Enphase Energy, Inc.

Good afternoon, everyone, and welcome to the Enphase Energy's third quarter 2025 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please send to a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Zach Friedman. Sir, please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's third quarter 2025 results. On today's call are Badri Kofondoraman, our President and Chief Executive Officer, Mandy Yang, our Chief Financial Officer, and Raghu Ballora, Chief Products Officer. After the market closed today, Enphase issued a press release announcing the results of its third quarter ended September 30, 2025. During this conference call, Enphase Management will make forward-looking statements, including but not limited to, and the benefits to homeowners and installers. Our operations, including manufacturing, customer service, and supply and demand, 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 adjusted to exclude certain charges. We have provided a reconciliation of these non-GAAP financial measures to GAAP financial measures in our earning Raman, our President and Chief Executive Officer. Audrey?

Good afternoon and thanks for joining us today to discuss our third quarter 2025 financial results. We had a good quarter. We reported quarterly revenue of $410.4 million, our highest revenue level in two years. We shipped 1.77 million microinverters and a record 195 megawatt hours of batteries. We generated free cash flow of $5.9 million. Our Q3 revenue also included $70.9 million of Safe Harbor revenue. As we exited Q3, our microinverter channel inventory returned to normal, while our battery channel inventory was slightly elevated due to sell-in of our new fourth-generation battery. For the third quarter, we delivered 49% gross margin, above the higher end of our guidance range, 19% operating expense, and 30% 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 was 77% in Q3 compared to 79% in Q2. The average call wait time was two minutes. To further enhance the customer experience, we are preparing to launch our AI-powered assistant in the Enphase app, which will help customers find answers quickly, troubleshoot issues, and manage their systems more intuitively. Our data engineering team continues to strengthen the intelligence behind our support systems, leveraging analytics and machine learning to identify common issues, predict service needs, and reduce response times across our region. Let's cover operations. In Q3, we shipped approximately 1.53 million microinverters from our US facilities booking 45x production tax credits. Our domestically made microinverters help residential lease BPA providers and commercial asset owners to qualify for the 10% domestic content ITC error. We grew our U.S. battery production in Q3, shipping 67.5 MWh compared to 46.9 MWh in Q2. We are now building our fourth generation battery, the IQ Battery 10C, in the US using domestically made microinverters, domestically made thermal and battery management systems, as well as packaging, while only sourcing cell packs from China. These batteries have greater than 45% domestic content and help our least BPA customers qualify for ITC bonuses. We remain on track to source non-China cell packs by the end of this year, scaling into battery builds in the first half of 26. Therefore, we expect limited exposure to the recent China-related tariffs as our supply chain transitions away from China. In summary, our U.S.-made microinverters and batteries can help customers qualify for domestic content ITC bonuses as well as meet FIAC compliance, even as the criteria becomes increasingly stringent each year, a big differentiator for Enphase. Let's now cover the regions. Our U.S. and international revenue mix for Q3 was 85% and 15% respectively. In the U.S., our revenue increased 29% in Q3 compared to Q2, primarily due to increased demand as well as higher safe harbor revenue of $70.9 million compared to $40.4 million in Q2. The overall sell-through of our products was up 9% in Q3 as compared to Q2. In Europe, our revenue decreased by 38% in Q3 compared to Q2, while overall sell-through decreased by 27%. Europe negatively impacted our Q3 revenue by approximately $25 million compared to Q2, a larger sequential decline than expected. The overall business environment across the region is still challenging, but we are maintaining our discipline on the channels as well as targeting specific growth areas that could drive higher 2026 revenues. I will now provide some color on key markets in Europe. In Netherlands, the solar demand remained soft in Q3. We are making steady progress towards the sizable battery retrofit opportunity we see in 2026 and beyond. The rising solar export penalties and the planned sunset of net metering at the end of 2026 are creating a compelling use case for storage. With an Enphase installed base of about 475,000 residential solar systems in Netherlands, we estimate a $2 billion total opportunity for batteries. We recently announced a collaboration with Essent, one of Netherlands' largest residential energy providers, or REPs, enabling customers to add IQ batteries and participate in Ascent's Smart Steering VPP program. This program is designed to boost self-consumption and lower utility bills. Through the Smart Steering, participating customers may receive fixed monthly compensation of up to €122, depending on the battery size. Ascent intelligently controls charging and discharging to optimize value for the home and the grid, supporting a more reliable energy system. Building on this momentum, we are advancing additional partnerships and expect battery sales in Netherlands to be a growth driver in 2026 and beyond. In France, the residential demand remained muted in Q3. Many households waited for the October 1st VAT cut of 5.5% for sub-9 kW, but its limited scope and dependence on low-carbon panels reduced the impact. Meanwhile, 2025 policy changes have extended payback period, creating a tougher market for installers. We are focusing on self-consumption, where low export incentives strengthen the value proposition for solar plus battery solutions. In Germany, the residential market remained weak in Q3. Lower export value and stop-start incentives