Enphase Energy rises after record quarter despite supply chain woes – News Couple

Enphase Energy rises after record quarter despite supply chain woes

Jonathan Fisk, Director of Solaray, has moved a solar panel at the solar installer’s Sydney facility.

Jason Reed | Reuters

Shares of Enphase Energy rose more than 12% during extended trading Tuesday after the company reported record third-quarter revenue, despite ongoing headwinds from supply chain bottlenecks.

The company, which makes small inverters and backup power storage for solar energy systems, reported sales of $351.5 million during the period, compared to the $345 million analysts polled by StreetAccount had been expecting.

Revenue jumped 11% on a quarterly basis, almost double the $178.5 million generated during the third quarter of 2020. The company also issued optimistic guidance, saying it expects fourth-quarter revenue to be between $390 million and $410 million. Wall Street analysts had expected $373.6 million in revenue guidance, according to StreetAccount estimates.

However, while CEO Badri Kothandharaman said business is thriving, Enphase, like companies across sectors and industries, is facing supply chain constraints. In an effort to get products to consumers faster, the company qualified alternative suppliers during the quarter, and also chose to move some small transformers. This increases costs dramatically, and along with the eightfold rise in ocean freight rates, the company has chosen to pass some of these costs on to the consumer by raising prices. Enphase again plans to raise prices during the fourth quarter.

“Every component of the supply chain is underlined,” Kothandharaman told CNBC. “Everything goes hand in hand…everything goes up and it’s happening now.” He noted that a shipping container that cost $2,000 last year now costs $16,000.

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While Kothandaraman expects the company to deal with supply chain headwinds during the current quarter, he has not issued any guidance for next year. But this is not a deviation from normal – Enphase never makes forecasts beyond the current period.

“The situation is dynamic. What happens in logistics tomorrow could be very different…the situation is changing every day,” he said, adding that the fourth quarter looks better on the small transformer front than the third quarter, just like the third quarter. The quarter looked better than the second quarter. However, the logistics around the batteries, which cannot be shipped by air, have worsened.

But the company does not envision any slowdown in the demand for the products despite the longer delivery times. Enphase expects to ship between 90 and 100 megawatt hours of storage systems in the fourth quarter, up from 65 megawatt hours during the third quarter.

Enphase has focused on cutting costs, and raising prices for consumers will help offset the increased expenses. But gross margins could fall during the current quarter. GAAP gross margins for the third quarter came in at 39.9%. Guidance for the fourth quarter puts that number between 37% and 40%.

The company is also expanding its product base. On Monday, Enphase announced the IQ8 – a new micro-inverter that allows the solar system to continue operating even if the grid fails, and without on-site storage.

“Overall, it was a strong quarter, as higher logistics costs were offset by price increases and cost management and demand for small transformers continued to outpace supply,” Citi wrote in a note to clients following the earnings announcement.

Enphase shares are down 1% for 2021 through Tuesday’s close.

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