SolarEdge, Enphase Hit by ‘Dramatic Slowdown’ in US Solar Installations Throughout COVID-19 Pandemic’s Depths

SolarEdge, Enphase Hit by 'Dramatic Slowdown' in US Solar Installations During COVID-19 Pandemic's Depths

Residential solar inverter competitors SolarEdge and Enphase faced the same headwinds from the COVID-19 pandemic in the second quarter. Both companies reported a decline in sales in the second quarter.

However, both companies also put forward plans to capture part of the fast-growing US battery-powered solar system market, saying the worst downturn may be over.

SolarEdge: Strong sales outside of the US

SolarEdge posted GAAP net income of $ 36.7 million on revenue of $ 331.9 million for the second quarter. That’s a little more than $ 331.9 million in revenue in the same quarter last year, but a decrease of $ 431.2 million in the first quarter of 2020 – an accomplishment that “reflects the impact of the global pandemic,” said CEO Zvi Lando on Monday conference call on results.

These effects varied from market to market. The company’s US solar revenue of $ 124 million was on par with the second quarter of 2019, but declined significantly from the first quarter of 2020. This was “expected considering the US has been severely affected by COVID-19,” Lando said. While inventory tracking suggests residential property sales have been improving since April, the commercial and industrial business has remained slow, he noted.

Cancellations and delays have eased somewhat in recent months, while dealers’ order and installation rates for inverters and power optimizers at the module level have increased, Lando said. “We are cautiously optimistic about the recovery of the US market in the coming months,” but “the speed of this recovery is questionable,” leading to a third quarter revenue forecast of between $ 325 million and $ 350 million.

European sales of $ 144 million increased from $ 122 million in the previous quarter, mainly driven by stronger economic recovery and ongoing renewables incentives in several key countries including Germany, the Netherlands, Italy, Switzerland, Poland and France.

SolarEdge had record sales in several markets outside the US and Europe, including Australia, Israel and Taiwan.

The non-GAAP gross margin for the solar business decreased to 33.8 percent, compared to 35 percent in the last quarter. This is mainly due to the share of business in Europe’s lower gross margin environment, where other European and Chinese inverter manufacturers have more competition and SolarEdge has a higher share of commercial revenue, said CFO Ronan Faier.

In the energy storage space, SolarEdge began shipping its HD Wave Energy Hub inverter, which is compatible with third-party batteries, to North America in May. This is an important step for solar installers like Sunrun, Sunnova, SunPower, Tesla, and Vivint Solar (recently acquired by Sunrun), all of whom see growing demand for battery-backed solar.

Battery manufacturer LG Chem announced last month that it would couple its 9.8 kilowatt-hour Resu battery with the Energy Hub inverters in a DC configuration optimized for emergency power supply. The system is installed with “many other types of batteries in an AC”. coupled configuration, ”said Lando.

SolarEdge plans to launch its own household battery later this year, with research and development progressing as planned and product certification slowing down a bit due to COVID-19 disruptions, Lando said. SolarEdge generated $ 21.8 million in revenue from its non-solar business, primarily related to lithium-ion battery sales from the Kokam acquisition in 2018.

Enphase: Solar systems have been recovering since June

Microinverter maker Enphase reported second-quarter sales of $ 125 million, up from $ 205.5 million in the previous quarter and $ 134.1 million in the year-ago quarter as solar systems experienced a “dramatic slowdown” in April June only recovered in normal ranges, CEO Badri Kothandaraman said on a conference call on Tuesday.

“COVID-19 put significant pressure on demand in the second quarter,” Kothandaraman said. However, many of its world-class residential solar installer partners have been able to move from in-person to online sales to make up for the in-person disruption caused by home assignments and work interruptions.

The Fremont, Calif., Company posted a GAAP loss of $ 47.3 million for the quarter, attributable to a non-cash charge of $ 59.7 million on accounting for March and May after the company’s share price had been attributed to market value convertible bonds had almost doubled. On a non-GAAP basis, net income for the second quarter was $ 23.5 million was $ 23.2 million for the second quarter of 2019 and $ 51.9 million for the first quarter of 2020.

Non-GAAP gross margin of 39.6 percent increased 39.5 percent in the previous quarter, while sales in the European and Australian markets increased. According to Solar Mackenzie’s U.S. PV rankings, Enphase has struggled to increase its share of the home solar inverter market in the U.S. from SolarEdge, which had a market share of around 60 percent in the first nine months of 2019, compared to around 20 percent for enphase.

In the energy storage area, Enphase started delivering its Encharge energy storage systems for pilot installations in June. This is an important step towards Enphase’s goal of capturing the added value of batteries in addition to selling microinverters.

“We are expanding the battery supply chain and have more demand than we can support in the third quarter,” said Kothandaraman.

Enphase does not disclose its battery storage revenue, but anticipates an average accumulation rate of 8 to 10 percent, or a percentage of microinverter installations that add batteries, by the fourth quarter. This is a lower rate of installation than reported by major solar installers in California and other markets with high demand for solar storage. However, Kothandaraman attributed this to delivery restrictions rather than a lack of customer interest.

“The feedback we’ve received on our Encharge systems has been pretty good,” he said. The installers praised functions such as the smartphone-compatible, network-independent switchover and the ability to restart power-hungry air conditioning systems and pumps without overloading the battery. Enphase is adding a second lithium-ion phosphate battery maker in the fourth quarter and expects a third to qualify next year, he said.

Enphase also plans to release a version of its microinverter that will provide solar-only homes with power during power outages through the fourth quarter of the year – a potentially valuable system for California residents facing power outages and for other customers who need emergency power without batteries.

Enphase projected third-quarter revenue in the range of $ 160 million to $ 175 million with 100 percent booked through the middle of the third quarter, Kothandaraman said.


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