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Narrower-than-Expected Loss at Enphase

Enphase Energy, Inc. (ENPH - Snapshot Report) posted first quarter 2013 results with a loss of 25 cents per share (including stock based compensation expense) narrower than the Zacks Consensus Estimate of a loss of 27 cents. The loss also declined significantly from the year-ago loss of $5.78 per share.

The results reflect the company’s effort to successfully control operating expenses.

Operational Results

Enphase Energy reported quarterly operating revenue of $45.6 million, marginally above the Zacks Consensus Estimate of $45.0 million and at the top end of the company’s guidance. Revenues were also up 7% year over year.

The top-line figure includes approximately $9 million of revenue associated with shipments related to the expiring 1603 grant program. Excluding these 1603 related units, revenue increased 36% year over year.

Gross margin reported by the company was 27.0%, up from 21.9% in the year-ago quarter.

Operating expenses were $20.4 million, up from $17.9 million in the year-ago quarter.

Financial Update

As of Mar 31, 2013, cash and cash equivalents were $36.4 million versus $45.3 million as of Dec 31, 2012. Term loans declined to $8.0 million from $8.7 million as of Dec 31, 2012. Net cash used in operating activities was $7.0 million versus $14.1 million in the year-ago period.

Guidance

The company expects revenues to climb sequentially to a range of $56 million to $60 million in the second quarter of 2013. It expects gross margin in the range of 26% to 28% and operating expenses to be flat sequentially.

Our Take

The loss incurred in the quarter was narrower than the Zacks Consensus Estimate. Moreover, the top-line succeeded in beating our expectation, though marginally. The company continues to progress well by executing its key initiatives which include improvement in operating performance, expanding gross margin, broadening market opportunity and developing new products and services.

Enphase Energy is engaged in the design, development, and sale of microinverter systems for the solar photovoltaic industry. The company believes that the long-term global prospects of the solar industry represent a great opportunity.

However, we remain concerned about the increased competition as well as lower demand for solar products. The company presently retains a short-term Zacks Rank #3 (Hold).

Stocks worth considering are JA Solar Holdings Co., Ltd. (JASO - Analyst Report), ReneSola Ltd. (SOL - Analyst Report), STR Holdings, Inc. (STRI - Snapshot Report), all with a Zacks Rank #2 (Buy).

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