Enphase revenue increases but shipments decline as supply chain constraints persist

Enphase Energy's microinverter shipments fell in the second quarter of 2021 from the previous quarter due to tight supply, but the manufacturer still managed to increase revenue sequentially.

Enphase shipped 2,362,401 units, equivalent to about 796MWdc, in the second quarter of 2021, down about 4% from 830MWdc in the previous quarter. The company reported a 4.7% increase in quarterly revenue, reaching the upper end of its guidance of $316.1 million.

The company's non-GAAP profit margin also rose slightly to 40.8%.

Enphase said that the global shortage of semiconductor chips has suppressed manufacturing output, and as the number of residential solar power generation in the United States soars year after year, demand continues to "far exceed" supply. In the second quarter, 81% of Enphase's revenue came from the United States, and this number would have been higher if it were not for supply chain constraints. Supply chain constraints resulted in only a 3% month-on-month increase in revenue in the region. However, revenue in Europe increased by 16% month-on-month, setting a new record.

Enphase was plagued by supply constraints in the second quarter for the AC FET drivers used in its flagship microinverter products. Two suppliers provided Enphase with these drivers for most of the second quarter, with a third added at the end of the quarter and a fourth expected to be added in the fourth quarter of 2021.

An Enphase microinverter being installed.

Chief Executive Badri Kothandaraman said the new projects would ease supply constraints in the second half of the year. Supply disruptions are expected to continue into the third quarter, but Kothandaraman said supply conditions would "improve significantly" by the fourth quarter, about which he was "cautiously optimistic."

In fact, on an analyst call, Kothandaraman said that by the end of the fourth quarter of 2021, Enphase expects to have the capacity to produce 5 million inverters per quarter, with additional production lines in Mexico and India providing further support.

However, supply constraints have further impacted the release of the next-generation microinverter, the IQ8. The IQ8 for residential products and the IQ8D for industrial and commercial customers will start shipping in the third and fourth quarters, respectively. But Enphase said it will now be more cautious about increasing production of these products due to supply issues.

As supply chain issues ease, albeit later than initially expected, Enphase expects revenue to grow over time, with third-quarter 2021 revenue in the range of $335 million to $355 million.

The company's domestic energy storage products shipped 43MWh in the second quarter of 2021, and the growth of such products has supported Enphase. Enphase expects shipments of 60-70MWh in the third quarter of 2021 and hopes to increase production capacity to 120MWh per quarter. In the energy storage field, Enphase is hindered by long product delivery times, which are currently 12-14 weeks. Kothandaraman told analysts that Enphase intends to reduce delivery times to less than 10 weeks by the end of this year by improving design processes and logistics.

Enphase’s energy storage business is also being boosted by its first foray into grid services offerings: Customers in Connecticut, Massachusetts and Rhode Island can now earn up to $1,500 per year by letting utilities use their capacity through Enphase’s ConnectedSolutions program.

Two recent Enphase acquisitions - system design software provider Sofdesk and Noida - also contributed more than expected to revenue, with Enphase saying both companies are now fully integrated into the business and new products will be released "as soon as possible".