UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________
FORM 8-K
________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 27, 2020
________________________________________________
(Exact name of registrant as specified in its charter)
________________________________________________
| (State or other Jurisdiction of Incorporation) | (Commission File No.) | (IRS Employer Identification No.) | ||||||||||||
(Address of principal executive offices, including zip code)
(877 ) 774-7000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On October 27, 2020, Enphase Energy, Inc. (the “Company”) issued a press release announcing the Company’s financial results for the third quarter ended September 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report.
The information in Item 2.02 of this Form 8-K and the exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and shall not be incorporated by reference in any registration statement or other document filed under the Securities Act or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filings, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d)Exhibits.
| Exhibit Number | Description | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: | October 27, 2020 | ENPHASE ENERGY, INC. | |||||||||
| By: | /s/ Eric Branderiz | ||||||||||
| Eric Branderiz | |||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||
Exhibit 99.1
Enphase Energy Reports Financial Results for the Third Quarter of 2020
FREMONT, Calif., Oct. 27, 2020 - Enphase Energy, Inc. (NASDAQ: ENPH), a global energy management technology company and the world’s leading supplier of microinverter-based solar-plus-storage systems, announced today financial results for the third quarter of 2020, which included the summary below from its President and CEO, Badri Kothandaraman.
We reported revenue of $178.5 million in the third quarter of 2020, along with a record 41.0% for non-GAAP gross margin. We shipped approximately 478 megawatts DC, or 1,442,743 microinverters.
The financial highlights for the third quarter of 2020 are listed below. The GAAP numbers include an approximate $23 million refund on tariffs which were previously paid on microinverters imported to the U.S. from China. The non-GAAP numbers do not include the tariff refund:
•Revenue of $178.5 million
•Cash flow from operations of $67.5 million; ending cash balance of $661.8 million
•GAAP gross margin of 53.2%; record non-GAAP gross margin of 41.0%
•GAAP operating income of $51.8 million; non-GAAP operating income of $43.7 million
•GAAP net income of $39.4 million; non-GAAP net income of $41.8 million
•GAAP diluted earnings per share of $0.28; non-GAAP diluted earnings per share of $0.30
Our revenue and earnings for the third quarter of 2020 are provided below, compared with those of the prior quarter and the year ago quarter:
(In thousands, except per share data and percentages)
| GAAP | Non-GAAP | ||||||||||||||||||||||||||||||||||
| Q3 2020 | Q2 2020 | Q3 2019* | Q3 2020 | Q2 2020 | Q3 2019* | ||||||||||||||||||||||||||||||
| Revenue | $ | 178,503 | $ | 125,538 | $ | 180,057 | $ | 178,503 | $ | 125,538 | $ | 180,057 | |||||||||||||||||||||||
| Gross margin | 53.2 | % | 38.5 | % | 35.9 | % | 41.0 | % | 39.6 | % | 36.2 | % | |||||||||||||||||||||||
| Operating expenses | $ | 43,222 | $ | 37,533 | $ | 31,000 | $ | 29,571 | $ | 26,024 | $ | 25,037 | |||||||||||||||||||||||
| Operating income | $ | 51,759 | $ | 10,854 | $ | 33,706 | $ | 43,675 | $ | 23,700 | $ | 40,166 | |||||||||||||||||||||||
| Net income (loss) | $ | 39,362 | $ | (47,294) | $ | 31,099 | $ | 41,760 | $ | 23,549 | $ | 39,466 | |||||||||||||||||||||||
| Basic EPS | $ | 0.31 | $ | (0.38) | $ | 0.25 | $ | 0.33 | $ | 0.19 | $ | 0.32 | |||||||||||||||||||||||
| Diluted EPS | $ | 0.28 | $ | (0.38) | $ | 0.23 | $ | 0.30 | $ | 0.17 | $ | 0.30 | |||||||||||||||||||||||
* Revenue for the third quarter of 2019 of $180.1 million included approximately $8.0 million of safe harbor revenue.
Our non-GAAP gross margin increased to 41.0% from 39.6% in the second quarter of 2020, driven by disciplined pricing and cost management. Non-GAAP operating expenses increased to $29.6 million in the third quarter of 2020, compared to $26.0 million in the prior quarter, primarily due to an increase in our engineering and sales headcount to support innovation and growth. Non-GAAP operating income was $43.7 million, compared to $23.7 million in the prior quarter.
