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Enphase Energy's High IQ

Mar. 05, 2018 8:38 AM ETEnphase Energy, Inc. (ENPH)9 Comments
TJ Roberts profile picture
TJ Roberts


  • Enphase achieves profitability as promised.
  • Enphase Q1 guidance above consensus.
  • Strong insider buying by CEO.
  • Why billionaire IQ invested in IQ.
  • Enphase IQ competitiveness post-solar-tariff.

Wall Street gave a major vote of confidence to Enphase Energy (NASDAQ:ENPH) after a masterful performance on February 27th; as a shareholder since 2014, it was one of the best conference calls in memory, and even the analysts, with nobody absent this time, were more enthusiastic than past calls. CEO Badri Kothandaraman proclaimed that Enphase had reached a "milestone" by achieving profitability, earning $0.01 per share on a non-GAAP basis. Clearly, the new management, signaled by the arrival of TJ Rodgers and Kothandaraman, is applying strong operational control while steadily ramping up IQ and ACM's. Furthermore, the CEO made another large share purchase, exemplifying his confidence and belief in Enphase's success.

Enphase Q1 guidance of $65-70M came in at the high end of analyst estimates. Historically, Enphase revenue is strongly influenced by changes in A/R, therefore, a similar pattern can be expected for Q1-2018. In 2017, Enphase management focused on improving the cash conversion cycle which it has now reduced to just 67 days.

( in thousands) 2017 2016 y-o-y days q-o-q days
Q4 Revenue 79,674 90,601
COGS 60,685 74,367
A/R 65,346 61,019 80.6 75.8
Inventory 25,999 31,960 46.0 38.1
A/P 28,747 31,696 47.9 47.0
Q4 CCC 78.6 66.9
Q4 OC 126.6 113.9

As mentioned during the conference call, Enphase management has a strong focus on the cash conversion cycle, but at the same time needs to maintain a balance between assets and liabilities, as well as meeting the term loan agreement which mandates A/R inventory being at least 1.5x the outstanding principal amount of $49.7M. The private placement of $20M enables Enphase to further improve their cash conversion cycle by bringing down A/R, as well as addressing liabilities in 1) warranty, 2) deferred revenue due to Trump's tax plan, and 3) debt. It is likely that the proceeds will also be used for the world-wide

This article was written by

TJ Roberts profile picture
I've written research articles on Enphase Energy (ENPH), Alpha & Omega Semiconductor (AOSL), Amprius (AMPX), Enovix (ENVX), Equitrans Midstream (ETRN), FTC Solar (FTCI), Katapult (KPLT), and Profound Medical (PROF).  Enphase has been by far my most successful endeavor, and their energy systems are the best in terms of reliability, safety, performance and longevity.  My articles on Amprius and Enovix spotlight an incredibly bright future for these battery companies that could offer a huge return for investors.  My article on Lease-to-Own company, Katapult (KPLT), discusses a beat-down company that is starting to show signs of life with 2023 being their pivotal year.  My article on Equitrans Midstream (ETRN) discusses the highly political Mountain Valley Pipeline.  Please enjoy my articles, and as always, do your own due diligence.  Good luck!

Analyst’s Disclosure: I am/we are long "ENPH". I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I live in the Sunshine State of Florida where a handful of monopolies still control 75% of the energy. I am a firm believer in decentralized power which Enphase represents. I believe wholeheartedly that the future of solar is the AC Module; Enphase will be a brand name for years to come; this is my 36th article promoting the company. I own a 20kW Enphase microinverter solution, and receive checks BACK from my utility company annually for the excess solar energy generated. Together, solar and storage, as well as other renewable energies, can defeat the trillion-dollar fossil fuel industry over the long term and bring about a green energy revolution.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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