Enphase (ENPH) Q1 2026 Earnings Transcript

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DATE

April 28, 2026, 4:30 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Badrinarayanan Kothandaraman
• Chief Financial Officer — Mandy Yang
• Chief Products Officer — Raghu Belur

TAKEAWAYS

• Revenue -- $282.9 million, including $34.5 million of safe harbor revenue.
• Gross margin -- Non-GAAP gross margin was 43.9%; GAAP gross margin was 35.5%, reduced by 6.7 percentage points from $235 million of 2025 PTC sales at a discount, along with approximately $2.5 million in transaction fees, and a further 4.3 percentage points from reciprocal tariffs.
• Microinverter and battery shipments -- 1.41 million microinverters and 103.1 megawatt-hours of batteries shipped.
• U.S. and international revenue mix -- 83% from the U.S. and 17% from international markets.
• Sequential U.S. revenue trend -- U.S. revenue declined 23% sequentially, mainly because of lower residential solar and battery demand after the 25D tax credit expiration and typical seasonality.
• Sell-through performance -- Sell-through in the U.S. fell 48% sequentially and 18% year over year, reflecting a decline in market demand.
• Commercial sales growth -- U.S. commercial microinverter sales more than doubled sequentially, driven by positive reception of IQ9 products.
• European revenue rebound -- European revenue increased by 36% sequentially as sell-in normalized with sell-through.
• Battery activations in key European markets -- April battery activations rose approximately 75% in the Netherlands, 20% in France, and 27% in Germany, all compared to fiscal Q1 monthly averages.
• Pricing actions -- Battery distributor list prices in Europe to be reduced by approximately 10% in May; a 20% price reduction for microinverters was implemented in December, and U.S. battery prices cut by 12%-14% in March.
• Fiscal Q2 guidance -- Revenue expected between $280 million and $310 million, including roughly $85 million of safe harbor revenue and shipments of 100-110 megawatt-hours of batteries.
• Safe harbor agreements -- New agreements total $843.6 million year-to-date, with $89.6 million under the 5% method and $754 million under the physical work test; this secures multi-year microinverter volume and future battery attach opportunities from 2027 to 2030.
• PROPEL prepaid lease program -- Expanded from 40 to over 200 installers across four states, reaching 200 net originations per week and an 84% battery attach rate.
• Cash and liquidity -- Ended the quarter with $930.6 million in cash, cash equivalents, and marketable securities; paid off $632.5 million in convertible notes due March 2026 using cash on hand.
• Operating performance -- Non-GAAP operating income was $47.3 million; non-GAAP net income was $62.3 million; non-GAAP diluted earnings per share was $0.47.
• GAAP net loss -- GAAP net loss was $7.4 million and GAAP diluted loss per share was $0.06.
• Free cash flow -- Generated $83 million in free cash flow for the quarter, including proceeds from PTC sales.
• Channel inventory -- Company exited the quarter with above-normal channel inventory for both microinverters and batteries, with most inventory concentrated in the U.S.
• AI assistant rollout -- Soft-launched Enphase AI assistant in the homeowner app to approximately 100 thousand homeowners, with plans to pilot an installer-focused assistant this quarter.
• Fifth-generation battery -- Upcoming AC-coupled battery features stackable 5 kilowatt-hour blocks, approximately 50% higher energy density, and about 40% lower internal cost versus its predecessor; pilots begin in fiscal Q3 with shipments expected in fiscal Q4.
• Commercial storage product -- IQ BART commercial battery platform revealed, with pilots set for fiscal Q1 2027.
• Solid state transformer initiative -- IQSST development for AI data centers is underway; a full system demo is targeted for later in the year, with customer pilots in 2027 and volume shipments in 2028.
• Tariff refunds -- Filed approximately $50 million in tariff refund claims due to recent court ruling; refunds expected within 90 to 120 days, subject to approval.
• Customer metrics -- Net Promoter Score reached a record 82, up from 79 in fiscal Q4; average customer service call wait time was approximately 1.4 minutes.

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RISKS

• CEO Kothandaraman said, "and fiscal Q2 sell-through expectations are roughly 10% to 15% below our prior view—a weaker start to the year primarily due to unfavorable weather conditions and TPO financing challenges."
• Yang reported GAAP net loss of $7.4 million and a decline in GAAP gross margin to 35.5%, impacted by large discounted PTC sales and reciprocal tariffs.
• "We exited the quarter with channel inventory above normal levels for both microinverters and batteries," CEO Kothandaraman noted, which could pressure future shipments as the company corrects to real demand.
• "Competition remains intense across Europe, particularly from low-cost string inverter and battery providers," prompting further price reductions in the region.

SUMMARY

Enphase Energy (NASDAQ:ENPH) reported lower fiscal Q1 sell-through and revenue driven by post-tax credit market contraction, above-normal U.S. inventory, and TPO financing headwinds. Management guided for flat to modestly higher fiscal Q2 revenue, supported by significant safe harbor demand and ongoing price reductions in both the U.S. and Europe to reinvigorate sales volumes amidst competitive and policy-driven market uncertainties. Near-term operational focus includes channel correction, expansion of the PROPEL lease pilot, and controlled launch of new product categories such as the fifth-generation battery, commercial storage solutions, and the IQSST platform for AI data centers, which represents a longer-term addressable market opportunity.

• Yang stated the company moved from direct pay to periodic PTC sales to align cash inflows and margin visibility, with future gross margin guidance incorporating projected PTC discounting.
• CEO Kothandaraman highlighted that "PROPEL is one of the things that can potentially improve the second half of the year and also 2027," with a stated goal of reaching a 500 originations-per-week run-rate by year-end.
• Reciprocal tariff reductions allowed sharper U.S. battery pricing, contributing to planned volume increases while $50 million in tariff refund claims, if approved, would enhance liquidity in the coming quarters.
• Solid state transformer (IQSST) pilots and volume ramp timing are unchanged, with Raghu Belur emphasizing the distributed architecture, fast response time, and low anticipated costs as key differentiators for data center applications.