We exited the third quarter with $661.8 million in cash and generated $67.5 million in cash flow from operations. Inventory was $37.5 million at the end of the third quarter of 2020, compared to $31.2 million at the end of the second quarter of 2020. The sequential increase in inventory was driven by the purchase of battery cell packs to support the increased shipments of Encharge™ storage systems in the fourth quarter of 2020, along with the expected increase in microinverter shipments.
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We started production shipments of our Encharge storage systems to customers in North America in July and ramped volume throughout the third quarter of 2020. The feedback from both installers and homeowners has been positive. Installers like the system’s modularity and having a single provider of a rooftop power electronics and battery storage systems, while homeowners value the product’s differentiated functionality, industrial design, reliability, safety, and ability to get on and off-grid from a smartphone app. The Encharge storage system features Enphase Power Start™ technology, allowing homeowners to start motor-driven appliances, such as air conditioners and pumps, in off-grid mode with optimal system size. In addition, the Enlighten™ energy management software platform gives homeowners the power of insight into the performance of their solar and storage systems. We are excited about the ability to offer our customers peace of mind with our energy independent solution.
Demand for our core microinverter products rebounded strongly in the third quarter of 2020. We experienced record sell-through from distribution to installers, resulting in channel inventory slightly below the low end of our typical target range. Sales to distributors improved significantly and was broad-based geographically. We were also pleased to report our first quarter of significant revenue from the sale of Encharge storage systems.
BUSINESS HIGHLIGHTS
On Aug. 17, 2020, Enphase Energy announced a strategic partnership with Sonnenstromfabrik (CS Wismar GmbH), one of Europe’s most modern, high-quality manufacturers of solar modules, to develop the first high-efficiency Enphase Energized™ AC module (ACM) utilizing the Enphase IQ 7+™ microinverters for the European residential solar markets.
On Aug. 26, 2020 Enphase Energy announced that Solargain, one of Australia's largest and most experienced solar energy providers, selected Enphase microinverters as the premium inverter solution for its turnkey retail solar offerings in Australia. Solargain was selected by IKEA as its Australian partner to support IKEA's in-store and online solar offering and Australian consumers purchasing a Solargain-IKEA solar system can select Enphase IQ 7+ microinverters.
On Aug. 31, 2020, Enphase Energy announced that Enphase IQ 7A™ microinverters for high-power monofacial and bifacial solar modules are shipping to customers in Australia and Europe. IQ 7A microinverters, support up to 450W high-power modules, targeting residential and commercial solar applications.
On Sept. 21, 2020, Enphase Energy announced it entered into partnerships with three solar distribution companies in Belgium and the Netherlands– Carbomat Group, Libra Energy and Solarclarity, further strengthening Enphase’s presence in the European solar market.
On Oct. 20, 2020, Enphase Energy announced that SunCool Energy has started offering the Enphase Encharge storage system to customers in South Florida. Encharge storage systems feature Enphase Ensemble™ energy management technology, which powers the world’s first fully integrated, grid-agnostic microinverter-based solar-plus-storage system.
FOURTH QUARTER 2020 FINANCIAL OUTLOOK
For the fourth quarter of 2020, Enphase Energy estimates both GAAP and non-GAAP financial results as follows:
•Revenue to be within a range of $245.0 million to $260.0 million; revenue guidance does not include any safe harbor shipments
•GAAP gross margin to be within a range of 37.0% to 40.0%, excluding the recovery of the remaining $16.0 million tariff refund that has not yet been approved; non-GAAP gross margin to be within a range of 38.0% to 41.0%, excluding tariff refund and stock-based compensation expenses
•GAAP operating expenses to be within a range of $51.0 million to $54.0 million, including $16.0 million estimated for stock-based compensation expenses and acquisition related amortization
•Non-GAAP operating expenses to be within a range of $35.0 million to $38.0 million, excluding $16.0 million estimated for stock-based compensation expenses and acquisition related amortization
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Use of Non-GAAP Financial Measures
The Company has presented certain non-GAAP financial measures in this press release. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States of America, or GAAP. Reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure can be found in the accompanying tables to this press release. Non-GAAP financial measures presented by the Company include non-GAAP gross profit, gross margin, operating expenses, income from operations, net income and net income per share.
These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same captions and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP. As such, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company uses these non-GAAP financial measures to analyze its operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. The Company believes that these non-GAAP financial measures reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.
