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Enphase Energy, Inc. (ENPH 1.43%)
Q4 2021 Earnings Call
Feb 08, 2022, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Thank you for standing by, and welcome to the Enphase Energy fourth quarter 2021 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator instructions] As a reminder, today's program is being recorded.
I would now like to introduce your host for today's program, Karen Sagot. Please go ahead.
Karen Sagot -- Head of Investor Relations
Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's fourth quarter 2021 results. On today's call are Badri Kothandaraman, Enphase's president and chief executive officer; Eric Branderiz, chief financial officer; Mandy Yang, chief accounting officer and corporate treasurer; and Raghu Belur, chief products officer. After the market closed today, Enphase issued a press release announcing the results for its fourth quarter ended December 31, 2021. During this conference call, Enphase management will make forward-looking statements, including, but not limited to, statements related to Enphase Energy's expected future financial performance; the capability of our technology and products, including features, performance in our operations, including manufacturing and customer service; the anticipated growth in our sales and in the markets in which we operate and target; the benefits to homeowners and installers and regulatory issues.
These forward-looking statements involve significant risks and uncertainties, and Enphase Energy's actual results and the timing of events could differ materially from these expectations. For a more complete discussion of the risks and uncertainties, please see the company's annual report on Form 10-K for the year ended December 31, 2020, which is on file with the SEC, and annual report on Form 10-K for the year ended December 31, 2021, which will be filed with the SEC in the first quarter of 2022. Enphase Energy cautions you not to place any undue reliance on forward-looking statements and undertakes no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in expectations. Also, please note that financial measures used on this call are expressed on a non-GAAP basis unless otherwise noted and have been adjusted to exclude certain charges.
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The company has provided a reconciliation of these non-GAAP financial measures to GAAP financial measures in its earnings release posted today, which can also be found in the Investor Relations section of its website. Now I'd like to introduce Badri Kothandaraman, president and chief executive officer of Enphase Energy. Badri?
Badri Kothandaraman -- President and Chief Executive Officer
Good afternoon, and thanks for joining us today to discuss our fourth quarter 2021 financial results. We had a good quarter. We reported revenue of $412.7 million, shipped approximately 3 million microinverters and 100.2 megawatt-hours of IQ batteries, achieved non-GAAP gross margin of 40.2%, and generated free cash flow of $84.1 million. We started production shipments of our IQ8 microinverters for customers in North America during Q4, and we have been very pleased with customer feedback so far.
We exited the fourth quarter at approximately 40, 17, 24. This means 40% gross margin, 17% operating expenses, and 24% operating income all as a percentage of revenue on a non-GAAP basis. As a reminder, our baseline financial model is 35, 15, 20. We will go into detail about our financials later in the call.
Let's now discuss how we are servicing customers. Our Q4 NPS worldwide was 69% compared to 67% in Q3. Our North American NPS was 73% compared to 71% in Q3. Our average call wait time increased to 8.9 minutes in Q4 compared to 5.5 minutes in Q3 as we onboarded new installers and fielded more calls on our batteries.
The ramp of our batteries has significantly increased call volumes as new installers learn how to commission the system and homeowners learn about the systems features. We're not happy about the higher wait time, and we are working on it to reduce it under a minute through staffing and training. During Q4, we also increased the number of field service technicians in the U.S. and Europe to provide on-site help to our installers particularly on batteries.
Let's talk about manufacturing. Our operations team did a great job flexing manufacturing as 2021 played out. As we have discussed in the past earnings call, the global supply chain situation -- the global supply chain is still under a little bit of stress, but our situation has been stable primarily due to diligent supplier management and qualification of alternate suppliers during the past year. Our supply of AC FET drivers is at a very healthy level, and we have five sources for AC FET drivers.
For ASICs used in our microinverters, our supply was quite healthy in Q4, and we continue to manage it closely as we ramp IQ8, and we have two foundry sources for our ASICs. With the growing demand for our microinverters, we remain vigilant regarding global supply chain and logistics. Given our strong demand, we added a fully automated line in Q4, bringing quarterly capacity to 2.25 million microinverters in Mexico. We had already added a second fully automated line earlier in 2021 at our contract manufacturer, Salcomp in India, bringing that quarterly capacity to about 1.5 million microinverters.