INDUSTRY GLOSSARY

• Safe harbor revenue: Revenue recognized from sales to customers anticipating multi-year installation timelines, often to secure eligibility for tax credits.
• PTC (Production Tax Credits): U.S. incentives granted per unit of electricity generated, which Enphase sells to monetize for liquidity.
• PROPEL: Enphase's prepaid lease program for residential solar and storage, distributed through third-party ownership providers and focused on rapid installer adoption.
• IQSST (Intelligent/Integrated Solid State Transformer): Enphase's modular AC-to-DC conversion and distribution system designed for high-power data center and industrial loads.
• VPP (Virtual Power Plant): Aggregated network of distributed energy resources managed collectively to participate in energy markets or offer grid services.
• TPO (Third-Party Ownership): Solar market segment where systems are owned by another entity (such as a developer or financier) and leased to homeowners, allowing access to tax credits.
• BESS (Battery Energy Storage System): Large-scale storage systems integrating batteries for grid or site-level energy management.

Full Conference Call Transcript

Badrinarayanan 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 Energy, Inc. issued a press release announcing the results for its first quarter ended 03/31/2026.

During the conference call, Enphase Energy, Inc. management will be making 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, the timing of new product introductions and enhancements to existing products, and regulatory, tax, tariff, and supply chain matters. These forward-looking statements involve significant risks and uncertainties, and our actual results and the timing of events could differ materially from these expectations.

For a more complete discussion of the risks and uncertainties, please see our most recent Form 10-K and 10-Qs filed with the SEC. We caution you not to place any undue reliance on forward-looking statements and we are under 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 have been adjusted to exclude certain charges.

We have provided a reconciliation of these non-GAAP financial measures to GAAP financial measures in our earnings release furnished with the SEC on Form 8-Ks, which can also be found in the Investor Relations section of our website. Now I would like to introduce Badrinarayanan Kothandaraman, our President and Chief Executive Officer. Badri?

Badrinarayanan Kothandaraman: Good afternoon, and thanks for joining us today to discuss our first quarter 2026 financial results. We reported quarterly revenue of $282.9 million, shipped 1.41 million microinverters, shipped 103 megawatt-hours of batteries, and generated free cash flow of $83 million. Q1 revenue included $34.5 million of safe harbor revenue. We exited the quarter with channel inventory above normal levels for both microinverters and batteries. On a non-GAAP basis, we delivered gross margin of 44%, operating expenses of 27%, and operating income of 17%, all as a percentage of revenue. Gross margin was above the midpoint of our guidance range. Mandy will cover financials in more detail later in the call.

Our customer service NPS (Net Promoter Score) was 82 in Q1, a record for Enphase Energy, Inc., compared to 79 in Q4. We are laser-focused on customer experience, and our average call wait time in the first quarter was approximately 1.4 minutes. We have also begun a soft rollout of our Enphase AI assistant in the homeowner app to approximately 100 thousand homeowners, and we expect this to expand over time. The AI assistant is trained on Enphase product knowledge, historical service cases, and relevant customer support data with access to Salesforce information to help answer system-specific questions more accurately. It also supports multiple languages, helping homeowners get faster, more intuitive help wherever they are.

We expect to pilot a similar AI assistant for installers during this quarter to help them do fleet management in a much more efficient manner. Let us cover operations. In Q1, we shipped approximately 1.39 million microinverters from our Texas and South Carolina manufacturing facilities and booked the associated 45X production tax credits. These U.S.-made microinverters help residential lease and PPA providers, as well as commercial asset owners, qualify for the 10% domestic content ITC adder. We shipped 49.5 megawatt-hours of IQ batteries from our Texas manufacturing facility in Q1. We offer IQ batteries that meet domestic content and FTA requirements, helping lease and PPA customers qualify for ITC bonuses. Let us cover the regions.

Our U.S. and international revenue mix in Q1 was 83%/17%, respectively. In the U.S., our revenue declined 23% sequentially, primarily due to lower residential solar and battery demand following the expiration of the 25D tax credits and typical seasonality. Safe harbor revenue increased to $34.5 million in Q1 compared to $20.3 million in Q4. Sell-through declined 48% sequentially as Q4 was elevated by significant demand pull-forward ahead of the tax credit expiration. On a year-over-year basis, which better reflects the underlying impact of the policy change, Q1 2026 sell-through declined 18% compared to Q1 2025. Our U.S. commercial microinverter sales more than doubled in Q1 as compared to Q4, driven by positive market reception for IQ9 microinverters.

We now serve both major U.S. three-phase commercial grid types: 480 volts as well as 208 volts. In Q3, we expect to begin shipping our high-power 548-watt IQ9s microinverter for 480-volt three-phase systems, which can support solar panels up to 770 watts DC. We also expect to see near-term safe harbor demand from customers placing orders between now and early July. With U.S. manufacturing, domestic content eligibility, and FTA-compliant products, we believe our commercial business is well positioned for continued growth. In Europe, our revenue increased 36% in Q1 compared to Q4, primarily because sell-in levels rose toward sell-through levels after we undershipped the European channel in Q4.