have kept many households on the sidelines, softening demand for both solar and batteries. Even so, our performance was relatively stable supported by our partnership with leading installers and the strong uptake of the flex-phase battery, which provides both self-consumption as well as three-phase backup. In the UK, residential solar and storage adoption is stable, driven by time-of-use tariffs, low export rates, and a growing focus on resilience and self-consumption. We are deepening ties with our EPs and supporting them with a robust API platform. In Q3, we also added backup capability for our batteries in UK, which was long overdue and further expanded our resilience offering. In Australia, the residential storage demand is accelerating following the July 2025 battery rebate program, with installers bundling PV and batteries, and the average battery size is increasing as low export rates push self-consumption. Distribution operators are rolling out dynamic export limits and interoperability standards favoring systems with fast controls and three-phase backup. Against this backdrop, we launched the FlexPhase battery in Q3, delivering three-phase backup, as well as flexible power to meet evolving DSO requirements. We also launched IQ8P high-powered microinverters for higher-powered modules, as well as our newest IQ EV chargers, strengthening our position in the strategic market. Let's discuss our Outlook for Q4. We are seeing a further ramp in the U.S. demand in Q4, primarily due to homeowners moving to capture the expiring 25D tax credit before the end of this year. In the first three weeks of October, our U.S. sell-through was up over 20% compared to the Q3 average. We anticipate this elevated activity will continue for much of Q4. We also anticipate that our overall sell-through for the company to be between $350 to $400 million in Q4. However, our revenue guidance is in the range of $310 to $350 million. And for IQ batteries, we expect to ship between 140 and 160 megawatt hours. There are two reasons contributing to this lower revenue guidance. We had $70.9 million of safe harbor revenue pulled in from Q4 to Q3 as customers wanted the product before the U.S. Treasury guidance in Q3. And second, we are reducing shipments of product to the channel in order to destock the channel as we head into 2026. This positions us to enter 2026 with a healthy channel, setting us up for a clean Q1 and beyond. Currently, we are approximately 75% booked. to the midpoint of our Q4 revenue guidance. Safe Harbor opportunities are not yet included in our Q4 guidance, but similar to Q3, they present upside opportunity. We are working closely with several TPO partners on Safe Harbor planning and are well positioned to support both methods of Safe Harbor, the 5% method as well as the physical work test method based on each partner's preference. Let's look ahead. to 2026. While we don't typically guide beyond the next quarter, we are sharing our preliminary views to frame expectations. For Q1 26, we anticipate a larger than normal seasonal decline following the expiration of 25D tax credit and estimate a company revenue of $250 million. We view Q1 as a cycle trough with conditions improving through the rest of the year. Why are we constructive on the balance of the year? There are three external drivers that could support recovery. First, the U.S. power prices are rising about 5% this winter with additional increases expected in 2026. Second, interest rates are declining, easing affordability. Third, new and attractive financing solutions are entering the market to help offset the loss of 25B. Taken together, these drivers could enable a second half of 2026 rebound and set the stage for growth. In addition, we see several Enphase-specific revenue drivers that are expected to fuel growth through 2026. Our fourth-generation battery, the IQ Battery 10C, is positioned to capture share through lower installation costs for backup. We are now entering the 480-volt commercial solar market with our IQ9 and GaN microinverter, which we expect to ship this December and ramp in 2026. We are also leveraging strategic partnerships to capture the battery retrofit opportunity in Netherlands. Our newest IQ EV chargers and upcoming IQ bi-directional EV chargers are poised to expand our market. And our fifth generation battery system paired with IQ9 residential microinverters will drive a step change reduction in system cost in both the US and Europe. While there is uncertainty around 2026, We remain confident in our ability to execute and deliver growth across these vectors. Now let's talk about financing. The industry is moving towards the TPO model in 2026. Enphase supports all the major TPOs today. We are further strengthening these relationships through safe harbor and tax equity support, providing domestic content as well as FEOC compliant products, offering O&M services, solar graph integration, and helping to implement innovative financing solutions. Looking ahead, we see a strong trend developing in the market towards prepaid lease offerings, which can provide homeowners with the option of ownership after five years. In this model, the TPO captures the 48e tax credit and in turn offers the homeowner an attractive lease prepayment or a lower monthly payment when paired with a loan. This structure makes the economics similar to today's solar loan economics with the 30% 25D tax credit. Furthermore, financing providers like the Enphase system value proposition, which includes not only the Enphase equipment, but support for operations and maintenance, as well as SolarGraph integration to offer an overall attractive package to consumers. We believe the TPO market is poised to growth in 26 and see multiple ways for Enphase to support this growth. Let's talk about products, starting with IQ batteries. In August, we began shipping our IQ battery 10C, supplied by our manufacturing facilities in the US, delivering domestic content, which is significant value in the growing TPO market. As a reminder, we introduced our fourth generation battery towards the end of June. The fourth generation battery stands out for its smaller footprint, enhanced features, easy installation, and reliability. It