Along with our existing capacity in China, we can now do a little more than 5 million microinverters per quarter in total for all microinverters worldwide. We are also planning to add a contract manufacturing facility for microinverters in Europe by the end of this year. We see rapid growth in the region and would like to service customers better. Let's now talk about batteries.
Our two sources for battery cell packs have increased their capacity to 180 megawatt-hours per quarter from 120. Our existing cell pack suppliers are capable of adding even more capacity if needed. And we are continuing discussions with additional cell pack suppliers as well. As always, there are a few components that we are managing to ensure we don't have a supply disruption.
There is never a dull day for our operations team in these times. Our lead times for batteries are still long today at approximately 14 to 16 weeks primarily due to logistics challenges, which are global. The lead times should come down once global shipping and port conditions improve. Let's move on to the regions.
Our U.S. and international revenue mix for Q4 was 82% and 18%, respectively. For 2021, we achieved record revenue across all regions with more than 78% growth year on year. Our U.S.
and international revenue mix for the full year was 80% and 20%, respectively. In the U.S., revenue increased 74% year on year. We reported record revenue and sell-through from our distribution partners to installers for both microinverters and batteries in Q4. Our microinverter channel inventory was at a healthy level at the end of Q4, but our storage channel inventory remained tight due to strong demand and logistics challenges.
We expect microinverter channel inventory to remain healthy in Q1 and storage channel inventory to improve. In Europe, revenue more than doubled year on year. I am very pleased with our team's performance and excited about the growth in 2022. During 2021, we expanded into Italy with solar microinverters and introduced batteries in Germany and Belgium.
We do plan to introduce batteries in other countries in Europe steadily throughout 2022. In Asia-Pacific region, revenue increased 80% year on year. Heading into 2022, we look to capitalize on the industry's recovery from COVID restrictions, as well as recent regulatory changes that are favorable to our software-defined AC architecture. We plan to introduce batteries in Australia in the second half of 2022.
In Latin America, revenue increased 77% year on year. We remain quite bullish about our solar plus storage business in Puerto Rico and expect steady growth there in the next few quarters. We're also very pleased with the progress we are making in Brazil as we started ramping IQ7+ microinverter installers in Q4. Now that we covered all the regions, let's discuss the overall bookings for Q1.
Our overall customer demand for Q1 is quite robust for both microinverters and batteries and exceeds the higher end of our guidance range. The component availability is certainly better than what we experienced last year. We are primarily left with logistics challenges, which are global in general and not very specific to Enphase. We are quite optimistic that our supply will catch up to demand during the year.
Let's talk about our storage systems. We shipped 100.2 megawatt-hours of IQ batteries, which was a significant 53% increase from Q3. As I mentioned, our lead times are a little long at around 14 to 16 weeks mainly due to logistics challenges. We expect to ship between 110 and 120 megawatt-hours of batteries in Q1.
This represents a 15% growth from Q4. Due to the increase in logistics costs which are significant increase in component costs driven by inflation, we are implementing a modest price increase on our batteries beginning March of 2022. Let's talk about installer training on batteries. By the end of Q4, we trained approximately 4,845 installer personnel, representing approximately 2,000-plus installation companies.
Our hands-on storage training continued through the use of mobile vans and regional training centers in the fourth quarter. We are continuing to work on commissioning times for installers while adding features such as load control and generator compatibility to our batteries. We expect to introduce batteries in North America and Australia with a modularity of five kilowatt-hour and double the continuous and peak power in the second half of 2022. We believe this will not only enhance the customer experience significantly, it will also bring down the cost.
Let's talk about new products. We started production shipments of IQ8 microinverters for customers in North America in Q4 -- late Q4. The IQ8 fundamentally changes the paradigm for solar technology, which otherwise requires a grid connection to operate. IQ8 can form a microgrid during a power outage using only sunlight, providing backup power even without a battery.
For homeowners who want a battery, there are no sizing restrictions on pairing an Enphase battery with an IQ8 solar system. We also expect to introduce IQ8 microinverters internationally in the second half of 2022. Let's now talk about the IQ 8D full system for small commercial solar applications. We have achieved compliance on the 640-watt AC microinverter for North America, and we are now focused on getting the full system and installer platform ready.