We are beginning to see green shoots in April, with solar and battery activations up healthy double digits across multiple European markets. This is being driven by rising power prices compared with the monthly averages in Q1 and increasing battery adoption. Europe is increasingly becoming a battery-critical market. As self-consumption, dynamic tariffs, and VPP become more important, the company that wins the battery relationship is well positioned to win the broader home energy system over time, including solar, software, and VPP. In the Netherlands, our battery activations in April increased by approximately 75% compared to the monthly run rate in Q1, as rising export penalties and the planned phase-out of net metering by 2026 strengthen the case for self-consumption.

In France, the reduction of feed-in tariff is also shifting the market towards self-consumption and increasing the interest in batteries, especially for new solar installations. Our battery activations in France increased approximately 20% in April from the monthly run rate in Q1—a more modest but positive trend. In Germany, our battery activations rose approximately 27% in April compared to Q1's monthly average. We have approximately 475 thousand Enphase residential solar systems in the Netherlands and approximately 400 thousand in France, creating a meaningful retrofit opportunity in both markets.

We are increasing homeowner events, doing direct marketing to consumers, and working with the retail energy providers along with strong support by our technologies such as PowerMatch technology and our upcoming fifth-generation battery. We have also built strong inside sales teams and a lead management platform across France and the Netherlands in the last three months, and we are hoping to convert this demand into revenue with a much higher throughput. Competition remains intense across Europe, particularly from low-cost string inverter and battery providers. In response, we are reducing our distributor list prices for batteries by approximately 10% in May, which follows a 20% reduction for microinverters already implemented from December.

In addition to this sharper pricing, we are instituting a stronger homeowner demand engine and a more competitive product roadmap which includes IQ9 and our fifth-generation battery, which is coming very soon. Together, these actions improve our competitiveness today and position us for stronger growth as Europe shifts towards self-consumption, VPP, and flexible storage. In Australia, we are bullish on the battery opportunity. Australia is one of the world's most mature rooftop solar markets, with more than 4 million rooftop solar systems installed, which is roughly one in every three homes already using solar.

Battery adoption is now accelerating, supported by the federal Cheaper Home Batteries program, which provides an upfront discount for eligible small-scale batteries connected to new or existing rooftop solar. The program is evolving on May 1 to better support right-sized systems and reduce incentives for oversized batteries. We believe this plays directly to our advantages and our upcoming fifth-generation battery, which has a stackable and scalable architecture that gives homeowners flexible capacity and the ability to add more over time. Let us now discuss our Q2 outlook. On the last earnings call, we said we expected Q2 revenue to be higher than Q1 driven in part by strong safe harbor demand.

In line with those comments, our Q2 revenue guidance is $280 million to $310 million, including approximately $85 million of safe harbor revenue. Since we exited the channel with high inventory in Q1, we are undershipping approximately $25 million compared to real demand. At this point, we are approximately 85% booked to the midpoint of our guidance. We expect modest underlying sell-through growth in Q2 as compared to Q1. That said, our Q1 sell-through results and Q2 sell-through expectations are roughly 10% to 15% below our prior view—a weaker start to the year primarily due to unfavorable weather conditions and TPO financing challenges.

We expect to offset some of this pressure in the second half of this year through prepaid lease adoption, U.S. commercial growth, and potential international recovery. For batteries, our guidance is 100 to 110 megawatt-hours. We recently lowered our battery list prices to distributors in the U.S. by approximately 12% to 14% in March, supported by the recently reduced reciprocal tariff rates. Combined with our pricing changes in Europe, we expect higher battery sales volumes in Q2. The revenue guidance anticipates us undershipping end-market demand by $25 million in order to correct for Q1's overshipment. Let us talk about safe harbor.

We have executed new agreements year to date with third-party owners for approximately $843.6 million of product—$89.6 million under the ITC five-percent safe harbor method and $754 million under the physical work test method. This is in addition to the $67.7 million physical work test orders secured in Q4. These microinverter orders create two important benefits for Enphase Energy, Inc. First, they secure significant multiyear volume for our microinverter business. Second, they position us very well for future battery attach sales from 2027 to 2030 when these systems are expected to be installed. These also underscore our strength with the TPO providers. Moving to financing. Prepaid lease adoption continues to build momentum.

Prepaid leases give homeowners a lower upfront cost today and the option to own the system after five years. The TPO initially owns the system, claims the $0.40/W tax credit, and shares that value with the homeowner through a prepaid lease or low monthly payments when paired with a loan. This lowers the homeowner's effective cost and helps restore the economics closer to the 30% 25D tax credit era. We continue to support PROPEL, a TPO-led prepaid lease program that exclusively uses Enphase equipment and is being field tested with our loan and distribution partners.

The pilot is designed to service the long tail of installers and has expanded from 40 installers at the time of our February earnings call to more than 200 installers today across four states. We are now seeing a run rate of approximately 200 net originations per week and are encouraged by early customer adoption trends. It must be noted that the battery attach to those originations is approximately 84%. That is not very surprising because one of the states PROPEL is now being piloted in is California. We expect to complete the pilots this quarter and expand the program more broadly beginning in July after validating customer experience, installer execution, which is happening now, and financing performance at scale.

Let us talk about products, starting with IQ batteries. Our fourth-generation IQ Battery 10C delivers a smaller footprint, higher energy density, and simpler installation with the IQ meter collar. The meter collar is now approved by 64 U.S. utilities and growing, covering approximately 34 million customer accounts. In California, the collar is approved by all three major investor-owned utilities and the largest customer-owned utility. We believe this gives Enphase Energy, Inc. the broadest utility approval footprint of any major battery provider today. Our fifth-generation AC-coupled battery is built from stackable 5 kilowatt-hour modular blocks that can scale up to 30 kilowatt-hours.

