Enphase Energy, Inc. · NASDAQ:ENPH
Enphase Energy — Investor Day (August 2018)
69 slides from Enphase Energy's investor day presentation, Aug 16, 2018
Slide 1: Safe Harbor
Safe Harbor Use of forward-looking statements The information in this presentation contains forward-looking statements within the meaning of the U.S. Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended. Such statements are based upon current
Slide 2: Agenda
Agenda Name Title Topic Duration Badri Kothandaraman CEO Profitable Top Line Growth 45 min Special Topic 30 min Raghu Belur CPO Ensemble Solar And Storage 45 min Break 15 min Jeff McNeil VP Customer Experience 30 min Eric Branderiz CFO Solid Financial Foundation 30 min Q&A 45 min
Slide 3: Profitable Top Line Growth
Profitable Top Line Growth Badri Kothandaraman President & CEO
Slide 4: Enphase: The #1 Microinverter Company In The World
Enphase The #1 Microinverter Company In The World To Deliver Technology Solutions That Make Clean Energy Affordable, Reliable And Accessible To All Founded In 2006, Total # Of Employees: 385, As Of June 30, 2018 Headquarters: Petaluma, California With Offices Globally Our Customers Are Installers An
Slide 5: Management Has Deep Semiconductor And Solar Expertise
Management Has Deep Semiconductor And Solar Expertise Badri Kothandaraman President and CEO Former COO At Enphase, Exec VP At Cypress Semiconductor For Memory And IoT Products B.Tech From IIT Madras And Masters In Materials Science From U.C. Berkeley Attended The Stanford Executive Program And Holds
Slide 6: What Is Enphase's Strategy
What Is Enphase’s Strategy 30-20-10 World Class Customer Experience Profitable Top Line Growth Solid Financial Foundation A C D B
Slide 7: Financial Turnaround
Financial Turnaround A Percent $M $58.5M $30M All numbers reflected are on Non-GAAP Basis, refer to Appendix for reconciliation to the most comparable GAAP measure
Slide 8: Marching Towards Operational Excellence
Marching Towards Operational Excellence A All numbers reflected are on Non-GAAP Basis, refer to Appendix for reconciliation to the most comparable GAAP measure $M
Slide 9: Pricing Evolving From Transactional To Value-Based
Pricing Evolving From Transactional To Value-Based Strategy Discipline: Transactional Control Across Sales Channels, Market Segments & Regions Segmentation: Increase Value From Premium Offerings (ACM, High Power) Services & Software: Tripled To-date And We Expect Will Triple Again In 2019 Innovation
Slide 10: Investing And Reducing Our Expenses
Investing And Reducing Our Expenses A All Numbers In Millions All numbers reflected are on Non-GAAP Basis, refer to Appendix for reconciliation to the most comparable GAAP measure $M
Slide 11: 2017 Was Fixing Operations
2017 Was “Fixing Operations” A All Numbers In Millions Revenue Stagnant Address Gaps Through Product Innovation And Solving Customer Problems Did Not Service Valued Customers Due To High Costs Missed Out On Storage Due To Not Having The Right Product Regional Gaps 96-Cell Compatibility Revenue Stagn
Slide 12: What is Enphase's Strategy
What is Enphase’s Strategy 30-20-10 World Class Customer Experience Profitable Top Line Growth Solid Financial Foundation A C D B
Slide 13: Residential Solar Is An Attractive Market
Residential Solar Is An Attractive Market Source: Enphase Estimates Enphase Has The Right Products To Address The Growing Residential Market Stable And Growing Market (10% CAGR 16’ – ’22) Growth Expected From All Regions Enphase’s Addressable Market Is ~ 40% Today We Expect To Improve This By Region
Slide 14: Residential Storage Market Is Showing Strong Growth
Residential Storage Market Is Showing Strong Growth Enphase Is Well Positioned To Capitalize On This Growth With Ensemble Storage Has Become Affordable Market Expected To Grow At A CAGR Of 34% Most Systems Today Are Based On Lithium-Ion Chemistry Key Customer Requirements Are Cost, Safety, Reliabili
Slide 15: Software = Value Driver For Enphase
Software = Value Driver For Enphase B Software Defined Architecture Rapid Entry Into New Regions Advanced Grid Functions Configured In Software Enlighten Manager Panel Level Monitoring Over-The-Air Firmware Upgrades Early Failure Detection MyEnlighten Energy Performance And Education For Homeowners
Slide 16: ASIC = Value Driver For Enphase
ASIC = Value Driver For Enphase 2014 2019 $X $0.2X ASIC Cost B Heron 2 – IQ 6 Control algorithm improvements 2.8 Million Gates Swift – IQ 8 Ensemble Support 5.0 Million Gates Heron 1 – S280 Advanced grid functions Reactive power control Heron 3 – IQ 7 (Today) Die shrink 3.8 Million Gates Swift 2 – I
