by Jeff St. John
November 09, 2017

We've seen a number of major acquisitions and consolidations in 2017 amongst companies playing a role in the grid edge. Smart meter vendors, demand response providers, and distributed energy startups are being bought and sold at a breakneck pace. 

Amid all this change, earnings season provides an important window into real-world conditions for the publicly traded companies competing in the field. The past week has brought quarterly earnings reports from Itron and Silver Spring, now in the process of merging into one of the world’s biggest grid edge networking providers, and Enphase and SolarEdge, two microinverter makers locked in competition. 

Itron and Silver Spring: A smart meter mega-merger in progress

Itron’s third-quarter earnings of 77 cents per share were lower than expected, largely driven by shipment delays in North America and water project delays in other parts of the world. Third-quarter revenues of $486.7 million were down 4 percent from the same quarter in 2016, with electricity, gas and water businesses all underperforming. However, the company’s third-quarter earnings of $25.6 million marked a turnaround from its $9.9 million loss in the same quarter last year.

Itron CEO Philip Mezey took several analyst questions about the Silver Spring acquisition during last week’s conference call, noting that the quarter’s results were not affected in any way by technology integration challenges between the two companies’ platforms, and reiterating that current contracts would be fully supported through the transition. 

“Generally, customer feedback has been supportive, [indicating] that the marketplace understands the transaction and the rationale,” said Mezey. “And we've really had to just reiterate the points...in particular around this notion of open standards, supporting other meter providers, of providing choice and value in the market” -- a reference to Itron’s plan to merge its OpenWay Riva platform and Silver Spring’s technology to create a truly open-standards-based platform, capable of supporting smart city and internet-of-things applications. 

Silver Spring didn’t hold a conference call to accompany its third-quarter earnings report this week, given its in-between status. As always, non-GAAP results differed significantly from its GAAP results, based on the company’s use of “billings,” or technology under contract with utilities, to smooth out big fluctuations in revenues from its pipeline of big projects. 

Third-quarter billings of $82.8 million were up 8.7 percent compared to the third quarter of 2016, although cost of billings also rose to $43.1 million, compared to $34.4 million in the third quarter of 2016. In GAAP terms, however, third-quarter revenues of $47.6 million were down 35.9 percent, and its net loss per diluted share of 47 cents rose from 29 cents in the same quarter last year.

“We delivered solid billings growth, underlying profitability, and significant cash flow from operations,” CEO Mike Bell stated in Wednesday’s press release. “New customer deployments continue for both domestic and international projects as we ramp deliveries of our Gen5 platform,” the company’s latest improvement to its wireless mesh network. 

Itron expects to complete its acquisition of Silver Spring late this year or early next year, and will provide more guidance on the combined companies’ financials in February. Itron and Silver Spring hold a dominant position in North America, but Landis+Gyr, the now publicly traded company that stands as its biggest rival, retains a lead in global market share. Landis+Gyr also has a claim of using the same open standards-based technology as Itron and Silver Spring, in the form of the Wi-SUN standard for mesh networks. 

Enphase and SolarEdge: A savage competition for solar microinverter market share

Solar inverters are another logical node in the grid edge network. But in this increasingly competitive space, delivering technology that’s both cheap and cutting-edge has become the primary directive. Microinverter makers Enphase Energy and SolarEdge Technologies are engaged in combat on these terms, with Enphase clawing its way back from a near-death experience, and SolarEdge taking the lion’s share of an expanding market. 

Enphase reported third-quarter revenues of $77 million, up 3 percent from the same quarter last year, selling about 790,000 microinverters, or about 231 megawatts-DC of power conversion technology. The company reported a GAAP net loss of $6.9 million, or 8 cents per share, compared to a loss of $18.8 million, or 40 cents per share, in the same quarter last year. Non-GAAP accounting reduced the quarterly loss to $964,000, or 1 cent per share, compared to a loss of $13.4 million, or 28 cents per share, in the same quarter last year. 

Enphase ended the quarter with a total cash balance of $28.9 million, slightly down from last quarter’s $31 million. But it also delivered its first next-generation IQ 6 technology for North American customers, and expects to leapfrog that with its IQ 7 products in the first quarter of 2018, said CEO Badri Kothandaraman in this week’s conference call. 

“My top priorities over the next six months are to improve cash flow, further expand gross margin with the introduction of IQ 7 worldwide, and achieve sustained profitability, creating a solid financial foundation,” Kothandaraman said. That includes putting its energy storage plans on the back burner, as he detailed in a September interview

As for Enphase’s move into solar module-integrated microinverters, Kothandaraman said that its August tally of 18,000 units shipped to partner LG had “increased sequentially” in the third quarter. The company also announced JinkoSolar and Indian module partner Waaree in September, adding, “We are working with a few other partners as well and will announce when we're ready,” he said. 

SolarEdge, the company that’s taken much of Enphase’s market share in the past year, kept winning in the third quarter, beating analyst expectations with record revenues of $166.6 million -- up 22 percent from the previous quarter’s record of $136.1 million, and up 30 percent year-over-year. 

The company sold 676 megawatts-AC of product in the quarter, nearly triple Enphase’s tally, including more than 2 million power optimizers and 90,000 inverters shipped. While just over half of SolarEdge’s business is outside the United States, it shipped 318 megawatts to North America in the quarter, up from 274 megawatts in the same quarter last year. 

The company also noted that growth in Germany and the Netherlands and “strong momentum” in Australia had reduced impact from Tesla, "which recently reported a major decline in its residential rooftop installations.”

Last week, Tesla reported a record quarterly loss of $671.16 million, compared to $21.88 million in profit in the third quarter of 2016. Difficulties at Tesla's Gigafactory battery assembly plant forced Elon Musk to announce a three-month delay in production targets for its mass-market Model 3 electric car. 

The latest utility mega-merger shakes up U.K. competitive energy markets 

Mega-mergers in the utility sector are all the rage these days -- pending regulatory approval. Last month, Vistra Energy and Dynegy, two U.S. generators that together own 40 gigawatts of generation assets concentrated in Texas, the Mid-Atlantic and New England, announced plans to merge in a $1.7 billion all-stock deal.

San Diego-based Sempra Energy is seeking regulator approval for a $9.45 billion purchase of Oncor Electric Delivery, which serves 10 million customers in Texas. And Houston-based Calpine is selling itself to Energy Capital Partners and other investors for $5.6 billion as it struggles with billions of dollars of debt.

This week brings a new mega-merger in the U.K.’s competitive energy retailing market. On Wednesday, SSE, the company formerly known as Scottish and Southern Energy, announced plans to merge its retail business with that of npower, a division of Innogy, the new subsidiary of German energy giant RWE.

The merger would reduce the U.K.’s six retail energy providers to five and yield a company with combined sales of £11 billion ($14.47 billion). It would also create a larger rival to the U.K.’s leading energy retailer, Centrica, whose British Gas subsidiary has about 14 million customers, compared to the 11.5 million served by SSE and npower. Together, the two companies would control more than half of the country’s market, potentially complicating the merger, which is expected to be complete in late 2018 or early 2019.