Enphase (ENPH) earnings Q2 2022: Huge growth in Europe

Enphase Energy’s second-quarter results were boosted by strong growth out of Europe as soaring natural gas prices prompt consumers to go solar.

Shares of the company, which supplies solar energy components and battery systems, jumped more than 9% during extended trading Tuesday after Enphase beat revenue estimates for the second quarter.

Here’s how Enphase did versus analysts’ 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 from the region jumping 69% quarter over quarter led by Germany and the Netherlands.

Currently the U.S. makes up roughly 80% of Enphase’s revenue. But CEO Badri Kothandaraman sees that changing fast.

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

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

On Tuesday the bloc agreed to voluntarily reduce gas consumption by 15%.The region has also pledged to ramp up its renewable energy infrastructure.

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

That price is equivalent to about $63 per million British thermal units (MMBtu), according to Argus Media, which is how U.S. natural gas is priced.

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

Kothandaraman expects revenue from Europe to grow another 40% during 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 from the U.S., 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. Gross margins increased quarter over quarter from 40.1% to 41.3%.

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

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

Most recently Senator Joe Manchin said he opposes — at least for the time being — the climate spending outlined in the reconciliation package. An extension of the Investment Tax Credit was included in the funding. The measure has traditionally received bipartisan support and was last extended in 2020.

Kothandaraman called the stalled funding a “setback.”

“Right now it would be good if the government provides an impetus, at least in the form of tax credits,” he said.

“But even if that doesn’t happen [the industry will be] maybe a little slower to grow, but everybody sees the benefit,” he added.