Enphase Microinverter Course Correction Includes Layoffs of 7% of Staff

Momentum shifts to SolarEdge in the growing module-level power electronics segment.

As we've reported, the contrasts are stark for Enphase and SolarEdge, the two leaders in the growing module-level power electronics segment.

While solar panel optimizer leader SolarEdge just posted a record-revenue quarter with an outlook for continued growth, microinverter leader Enphase just revealed a disappointing revenue and margin outlook for the next quarter.

GTM confirmed today that Enphase has had to lay off 7 percent of its staff. Here's a statement from CEO Paul Nahi:

Today I announced a plan to realign the Company's resources. Over the last quarter, the management team and I have assessed every part of our business and developed a plan that better positions Enphase to compete in today’s global environment and bring our next generation of products to market.

As part of this process, we have made a number of difficult but necessary organizational changes, including eliminating 7% of our positions. Today, we informed employees about these changes. This restructuring means we are losing talented and dedicated friends and colleagues and we thank all those who are leaving for all they contributed to Enphase Energy. We are treating all of our people with dignity and respect, providing a severance package to help their transition.

It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas. The difficult actions we are taking now will result in a company better equipped to innovate as fast as our customers and our industry require.

Enphase reported revenue of $102.9 million for its third quarter, up 4 percent year-over-year and in line with guidance. Gross margin was also in line with guidance. The company shipped 950,000 microinverters for 219 megawatts (AC), up 28 percent year-over-year.

But Enphase's guidance for the fourth quarter was significantly below expectations at $62 million to $70 million. Street consensus was $111 million, a big miss. The CFO said, "The fourth-quarter revenue decline is driven by a correction of higher inventory levels in our distribution channel and softer overall market demand. We expect gross margin to be within a range of 23 percent to 26 percent, as a result of a more aggressive pricing strategy."

Meanwhile, here are SolarEdge's stats from the current quarter:

That's three consecutive profitable quarters as a public company for SolarEdge. SolarEdge's guidance for the next quarter points to revenue of $118 million to $121 million and gross margins of 28 percent to 30 percent. Guidance was ahead of consensus.

Scott Moskowitz, solar markets analyst at GTM Research, notes, "Enphase's third-quarter earnings expose the unfortunate reality of exceptional cost pressure in the residential PV inverter market. Year-over-year pricing declines have far exceeded expected annual reductions of 10 percent to 15 percent."

Moskowitz continued, "The 219 megawatts shipped in Q3 represent Enphase's highest-volume quarter ever. However, market share has fallen from a high of 40 percent in Q3 of 2014 as SolarEdge Technologies has grown to challenge Enphase."

He concluded, "Enphase's rise to the top of the U.S. residential market was a result of design simplicity, a loyal customer base, and the company's early ability to meet NEC 2014 safety requirements. Momentum shifted as SolarEdge also met rapid shutdown requirements at a lower cost."

FIGURE: Residential Inverter Suppliers, 1H 2015

Source: GTM Research Q3 2015 U.S. PV Leaderboard