Enphase Energy, Inc.

Good day, and welcome to the Enphase Energy's first quarter 2025 financial results call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to Zach Friedman. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's first quarter 2025 results. On today's call are Badri Kothandaraman, our President and Chief Executive Officer, Mandy Yang, our Chief Financial Officer, and Ragubalur, our Chief Products Officer. financial performance, market trends, the capabilities of our technology and products, and the benefits to homeowners and installers, our operations, including manufacturing, customer service, and supply and demand, anticipated growth and existing in new markets, the timing of new product introductions, and regulatory, tax, tariff, and supply chain matters. These forward-looking statements involve significant risks and uncertainties, and our actual results and the timing of events could differ materially from these expectations. For a more complete discussion of the risks and uncertainties, please see our most recent Form 10-K and 10-Qs, of the SEC. We caution you not to place any undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes in expectations. Also, please note that financial measures used on this call are expressed on a non-GAAP basis unless otherwise noted and have been adjusted to exclude certain charges. We have provided a reconciliation of these non-GAAP financial measures to GAAP financial measures in our earnings release furnished Founder Rahman, our President and Chief Executive Officer. Audrey?

Good afternoon, and thanks for joining us today to discuss our first quarter 2025 financial results. We reported quarterly revenue of $356.1 million, shipped approximately 1.53 million microinverters and 170.1 megawatt hours of batteries, and generated free cash flow of $33.8 million. Our Q1 revenue included approximately $54 million of safe harbor. As we exited Q1, our battery channel inventory was normal, while our microinverter channel inventory was a little elevated. For the first quarter, we delivered 49% gross margin, 22% operating expenses, and 27% operating income. all as a percentage of revenue on a non-GAAP basis and including the net IRA benefit. Mandy will go into our financials later in the call. Our customer service NPS held steady at 77% in Q1 as compared to 78% in Q4. The average call wait time increased slightly to three and a half minutes, largely due to the winter storms in the U.S. We are continuing to invest in AI and machine learning, to make our support experience faster, smarter, and more helpful. Let's cover operations. Our global capacity is around 7.25 million microinverters per quarter. Five million of those are in the U.S. In Q1, we shipped approximately 1.21 million microinverters from our U.S. contract manufacturers, booking 45x production tax credits. Our domestically produced microinverters help residential lease flat PPA providers and commercial asset owners to qualify for the 10% domestic content ITC error. We expect to ship approximately a million microinverters from the U.S. in Q2. Q1 was our second quarter of building the IQ batteries in the U.S. using domestically manufactured microinverters, battery management systems and packaging, while sourcing cell packs from China. We shipped 44 megawatt hours of batteries from our Texas facility, a strong step forward as we continue scaling U.S. production. Let's cover tariffs. The newly announced 145% tariff on products from China, along with the 10% reciprocal tariffs on imports from other countries, is expected to have minimal impact on our microinverters and accessories. Thanks to the excellent work our team has done to diversify the supply chain. However, our batteries will be more impacted as we currently source battery cell packs from China. These tariffs are expected to reduce our gross margin by approximately 2% in Q2 of 2025. The effect of the tariffs is limited in Q2 due to us having free tariff inventory. Starting in Q3, we anticipate a 6% to 8% total gross margin impact after accounting for pricing adjustments. We expect the gross margin impact to gradually lessen over the subsequent quarters as our mitigation efforts take effect. We are moving with urgency. We have already identified tangible sourcing options outside China, and we are fast-tracking the qualification. These efforts are progressing quickly, and we expect to fully offset the impact starting in Q2-26. As always, tariff policy remains fluid and may evolve with future government decisions. Let's come to the regions. Our U.S. and international revenue mix for Q1 was 74% and 26% respectively. In the US, our revenue decreased 13% in Q1 compared to Q4, primarily due to seasonality and softening in customer demand, partially offset by Safe Harbor revenue of $54 million. The overall sell-through of our product was down 18% compared to Q4. In addition to seasonality, installation activity was negatively impacted by one of the large national lease providers facing financial challenges. The U.S. solar market remains under pressure from high interest rates, and many installers, lease providers, and distributors are navigating through a tough environment. That said, there are some encouraging signs. In California, installers are growing more confident selling M3.0 systems supported by strong battery attach rates. At the same time, power prices continue to rise across several key regions. We are staying focused on product innovation, quality, and customer experience. Our upcoming fourth generation battery is designed to lower total system costs for backup. Our complementary offerings like bus bar PCS and NEM expansion software help customers unlock even more value. In Europe, our revenue increased 7% in Q1 due to shipping the flex-phase battery in Germany as compared to the prior quarter, while our overall sell-through declined a little by about 9%. The overall business environment