Slide 17: Software + ASIC = Digitizing Energy
Software + ASIC = Digitizing Energy Today Tomorrow Power Electronics Controlled By Digital Architecture Digital Architecture Implemented By Semiconductor Integration Nanosecond Control Enables Fast Reaction To Grid Faults Component Integration Into ASIC Improves Quality And Cost IoT System Managed V
Slide 18: Profitable Top Line Growth Vectors
Profitable Top Line Growth Vectors B Expand Into New Regions, Leveraging Software Configurability Of IQ Platform Create High Power & High Performance Microinverters, Through Architectural Innovation Create Value By Reducing Installation Time And Logistics Create Module Partnerships To Grow Share Tra
Slide 19: Regional Expansion With IQ
Regional Expansion With IQ 7 B1 Source: Enphase Estimates Software Defined Architecture Allows For Rapid Entry Into New Regions Single SKU Hardware Reduces Inventory And Provides Faster Logistics IQ 7 Adds 1GW Of Addressable Market Expansion Further Into EMEA And LATAM Enables Competitive Product Fo
Slide 20: High Power, High Performance Products
High Power, High Performance Products B2 <2017 250W 280W 300W 320W 425W >500W 2018 2019 >2020 IQ7X - US IQ7X - RoW 425W product 500W product 96-Cell Modules – SunPower, Panasonic Highest Power Enphase Microinverter To Date Compatible With AC Modules High power - AC Single Stage Architecture Results
Slide 21: AC Modules Are The Future Of Residential Solar
AC Modules Are The Future Of Residential Solar B3 Faster Installation 20 - 40% Reduction In Installation Time* Logistics & Supply Chain 10 - 12% Reduction* High Quality Of Installation Plug And Play Easy Training Plug And Play Great Module Partners SunPower, Panasonic, Solaria, Jinko, LG Source: Enp
Slide 22: Acquisition Of SunPower's Microinverter Business
Acquisition Of SunPower’s Microinverter Business B3 High Performance, High Quality, Easy-To-Use Home Solar Systems Advances AC Modules As The Future Of Residential Solar Enphase Is The Exclusive MLPE Supplier For SunPower’s Residential Business In The US Closed August 9, 2018 $15M Cash & 7.5M Shares
Slide 23: Long Tail Tier AC Modules: Enphase Energized
B3 Long Tail Tier 1 AC Modules: Serving Long Tail And Tier 1 Installers Enphase EnergizedTM
Slide 24: Ensemble Is An Energy Management Technology
Ensemble Is An Energy Management Technology Enables Solar Even When Grid Is Not Present Includes High Capacity, Flexible Storage With Backup, Ideal for Residential Market Creates an AC Marketplace For Solar, Storage, Load Control, Grid And Generator IQ 8 Based On Ensemble Can Transform Access To Ene
Slide 25: Sunnova – A Strategic Partner To Enphase
Sunnova – A Strategic Partner To Enphase B4 Leading Privately Held Residential Solar and Storage Service Provider In the USA Sunnova partners with a qualified network of regional solar installation specialists to facilitate the sale and installation of solar and storage, which Sunnova manages as a s
Slide 26: Sunnova and Enphase Partnership
Sunnova and Enphase Partnership John Berger CEO, Sunnova
Slide 27: Sunnova — An Industry Leader
The energy industry is changing and Sunnova is helping lead the charge. With competition and consumer choice guiding our strategy, we support policies that offer customers more options, better service, greater savings and energy freedom. Sunnova — An Industry Leader Founded in 2012 and headquartered
Slide 28: Power Energy Independence
POWER ENERGY INDEPENDENCE Driven by Sunnova Freedom to live life uninterrupted Managed as a service
Slide 29: Sunnova: Energy Independence
At Sunnova, we see energy independence as the freedom to live life uninterrupted. We are the source for clean, affordable, renewable and always available energy. We are driven to harness solar to ensure that whether on or off grid, day or night, during the calm or when nature is fiercest, the sun wi
Slide 30: Sunnova and Enphase Partnership
Sunnova and Enphase Partnership As an early adopter of their technology, Enphase’s various technology solutions have decreased our cost to serve our customers, enabling us to offer our customers a better service at a better price. Our two companies share a common vision for the future of the energy
Slide 31: Ensemble Solar And Storage
Ensemble Solar And Storage Raghu Belur Chief Products Officer
Slide 32: What Is Ensemble?
