Enphase Energy, Inc.

Good afternoon, everyone, and welcome to Enphase Energy's second quarter 2026 financial results conference 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 and then one on your touchtone phones. To withdraw your questions, you may press star and two. Please also note this event is being recorded. At this time, I'd like to turn the floor over to Zach Freedman with Enphase. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's second quarter 2026 results. On today's call are Badri Kothandaraman, our President and Chief Executive Officer, Mandy Yang, our Chief Financial Officer, and Raghu Belur, our Chief Products Officer. After the market closed today, Enphase issued a press release announcing the results for its second quarter, ended June 30, 2026. During this conference call, Enphase management will make forward-looking statements, including but not limited to statements related to our expected future 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 in existing and new markets, including the TPO market, Thank you for joining us. Thank you for joining us today to discuss our second quarter

We reported quarterly revenue of $291.9 million, shipped 1.59 million microinverters and 113.8 MWh of batteries, and generated free cash flow of $25.9 million. Our Q2 revenue included $84.3 million of Safe Harbor revenue. We exited the quarter with channel inventory normal for batteries and slightly elevated for microinverters. On a gap basis, we delivered gross margin of 60%, operating expense of 42.3%, and operating income of 17.7%, all as a percentage of revenue. On a non-gap basis, we delivered gross margin of 46.8%, operating expense of 27.3%, and operating income of 19.4% all as a percentage of revenue. Mandy will cover the financials later in the call. Our global customer service NPS was 80% in the second quarter as compared to 82% in the first quarter. Our average call wait time remained approximately two minutes. We also made our AI assistant available to 1.5 million homeowners worldwide. This gives our customers faster access to personalized system-specific support and making their energy systems easier to understand and manage, ultimately reducing the number of costs. Let's cover operations. In the second quarter, we shipped approximately 1.58 million U.S.-made microinverters and battery inverters from our Texas and South Carolina manufacturing facilities and booked and the associated 45X production tax credits. We also shipped 43 MWh of IQ batteries from our Texas facility in the second quarter. We offer IQ batteries that meet domestic content and FIOC requirements, helping lease and PPA customers qualify for ITC bonuses. Let's now cover revenue and regional performance. Our global Q2 revenue increased 3% compared to Q1. Our global sell-through was approximately flat as compared to Q1 as growth in Europe offset the softness in the U.S. Our revenue mix was 78% from the U.S. and 22% from international markets. In the U.S., revenue declined 3% sequentially. Safe Harbor revenue increased to $84.3 million in Q2 as compared to $34.5 million in Q1. The U.S. revenue declined primarily due to us undershipping into the channel. Our U.S. sell-through in Q2 decreased 7% as compared to Q1. Excluding one-time orders in Q1 that did not recur in Q2, the sell-through was approximately flat sequentially. Our Q2 26 sell-through declined 34% as compared to one year ago. in Q2-25, reflecting continued pressure from higher interest rates and transition following the expiration of the 25D tax credit. Third-party market reports suggest that the broader U.S. residential solar market has stabilized with industry-wide permits in June increasing 4% from May and upstream sales activity rising 5%. Both remain about 30% below prior year levels. Higher electricity cost markets are performing better while several sun-belt states remain under pressure. The stronger industry-wide signals are for storage and commercial solar. National residential battery attachment remains near 40% with materially higher levels in key markets, while the U.S. commercial battery Solar permit activity increased 36% year-on-year in June. Taken together, these third-party data points suggest that the next phase of U.S. market growth will be shaped by storage economics, the commercial demand, financial availability, and utility rates. In Europe, our revenue increased 35%, Thank you very much. to expand over time into the broader home energy system including solar, EV charging, and VPP. In the Netherlands, our battery activations increased approximately 102% from the first quarter as rising export penalties and the planned phase-out of net metering at the end of 2026 strengthened self-consumption. Lower feed-in tariffs are similarly shifting the market towards self-consumption and driving greater interest in batteries, particularly with new solar installations. The battery activations in France increased approximately 34% sequentially. In Germany, the growth was broad-based with both micro-inverter and battery activations increasing approximately by 35% and 27% respectively. We are intensifying our focus on battery retrofits in both Netherlands and France where we have a combined installed base of nearly 900,000 Enphase customers. Building on the success of our initial programs, we have increased the cadence of homeowner events and direct marketing campaigns. Our newly established Insight sales team, supported by an improved lead management platform, is helping convert this demand into revenue. We also showcased our fifth generation battery at InterSolar Munich, where customer feedback was positive and we expect initial shipments before the end of this year. Let's now discuss our outlook for the third quarter. We expect revenue of $290 to $320 million, representing approximately 5% growth at the midpoint. Our Q3 revenue guidance includes approximately $75 million of safe harbor revenue. We are currently over 70% booked