across the region is still challenging, but we are maintaining our discipline on controlling the channel, as well as expanding our served available market by introducing a number of new products. I'll provide additional color on our key markets in Europe. the Netherlands, France, Germany, and UK. In Netherlands, the demand softens slightly in Q1 in line with typical winter seasonality. The market continues to shift from solar only to solar plus battery solutions, which help avoid export penalties and enable participation in retail energy markets. We started shipping our new IQ EV charger into the region and recently introduced backup capability for our batteries, further strengthening the value proposition. In France, the market has slowed down following the recent utility rate cuts, and we expect the demand to be muted over the next two quarters. However, a significantly lower VAT is set to begin in October, which should help spark a rebound in solar. France remains a key long-term growth market for us, given our leadership position and the country's low solar penetration. We started shipping our new IQ EV charger into France, and we also plan to introduce hot water heater compatibility in the second quarter, allowing homeowners to increase their self-consumption. We also added backup capability for our batteries, further strengthening resilience offering. In Germany, we are ramping sales of our new IQ battery 5P with FlexFace and the new IQ EV charger. The typical installations are three-phase in Germany, and we are seeing a 30% backup attached for our batteries, a strong indicator of the growing demand for resilience. We are also preparing to launch our balcony solar product imminently in Germany in Q2, which expands our addressable market by approximately 400 megawatts annually. We believe these product introductions position us well for meaningful growth in both sell-in and sell-through over the coming quarters. The UK market continues to perform well for us as we strengthen our relationships with the retail energy providers in the region. We already started shipping our newest IQEV charger, and we plan to introduce backup capability in Q3 of this year, further expanding our energy resilience offerings. We remain under-penetrated in several European countries, including Italy, Spain, Belgium, Luxembourg, Switzerland, Austria, Sweden, Poland, and others, and we see them as important pillars of our long-term growth strategy. Over the coming months, we plan to introduce our full product portfolio across more of Europe, including IQ microinverters, IQ battery flex phase with backup, our latest and the greatest EV charger, AI-powered energy management software, and the solar graph installer platforms. We continue to make steady progress in other regions. In Puerto Rico, we are seeing a very sharp rise in demand for our higher domestic content battery, driven by an increased need for resilience. In India, sales of our IQ8T microinverters continue to grow, and we are also shipping our batteries into the region. We are encouraged by the early signs of strong product market fit in both the urban and rural areas. In Brazil, new fire safety recommendations such as rapid shutdown should support continuous growth of our IQ8T microinverters. Now let's turn to our Q2 guidance. We expect Q2 revenue to be in the range of $340 to $380 million. This includes approximately $40 million in safe harbor revenue, which we define as sales made to customers who plan to install the inventory over more than a year. We are currently about 80% booked to the midpoint of our revenue guidance. For IQ batteries, we expect a shift between 160 and 180 megawatt hours during the quarter. Let's talk about new products, starting with IQ batteries. Our fourth generation IQ battery is all set to ramp up production in this quarter. This system includes the IQ Battery 10C, the IQ Combiner 6C, and the meter collar. The IQ Battery 10C delivers the same 10 kilowatt-hour capacity while using 60% lesser wall space, thanks to its fully integrated battery management and power conversion. When paired with the IQ Combiner and the collar, the system significantly simplifies backup, eliminating the need to relocate loads install current transformers, or run high-current wiring. For both homeowners and installers, the improvement is substantial. What once took four boxes on the wall can now be done with just two. We have successfully completed the required meter collar testing with PG&E and four other utility companies. We expect to begin pilots in May. We have now expanded the IQ microinverter family into 58 countries and plan to grow that number further by the year end. In Japan, we expect to begin production shipments this week through a distribution agreement with the Tochu Corporation, one of the country's largest trading companies. Recently, Tokyo became the first Japanese city to mandate rooftop solar on new home builds. Given the typically small roof areas in Tokyo, system design can be complex, which is exactly where our Enphase IQ8 microinverter shines, offering the flexibility and scalability needed to maximize production and reliability from every rooftop. In Q2, we plan to launch our IQ balcony solar product in Germany and Belgium, with additional countries in Europe and Asia to follow in 2025. The product offers a simple, efficient way for apartment dwellers to harness solar energy from their balcony. Built on our proven AC-coupled architecture, the system allows the users to plug in one to four panels directly into a standard wall outlet. We plan to offer pre-wired kits that include IQ microinverters and the balcony gateway, enabling fast setup and seamless monitoring through the Enphase app. In the event of a grid outage, The system also supports sunlight backup via an auxiliary socket located on the IQ Balcony 8-way product. Let's come to our IQ8P3P commercial microinverter, a product that is