This battery uses 100 ampere-hour prismatic cells and targets roughly 50% higher energy density than the fourth-generation battery, at about 40% lower cost. Paired with our PowerMatch software, we believe it will deliver a compelling combination of performance, flexibility, and value for installers and homeowners. We expect to begin pilots in Q3 and begin shipping in Q4. We are also making strong progress on IQ BART, our commercial battery. The first product here is an 80 kilowatt-hour AC-coupled commercial battery designed for small and medium commercial markets in the U.S. Our internal estimates indicate that this small commercial market represents an annual opportunity of approximately 1 gigawatt-hour.

The IQ BART uses 314 ampere-hour prismatic cells in a compact building block architecture and will be even more cost effective. It can scale up by stringing up to 25 units together for approximately 2 megawatt-hours of capacity. The platform is designed to support backup, self-consumption, peak shaving, time-of-use optimization, as well as VPP participation, all managed through Enphase software. We believe IQ BART brings our distributed architecture, our electronics expertise, and system-level intelligence into commercial storage, giving customers a flexible, high-quality platform for resilience and cost savings. We expect to begin pilots in Q1 2027. Turning to microinverters. We began shipping our IQ9 three-phase commercial microinverter in December.

Built on our GaN architecture, IQ9 opens up the 480-volt three-phase U.S. commercial segment for Enphase Energy, Inc. for the first time, representing a new TAM of approximately $400 million annually. Installer feedback has been strong, with customers valuing Enphase quality, per-panel monitoring, simpler system design, lower installation cost and balance-of-system cost, and higher system efficiency. We expect to introduce the higher power IQ9s three-phase product in Q3, supporting 548 watts of AC power and pairing with solar panels up to 770 watts DC. We also expect to introduce IQ9 for global residential markets this quarter. Moving on, EV charging.

We are making excellent progress on our IQ bidirectional EV charger, which is built on our 650-volt GaN power platform and engineered to work with modern 800-volt DC EV architectures. This is a clear example of our ability to move power efficiently and bidirectionally between grid-facing AC and high-voltage DC systems with tight control and protection. The product is especially compelling because it simply pairs with the meter collar in the U.S. or a backup switch in Europe, enabling streamlined home backup and VPP participation. We are in advanced discussion with multiple auto OEMs, including two partnership opportunities that are progressing well. We will share more as these discussions mature.

We are targeting initial availability in Q4 as we complete the certifications, utility coordination, and vehicle compatibility validation. Finally, we are excited to announce today the development of our IQ solid state transformer product for AI data centers. AI is driving rack power roughly 150 kilowatts to more than a megawatt. The industry is moving towards higher-voltage DC architectures including 800-volt DC, as outlined in NVIDIA's white paper last September. We estimate the initial annual U.S. addressable opportunity for IQSST in AI data centers to exceed 11 gigawatts by 2031, creating a significant new market for high-efficiency medium-voltage power conversion.

The IQSST product is designed to convert medium-voltage AC directly to low-voltage DC in a single stage, creating the potential to eliminate sidecar batteries and rack-level backup while improving efficiency, reducing cost, and complexity. IQSST will be built as a distributed modular architecture. It is expected to deliver approximately 1.25 megawatts through a super cluster of 342 power modules with 800-volt DC output for next-generation AI racks. At the core of each power module will be a custom silicon ASIC and a high-frequency GaN-based power platform which enables precise control, high efficiency, and fast response of the order of 1 to 3 milliseconds.

This fast response will enable advanced grid functions, improved handling of load and grid transients, and support centralized energy storage at the facility level. IQSST is designed for reliability and serviceability. It is modular, includes built-in redundancy, and supports hot swapping without shutdown. It is also expected to deliver cost and supply chain advantages through fewer components, standard high-volume parts, automated manufacturing, and U.S.-based production. Our SST platform will be able to scale from a single 1.25 megawatt rack to multi-megawatt systems, supporting multiple grid voltages, and extends beyond data centers into other adjacent high-power markets as well. We are now engaged with more than 20 prospective customers and are expanding our partner ecosystem.

We have completed product feasibility, built working power modules, and converged on the system design. In Q1, we restructured the company to fund SST within our existing operating framework and create room for this strategic program. More than 80 engineers are now working on SST across power electronics, ASICs, software, mechanical design, manufacturing, and reliability. As we continue to drive productivity with AI across the company, we are targeting to fund the SST program within our current operating expense structure. We expect a full system demo later this year, pilots with customers in 2027, and volume shipments in 2028. We also expect revenue to build over time, but the strategic logic is clear.

IQSST is a direct extension of our core strength in distributed power electronics, custom silicon, software-defined control, and high-volume U.S. manufacturing. We believe this architecture is the right way to power the next generation of AI infrastructure and Enphase Energy, Inc. is well positioned to lead in this transition. Let me conclude. The market is going through a transition, especially in the U.S. residential solar market, but we are focused on what we can control: execution, cost, innovation, financing solutions, and customer experience. We are seeing early traction in several important areas. Prepaid leases are gaining momentum in the U.S. Europe is beginning to show signs of recovery. Battery is becoming increasingly critical to the customer decision.

In the U.S., commercial solar is starting to ramp, supported by IQ9 microinverters and our domestic manufacturing position. Our roadmap is also strengthening. Our fifth-generation battery, bidirectional EV charger, our IQ BART commercial battery, and the IQ9 family of microinverters all expand what Enphase Energy, Inc. can deliver to homeowners, installers, and commercial customers. These products strengthen the core and open new growth opportunity. Finally, we believe IQSST can give Enphase Energy, Inc. access to significantly larger end markets. It is a natural extension of what we have built over the last twenty years: reliable power electronics, semiconductor innovation, software intelligence, and distributed system design. We believe Enphase Energy, Inc. is well positioned for the next phase of growth.

With that, I will turn the call over to Mandy for her review of our financial results. Mandy?