to the midpoint of our guidance. We expect global sell-through in Q3 to increase 10% as compared to Q2. Distributors remain cautious amid broader macroeconomic uncertainty including interest rates and our guidance assumes Thank you very much. Further targeted pricing actions as necessary to improve system economics and support demand. Turning to Safe Harbor, we have executed year-to-date agreements with third-party owners, totaling approximately $1.1 billion, $202 million under the 5% ITC Safe Harbor method, and $878.6 million under the physical work test These agreements provide two important benefits. They secure meaningful multi-year volume for our micro-inverter and accessory business. And second, they create a strong foundation for future battery attach opportunities as these systems are installed from 2028 through 2030. Moving to financing, Propel is entering a new phase of growth. Just to remind you, Propel is a TPO offering from SolSource Solutions that combines end-phase equipment, financing, loan financing provided by TriBeam Financial through the Concert Finance Platform, and national distribution through Green Tech Renewables. Purpose-built for the long tail of installers, Propel has expanded from four states to six states with recent launches in Pennsylvania and Colorado. and plans to reach a total of 12 states during the third quarter. Installer participation has grown to about 290. The propeller originations are running at approximately 200 per week with battery attachment at roughly 75%. We expect this will begin to grow again as installers in new states start to ramp up. SolSource is targeting 500 originations per week by the end of the year and scaling by securing sufficient warehousing capacity and tax credit buyers. In today's higher interest rate environment, Propel offers homeowners and installers a compelling alternative to conventional solar loans and can help restore a meaningful portion of the cash and loan market affected by the 25D expiry. Let's talk about products, starting with IQ batteries. We showcased our fifth-generation IQ battery G5 at Intersolar Munich in June, where it received a strong response. Built from stackable AC-coupled 5-kilowatt-hour modules that can scale up to 30 kilowatt-hours in one stack, the G5 uses 100-ampere-hour prismatic cells and is designed to deliver 50% Thank you very much. should make it highly competitive across the US, Europe, and Australia. We are also making good progress on our commercial battery called IQVault, targeted for both three-phase 208 and 480 volt market. The first product called IQVault 80 is an 80 kilowatt-hour battery, again, three-phase 480 and 208 volts with 40 kilowatts of continuous power. Basically, it is a two-hour battery. Each outdoor cabinet uses five field-serviceable 16-kilowatt-hour LFP modules built with 314-ampere-hour prismatic cells, and up to 25 cabinets can scale the system to 2-megawatt-hours. The 480-volt three-phase configuration is designed for larger commercial buildings, while the 208-volt three-phase configuration will address Small Commercial and Multifamily Properties, including applicable California projects driven by Title 24 requirements. The distributed architecture provides module-level fire suppression and is designed for self-consumption, peak shaving, time of use, BPP, and backup. We have completed the functional system demonstration in the last quarter, and we expect to open pre-orders soon. with initial shipments planned for Q127. Turning to microinverters, we launched our GAN-based IQ9N residential microinverter across the U.S. and key European markets in June, followed by Australia and New Zealand earlier this month. We are also gaining traction in the U.S. commercial market with several promising national opportunities advancing with large retail customers. During the second quarter, we began shipping the IQ9S3P microinverter, our highest power microinverter till date, 548 watts, based on gallium nitride, GaN, for 480 volt systems. This is designed to support solar panels up to 770 watts. With U.S. manufacturing, and Fiat Compliant Products, we believe our commercial business is well positioned for continued growth. We recently opened pre-orders for our smart thermostat, a new control point for the Enphase energy system. By bringing HVAC into the system, Enphase can optimize one of the home's largest energy loads alongside solar and batteries to improve savings, preserve backup capacity and support VPP. The integrated display on the device also gives homeowners a simple way to view their solar, battery, and home power live from inside the home. We expect shipments next month. Moving on to EV charging. We are making strong progress on the DC-based IQ bidirectional EV charger, which we showcased at Intersolar Munich. Built on our GaN power platform, this is designed to support both 400 volt DC and 800 volt DC EV architectures and deliver up to 11.5 kilowatts of bidirectional power. ISO standard 15118-20 enables standardized communication between the vehicle and the charger while our expertise in utility interconnection, grid code compliance and distributed energy management supports V2H backup, V2G, and use cases like green charging. We are collaborating with three leading automotive OEMs in the U.S. and one in Europe with additional engagements underway. Subject to the successful completion of applicable compliance testing, we expect to begin pilot shipments in the fourth quarter alongside vehicle launches from one U.S. OEM and one European OEM. Finally, let me provide a more detailed update on our IQ Solid State Transformer or IQSST. The rapid build-out of AI infrastructure is reshaping data center power architecture as rack densities rise from approximately 150 kilowatts today towards one megawatt and beyond. Delivering power at that scale will require a more fundamental will require a fundamentally more efficient, responsive, and reliable way to move medium