We expect pilot shipments of the full system to select installers in this quarter, Q1, with volume shipments beginning in Q2. Let's go to ClipperCreek, an acquisition we completed in Q4. ClipperCreek offers EV charging solutions for residential and commercial customers in the U.S. They have been a pioneer in the EV charging market since 2006 and have sold more than 110,000 level 2 charging stations -- AC charging stations since inception.
The business is very healthy, and the gross margins are in line with Enphase. The ClipperCreek brand has a reputation for quality -- high quality and great service, which we like a lot. Let me outline our plans for ClipperCreek. We plan to transfer manufacturing to our contract manufacturing facility in Mexico by the end of this year so that we can rapidly scale the business and support demand.
We're also looking forward to introducing the products imminently to distribution and installation partners in the U.S. In addition, we plan to introduce connectivity in every charger we'll be shipping to enable smart EV charging with the Enphase app. This will enable charging on a schedule, tariff optimization, and charging with green electrons from an Enphase solar plus storage home energy system. For the long term, we plan to work on bidirectional charging and grid services integration for vehicle-to-home and vehicle-to-grid applications.
Let me go to grid services. In December, we announced our participation in Arizona Public Service, APS, residential battery grid services program. The program offers homeowners who install Enphase batteries in APS' territory the chance to participate and earn money through onetime upfront incentives. We believe this new program from APS will help accelerate the adoption of Enphase systems in Arizona.
We have previously discussed our participation in the ConnectedSolutions program and Hawaiian Electric Battery Bonus grid services programs. As a reminder, ConnectedSolutions is an incentive program implemented by three utilities in Connecticut, Massachusetts, and Rhode Island to reduce electrical demand during high-use periods. The Hawaiian Electric Battery Bonus grid services program offers incentives for homeowners on the island of Oahu who install a new home battery. We also have about a dozen new grid services engagements in the pipeline, and we look forward to working with more utilities and aggregators in the months ahead.
Let's talk about the installer digital platform. We are working to release Solargraf Pro later this quarter to improve the installer experience with an all-in-one solar and storage design and proposal tool that incorporates shading analysis, the ability to detect obstructions on the roof, and 3D modeling of homes all driven by AI. The product is currently being piloted by key installers -- yes, some of our top installers and will be released later this quarter. The former solar business of DIN Engineering, now Enphase Noida, provides proposal and permitting services.
There, we have added significant resources to accelerate automation, and we expect to offer enhanced permitting services in the second half of the year. As part of our efforts to further strengthen the installer digital platform, we acquired 365 Pronto in Q4. The company offers a predictive software platform dedicated to simplifying maintenance by matching cleantech asset owners to a local and on-demand workforce of service providers. The software platform will provide our installers the ability to service their own O&M contract.
Let me now give you an update on our Enphase Installer Network or EIN. We have now onboarded approximately 1,130 installers to our EIN worldwide through a highly selective process focused on installation quality and an exceptional homeowner experience. Next, I would like to comment on the California NEM 3 proposed decision, or PD, which was announced originally in December. In our opinion, the PD in its current form unfairly penalizes solar-only systems by imposing fixed charges, significantly reducing export compensation, and retroactively changing the length of the original NEM contract.
The PD was meant to encourage the transition from solar-only to solar plus storage. While we believe this transition is a correct long-term goal to meet California's energy targets, storage is not yet fully mature or 100% attached in terms of cost, in terms of supply, in terms of permitting, warranty and training. We would like to see a modified PD where the fixed charges are removed, the original length of the existing NEM contracts are restored, and a multiyear glide path is established to gradually reduce the export compensation. We are working diligently with various stakeholders to try and influence a better outcome in order to eliminate any market disruptions and create a win-win for all ratepayers and utilities.
In summary, we are pleased with our overall performance. As a reminder, our strategy is to build best-in-class home energy systems and deliver them to homeowners through our installation and distribution partners enabled by an installer digital platform. With our recent acquisitions, we are now able to offer more complete home energy systems to our partners, comprising of solar, batteries, grid services, load control, EV chargers and even compatibility with most third-party generators. We can also now offer design and proposal software, permitting services, installation and commissioning software, fleet management and monitoring software, and, finally, O&M services for our installers through the digital platform.
