which has reduced demand for residential solar-only systems, Enphase said in a more detailed filing with the U.S. Securities and Exchange Commission.
Dive Insight:
Enphase earned $0.43/share in Q2 2024, less than the average analyst estimate of $0.48/share.
The company’s Q2 net income was $10.8 million, up from a loss of $16.1 million in Q1 but down from $157.2 million in Q2 2023, it said.
Despite the miss, investors cheered the company’s performance, sending the Nasdaq-listed stock up more than 10% on Wednesday even as the broader index fell nearly 4%.
On Enphase’s Tuesday earnings call, Kothandaraman suggested the company is turning the corner after a difficult 12 months.
Enphase’s residential battery business is expected to build on its recent growth in Q3 2024, Kothandaraman said. The company is guiding for 160 MWh to 180 MWh of battery shipments in Q3, he said.
Much of that volume is attributable to California’s NEM 3.0 net billing tariff, which incentivizes battery attachments on residential energy systems that applied for interconnection after April 15, 2023. Enphase’s battery revenue in California rose 14% during the second quarter compared with a 10% rise for the company in the rest of the United States. Overall, U.S. sales of Enphase batteries, microinverters and other products rose 7%, Kothandaraman said.
As of mid-July, approximately 60% of Enphase’s California installations were on the NEM 3.0 tariff, with battery attachment rates of about 90% on those compared with 15% on NEM 2.0 systems, Kothandaraman said.
California’s overall residential battery attachment rate rose from about 10% to about 60% after NEM 3.0 went into effect, Lawrence Berkeley National Laboratory said in May.
Approximately half of NEM 3.0 systems installed by Enphase use its proprietary batteries, and the company’s average revenue per NEM 3.0 system is about 50% greater than its average NEM 2.0 system, Kothandaraman said. Customers generally pay more for solar-and-storage installations than for solar-only installations due to the additional cost of the attached battery.
The company expects to be done with NEM 2.0 installations “in maybe another two, three quarters,” though the exact endpoint depends on factors outside Enphase’s control, he added.
Another tailwind for Enphase’s business is the Inflation Reduction Act, which added 6.1% to the company’s non-GAAP gross margins and a total net benefit of $18.4 million in the second quarter, according to its earnings report and SEC filing. Enphase expects a net IRA benefit of $30 million to $33 million in the third quarter, Kothandaraman said on the earnings call.
Enphase shipped approximately 574,000 microinverters during the quarter from U.S. contract manufacturing facilities booked to qualify for the IRA’s 45X production tax credit, the company said.
Enphase plans to begin manufacturing batteries in the United States in Q4 2024, later than previously forecast. The delay is due to the U.S. Treasury Department’s guidance on IRA domestic content requirements, Kothandaraman said.
“There are a few more things we have to manufacture in the U.S.” to meet Treasury guidance, he said.
