Despite the optimism of Enphase CEO Paul Nahi on this quarter's earnings call and the confidence of some equity analysts, Enphase CFO Bert Garcia still used the chilling term "going concern" during the call -- and that's never a good sign.
"Based on our liquidity position at December 31, 2016 as well as our history of operating losses, we acknowledge there is substantial doubt about our ability to continue as a going concern. In light of the challenges that we faced in 2016, these concerns are understandable. However, it's important to note that we have taken a number of meaningful actions that we believe will directly address many of these concerns, and taken together will significantly improve our financial condition in 2017."
Here are the recent actions taken by the microinverter builder.
- In January, T.J. Rodgers, founder of Cypress Semiconductor, and John Doerr, chairman of Kleiner Perkins, invested $10 million in the firm. Rodgers joined the board.
- A "restructuring action" in late January laid off approximately 18 percent of Enphase's workforce.
- A secondary offering of common stock in 2016 resulted in net proceeds of approximately $16.2 million.
- During the first quarter of 2017, Enphase realized net proceeds of approximately $11.3 million under its At Market Issuance Sales Agreement.
- In February, Enphase extended and refinanced its term loan facility from $25 million to $50 million.
Enphase expects a $38 million reduction in operating expenses (on an annualized basis) due to these actions.
Here are the takeaways from Enphase's most recent Q4 financial results.
- Revenue in Q4 2016 was $90.6 million versus the Street's estimate of $93.9 million. Revenue increased 2 percent sequentially and 38 percent compared to Q4 2015.
- Enphase shipped approximately 194 megawatts AC (approximately 815,000 microinverters).
- GAAP gross margin was 17.9 percent for the quarter and 18 percent for the year.
- GAAP net loss was $13.2 million for the quarter and $67.5 million for the year.
- Total revenue for 2016 was $322.6 million, down 10 percent from 2015, albeit with record shipments of 726 megawatts AC, translating to 3.1 million microinverters.
- The firm exited the fourth quarter with a total cash balance of $17.8 million.
- Non-inverter revenue increased 22 percent sequentially.
Nahi claimed Enphase's U.S. market share increased from approximately 20 percent in Q1 to over 30 percent in Q4.
Guidance for Q1 dampened by California rain
Revenue outlook for the first quarter of 2017 is expected to be in the range of $60 million to $65 million. That's versus a Street estimate of $73.1 million.
"While our first-quarter results are typically impacted by normal seasonality, the extraordinarily wet winter in California, where we have a strong presence, has negatively impacted our first-quarter revenues. We estimate that the residential PV market in California will be off by as much as 50 percent in Q1. However, we believe that the California market will recover in Q2 and return to normal growth rates."
Huawei inverters and SunPower AC modules
CEO Paul Nahi noted, "We have heard the same rumors you have about Huawei entering the market with an optimizer solution." Nahi also thought that SunPower's recent market share growth for its AC module was a positive sign for the Enphase AC module.
Enphase still has to hit profitability in the next few quarters while ramping two new product lines (its AC battery and sixth-generation microinverter) and keeping its inventory down while managing its working capital.