We are entering Earnings Season and two of the companies that I post about reported yesterday. I have decided to start with my review of Enphase's Q1 results. The basics are the company had Revenue of $54M down from $64M a year ago. The company lost $0.30 per share compared to a loss of $0.41 a year ago. I want quote the transcript from the Q4 Conference Call held on February 28th, 2017:
"Now, let's discuss our outlook for the first quarter of 2017. We expect our revenue for the first quarter of 2017 to be within the range of $60 million to $65 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% in Q1. However, we believe that the California market will recover in Q2 and return to normal growth rates.
Turning to margins, we expect GAAP and non-GAAP gross margin in Q1 to be within a range of 16% to 20%. Non-GAAP gross margin excludes approximately $250,000 of stock-based compensation expense. We expect GAAP operating expense for the first quarter to be within a range of $27.5 million to $29.5 million, and non-GAAP operating expense to be within a range of $19 million to $21 million, excluding an estimated $1.5 million of stock-based compensation expense and approximately $7 million of additional restructuring expense."
About the only thing that the company hit was the Operating Expense numbers. Revenue was less than expected as was the Gross Margin. Note that on the Q1 call the weather in CA was blamed for much of the downturn in Q1. The problem is that the Q4 call happened at the end of February. The company should have had a really good look at the totals for Q1 and apparently did not. Which leads to the thing that I think that investors need to deal with. Do you trust Management and their projections?
I think this is a fair question in this case. There have been so many wrong turns that you have to wonder if Management is in touch with what it is doing. Let me point something else out from the conference calls. The Q4 call predicted that Q2 would see a return to normal growth rates. On the Q1 call, we were told that California is 40% of Enphase's business. And the projection for Q2 is flat to down from last year. How is this a return to growth?
I think it is important to judge management by their words and actions. We will be having this conversation again about Calix, but it is so stark with Enphase that I want to call it to your attention. Enphase builds great products but are they a great company? Is the Leadership in place to lead them into the future? These are the decisions that you need to make.
Have a great day!
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