As presented in the “Reconciliation of Non-GAAP Financial Measures” tables in the accompanying press release, each of the non-GAAP financial measures excludes one or more of the following items for purposes of calculating non-GAAP financial measures to facilitate an evaluation of the Company’s current operating performance and a comparison to its past operating performance:
Stock-based compensation expense. The Company excludes stock-based compensation expense from its non-GAAP measures primarily because they are non-cash in nature. Moreover, the impact of this expense is significantly affected by the Company’s stock price at the time of an award over which management has limited to no control.
Tariff refunds. This item represents approved tariff refunds by the U.S. Customs and Border Protection that qualify for the tariff exclusion on Chinese imported microinverter products that fit the dimensions and weight limits within a Section 301 Tariff exclusion under U.S. note 20(ss)(40) to subchapter III of chapter 99 of the Harmonized Tariff Schedule of the United States. Approved refunds relate to tariffs previously paid from September 24, 2018 to March 31, 2020 and are excluded from the non-GAAP measures as the refunds are non-recurring in nature for tariff costs incurred in the past and are not reflective of the Company’s ongoing financial performance.
Restructuring and asset impairment charges. The Company excludes restructuring charges due to the nature of the expenses being unplanned and arising outside the ordinary course of continuing operations. These costs primarily consist of fees paid for restructuring-related management consulting services, cash-based severance costs and modification of stock-based compensation related to workforce reduction actions, asset write-downs of property and equipment and lease loss reserves, and other contract termination costs resulting from restructuring initiatives.
Acquisition related expenses and amortization. This item represents expenses incurred related to the Company’s acquisition of SunPower’s microinverter business, which are non-recurring in nature, and amortization of acquired intangible assets, which is a non-cash expense. Acquisition related expenses and amortization of acquired intangible assets are not reflective of the Company's ongoing financial performance.
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Non-recurring debt prepayment fees and non-cash interest. This item consists primarily of amortization of debt issuance costs, accretion of debt discount and non-recurring debt settlement costs, because these expenses does not represent a cash outflow for the Company except in the period the financing was secured or when the financing was settled, and such amortization expense or settlement of debt costs is not reflective of the Company’s ongoing financial performance.
Change in fair value of derivatives. This item is reflected in other income (expense), net and represents changes in fair value of the conversion option in the convertible notes due 2025, as well as the convertible note hedge and warrant transactions, which is non-cash in nature and is not reflective of the Company’s ongoing financial performance.
Non-GAAP income tax adjustment. This item represents the amount adjusted to the Company’s GAAP tax provision or benefit to present the non-GAAP tax amount based on cash tax expense and reserves.
Conference Call Information
Enphase Energy will host a conference call for analysts and investors to discuss its third quarter 2020 results and fourth quarter 2020 business outlook today at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time). The call is open to the public by dialing (877) 644-1284; participant passcode 3662778. A live webcast of the conference call will also be accessible from the “Investor Relations” section of the Company’s website at investor.enphase.com. Following the webcast, an archived version will be available on the website for approximately one year. In addition, an audio replay of the conference call will be available by calling (855) 859-2056; participant passcode 3662778, beginning approximately one hour after the call.
Forward-Looking Statements
This press release contains forward-looking statements, including statements related to Enphase Energy’s expectations as to future financial performance, expense levels, the capabilities, advantages, and performance of our technology and products, our business strategies and anticipated demand for our products. These forward-looking statements are based on the Company’s current expectations and inherently involve significant risks and uncertainties. Enphase Energy’s actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of certain risks and uncertainties including those risks described in more detail in the Company’s most recent Annual Report on Form 10-K and other documents on file with the SEC and available on the SEC’s website at www.sec.gov. Enphase Energy undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in its expectations, except as required by law.
A copy of this press release can be found on the investor relations page of Enphase Energy’s website at investor.enphase.com.
About Enphase Energy, Inc.
Enphase Energy, a global energy technology company, delivers smart, easy-to-use solutions that manage solar generation, storage and communication on one intelligent platform. The Company revolutionized the solar industry with its microinverter technology and produces a fully integrated solar-plus-storage solution. Enphase has shipped more than 30 million microinverters, and approximately 1.3 million Enphase systems have been deployed in more than 130 countries. For more information, visit www.enphase.com.