Mandy Yang: Thanks, Badri, and good afternoon, everyone. I will provide more details related to our Q1 2026 financial results as well as our business outlook for Q2 2026. We have provided reconciliations of these non-GAAP to GAAP financial measures in our earnings release posted today, which can also be found in the IR section of our website. Total revenue for Q1 was $282.9 million. We shipped approximately 627.6 megawatts DC of microinverters and 103.1 megawatt-hours of batteries in the quarter. Q1 revenue included $34.5 million of safe harbor revenue. As a reminder, we define safe harbor revenue as any sales made to customers who plan to install the inventory over more than a year.

Non-GAAP gross margin was 43.9% in Q1, compared to 46.1% in Q4. GAAP gross margin was 35.5% in Q1, compared to 44.3% in Q4. GAAP gross margin was negatively impacted by 6.7 percentage points from the sale of our 2025 PTCs, which totaled $235 million and were sold at 93% of face value. This resulted in a discount of approximately $16.5 million, plus approximately $2.5 million of transaction-related fees. Reciprocal tariffs also impacted our gross margin by 4.3 percentage points in Q1. Non-GAAP operating expenses were $77 million for Q1, compared to $78.8 million for Q4. GAAP operating expenses were $130 million for Q1, compared to $129.6 million for Q4.

GAAP operating expenses for Q1 included $45.4 million of stock-based compensation expenses, $3.8 million of acquisition-related expenses and amortization, and $3.8 million of restructuring and asset impairment charges. On a non-GAAP basis, income from operations for Q1 was $47.3 million, compared to $79.4 million for Q4. On a GAAP basis, loss from operations was $29.6 million for Q1, compared to income from operations of $22.4 million for Q4. On a non-GAAP basis, net income for Q1 was $62.3 million, compared to $93.4 million for Q4. This resulted in non-GAAP diluted earnings per share of $0.47 for Q1, compared to $0.71 for Q4. GAAP net loss for Q1 was $7.4 million, compared to GAAP net income of $38.7 million for Q4.

This resulted in GAAP diluted loss per share of $0.06 for Q1, compared to earnings per share of $0.29 for Q4. We exited Q1 with a total cash, cash equivalents, and marketable securities balance of $930.6 million, compared to $1.51 billion at the end of Q4. The five-year convertible notes we raised in 2021 were due on 03/01/2026, and we settled all the outstanding principal amount of $632.5 million with our cash on hand. As part of our antidilution plan, we spent approximately $18.7 million in Q1 for withholding shares to cover taxes on employees’ vesting, reducing diluted shares by 441 thousand shares.

We did not repurchase common stock during the quarter, as we are prioritizing disciplined cash allocation and preserving flexibility for strategic investments and potential acquisition opportunities. We had approximately $269 million remaining under our share repurchase authorization and remain confident in our long-term business outlook. In Q1, we generated $102.9 million in cash flow from operations and $83 million in free cash flow, including proceeds from the sale of the 2025 PTCs, compared to $9.7 million for Q4. Capital expenditure was $19.9 million for Q1. The increase was primarily due to continued investment in U.S. manufacturing. As of 03/31/2026, after monetizing the PTCs generated in 2025, we had approximately $162.9 million of PTCs on our balance sheet.

This includes $108.3 million related to U.S.-made microinverters shipped to customers in 2024 and $54.6 million related to shipments in Q1 2026. We elected direct pay for the 2024 PTCs, which are expected to be refunded through our 2024 tax return filed in April 2025. However, we have limited visibility into the timing of receipt of the $108.3 million due to extended IRS processing timelines. In March 2026, we revoked our direct pay election. Going forward, we plan to sell PTCs on a regular basis to better align cash inflows with expenses. We expect these sales to be part of our normal course of business, and the impact of this approach is included in our quarterly gross margin guidance.

In addition, on 02/20/2026, the U.S. Supreme Court issued a ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act (IEEPA). In April 2026, U.S. Customs and Border Protection launched an online portal for companies to submit IEEPA tariff refund requests. As of today, we have submitted approximately $50 million of refund claims through the portal. Subject to approval, we currently expect to receive the refund within the next 90 to 120 days. Now let us discuss our outlook for Q2 2026. We expect our revenue for Q2 to be within a range of $280 million to $310 million, which includes shipments of 100 to 110 megawatt-hours of battery.

The revenue guidance includes approximately $85 million of safe harbor revenue. We expect GAAP gross margin to be within a range of 42% to 45%, including approximately 3 percentage points of reciprocal tariff impact. We expect non-GAAP gross margin to be within a range of 44% to 47%, including the reciprocal tariff impact. Non-GAAP gross margin excludes stock-based compensation expense and acquisition-related amortization. We expect our GAAP operating expenses to be within a range of $120 million to $124 million, including approximately $45 million estimated for stock-based compensation expense, acquisition-related expenses, amortization, and restructuring and asset impairment charges. We expect our non-GAAP operating expenses to be within a range of $75 million to $79 million.

With that, I will open the line for questions.

Operator: We will now open the call for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. In the interest of time, please limit yourself to one question and one follow-up. If you have additional questions, you may rejoin the queue. At this time, we will pause momentarily to assemble a roster. The first question will come from Brian Lee with Goldman Sachs. Please go ahead.

Brian Lee: Hey, guys. Thanks for taking the questions. First one, on the safe harbor because it is so lumpy here, can you give us any sense on what the safe harbor expectations are for Q3? And then I know you said, Badri, 10% to 15% below run-rate you originally expected due to the start-of-year weakness. Can you give us a sense of where you think core revenue trends are into Q3 and Q4? Are you going to recapture that kind of volume in the back half of the year? Maybe any sense on cadence from here, excluding the safe harbor? And then I had a follow-up on the SST.