I would like to thank our employees for their hard work toward our strategy and continued dedication to advancing a sustainable future for all. Before I turn the call over to discuss our financials, I want to inform you that Eric is retiring from Enphase. His last day at Enphase will be February 14. He has been a great partner to me over the last three and a half years, and the financial leadership helped drive our sustained profitability and shareholder value.
We would like to thank him for his service and wish him well as he takes time to spend with his family. I'm pleased to announce that Mandy Yang, our chief accounting officer, and corporate treasurer, has accepted the role of CFO effective February 15. With Mandy as our CFO, we will have a seamless transition as we continue to deliver growth and operational excellence. Eric will be in an advisory capacity with Enphase through June 30 to assist with this transition.
With that, I will hand the call over to Eric for his review of our financial results. Eric?
Eric Branderiz -- Chief Financial Officer
Thanks, Badri, and good afternoon, everyone. I would like to convey my deep gratitude for my experience at Enphase. I have had the pleasure to work with not only a very talented executive team but also a remarkable group of professionals who have shown such hard work and dedication to the company. I want to especially thank Badri for his partnership and leadership in driving Enphase's success.
I plan to remain a shareholder, and I wish the company continued success. I will provide more details related to our fourth quarter of 2021 financial results and hand over -- the call over to Mandy to provide our business outlook for the first quarter of 2022. We have provided a reconciliation of these non-GAAP to GAAP financial measures in our earnings release posted today, which can also be found in the IR section of our website. Total revenue for Q4 was $412.7 million, representing an increase of 17% sequentially and a quarterly record.
We shipped approximately 1,082 megawatts DC of microinverters and 100.2 megawatt-hours of IQ batteries in the quarter. Non-GAAP gross margin for Q4 was 40.2% compared to 40.8% in Q3. Non-GAAP gross margin was impacted by product mix. GAAP gross margin was 39.6% for Q4.
Non-GAAP operating expenses were $68.2 million for Q4 compared to $57.3 million for Q3. The sequential increase was primarily due to increased investment in product launches, R&D, and IT infrastructure. GAAP operating expenses were $105.6 million for Q4 compared to $103 million for Q3. GAAP operating expenses for Q4 included $35 million of stock-based compensation expenses and $2.7 million of acquisition-related expenses and amortization for acquiring intangible assets.
On a non-GAAP basis, income from operations for Q4 was $97.7 million compared to $85.9 million for Q3. On a GAAP basis, income from operations was $57.7 million for Q4 compared to $37.4 million for Q3. On a non-GAAP basis, net income for Q4 was $102.8 million compared to $84.2 million for Q3. This resulted in non-GAAP diluted earnings per share of $0.73 for Q4 compared to $0.60 per share for Q3.
GAAP net income for Q4 was $52.6 million compared to GAAP net income of $21.8 million for Q3. GAAP diluted earnings per share was $0.37 for Q4 compared to diluted earnings per share of $0.15 for Q3. We exited Q4 with a total of cash, cash equivalents, and marketable securities balance of approximately $1 billion compared to approximately $1.4 billion at the end of Q3. We repurchased our common stock for a total amount of $300 million on the open market in December 2021 against our previously announced $500 million share repurchase authorization.
Together with the $200 million of share buyback in May 2021, we repurchased approximately 3.2 million shares in 2021 for a total of $500 million with an average price of $155 per share. This represents approximately 2.4% of our outstanding shares. In Q4, we generated $97.2 million in cash flow from operations and $84.1 million in free cash flow. For the year 2021, we generated a record $315.5 million of free cash flow.
Capital expenditures were $13.2 million for Q4 to expand both microinverter and storage manufacturing capacity, as well as costs related to new product development. I will now hand over the call to Mandy to discuss our Q1 outlook. There is no greater joy for me to see her accepting this role as the CFO of Enphase. I cannot think of anyone more capable or with higher integrity to take on the challenges of this function as the company continues to grow both organically and in complexity.
Mandy is a remarkable professional with the right combination of finance and accounting technical skills, coupled with a proven track record of building large global finance teams. Under her leadership, she will take this function to an even higher level of excellence. Mandy has been chief accounting officer and corporate treasurer at Enphase for the past three and a half years and has done an outstanding job leading the controllership, finance operations, internal audit, and controlled treasury and tax functions of Enphase. With this transition to her as the new CFO, we will not miss a beat, and I'm very pleased she has accepted this new role.
