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Enphase Cuts Q2 Loss, Beats Estimates

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Enphase Energy, Inc. (ENPH - Free Report) posted second quarter 2013 results with a loss of 15 cents per share (including stock based compensation expense) coming in a penny lower than the Zacks Consensus Estimate of a loss of 16 cents. The loss also declined from the year-ago loss of 21 cents per share. The results reflect the company’s effort to successfully control operating expenses.

Operational Results

Enphase Energy reported quarterly operating revenue of $58.2 million, marginally below the Zacks Consensus Estimate of $59 million. Revenues were up 4.4% year over year from $55.7 million. Revenues in second quarter 2012 included approximately $19 million associated with shipments related to the expiring Section 1603 grant program. Excluding these 1603 related units, revenue was up 58.5% year over year.

Gross margin reported by the company was 28.0%, up from 24.4% in the year-ago quarter.

Operating expenses were $20.4 million, flat sequentially. Loss from operations was $5.5 million versus a loss of $7.5 million in the year-ago quarter.

Financial Update

As of Jun 30, 2013, cash and cash equivalents were $34 million versus $45.3 million as of Dec 31, 2012. Term loans declined to $6.5 million from $8.7 million as of Dec 31, 2012.


The company expects revenues in the range of $59 million to $63 million for the third quarter of 2013, up sequentially. However, it expects this sequential increase to be partially offset by reduction in inventory levels within the distribution channel, as a result of the transition from the third to the fourth generation microinverter system.

Recently, the company introduced its fourth generation of solar microinverters that work together with Envoy advanced communications gateway and Enlighten intelligent monitoring software platform to deliver reliable, high-performance solar arrays. The Enphase System now includes an M250 microinverter that produces 250-Watts peak AC output power.

With the introduction of this new product, the company expects margins to improve. Enphase forecasts gross margin in the range of 27% to 29% and operating expenses to be flat sequentially.

Our Take

The loss incurred in the quarter was narrower than the Zacks Consensus Estimate, while the top-line marginally failed to match our expectation.

The company continues to progress well on its key initiatives, which include improvement in operating performance, expanding gross margin, broadening market opportunity and developing new products and services. The release of the fourth generation microinverter system combined with one terawatt-hour plus of clean energy production from Enphase systems proves the company’s leadership position in the market as well as in technology.

However, we remain concerned about the increased competition as well as excess supply compared to demand for solar products.

The company presently retains a short-term Zacks Rank #3 (Hold). Stocks worth considering are SunPower Corp. (SPWR - Free Report) , ReneSola Ltd. (SOL - Free Report) and Yingli Green Energy Holding Co. Ltd. (YGE - Free Report) . While SunPower Corp. carries a Zacks Rank #1 (Strong Buy), ReneSola and Yingli Green Energy hold a Zacks Rank #2 (Buy).

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