Enphase Energy®, the Enphase logo, Encharge, Power Start, Enlighten, Enphase Energized, IQ 7+, IQ 7A, Ensemble, and other trademarks or service names are the trademarks of Enphase Energy, Inc. Other names are for informational purposes and may be trademarks of their respective owners.
Contact:
Adam Hinckley
Enphase Energy, Inc.
Investor Relations
ir@enphaseenergy.com
+1-707-763-4784 x7354
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ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| September 30, 2020 | June 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||||||||||||||
| Net revenues | $ | 178,503 | $ | 125,538 | $ | 180,057 | $ | 509,586 | $ | 414,301 | |||||||||||||||||||
| Cost of revenues (1) | 83,522 | 77,151 | 115,351 | 285,543 | 270,937 | ||||||||||||||||||||||||
| Gross profit | 94,981 | 48,387 | 64,706 | 224,043 | 143,364 | ||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||
| Research and development | 15,052 | 13,192 | 11,085 | 40,120 | 29,213 | ||||||||||||||||||||||||
| Sales and marketing | 14,645 | 12,371 | 9,551 | 38,788 | 26,038 | ||||||||||||||||||||||||
| General and administrative | 13,525 | 11,970 | 9,895 | 37,810 | 28,358 | ||||||||||||||||||||||||
| Restructuring charges | — | — | 469 | — | 1,468 | ||||||||||||||||||||||||
| Total operating expenses | 43,222 | 37,533 | 31,000 | 116,718 | 85,077 | ||||||||||||||||||||||||
| Income from operations | 51,759 | 10,854 | 33,706 | 107,325 | 58,287 | ||||||||||||||||||||||||
| Other expense, net | |||||||||||||||||||||||||||||
| Interest income | 110 | 282 | 894 | 1,483 | 1,698 | ||||||||||||||||||||||||
| Interest expense | (5,993) | (5,952) | (2,286) | (15,100) | (7,388) | ||||||||||||||||||||||||
| Other expense, net | (1,031) | 653 | (943) | (1,302) | (6,904) | ||||||||||||||||||||||||
| Change in fair value of derivatives (2) | — | (59,692) | — | (44,348) | — | ||||||||||||||||||||||||
| Total other expense, net | (6,914) | (64,709) | (2,335) | (59,267) | (12,594) | ||||||||||||||||||||||||
| Income before income taxes | 44,845 | (53,855) | 31,371 | 48,058 | 45,693 | ||||||||||||||||||||||||
| Income tax benefit (provision) | (5,483) | 6,561 | (272) | 12,946 | (1,211) | ||||||||||||||||||||||||
| Net income (loss) | $ | 39,362 | $ | (47,294) | $ | 31,099 | $ | 61,004 | $ | 44,482 | |||||||||||||||||||
| Net income (loss) per share: | |||||||||||||||||||||||||||||
| Basic | $ | 0.31 | $ | (0.38) | $ | 0.25 | $ | 0.49 | $ | 0.39 | |||||||||||||||||||
| Diluted | $ | 0.28 | $ | (0.38) | $ | 0.23 | $ | 0.44 | $ | 0.35 | |||||||||||||||||||
| Shares used in per share calculation: | |||||||||||||||||||||||||||||
| Basic | 126,109 | 125,603 | 122,123 | 125,084 | 114,720 | ||||||||||||||||||||||||
| Diluted | 141,820 | 125,603 | 133,611 | 140,207 | 131,114 | ||||||||||||||||||||||||
(1) We sought refunds totaling approximately $39 million plus accrued interest on tariffs previously paid from September 24, 2018 to March 31, 2020 for certain microinverters that qualify for the tariff exclusion on Chinese imported microinverter products that fit the dimensions and weight limits within a Section 301 Tariff exclusion under U.S. note 20(ss)(40) to subchapter III of chapter 99 of the Harmonized Tariff Schedule of the United States. The refund request is subject to review and approval by the U.S. Customs and Border Protection; therefore, we have assessed the probable loss recovery in the three and nine months ended September 30, 2020 is equal to the $23.0 million approved refund requests available to us prior to issuance of the financial statements on October 27, 2020. As of both the three and nine months ended September 30, 2020, we have recorded $23.0 million as a reduction to cost of revenues in our condensed consolidated statements of operations as the approved refunds relate to paid tariffs previously recorded to cost of revenues, therefore, we recorded the corresponding approved tariff refunds as credits to cost of revenues in the current period.