steadily gaining traction. We have over 650 commercial sites live across the U.S., averaging about 35 kilowatts per system, with consistent positive feedback from the field. These three-phase microinverters now ship from the U.S. with increased domestic content that help qualify for the 10% ITC adder, a meaningful advantage for commercial asset owners. And we expect the momentum to grow with the upcoming IQ9 microinverter, which is purpose-built for 480-volt three-phase systems, unlocking even more of the commercial market. Let's talk about IQ9. So IQ9... microinverters are powered by cutting-edge gallium nitride technology. These microinverters are engineered for the future with support for 18 ampere DC input current, higher AC voltages, and three-phase configurations. Designed specifically for small commercial systems, IQ9 will support 480 volts AC, the most common commercial voltage in the U.S. The first model will deliver peak output power of 427 watts, and 548 watts, making them ideal for pairing with today's most powerful residential and commercial solar panels. IQ9 uses GAN-based bidirectional switches that allow us to reduce conduction losses and increased power density. While we are currently operating at similar switching frequencies to maintain compatibility with our existing transformer design, Gallium nitride, or GAN, gives us the foundation to enable much higher frequencies and even greater efficiency in future products like IQ10. Thanks to GAN, IQ9 already delivers efficiencies that meet or exceed prior generations with a sleek, compact footprint. We expect to begin internal installations at Enphase facilities soon, ahead of a full production launch in Q4. On the portable power front, we began shipping the IQ Power Pack 1500 to customers in the U.S. and Canada. This compact 1.5-kilowatt-hour solution brings together our core strengths, Enphase and Abops, which is advanced power electronics, battery management, and intelligent software into a smart, portable product designed for home backup, travel, and emergencies. IQ Power Pack marks our entry into the portable consumer energy market. We see this as a meaningful growth vector and plan to expand the product family in 2025 to address many more use cases and reach many more countries. Let's dive into EV charging. In late 2024, we began shipping our next generation IQ EV charger into Europe. We are now active in 14 countries across the region. This is one of our most advanced residential chargers till date. designed to work seamlessly with the Enphase energy system or as a high-performance standalone system. Smart features like green charging help homeowners maximize solar usage while intelligent scheduling reduces energy costs during peak hours, delivering both sustainability and savings. We are excited to expand the availability of the IQ EV charger throughout this year into more European countries, as well as into Australia, Brazil, India, and the U.S., where we will position it as a premium feature-rich offering. With strong early momentum, we expect continuous growth this year and beyond. Our IQ Energy Management software supports grid services programs, VPPs, in regulated markets like the U.S., and energy market participation in deregulated markets like Europe and Australia. In the U.S., we are active in 26 programs across key states such as California, Colorado, Massachusetts, North Carolina, and Texas. These programs discharge batteries during peak demand, supporting the utilities. As electricity rates become more complex, we believe our AI-powered software differentiates us, maximizing ROI and reducing the payback period. Let's cover SolarGraph, our all-in-one installer platform. We are investing in major enhancements, including a one-click express editor for customized proposals, a GenAI-powered in-app assistant, integration with racking, and expanded CNI capabilities, all aimed at making SolarGraph even more intuitive. The platform is now available to residential and commercial installers in the U.S., Canada, Brazil, Germany, Austria, Netherlands, and France, with plans to expand into additional countries in the coming quarters. SolarGraph continues to evolve as a strategic part of our software ecosystem, helping installers sell faster, design smarter, as well as scale efficiently. Let me conclude. While the global policy environment remains fluid with tariffs, with interest rates and subsidies constantly evolving, we are moving quickly to realign our supply chain to minimize downside across a range of scenarios. While we cannot control the macroeconomic conditions, we can absolutely control our response. This means doubling down on what has always made Enphase successful. Relentless product innovation, world-class reliability, and exceptional customer service. Looking ahead, our strategy is clear. We are driving revenue growth through a wave of new products, starting with our fourth generation system. which delivers the lowest installation cost of any Enphase solar plus battery solution today. In Europe, our SAM is expanding rapidly with the launch of our FlexFace battery with backup, the IQEV charger, and the upcoming IQ balcony solar kit. We are empowering installers with tools like NEM expansion software to expand legacy systems, bus bar PCS software to avoid main panel upgrades, and dynamic tariff optimization software in European markets to help save money for the homeowner. And with our upcoming IQ9 microinverters, we expect to unlock a 10 gigawatt opportunity in commercial solar while driving cost-per-watt improvement across our residential business. As the world faces rising power prices and increasing grid instability, Enphase is becoming leaner, faster, and more innovative. We are energized by the future and firmly focused on delivering value for our customers, partners, and shareholders. With that, I will turn the call over to Mandy for her review of our financials. Mandy?