What Is Ensemble? B4 IQ 8 Storage Micro + Cells + BMS Tertiary control, API interface, Over-the-air- firmware- upgrade IQ 8 Micro IQ 8 Micro IQ 8 Micro Enlighten Cloud Load Center Critical Loads Loads Critical Loads Communication and Control Non-Critical Loads Generator Automatic Transfer Switch Sol
Slide 33: Ensemble Value Proposition – Power Of The Platform
Ensemble Value Proposition – Power Of The Platform Complete Solution: Solar + Storage + Communication & Control + Cloud Energy Management: Economic Optimization, Fleet Management Distributed Architecture: Master-less System Scalable: Easily Expandable Flexible: Any Configuration Of Solar, Storage An
Slide 34: IQ8 Microinverter Is The Foundation Of Ensemble
IQ8 Microinverter Is The Foundation Of Ensemble Bi-directional System That Enables Grid Independent Operation IQ 8 Storage Micro + Cells + BMS Tertiary control, API interface, Over-the-air- firmware- upgrade IQ 8 Micro IQ 8 Micro IQ 8 Micro Enlighten Cloud Load Center Critical Loads Loads Critical L
Slide 35: IQ8 Microinverter: Swift ASIC Is The Heart
IQ8 Microinverter B4 Swift ASIC Is The Heart Of The System 55nm; 5 Million Gates; Mixed Signal ARM Processor Embedded In The ASIC High Speed Digital Control Control Vectors Updated Every 20ns Software Defined Grid Tied Or Grid Independent Bi-directional Acts As An Inverter And Charge Controller Used
Slide 36: Energy Storage Is A Key Element Of Ensemble
Energy Storage Is A Key Element Of Ensemble High Capacity AC Coupled Storage System IQ 8 Storage Micro + Cells + BMS Tertiary control, API interface, Over-the-air- firmware- upgrade IQ 8 Micro IQ 8 Micro IQ 8 Micro Enlighten Cloud Load Center Critical Loads Loads Critical Loads Communication and Con
Slide 37: Enphase Storage Portfolio
Enphase Storage Portfolio B4 Q4’18 ACB 1.5 Coming Second Generation Cost Reduction EMEA, APAC 1.2 kWh Modular System 2016 ACB 1.0 First Generation ToU optimization EMEA, APAC 1.2 kWh Modular System Shipped Over 25 MWh Till Date 3.3 kWh and 10 kWh Modular Systems 1H’19 Encharge Third Generation Ensem
Slide 38: Encharge 3.3 kWh
Encharge 3.3 kWh B4 Modular 2-Person Install Flexible and Scalable Single Phase Distributed Resilient 3.3kWh x 1 = 3.3kWh 1.28kW x 1 = 1.28kW Cells LFP Cooling Passive Environ. Outdoor Comms Zigbee Weight: 40kg Size: 300mm x 700mm x 265mm Mounting: Wall and Floor
Slide 39: Encharge 10 kWh Modular Design
Encharge 10 kWh (Modular Design) Modular 2-Person Install Flexible and Scalable Single & Three Phase Distributed Resilient 3.3kWh x 3 = 10kWh 1.28kW x 3 = 3.8kW Cells LFP Cooling Passive Environ. Outdoor Comms Zigbee Weight: 120kg Size: 1000mm x 700mm x 265mm Mounting: Wall and Floor B4
Slide 40: Ensemble Communication And Control
Ensemble Communication And Control Fine Grained Load Control IQ 8 Storage Micro + Cells + BMS Tertiary control, API interface, Over-the-air- firmware- upgrade IQ 8 Micro IQ 8 Micro IQ 8 Micro Enlighten Cloud Load Center Critical Loads Loads Critical Loads Communication and Control Non-Critical Loads
Slide 41: Ensemble Communication And Control Gateway