(2) Change in fair value of derivatives of $44.3 million for the nine months ended September 30, 2020, represents changes in fair value of the conversion option in the Notes due 2025, as well as the convertible note hedge and warrant transactions. Initially, conversion of the Notes due 2025 would be settled solely in cash as a result of the Company not having the necessary number of authorized but unissued shares of its common stock available to settle the conversion option of the Notes due 2025 in shares; therefore, the conversion option, convertible note hedge and warrant transactions were classified as derivatives that required marked-to-market accounting. On May 20, 2020, at the Company’s annual meeting of stockholders, the stockholders approved an amendment to its certificate of incorporation to increase the number of authorized shares of the Company’s common stock. As a result, the Company will now be able to settle the Notes due 2025, convertible notes hedge and warrants through payment or delivery, as the case may be, of cash, shares of its common stock or a combination thereof, at the Company’s election. Accordingly, on May 20, 2020, the conversion option, convertible note hedge and warrant transactions were remeasured at fair value and were then reclassified to additional paid-in-capital in the condensed consolidated balance sheet in the second quarter of 2020 and are no longer remeasured as long as they continue to meet the conditions for equity classification.
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ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| September 30, 2020 | December 31, 2019 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 661,792 | $ | 251,409 | |||||||
| Restricted cash | — | 44,700 | |||||||||
| Accounts receivable, net | 122,386 | 145,413 | |||||||||
| Inventory | 37,535 | 32,056 | |||||||||
| Prepaid expenses and other assets | 28,521 | 26,079 | |||||||||
| Total current assets | 850,234 | 499,657 | |||||||||
| Property and equipment, net | 35,187 | 28,936 | |||||||||
| Operating lease, right of use asset, net | 14,487 | 10,117 | |||||||||
| Intangible assets, net | 26,839 | 30,579 | |||||||||
| Goodwill | 24,783 | 24,783 | |||||||||
| Other assets | 51,998 | 44,620 | |||||||||
| Deferred tax assets, net | 88,812 | 74,531 | |||||||||
| Total assets | $ | 1,092,340 | $ | 713,223 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 48,148 | $ | 57,474 | |||||||
| Accrued liabilities | 52,203 | 47,092 | |||||||||
| Deferred revenues, current | 41,738 | 81,783 | |||||||||
| Warranty obligations, current | 10,760 | 10,078 | |||||||||
| Debt, current | 103,670 | 2,884 | |||||||||
| Total current liabilities | 256,519 | 199,311 | |||||||||
| Long-term liabilities: | |||||||||||
| Deferred revenues, noncurrent | 115,757 | 100,204 | |||||||||
| Warranty obligations, noncurrent | 33,019 | 27,020 | |||||||||
| Other liabilities | 14,387 | 11,817 | |||||||||
| Debt, noncurrent | 256,452 | 102,659 | |||||||||
| Total liabilities | 676,134 | 441,011 | |||||||||
| Total stockholders’ equity | 416,206 | 272,212 | |||||||||
| Total liabilities and stockholders’ equity | $ | 1,092,340 | $ | 713,223 | |||||||
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ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| September 30, 2020 | June 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||||||||||||
| Net (loss) income (1) | $ | 39,362 | $ | (47,294) | $ | 31,099 | $ | 61,004 | $ | 44,482 | |||||||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||||||||||||||||
| Depreciation and amortization | 4,765 | 4,141 | 3,857 | 12,750 | 11,551 | ||||||||||||||||||||||||
| Provision for doubtful accounts | 69 | 81 | 201 | 254 | 408 | ||||||||||||||||||||||||
| Non-cash interest expense | 5,422 | 5,372 | 1,907 | 13,516 | 4,173 | ||||||||||||||||||||||||
| Financing fees on extinguishment of debt | — | — | — | — | 2,152 | ||||||||||||||||||||||||
