Enphase (ENPH) Q2 2022 Results: Strong Growth in Europe

Workers install solar panels on the roofs of houses under construction south of Corona, California. The California Energy Commission in May 2018 passed new energy building standards requiring solar panels for virtually all new homes built in the state starting in 2020.

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Enphase Energy’s second quarter results were boosted by strong growth outside of Europe as soaring natural gas prices prompted consumers to switch to solar.

Shares of the company, which provides solar power components and battery systems, jumped more than 9% in extended trading Tuesday after Enphase beat second-quarter revenue estimates.

Here’s how Enphase fared against analyst expectations, as compiled by Refinitiv:

  • Earnings: $1.07 per share, adjusted
  • Revenue: $530 million vs $505 million expected

Europe was a key growth area, with revenue in the region jumping 69% quarter over quarter, led by Germany and the Netherlands.

Currently, the United States accounts for approximately 80% of Enphase’s revenues. But CEO Badri Kothandaraman sees that changing fast.

“Maybe two years from today that number will be closer to 50/50,” he told CNBC, with Europe accounting for the bulk of international revenue.

This growth opportunity comes as Europe strives to revamp its energy system in a bid to move away from Russian fuel.

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On Tuesday, the bloc agreed to voluntarily reduce gas consumption by 15%. The region is also committed to strengthening its renewable energy infrastructure.

But in the meantime, fuel prices are skyrocketing. On Tuesday, Dutch TTF natural gas futures jumped 19.8% to 211.70 euros per megawatt hour, the highest level since March.

That price equates to about $63 per million British thermal units (MMBtu), according to Argus Media, which matches the price of U.S. natural gas.

To put the move into perspective, U.S. natural gas futures hit $9.75 per MMBtu on Tuesday, which was the highest level since 2008 but significantly lower than European prices.

Kothandaraman expects revenue from Europe to grow another 40% in the current quarter.

“We are aggressively expanding the team. We expect this momentum to continue,” he said on the company’s earnings call.

Enphase is also seeing demand growth in the United States, where utility bills are rising. Increasingly frequent grid outages are also prompting consumers to seek energy independence.

Total revenue for the company, which makes microinverters and backup energy storage for solar systems, jumped 20% quarter-over-quarter to a record $530 million of dollars. Gross margins increased quarter over quarter from 40.1% to 41.3%.

Enphase gave an optimistic outlook for the current quarter, with a revenue range of $590 million to $630 million. Wall Street was claiming $550.5 million, according to estimates compiled by Street Account.

The industry as a whole has faced a number of challenges in recent months, including supply chain issues, rising raw material costs and political uncertainty.

More recently, Senator Joe Manchin said he opposes — at least for now — climate spending outlined in the reconciliation package. An extension of the investment tax credit was included in the financing. The measure has traditionally received bipartisan support and was last extended in 2020.

Kothandaraman called the blocked funding a “setback”.

“Right now it would be nice if the government gave some impetus, at least in the form of tax credits,” he said.

“But even if it doesn’t happen [the industry will be] maybe a bit slower to develop, but everyone sees the benefits,” he added.

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