Mandy?
Mandy Yang -- Chief Accounting Officer and Corporate Treasurer
Thanks, Eric. It's been great for me to work with Eric at Enphase. Under his leadership, we have built an exceptional finance team, and I look forward to building on that foundation. We expect our revenue for the first quarter of 2022 to be within a range of $420 million to $440 million, which includes shipments of 110 to 120 megawatt-hours of IQ batteries.
We expect GAAP gross margin to be within a range of 37% to 40% and non-GAAP gross margin to be within a range of 38% to 41%, which excludes stock-based compensation expenses and acquisition-related amortization. We expect our GAAP operating expenses to be within a range of $130.5 million to $133.5 million, including a total of approximately $63 million estimated for stock-based compensation expenses and acquisition-related expenses and amortization. The estimated stock-based compensation expenses include approximately $12.3 million accrual for the earnouts and are tied to certain performance targets to be paid in the company's stock for the acquisitions of ClipperCreek and 365 Pronto. We expect our non-GAAP operating expenses to be within a range of $67.5 million to $70.5 million.
With that, I will now open the line for questions.
Questions & Answers:
Operator
Certainly. [Operator instructions] We'd like to ask you that you please limit yourself to one question and one follow-up. You may get back in the queue as time allows. Our first question comes from the line of Philip Shen from ROTH Capital Partners.
Your question, please.
Philip Shen -- ROTH Capital Partners -- Analyst
Hi, everyone. Congrats on the strong quarter. Our checks suggest demand for the battery product is very strong even in the face of the two recent price hikes. When do you expect your battery volumes to possibly hit 180-megawatt hours? And when could a third supplier or the capacity within the existing two suppliers be increased? Thanks.
Badri Kothandaraman -- President and Chief Executive Officer
Yeah, thank you, Phil. We are very happy with our demand on batteries. So I will give you some color on how we have done in the last year. First of all, our battery DC coupled its modular low voltage DC operation uses lithium-ion phosphate, which is extremely safe chemistry, air cooled, no need of any fans.
Additionally, we offer 15-year warranty, no single point of failure. Through the last year we have offered load control. We have offered power start generator compatibility. And all of those are the bells and whistles that we have continuously added on top of our batteries, the basic functionality.
In addition, the most important thing I am proud of, we have trained over 2,000 installers, long-tail installers, it's no secret that long-tail installers is Enphase's bread and butter. We have trained 2,000 plus installers, installation companies that and then out of that 2,000, there is 1,300 plus installers who are certified which is they have done an installation, they took the training, they did an installation and recertified them, extremely difficult to do one installer at a time in the last year. And we believe that's the reason why our business is very strong and diversified. At the same time, in the last year, almost on a weekly basis, we have done weekly roundtables with our installers, where in every meeting we have 10 plus installers around and they are not afraid to talk about issues.
And I am not saying we are perfect. But what we promise installers is we take feedback, we work on it, we improve our product, and we make our product better and better and better. That's why you saw us growing 53% from Q3 to Q4. And those are nice numbers by the way.
From a supply chain perspective, every quarter, we are doing better on batteries, but it is no secret that the logistics challenges are global. And that's what is causing a 14 to 16-week lead time on batteries. When do I expect it to get better? I expect it to get better continuously throughout 2022. And it is global, nothing specific with Enphase.
Of course, we have pockets of shortages here and there, but our team has become excellent at navigating all of those very well. So, I expect continuous growth on batteries throughout the year. I am not going to give you a number on when we will break the 180-megawatt hours. And if we break the 180-megawatt hours soon, our cell pack suppliers are willing to flex and they will take us to a little bit more.
So we are not worried about that too much. Right now, we are focused on servicing customers properly, adding new installers, and making sure we improve customer experience.
Philip Shen -- ROTH Capital Partners -- Analyst
Great. Thanks for that color, Badri. And in terms of my follow-up, I was wondering if you might be able to share where the margins on the storage product is -- or are today. And with the price increases, does that correspond with the 7%, I think, expected for March 1 increase? Does that correspond directly to that margin? And how do you expect that battery margin to trend through '22?