| Fees paid for repurchase and exchange of convertible notes due 2023 | — | — | — | — | 6,000 | ||||||||||||||||||||||||
| Stock-based compensation | 14,399 | 12,300 | 5,776 | 34,214 | 14,000 | ||||||||||||||||||||||||
| Change in fair value of derivatives | — | 59,692 | — | 44,348 | — | ||||||||||||||||||||||||
| Deferred income taxes | 5,060 | (7,067) | — | (14,507) | — | ||||||||||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||||||||||||||
| Accounts receivable | (32,633) | 6,529 | (37,035) | 23,533 | (56,139) | ||||||||||||||||||||||||
| Inventory | (6,349) | 3,430 | (10,137) | (5,479) | (13,964) | ||||||||||||||||||||||||
| Prepaid expenses and other assets | (917) | (4,525) | 934 | (10,451) | (8,634) | ||||||||||||||||||||||||
| Accounts payable, accrued and other liabilities (1) | 26,189 | (13,323) | 1,851 | (9,200) | 18,656 | ||||||||||||||||||||||||
| Warranty obligations | 5,872 | 406 | 1,631 | 6,681 | 3,330 | ||||||||||||||||||||||||
| Deferred revenues | 6,262 | 5,689 | 4,877 | (24,509) | 10,781 | ||||||||||||||||||||||||
| Net cash provided by operating activities | 67,501 | 25,431 | 4,961 | 132,154 | 36,796 | ||||||||||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||||||||||||
| Purchases of property and equipment | (3,903) | (4,451) | (4,192) | (11,707) | (7,368) | ||||||||||||||||||||||||
| Net cash used in investing activities | (3,903) | (4,451) | (4,192) | (11,707) | (7,368) | ||||||||||||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||||||||||||||
| Issuance of convertible notes, net of issuance costs | — | (591) | (559) | 312,420 | 127,481 | ||||||||||||||||||||||||
| Purchase of convertible note hedges | — | — | — | (89,056) | (36,313) | ||||||||||||||||||||||||
| Sale of warrants | — | — | — | 71,552 | 29,819 | ||||||||||||||||||||||||
| Fees paid for repurchase and exchange of convertible notes due 2023 | — | — | — | — | (6,000) | ||||||||||||||||||||||||
| Principal payments and financing fees on debt | (636) | (485) | (536) | (2,269) | (45,658) | ||||||||||||||||||||||||
| Proceeds from exercise of equity awards and employee stock purchase plan | (138) | 2,867 | 303 | 4,708 | 2,925 | ||||||||||||||||||||||||
| Payment of withholding taxes related to net share settlement of equity awards | (8,390) | (9,385) | (2,348) | (52,042) | (4,438) | ||||||||||||||||||||||||
| Net cash provided by (used in) financing activities | (9,164) | (7,594) | (3,140) | 245,313 | 67,816 | ||||||||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 104 | 24 | (542) | (77) | (435) | ||||||||||||||||||||||||
| Net increase in cash and cash equivalents | 54,538 | 13,410 | (2,913) | 365,683 | 96,809 | ||||||||||||||||||||||||
| Cash, cash equivalents and restricted cash—Beginning of period | 607,254 | 593,844 | 205,959 | 296,109 | 106,237 | ||||||||||||||||||||||||
| Cash and cash equivalents—End of period | $ | 661,792 | $ | 607,254 | $ | 203,046 | $ | 661,792 | $ | 203,046 | |||||||||||||||||||
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(1) As of September 30, 2020, we have received $16.0 million of tariff refunds and accrued for $7.0 million tariff refunds that were approved, however, not yet received on or before September 30, 2020. As of both the three and nine months ended September 30, 2020, we have recorded $23.0 million as a reduction to cost of revenues in our condensed consolidated statements of operations as the approved refunds relate to paid tariffs previously recorded to cost of revenues, therefore, we recorded the corresponding approved tariff refunds as credits to cost of revenues in the current period. The tariff refund receivable of $7.0 million is recorded as a reduction of accounts payable to Flex Ltd. and affiliates (“Flex”), our manufacturing partner and the importer of record who will first receive the tariff refunds, on the condensed consolidated balance sheet as of September 30, 2020.