delivers 30% more energy density, occupies 62% lesser wall space, and reduces installation cost of backup compared to our prior products. In addition, our fourth generation battery system also includes the IQ Meter Caller, which simplifies backup, and IQ Combiner 6C, which seamlessly integrates solar, batteries, EV chargers, and load control. The IQ Meter Caller is now approved by 39 U.S. utilities, and that list is growing every week. We are making strong progress in building partnerships with REPs as well as VPP operators around the world that are looking for flexible distributed energy capacities. Homeowners can receive attractive compensation for installing Enphase batteries as part of these programs. In addition to the Ascent program I mentioned earlier, we signed multiple new contracts with the utilities, including one recently with San Diego Community Power. With advanced APIs, our batteries seamlessly integrate into VPPs in regulated markets like the U.S. and participate in wholesale energy markets in deregulated regions such as Europe and Australia. We are actively engaged currently in over 53 VPP programs worldwide, and this is growing at a strong pace. Let's talk about microinverters. In September, we opened U.S. pre-orders for the IQ9N commercial microinverter, our first microinverter powered by gallium nitride or GAN. We expect to begin shipping the product in December. As I said earlier, we believe IQ9 marks a major leap in performance and platform flexibility, and most importantly, unlocks a 2-gigawatt market opportunity by enabling us to service 480-volt three-phase commercial systems in the USA for the first time. This represents an approximately $400 million total addressable market for Enphase, which we believe will help drive additional revenue in 2026 and beyond. IQ9 microinverters are expected to meet Fiat compliance as well as domestic content right off the bat, offering a powerful and reliable alternative in a market still dominated by Chinese equipment. Why does GaN matter? GaN replaces legacy silicon power devices to deliver faster switching, better thermal performance, and higher reliability. We have invested over five years in the semiconductor technology, and this rollout sets a new trajectory for cost and performance across our next generation microinverters, batteries, bidirectional EV chargers, and more. Let's talk about EV charging. We are now shipping our latest and greatest IQ EV Charger 2 across 18 European countries as well as Australia and New Zealand. The charger supports up to 22 kilowatts three-phase charging and works as a standalone unit or fully integrated with N-phase solar and batteries. We have opened U.S. pre-orders and expect Q4 shipments into the U.S. with further expansion planned in additional European markets and India. Let me share an update of our IQ bi-directional EV charger expected to launch in mid-2026. We showcase this 11-kilowatt solution powered by three high-performance GAN-based microinverters of 3.84 kilowatts each at the recent RE Plus trade show. The IQ bi-die EV charger only needs to be paired with the IQ meter collar. For a simple, powerful configuration that enables home backup and grid services. Together, these two components offer one of the lowest cost and simplest ways to provide whole home backup, even without rooftop solar or home batteries. Homeowners can just start with this configuration and expand over time by adding in-phase solar and batteries to build a full energy system. Let's now switch to Solar Graph, our all-in-one platform, purpose-built for installers. We have been rolling out major enhancements, including seamless integration with TPO partners, an express editor that allows installers to quickly adjust proposals on the spot, a powerful custom tariff builder, advanced installer management tools, and a simplified AI-driven design experience. We believe these updates make it easier for installers service more homeowners at the kitchen table with greater flexibility, speed, and financial transparency. We plan to expand the SolarGraph platform into additional markets and countries and introduce new features to support productivity, sales velocity, and customization for solar installers. Let me conclude. There is a significant change occurring in our markets. The loss of the 25D tax credit is a near-term headwind that will impact our results in early 2026, but we believe there is also tremendous positive change that is bolstering the long-term outlook for our business. We are entering an interest rate reduction cycle, which historically has been the catalyst for residential solar sector. Power price outlooks are surging on the back of AI power demand as well as overall electrification growth. Utilities are struggling to keep up with this demand, creating bottlenecks and price inflation across the grid that are poised to accelerate. We provide homeowners and commercial businesses with an easy off-ramp from this price inflation with a solution that can be interconnected in 90 days. The U.S. residential and commercial rooftop solar industry brings on merely two gigawatts of new power interconnected to the grid every quarter with the 48E tax credit expanding to more customers in 2026 through innovative financing solutions like the prepaid leases. We see an attractive value proposition for solar driving recovery in the second half of 2026 and beyond. We are laser focused on the revenue drivers we can control. Growing battery sales with our fourth-generation battery. Expanding into the 480-volt commercial market with GaN microinverters. Capitalizing on battery retrofits to our solar install base in Netherlands. Ramping our newest EV chargers now and the BiDi EV chargers, which will launch later in 2026. And last, launching our fifth-generation residential batteries along with IQ9 residential microinverters to reduce system costs significantly for residential solar for both U.S. as well as Europe. As always, we remain focused on operational excellence, product reliability and quality, and customer service, delivering best-in-class solutions for our long-term growth markets. With that, I will turn the call over to Mandy for her review of our financial results. Mandy?