Badri Kothandaraman -- President and Chief Executive Officer
We're not breaking out the battery gross margin. The overall company gross margin was 40.2% in Q4. And I'll talk -- I'll give you guys some general color on gross margins. In the last year, the overall industry, almost all industries have seen a lot of component shortages and logistics province, which is -- from a component cost perspective, the costs have increased significantly.
And the same thing on logistics, a container before which was $3,000, it's now $18,000, six times increase. So, our costs have gone up. But what our team has done is remarkable, which is both on microinverters and batteries, we are able to still take cost out. Yes, a couple of examples which I mentioned in the Analyst Day was the bulkhead on our microinverter.
That's the project we've been talking about for some time. It is a painful learning for us but it's a very important project because it helps us to remove an adapter cable shipped with the microinverters. And if we ship -- I mean, if you remove the adapter cable, the cost of the microinverter obviously goes down. So with initiatives like that, our costs have actually gone down.
But because of the component charges, the suppliers have raised costs on us, which is understandable and due to inflation as well. So similar on batteries. In batteries, the same dynamics with reference to suppliers. What are we doing about it? Every day, we work on the tactical stuff.
How can we optimize enclosures? How can we optimize the battery management circuit? And then we are going to introduce product in second half of 2022, where because we are going to increase the modularity a little bit from 3.3 kilowatt hours to five kilowatt hours, we gain economies of scale there. So that's going to help us improve the cost on batteries come the second half of 2020 structurally. In addition, on top of that, I showed you in the Analyst Day that early 2023, we'll have a radically new structure, at least for power conversion and battery management, where we integrate both power conversion and battery management into a single board, both hardware and software unify. And then there is only one board between the battery and AC line versus we have seven boards that we showed you at the Analyst Day.
So we are extremely excited by that product. And that will help us to get even more click down on costs as customers expect the optimal pricing from us. So -- and hopefully, it gave you some color. And so we are quite confident of the gross margin trajectory, and we're going to make a lot of progress soon.
Philip Shen -- ROTH Capital Partners -- Analyst
Great. Thanks, Badri. I'll pass it on.
Operator
Thank you. Our next question comes from the line of J.B. Lowe from Citi. Your question, please.
J.B. Lowe -- Citi -- Analyst
Hi, good afternoon, guys. Question was on the 4Q margins. I know that costs are increasing. But the margins, you said were down due to mix.
Can you just walk through what the product mix was and how it affected margins in 4Q?
Badri Kothandaraman -- President and Chief Executive Officer
Well, like what I said, the product mix -- we are talking about a drop from 40.8%, I think, in Q3 to 40.2%. So it's kind of very small. We are talking about -- we just broke it out saying that on storage, we basically exceeded the higher end of guidance. So it was slightly depressed.
But all the comments I just talked about on margins are true. And the margins have been -- understandably because of inflation and because of increasing component costs and because of increased logistics, which I pointed out, there's always pressure on gross margins, but we are able to counter it. That's what we do. We have a world-class cost task force on both microinverters and batteries.
We are not starting to work on anything. We work on capacitors. We work on transformers. We work on semiconductors.
We work on resistors. We work on parking. And I told you the big stuff like the bulkhead, but we work on numerous things at the same time. So we don't distinguish between microinverters or batteries.
We -- the company continues to get healthier all the time. So when the component shortages go away, the supply chain constraints go away, the logistics constraints go away, then we'll have structurally better gross margin.
J.B. Lowe -- Citi -- Analyst
OK. Great. And then on the 1Q guide, just wondering if you could break down the growth that we're going to see in top line in 1Q. Can we break it down between volume improvement? And I know we're seeing volume improvement on the storage side of 15%.
But I guess, break it down between volume improvement on the micro side versus the pricing increases rolling through.
Badri Kothandaraman -- President and Chief Executive Officer
Well, the price increase is only from March. So it's not going to be for the full quarter. I would say, impact of pricing increase is not going to be much. In terms of microinverters, you all know that Q1 is seasonally down, but yes, our business is not down.