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ENPHASE ENERGY, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data and percentages)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| September 30, 2020 | June 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||||||||||||||
Gross profit (GAAP) | $ | 94,981 | $ | 48,387 | $ | 64,706 | $ | 224,043 | $ | 143,364 | |||||||||||||||||||
| Stock-based compensation | 1,294 | 1,337 | 497 | 3,237 | 1,114 | ||||||||||||||||||||||||
| Tariff refunds | (23,029) | — | — | (23,029) | — | ||||||||||||||||||||||||
Gross profit (Non-GAAP) | $ | 73,246 | $ | 49,724 | $ | 65,203 | $ | 204,251 | $ | 144,478 | |||||||||||||||||||
Gross margin (GAAP) | 53.2 | % | 38.5 | % | 35.9 | % | 44.0 | % | 34.6 | % | |||||||||||||||||||
| Stock-based compensation | 0.7 | % | 1.1 | % | 0.3 | % | 0.6 | % | 0.3 | % | |||||||||||||||||||
| Tariff refunds | (12.9) | % | — | % | — | % | (4.5) | % | — | % | |||||||||||||||||||
Gross margin (Non-GAAP) | 41.0 | % | 39.6 | % | 36.2 | % | 40.1 | % | 34.9 | % | |||||||||||||||||||
Operating expenses (GAAP) | $ | 43,222 | $ | 37,533 | $ | 31,000 | $ | 116,718 | $ | 85,077 | |||||||||||||||||||
| Stock-based compensation (1) | (13,105) | (10,963) | (4,948) | (30,977) | (12,168) | ||||||||||||||||||||||||
| Restructuring and asset impairment charges | — | — | (469) | — | (1,468) | ||||||||||||||||||||||||
| Acquisition related expenses and amortization | (546) | (546) | (546) | (1,638) | (1,638) | ||||||||||||||||||||||||
Operating expenses (Non-GAAP) | $ | 29,571 | $ | 26,024 | $ | 25,037 | $ | 84,103 | $ | 69,803 | |||||||||||||||||||
(1) Includes stock-based compensation as follows: | |||||||||||||||||||||||||||||
Research and development | $ | 4,248 | $ | 3,263 | $ | 1,411 | $ | 9,430 | $ | 3,255 | |||||||||||||||||||
Sales and marketing | 3,952 | 3,610 | 1,541 | 9,504 | 3,900 | ||||||||||||||||||||||||
General and administrative | 4,905 | 4,090 | 1,996 | 12,043 | 5,013 | ||||||||||||||||||||||||
Restructuring | — | — | — | $ | — | $ | 718 | ||||||||||||||||||||||
Total | $ | 13,105 | $ | 10,963 | $ | 4,948 | $ | 30,977 | $ | 12,168 | |||||||||||||||||||
| Income from operations (GAAP) | $ | 51,759 | $ | 10,854 | $ | 33,706 | $ | 107,325 | $ | 58,287 | |||||||||||||||||||
| Stock-based compensation | 14,399 | 12,300 | 5,445 | 34,214 | 13,282 | ||||||||||||||||||||||||
| Tariff refunds | (23,029) | — | — | (23,029) | — | ||||||||||||||||||||||||
| Restructuring and asset impairment charges | — | — | 469 | — | 1,468 | ||||||||||||||||||||||||
| Acquisition related expenses and amortization | 546 | 546 | 546 | 1,638 | 1,638 | ||||||||||||||||||||||||
| Income from operations (Non-GAAP) | $ | 43,675 | $ | 23,700 | $ | 40,166 | $ | 120,148 | $ | 74,675 | |||||||||||||||||||
| Net income (loss) (GAAP) | $ | 39,362 | $ | (47,294) | $ | 31,099 | $ | 61,004 | $ | 44,482 | |||||||||||||||||||
| Stock-based compensation | 14,399 | 12,300 | 5,445 | 34,214 | 13,282 | ||||||||||||||||||||||||
| Tariff refunds | (23,029) | — | — | (23,029) | — | ||||||||||||||||||||||||
| Restructuring and asset impairment charges | — | — | 469 | — | 1,468 | ||||||||||||||||||||||||
| Acquisition related expenses and amortization | 546 | 546 | 546 | 1,638 | 1,638 | ||||||||||||||||||||||||
Non-recurring debt prepayment fees and non-cash interest | 5,422 | 5,372 | 1,907 | 13,516 | 11,297 | ||||||||||||||||||||||||
| Change in fair value of derivatives | — | 59,692 | — | 44,348 | — | ||||||||||||||||||||||||
| Non-GAAP income tax adjustment | 5,060 | (7,067) | — | (14,507) | — | ||||||||||||||||||||||||
| Net income (Non-GAAP) | $ | 41,760 | $ | 23,549 | $ | 39,466 | $ | 117,184 | $ | 72,167 | |||||||||||||||||||
9
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| September 30, 2020 | June 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||||||||||||||