Badrinarayanan Kothandaraman: Brian, for our revenue for Q2, the estimate is $85 million for safe harbor, as we said. Your question is safe harbor estimate for Q3. It is difficult for us to estimate right now, but if I were to give you a number, between $40 million and $50 million is what I expect for Q3 safe harbor revenue, and that is my opinion. I talked about expecting modest underlying sell-through growth in Q2, the current quarter we are in, compared to Q1. That said, Q1 and Q2 sell-through expectations are roughly 10% to 15% below our prior view—a weaker start due to TPO financing challenges and unfavorable weather for us.

What we are very excited about is PROPEL, our prepaid lease offering through our partners. I gave you some color: on the last earnings call, I told you we had 40 installers on PROPEL; as of last week, we have 200 installers. We still have the same four states because we are disciplined in not entering additional states until we finish the pilot. Our originations have increased at a very healthy rate to 200 net originations a week. That amounts roughly to a 90 to 100 megawatt annual run-rate if I freeze that 200 per week as of today. So, extraordinary reception for PROPEL, and we have to thank our partners. In PROPEL, our battery attach is 84%.

California drives a lot of battery attach, so when we expand to other states, it might be a little less. We are excited because that means more megawatt-hours very soon, and we expect that in the second half of the year for sure. We also gave you color on Europe: in April, we are seeing double-digit percentage increases for most European markets compared with the monthly average in Q1, driven by rising power prices and increasing battery adoption. In the Netherlands alone, battery activations in April increased by approximately 75% compared to the monthly run rate in Q1. In France, that number was 20%, and in Germany, 27%.

We are very encouraged by PROPEL and by the green shoots in Europe. That said, the market is fickle right now with a lot of dynamics. We do not want to hazard a guess for Q3 and Q4, but this is what we are doing from our side. We are also actively working on four new products: the fifth-gen battery, the bidirectional charger, the commercial battery, as well as the IQ9 high-powered version for commercial. And, of course, the big announcement we made is the SST, which is more a 2028 revenue opportunity.

Brian Lee: That is helpful. On that last point, the timing for IQSST being 2028 is helpful. I know you gave a gigawatt sizing for that opportunity. Can you give us a sense of the revenue dollar opportunity for Enphase Energy, Inc.? And then also, how does the Enphase Energy, Inc. offering differ from what you are seeing from peers for those that actually have a product?

Raghu Belur: Hey, Brian. We are fundamentally different from at least some of the announcements that we have seen in the market in that we leverage our twenty years of experience developing distributed architecture products. Think about it as a single-stage resonant converter, which is our core technology since inception: high-frequency design, soft switching, custom ASIC, and then wide bandgap devices. We were the first in 2008 to deploy wide-band silicon carbide diodes as an example. We are doing GaN now. When you are a completely distributed or decentralized architecture, the 342 power modules arranged in a super cluster really bring a tremendous amount of value.

You get sub-millisecond response times, and when you have sub-millisecond response time, now you can target getting rid of the sidecar completely—so no BBU or no storage anywhere in the low-voltage system. You can now move all your storage to the medium-voltage section via BESS. Second, when you are a completely distributed architecture, you get very high reliability. With 342 of these devices, we have built in 10% redundancy, so you can achieve very high uptime, and our target there is five nines, which is very good, and serviceability without having to take the entire rack down. We talked about U.S. supply chain and volume manufacturing.

It leverages the same platform that we already have from a manufacturing point of view. On cost, the single-stage resonant converter with soft switching means the electromagnetic interference (EMI) signature is extremely low. You do not have to build big metal enclosures to reduce EMI. That is why the power module is in a potted polymeric enclosure, so we really drive cost down. The single-stage power conversion means very few components—we drive cost down. With price-to-value, our costs are going to be very low. So, very good response time, which means we can target completely eliminating the sidecar—more compute racks means more tokens, more tokens means more revenue.

With 342 of these power modules, you get architecturally correct redundancy, very high reliability, five nines uptime, supply chain and volume manufacturing advantages, and, of course, cost.

Operator: The next question will come from Praneeth Satish with Wells Fargo. Please go ahead.

Praneeth Satish: Good evening. Thanks. We have seen some changes on the installer landscape—Sunrun exiting their affiliate channel, Freedom Forever filing for bankruptcy. From what I can tell, neither were really major Enphase Energy, Inc. users. Do you see an opportunity for Enphase Energy, Inc. to pick up share as that demand reallocates, and are you seeing any early indications of that today? Or is that something that could play out over the next quarter or two? And then shifting gears to C&I: for Q1, you previously indicated potentially generating around $5 million or so of revenue for C&I. Can you share where C&I revenue landed in Q1? And what is embedded in the Q2 guide for C&I?

Should we expect C&I revenue to grow every quarter this year based on the pipeline you are seeing?

Badrinarayanan Kothandaraman: We are not going to talk about our customers today. Sunrun is our customer; we have a very good relationship with them. On Freedom, we do zero business with them. We view that the market will redistribute itself amongst the existing installer base, and we expect to get our fair share of it. On C&I, we did in Q1 a little more than $5 million—we did in the high single digits. C&I is a very lumpy business, at least for us, until we have a nice pipeline established.

The opportunity for us is that C&I installers and C&I developers have a safe harbor window as well, and that window will be closing; they have to make their plans by early July. For that, we have three products. One is our already existing 208-volt three-phase product, IQ8T, which we have been supplying for some time. The other is our brand-new IQ9 427-watt product, which we introduced very recently. The third one, which is coming and we plan to start shipping in Q3, is the 548-watt, even higher-powered version. That is suitable for safe harbor because if they are going to be using these later in the years, panel sizes are going to be even more.