Batteries is a 15% increase. So if you assume $600 to $700 or $600 to $800 per kilowatt hour is the price range, you can calculate it yourself. So you can see that there is steady growth on both businesses, both microinverters and batteries.
J.B. Lowe -- Citi -- Analyst
OK, great. Thanks, Badri, and congrats, Eric.
Eric Branderiz -- Chief Financial Officer
Thank you.
Operator
Your next question comes from the line of Brian Lee from Goldman Sachs. Your question, please.
Brian Lee -- Goldman Sachs -- Analyst
Hey, guys. Thanks for taking the questions. Congratulations, Eric, on the retirement. You've always been one of my favorite CFOs, so you will be missed.
I and look forward to working with you going forward, Mandy. Couple of questions, I guess, just -- there's a lot of moving parts here. So can you guys -- I mean demand is obviously great, and you're fixing all the supply chain issues from last year, but can you give us also a sense of I guess, first on the Q1 outlook, how much is ClipperCreek adding? And then can you talk about their margins and what that does to your overall margin profile? And then with the price increase on the batteries, are you seeing or anticipating any demand pull-forward in Q1 ahead of the price increase? Is that embedded in the outlook? Just wondering if there's anything into Q1 we should be aware of? And then I had a follow-up.
Badri Kothandaraman -- President and Chief Executive Officer
Yeah. We're not breaking ClipperCreek out right now. Regarding gross margins, I already said the gross margins after ClipperCreek are in line with Enphase. So you can assume that.
With reference to battery price increase, the price increases are beginning in March. So the contribution for Q1 is a little bit less. But do I think that that will influence demand? I mean I don't think so. It is fairly inelastic right now.
Our backlog is quite high. The customers do understand we are taking care of them whenever we are able to. They know that we don't pass all of our cost increases. We try to absorb them.
And we only pass whatever we feel like we have to. So -- and we are going to give them plenty of time, and that's why it is effective in months. We gave a plenty of time to adjust very transparent to them. So we are not worried about demand.
Brian Lee -- Goldman Sachs -- Analyst
OK. That sounds great. So I guess as a follow-up to that, Badri, I know Q1 is seasonally a little bit weaker. You would anticipate battery demand and volumes, you know, kind of back to that 30% sequential growth that you've been seeing, you know, outside of the slightly slower Q1.
Is that a fair assumption into 2Q? And then another kind of question around pull forward is your Q1 outlook, I don't think it does, but you anticipate having any pull-forward demand from NEM 3.0 uncertainty in California in Q1? Or is that something we might maybe see in 2Q? Just wondering if you've either seen any of that or you're forecasting to have some of that in the next couple of months here? Thanks, guys.
Badri Kothandaraman -- President and Chief Executive Officer
Right. So I'll give you some numbers for context. We grew 53% from Q3 to Q4, and a 15% growth from 100% is not too shabby. That's our comment.
Yes, we'd like to grow 30%. But I already told you the comment on -- our lead time is 14 to 16 weeks. Our backlog is very strong. Our lead time is 14 to 16 weeks due to logistics.
The logistics situation will ease up every quarter a little bit. So we expect to continuously grow if it is -- whether it will be 30% or not, I cannot make a comment on, but we are very happy with our performance on batteries. And Brian, the last portion of the question, can you please repeat so I can answer?
Brian Lee -- Goldman Sachs -- Analyst
Yeah. Badri, just you alluded to NEM 3.0 uncertainty in your opinion on what needs to change. But in terms of impact on your business, are you actually seeing any demand pull-forward in the state of California due to that uncertainty in your Q1 outlook? Or is that something you maybe anticipate would start to show up in Q2 if that uncertainty around NEM 3.0 continues to persist? Thank you.
Badri Kothandaraman -- President and Chief Executive Officer
Yeah. If I were to see the situation before December and after December, I wouldn't say -- if I were to extrapolate to the situation, I would not say there has been a pull-through. And I'm not sure if I can predict Q2, but you saw that the PD decision is delayed. I don't know when the new schedule is, but that's good news, in general.
I guess the installers are taking a breather right now.
Brian Lee -- Goldman Sachs -- Analyst
All right. Thanks for the color. Appreciate it. Congrats, Eric.
Bye.
Eric Branderiz -- Chief Financial Officer
Thank you.