voltage power directly to the computer app. IQ-SST is designed to meet that need by converting 13.8 kV or 34.5 kV medium voltage AC directly to 800 volt DC through a modular single stage architecture. At the core of the platform is our IQSST power module, which utilizes our predictive control enabled by the custom silicon, GAN, which enables high-frequency switching, and innovation in medium voltage transformer design. Built on more than 20 years' experience in distributed power electronics, we are targeting approximately 98.5% efficiency, 5 9ths reliability, and Sub Millisecond Response Time. That response time is a key differentiator. AI workloads can create rapid swings in power demand and IQSST is designed to respond in real time to help stabilize the load as seen by the data center power system. This could allow most of the energy storage to be centralized in a BESS located in the data center's black space rather than placed beside every compute rack, freeing up valuable white space. This configuration would utilize a second SST for the BESS, effectively doubling our data center opportunity. For customers that still require storage near the rack, the same platform can also support a DC-DC configuration that charges and discharges a local high C-rate battery and many more. can be as important as product performance. Our new and existing customer engagements continue to deepen. We have advanced a few of these opportunities to the RFI and RFP stages representing potential demand totaling multiple gigawatts. These engagements are directly shaping our roadmap across power level, input voltage, footprint, cooling, battery connectivity, and serviceability. Importantly, we have been able to address evolving customer requirements without changing the fundamental IQ SSD power module, underscoring the flexibility of our platform. We have also made substantial technical progress over the last three months towards a fully working system later this year. Our team has now grown to about 120 people. We have begun testing the second revision of the IQSST power module and the results give us confidence that the next revision can become our production candidate. We have completed the build-out of our medium voltage lab and validated the medium voltage transformer design. We are now optimizing it for manufacturability and cost. This work has already generated meaningful IT, particularly around the transformers. At the system level, our power modules are connected in series on the medium voltage input side and in parallel on the regulated 800 volt DC output side. Managing stability and balancing power across the series stack are mission critical. Through modeling and hardware experimentation, we have demonstrated that our proprietary droop control architecture can robustly manage the series stack and maintain balanced power across the modules. Specifically, we have demonstrated 15 IQ SST power modules operating in series and are now advancing the complete first-generation system, including the thermal architecture, rack-level controls, and mechanical design. The first-generation platform is designed to scale from 1.25 MW to 2.5 MW across 13.8 kV and 34.5 kV configurations. We remain on track for a fully working system later this year, customer pilots beginning in 2027 and commercial shipments in 2028. Beyond AI data centers, we are evaluating the broader applicability of the IQ SSD platform across utility-scale solar, storage, and DC fast charging. In each of these markets, we believe IQ SSD can connect directly to medium voltage AC. Eliminating the need for a conventional transformer and simplifying the overall power architecture. This can reduce the number of stages, system complexity, footprint and cost while preserving the same core advantages of high efficiency, fast control and modular redundancy. While these applications are at an earlier stage, we believe that the same underlying platform can ultimately support a much broader set of power conversion markets. Let me conclude. Our next phase of growth starts with residential energy systems. Across the U.S. and Europe, IQ9 microinverters, our upcoming fifth-generation battery, and the IQ bidirectional EV charger significantly expand the value of the Enphase home. Together, they position us to win new battery-led systems, deepen engagement with our install base, and address standalone bidirectional EV charging. In the U.S., prepaid lease programs like Propel add an important financing lever to support that growth. Beyond residential, we are expanding into small commercial energy systems. Our three-phase microinverter portfolio now spans both 208 volts and 480 volts applications. The IQ board with the 80 kilowatt hour battery adds commercial storage and our EV charging portfolio broadens the opportunity further. Together these products give us the foundation for an integrated small commercial energy system spanning solar, batteries, EV charging, controls, and energy management. The next frontier is data center infrastructure that we talked about with IQ SST. and the same architecture can extend into utility scale solar, battery and high power DC fast charging. These markets require the same fundamental capabilities. Direct medium voltage connectivity, high efficiency, fast control, modular redundancy, compact design and competitive system cost. Our expansion from residential to commercial, two data centers and ultimately two utility scale is built on the same core technology foundation. Single-stage power conversion, custom silicon-enabled control, high-frequency GAN switching, and innovation in transformer design. We believe this position is in phase to compound growth across progressively larger markets while leveraging the same differentiated architecture, technology, and execution capabilities that established our leadership in residential energy systems. With that, I will turn the call over to Mandy for her review of her financial results. Mandy.