B4 Ensemble Communication And Control AC Combiner And Automatic Transfer Switch Gateway With Cellular & Wi-Fi Fall Back To Cellular When Wi-Fi Fails Protection Circuit For Solar And Storage 4 X 20A: Solar + Storage Revenue Grade Metering ANSI C12 Electronic Current Limiting Eliminates Main Panel Upg
Slide 42: Use Case – Grid Tied Solar System
Use Case 1 – Grid Tied Solar System Backward Compatible To Install Base B4 AC Combiner (Gateway) Non-Critical Loads Tertiary control, API interface, Over-the-air- firmware- upgrade Load Center Communication and Control Loads Enlighten Cloud Solar + Communication & Control + Cloud Grid IQ 8 Micro IQ
Slide 43: Use Case – Grid Independent Solar System
Automatic Transfer Switch Use Case 2 – Grid Independent Solar System Seamless Transition Between Grid Tied And Off Grid B4 Non-Critical Loads Tertiary control, API interface, Over-the-air- firmware-upgrade Load Center Communication and Control IQ 8 Micro IQ 8 Micro IQ 8 Micro Solar + Communication &
Slide 44: Use Case – Grid Independent Energy System
Use Case 3 – Grid Independent Energy System B4 IQ 8 Storage Micro + Cells + BMS Non-Critical Loads Tertiary control, API interface, Over-the-air- firmware- upgrade Enlighten Cloud Critical Loads Load Center Generator Communication and Control Non-Critical Loads Solar + Storage + Communication & Cont
Slide 45: Enphase Ensemble Advantage versus Competition
Enphase Ensemble Advantage versus Competition B4 Storage Enphase AC Coupled DC Coupled System AC Coupled System Scalability High Limited Limited Chemistry LFP NMC NCA or NMC Safety Low Voltage DC High Voltage DC High Voltage DC Installation 40 kg (12kg/kWh) 88.5 kg (8.9kg/kWh) 125 kg (9.3kg/kWh) Sys
Slide 46: We are Transforming Access To Energy
We are Transforming Access To Energy Grid Tied to Grid Independence B4
Slide 47: What is Enphase's Strategy
What is Enphase’s Strategy 30-20-10 World Class Customer Experience Profitable Top Line Growth Solid Financial Foundation A C D B
Slide 48: Quality Is The Bedrock Of The Enphase Design
Quality Is The Bedrock Of The Enphase Design C ASIC Integration Over-The-Air Software Upgrade Design For Reliability No Single Point Of Failure 10X Reduction in DPPM Testing > Industry Standards
Slide 49: Improving Quality From One Generation To Next
Improving Quality From One Generation To Next C Improvement Every Generation 0.7X 0.1X Source: Enphase Data
Slide 50: Enphase Has Made Customer Service A Priority
Enphase Has Made Customer Service A Priority C Take Care Of Homeowners and Installers Put in Place Right People, Processes Enable Self-Service – App, Chat, Forums > 60% NPS Customers = Promoters Achieve Best in Class Quality Issues Solved First Time In Minutes
Slide 51: Improving Operations To Resolve Customer Issues
Improving Operations To Resolve Customer Issues C 3.0X 2.0X 1.0X Source: Enphase Data
Slide 52: Getting Enphase NPS To World Class
Getting Enphase NPS To World Class C Target NPS = 60% Benchmark NPS data from https://npsbenchmarks.com.Stock values and 5 year % change as of Aug 5th 2018.