Today, panel sizes are between 595 watts and 650 watts in the commercial business, and it is going to keep going up a little more. So the 548-watt is also exciting. We are very excited by the C&I business. Directionally, we expect it to continuously grow until we establish a pipeline, but quarter to quarter, it is going to be a little lumpy at the beginning.

Operator: The next question will come from Colin Rusch with Oppenheimer. Please go ahead.

Colin Rusch: Thanks so much, guys. Can you talk a little bit about the geographic distribution of where the channel inventory is? Is it primarily in the U.S.? Are you seeing some channel inventories build up in the EU as well? And then about the customer maturity with the solid state transformer—how soon can we start seeing some piloting of that product, and how many customers are you engaged with now in terms of potential testing near term?

Badrinarayanan Kothandaraman: It is mostly the U.S. On SST, we have talked to on the order of 20 prospective customers. The most important thing is to get a full demonstration system ready, which is what we are targeting for this year. Once that is done, there are enough people out there who will be willing to test the system, but we need to get to the demonstration system, which we will be ready with this year, and that is what we are singularly focused on. 2027 will be about customer pilots, and 2028 will be about volume shipments. We have a detailed investor presentation on the website as well as on the SST page.

Our team recognized the opportunity in the SST data center space about nine months ago, and we started working on feasibility then. Since then, we have gradually assigned approximately 80 engineers in the company to be working on SST full-time. We restructured the company in Q1 to focus on SST without changing our operating expense structure. We have built the basic power module and have it functional. The next step is to put together the full system, which is a lot more complex, and we expect to demonstrate that by the end of the year. Once we do that, the customer engagements are going to be there, and we target customer pilots throughout 2027 and volume shipments in 2028.

Operator: The next question will come from Philip Shen with ROTH Capital Partners. Please go ahead.

Philip Shen: Hi, thanks for taking my questions. Badri, you said that Q2 sell-through was 10% to 15% below expectations. You cited TPO challenges. We have been talking about tax equity pausing, and there is a fair amount of challenge out there. With the core revenue for Q2 being down to about $210 million, now what do Q3 and Q4 look like—down from ~$250 million in Q1? This is a seasonally strong time, Q2 and Q3, but this TPO challenge with this tax equity pause may endure. I know you have not guided Q3; can you give qualitative or quantitative color on Q3 and Q4?

Also, a housekeeping question: in your 10-Q, you entered into a $30 million secured revolving credit facility with a privately held company. Is this SoleSource, the company you do PROPEL with? And then back on SST for a moment—Raghu, you talked about pricing to value with your low-cost structure. Can you share what margins you might be targeting for this SST product?

Badrinarayanan Kothandaraman: At this point, I will tell you what I see—this is my opinion. We expected Q1 sell-through to be around the $250 million range, and we were 10% to 15% below that number. We overshipped approximately $25 million in Q1; that is why I said we ended the channel with a little more inventory than we would have liked. We are correcting that immediately within one quarter by undershipping in Q2 by that number. We do expect native sell-through in Q2 to be a little better than Q1 driven by the usual seasonality. What could surprise us in Q3 and Q4 are a few factors. PROPEL could surprise us; we are proceeding with some caution.

We are piloting in four states now; we are at a run-rate of 200 originations a week, which is nontrivial and climbing rapidly. PROPEL comes with an 84% storage attach—high because of California—but encouraging for our batteries. The second vector is Europe; we talked about batteries starting to show signs of strength in the Netherlands and France and, in general, even for solar. We are already seeing that in April compared to Q1. The third is the IQ Battery 10C; we are making a lot of progress, and 64 utilities have accepted our meter collar. With the PROPEL ramping, IQ Battery 10C will also be ramping with new installers who have not used Enphase before.

On small commercial, we see more opportunities before the safe harbor window closes; commercial developers are going to need a solution for 2028 through 2030. We expect steady increases in the commercial business and some potential safe harbor orders which will be shipped in Q3. We see challenges—tax equity challenges, installer bankruptcies—they are never good for the business. We are not the ones to complain; we will do what we can, and these initiatives are what we will be working on.

Raghu Belur: It is very early to tell, Phil, about what our price and cost will be for SST. We have a rough estimate, but it is too early to share. We are focused on continuing the development so we can get to that 1.25 megawatt customer demo by the end of this year. We are also investigating if there are any IRA advantages for us because we are using a very similar module to what we already do for solar. Over time, as we get deeper into the design, we will be happy to share more details. On the $30 million line, we are not breaking out the end customer.

Operator: The next question will come from Julien Dumoulin-Smith with Jefferies. Please go ahead.

Julien Dumoulin-Smith: Excellent. Maybe picking up on the tax equity piece and the target—you talked about 200 originations a week. What are you thinking quarter over quarter or into Q4 for that target installer partnership? How many are you pursuing? How do you think about tax equity as a limitation on the PROPEL program to ramp? What are the other factors to get this program up and going? In theory, it is part of your conscious ramping.

Badrinarayanan Kothandaraman: PROPEL is offered through our partners, so we are working very closely with them. My wish is to get up to a run-rate of 500 originations a week by the end of Q4—that is my wish. Today, we have 200 installers using PROPEL. Our vision with PROPEL is to give prepaid lease access to our long tail of installers with ease of doing business, so that number should be a healthy multiple of 200 over time. The tax equity question is better for our PROPEL partner; we are not going to make any comments on that right now.

Julien Dumoulin-Smith: Got it. Thank you so much. Appreciate it.

Operator: The next question will come from Eric Stine with Craig-Hallum. Please go ahead.