| Net income (loss) per share, basic (GAAP) | $ | 0.31 | $ | (0.38) | $ | 0.25 | $ | 0.49 | $ | 0.39 | |||||||||||||||||||
| Stock-based compensation | 0.12 | 0.10 | 0.05 | 0.28 | 0.12 | ||||||||||||||||||||||||
| Tariff refunds | (0.18) | — | — | (0.18) | — | ||||||||||||||||||||||||
| Restructuring and asset impairment charges | — | — | — | — | 0.01 | ||||||||||||||||||||||||
| Acquisition related expenses and amortization | — | — | — | 0.01 | 0.01 | ||||||||||||||||||||||||
| Non-recurring debt prepayment fees and non-cash interest | 0.04 | 0.05 | 0.02 | 0.11 | 0.10 | ||||||||||||||||||||||||
| Change in fair value of derivatives | — | 0.48 | — | 0.35 | — | ||||||||||||||||||||||||
| Non-GAAP income tax adjustment | 0.04 | (0.06) | — | (0.12) | — | ||||||||||||||||||||||||
| Net income per share, basic (Non-GAAP) | $ | 0.33 | $ | 0.19 | $ | 0.32 | $ | 0.94 | $ | 0.63 | |||||||||||||||||||
Shares used in basic per share calculation GAAP and Non-GAAP | 126,109 | 125,603 | 122,123 | 125,084 | 114,720 | ||||||||||||||||||||||||
| Net income (loss) per share, diluted (GAAP) | $ | 0.28 | $ | (0.38) | $ | 0.23 | $ | 0.44 | $ | 0.35 | |||||||||||||||||||
| Stock-based compensation | 0.11 | 0.09 | 0.04 | 0.26 | 0.10 | ||||||||||||||||||||||||
| Restructuring and asset impairment charges | — | — | 0.01 | — | 0.01 | ||||||||||||||||||||||||
| Tariff Refunds | (0.17) | — | — | (0.17) | — | ||||||||||||||||||||||||
| Acquisition related expenses and amortization | — | — | 0.01 | 0.01 | 0.01 | ||||||||||||||||||||||||
| Non-recurring debt prepayment fees and non-cash interest | 0.04 | 0.04 | 0.01 | 0.10 | 0.09 | ||||||||||||||||||||||||
| Change in fair value of derivatives | — | 0.48 | — | 0.33 | — | ||||||||||||||||||||||||
| Non-GAAP income tax adjustment | 0.04 | (0.06) | — | (0.11) | $ | — | |||||||||||||||||||||||
| Net income per share, diluted (Non-GAAP) (2) (4) | $ | 0.30 | $ | 0.17 | $ | 0.30 | $ | 0.86 | $ | 0.56 | |||||||||||||||||||
| Shares used in diluted per share calculation GAAP | 141,820 | 125,603 | 133,611 | 140,207 | 131,114 | ||||||||||||||||||||||||
Shares used in diluted per share calculation Non-GAAP (3) (4) | 137,352 | 135,770 | 132,323 | 136,359 | 130,729 | ||||||||||||||||||||||||
(2) Calculation of non-GAAP diluted net income per share for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019 excludes convertible notes due 2023 interest expense, net of tax of less than $0.1 million in each period from non-GAAP net income. Calculation of non-GAAP diluted net income per share for the nine months ended September 30, 2020 and September 30, 2019 excludes convertible notes due 2023 interest expense, net of tax of less than $0.1 million and $0.9 million, respectively, from non-GAAP net income.
(3) Effect of dilutive in-the-money portion of convertible senior notes and warrants are included in the GAAP weighted-average diluted shares in periods where the Company has GAAP net income. The Company excluded the in-the-money portion of convertible notes due 2024 totaling 4,468 thousand shares, 3677 thousand shares and 1,288 thousand shares in the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively, and 3,849 thousand shares and 385 thousand shares for the nine months ended September 30, 2020 and September 30, 2019, respectively for non-GAAP weighted-average diluted shares as the Company entered into convertible note hedge transactions that reduce potential dilution to the Company’s common stock upon any conversion of the notes due 2024.
(4) Effect of dilutive in-the-money portion of Stock Options, RSUs, PSUs, shares to be purchased under the Company’s ESPP, the Notes due 2023 and the warrants issued in conjunction with the Notes due 2024 are included in the non-GAAP weighted-average diluted shares in periods where the Company has non-GAAP net income, which totaled 10,167 thousand shares in the three months ended June 30, 2020.
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