Slide 53: What is Enphase's Strategy
What is Enphase’s Strategy 30-20-10 World Class Customer Experience Profitable Top Line Growth Solid Financial Foundation A C D B
Slide 54: Solid Financial Foundation
Solid Financial Foundation D Company Executing On Operations 30-20-10 On Track For Q4’18 Positive Free Cash Flow Generation For Two Quarters In A Row Balance Sheet Transformation Reducing Cash Conversion Cycle Convert Financing
Slide 55: Enphase 30-20-10 Target Operating Model
Enphase 30-20-10 Target Operating Model D Gross Margin 30% Cost Management – Multi-Sourcing, Zero-Based Cost Focusing On Accessories And Overhead Strong Pricing Management OPEX 20% Off-Shoring To India Increasing Corporate Efficiency Targeted Investments Operating Income 10% Achieve And Sustain Prof
Slide 56: Enphase Financials
Enphase Financials D *See reconciliation to most comparable GAAP measure in Appendix
Slide 57: Enphase On Track For 30-20-10
All numbers reflected are on Non-GAAP Basis, refer to Appendix for reconciliation to the most comparable GAAP measure Enphase On Track For 30-20-10 D Q1’17 To Q2’18 Exited Low GM Accounts Focus on Profitable Growth Q1’17 To Q2’18 Re-structuring Off-shoring To India Q1’17 To Q2’18 On Track to 30-20-1
Slide 58: Balance Sheet Transformation
Balance Sheet Transformation D Solid Execution On Free Cash Flow Base Business Generating Free Cash Flow (FCF) With 30-20-10 SunPower’s Microinverter Acquisition Expected To Be Highly Accretive Rigorous Management Helps In Reducing Cash Conversion Cycle Recently Announced Convertible Notes Offer Opp
Slide 59: Reducing Cash Conversion Cycle
D Maintain 30 Days Of Inventory Optimize Receivables and Revenue Linearity Reducing Cash Conversion Cycle (CCC) Optimize Payables Using Multi-Sourcing Best-In-Class CCC AR, AP, Inventory Management Cash Business Process Simple Asset-Lite Business Model Lends Itself to Achieving Best-In-Class CCC Imp
Slide 60: Convert Offering Summary
Convert Offering Summary Issuer: Enphase Energy, Inc. (Nasdaq: ENPH) Security Offered: Convertible Notes Due 2023 Ranking: Senior Unsecured Offering Size: $60 Million Private Placement To TJ Rodgers: $5 Million In a Separate Private Placement in Addition to $60M of Notes Sold Use Of Proceeds: Genera
Slide 61: Ensemble Storage Set To Ramp
Ensemble Storage Set To Ramp Storage Attach With Solar Rapidly Increasing Globally Enphase Microinverters Are Installed On 130K-180K Homes Annually Expect 3-5% Storage Attach Rate By Q4’19 10kWh Storage Expected To Be The Sweet Spot Pricing Based On Ensemble Value For Both Long Tail And Tier 1 Gross
Slide 62: Conclusions
Conclusions Badri Kothandaraman President & CEO
Slide 63: Conclusions
Conclusions On Track For 30–20–10 In Q418 Solidify Market Share Leadership In Microinverters Innovate To Solve Customer Problems Creating A Solid Foundation For Profitable Top Line Growth Supply Chain Optimization, Pricing Management And IQ 7 Transition Ensemble Solar And Storage Expected To Be A Ga
Slide 64: Conclusions
I Conclusions On Track For + Supply Chain Optimization, Pricing Management And IQ 7 To ition Creating A Solid + 1Q7 Platform Enables Regional Expansion Now Foundation For epee market : n Rete - 1Q7X Supports 96-Cell Modules Now — More Coming! Profitable Top In Microinverters — *§ Microl i itine\Grow
Slide 65: Appendix
Appendix
Slide 66: Enphase Financials – GAAP Basis
Enphase Financials – GAAP Basis
Slide 67: Enphase Financials – GAAP To Non-GAAP Reconciliation
Enphase Financials – GAAP To Non-GAAP Reconciliation
Slide 68: Enphase Financials - GAAP To Non-GAAP Reconciliation
J Enphase Financials - GAAP To Non-GAAP Reconciliation 22018 © ai2018 «© 4201732017 22017 at 2017 Gross margin (GAAP) 299% 26.2% «= «238% «= 21.4% ©=—= 18.1% 12.9% Stock-based compensation 0.6% 0.3% 0.4% 0.4% 0.3% 0.4% Gross margin (Non-GAAP) BOS% 265% 24% TBH 184% 19.3% Operating expenses (GAAP) $
Slide 69: Enphase
S ENPHASE.