Eric Stine: Hi, everyone. Sticking with PROPEL, can you talk about the limiting factor to expanding beyond the four states? I would assume piloting means going hand in hand with your TPO partner to installers, educating those installers. Am I thinking about that correctly, and what is the time frame to expand to different states?

Badrinarayanan Kothandaraman: Yes. We want to look at the entire chain: start from originations, then installations, M1, M2, M3, then appropriately monetize the tax credits. That takes time. From originations to monetization could be four to five months. That is why we are still in the pilot; all of that needs to execute flawlessly. Ease of doing business for installers is critical. We cannot keep changing parameters on installers. The TPO needs to be able to monetize the tax credits properly. We need to prove that the entire chain works properly, and until then, we will not do a broad launch. We are piloting to see if we can support a lot of installers, and the answer is yes.

Since the last earnings call, installers went from 40 to 200; originations are now 200 a week and climbing rapidly. We are closely monitoring and working with our partners, and the moment we are ready to launch, we will be transparent about it. PROPEL is one of the things that can potentially improve the second half of the year and also 2027. Do not forget the other things: Europe is a big one—Netherlands and France have picked up steam. We are holding two to four homeowner events a week; each event is attended by almost 150 homeowners, and my target is each event should at least generate half a megawatt-hour.

If you do four events, that should generate 2 megawatt-hours a week, and that should compound. We will replicate the same in France where we have a 400 thousand installed base. We are introducing our fifth-generation battery—the form factor is very small, ~50% higher energy density using 100 ampere-hour prismatic cells and ~40% lower internal cost, and we expect to translate that into a lower price for our distribution partners. On the bidirectional charger, we are gearing up for a launch in Q4. Along with the meter collar and just the charger, it can provide V2X, which is both V2H (vehicle-to-home) resiliency and V2G/VPP.

We have two partnerships with North American OEM car providers, which we will announce when we are ready. On IQ9, we are launching for residential markets and have already launched for the commercial market; we are going to introduce the higher-power version. With our domestic content, FTA compliance, and U.S. manufacturing, that is a big advantage. That business is design-in and takes time; we expect steady progress. On the commercial battery, it is a gigawatt-hour TAM—small and medium businesses, schools, hospitals, churches, small businesses, gas stations, convenience stores—typically need between a 50 kilowatt-hour system and a 250 to 300 kilowatt-hour system.

We will be able to offer that along with our IQ9 on the PV side and an 80 kilowatt-hour battery you can string to 25 units up to 2 megawatt-hours. We are extremely excited by that offering as well. We expect sequential growth. It is a turbulent market, but we are controlling what we can—and, of course, the IQSST which we talked about.

Operator: The next question will come from Dylan Nassano with Wolfe Research. Please go ahead.

Dylan Nassano: Hi. Thanks for taking my question. Badri, I would love your take on Europe in terms of how durable you think this bump is. The market went through a boom for similar reasons back in 2022 and it was followed by a pretty severe destocking cycle. Can you compare and contrast where we are today?

Badrinarayanan Kothandaraman: It is anybody’s guess. Last time, the Ukraine crisis led to an explosion of demand. This one may be more modest, but nevertheless we are seeing an increase. I am not sure how long it will last. There are some fundamentals: batteries are good in general. Europeans are a little more advanced than the U.S. here. Almost every region is accelerating to a battery-first market, and battery-first pulls everything else—solar, EV chargers, energy management. We are going to get more competitive: we already made pricing corrections on microinverters in December and are making pricing corrections on batteries in May, and we already made battery pricing corrections in the U.S. in March. We are laser-focused on expanding our battery business.

In Europe, we are going from a third-generation battery to our fifth-generation battery in Q4—a massive leap in cost, pricing, installation, and space. Before we finalized the design, we showed it to installers in France, the Netherlands, and Germany in Q1 and got a lot of feedback—mostly very positive. For us, it is all about batteries there, and batteries will pull through solar. We think we are making the right steps to grow through 2026.

Operator: Again, if you have a question, please press star, then 1. The next question will come from Vikram Bagri with Citi. Please go ahead.

Vikram Bagri: Hi, it is Ted on for Vic. Thanks for taking the questions. On the guidance for Q2, it looks like it still includes tariff impact. Are you able to share how much of the inventory is still impacted by those tariffs? Would there be any interplay between the refunds that you may receive on that? And could you also talk about the progress being made on ramping the non-China battery cell supply—what is the outlook for that mix?

And then one follow-up: going back to the prepaid lease offering, do you have a view on where the prepaid lease product could be as a portion of the total TPO market this year, not necessarily for PROPEL but for the market as a whole?

Badrinarayanan Kothandaraman: In terms of tariffs, as Mandy said, we have applied for a $50 million refund, and we expect the decision and the refund to come within 90 to 120 days. As far as our gross margin guidance for Q2, it includes a benefit of approximately 2 percentage points in gross margin due to the change in reciprocal tariffs. Note that most of the countries are at 10% right now. The reduction in tariffs helps us be a little more aggressive on our batteries, and we have taken advantage of that to increase demand by adjusting pricing to be a little bit sharper in both Europe as well as the U.S.

On the prepaid lease portion of TPO, it is hard to say, and my comments should be taken with a grain of salt because we are still in a pilot. Right now, at 200 originations a week, it corresponds to something like 90 to 100 megawatts a year. You can do your math on how that compares to the TPO market.

Operator: Again, if you have a question, please press star, then 1. Please stand by as we poll for questions. Showing no further questions, this will conclude our question and answer session. I would like to turn the conference back over to Badrinarayanan Kothandaraman for any closing remarks.

Badrinarayanan Kothandaraman: Thank you for joining us today and for your continued support of Enphase Energy, Inc. We look forward to speaking with you again next quarter. Bye.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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