Operator
Thank you. Our next question comes from the line of Julien Dumoulin from Bank of America. Your question, please.
Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst
Hey, good afternoon, team. Congratulations, Eric and Mandy here. Eric Bainley here. Let me start with an easy one, and I'll follow up with a more complicated one here.
Just on the share buyback. Just can you guys talk a little bit more to the thought process and further authorization? Obviously, it's an incredible year if you look past sense. Prospectively, it looks like trends, as you've already articulated, look pretty robust. Shares are obviously reacting.
How do you think about that and further authorization?
Badri Kothandaraman -- President and Chief Executive Officer
Yeah. I mean, our general philosophy is anti-dilution. So we look at, OK, saying how do we compensate for that, and we decide to do share buyback. So we first look at, do we have enough capital for the needs of the business, the daily needs of the business? Do we -- if we want to invest in contract manufacturing lines, if we want to do something on batteries, do we have capital for that? That's what we see first.
And then we basically look at, OK, are there any M&As that are in the hopper where we can truly increase the value of the enterprise? So we look at that next. And we have -- we evaluate a lot of companies every quarter. And then if we find we have enough for number one, we have enough for number 2, then we go down to number three. And number three, what we say is OK.
Am I confident that the share price today is below the conservative intrinsic value for the company? So I look at that and then I make decisions. I may not hit it -- I may not get the lowest stock price over a period, but I know I bought it because I consider the share -- the stock price below the intrinsic value of the company and that to a conservative value. So that's our thought process. And so for this year, we had roughly over 3 million shares, which was about 2.4%.
It's a pretty healthy number. And you should expect that philosophy from us going forward. We still have about $200 million left out of the $500 million authorized by the board. And we will execute on it when we think the time is right.
Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst
Got it. All right. Excellent. And then just -- I want to revisit the storage conversation just a bit more just to tie a couple of things that you said back.
I mean given the lead times that you described, I mean conceivably, you have visibility into -- well into second quarter as you start to think about that 16 weeks out and what that means on your thought process here. I mean you also said you're not going to comment on when you break that 180-megawatt-hour threshold here. But can you elaborate a little bit more on how you're thinking about the year shaping up on them especially given the potential pull forward that could manifest once you get clarity on that policy, as well as just the underlying demand? I mean as you've already alluded to and has already been discussed, I mean demand seems strong. You've posted good numbers, 4Q, 1Q.
Conceivably, you've got some degree of visibility into the year. I mean maybe a little further parameters on how you're thinking about even stacking and securing supply around what a number above 180 might look like as well.
Badri Kothandaraman -- President and Chief Executive Officer
Yeah. I mean just to tell you, you are right, lead time is 14 to 16 weeks. So we have good visibility on the situation in Q2. And because now we have time for Q2, we are getting things ready.
And like what I said, our business is very strong. But we are not going to guide Q2 for now. I'm going to have Raghu talk about the NEM situation and how he sees that thing.
Raghu Belur -- Chief Products Officer
Yeah. With regards to NEM 3, the original decision which was supposed to happen now had it come into effect at least four to five months after the decision was made. And then it also required additional time for the utilities to gear up for that change. So realistically, it was late 2022 or even in 2023 is when it would take -- come into effect.
So I think from a pull-through in demand would probably not be seen in at least for the next few quarters. It's likely going to be -- if there is -- if NEM 3 holds in its current form, which is -- may not be likely, demand pull-through is likely to happen end of the year or even sometime early next year.
Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst
Got it. All right. It sounds like everything is good, but a little bit early to talk about exactly how that compares versus the earlier guidance, right?
Raghu Belur -- Chief Products Officer
Yes.
Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst
Excellent. All right. Wish you all the best of luck. See you soon.
Operator
Our next question comes from the line of Colin Rusch from Oppenheimer. Your question, please.
Colin Rusch -- Oppenheimer and Company -- Analyst
Thanks so much. Guys, as you start investing in some of the software applications and have the remote upgrade and possibility, how are you thinking about the business model and the revenue model for some of those software upgrades? Is it still included in the functionality of the hardware? Is there another line item that we might start thinking about in the next couple of years?
Badri Kothandaraman -- President and Chief Executive Officer
It's still included in the functionality of the hardware. The way we think about -- of course, we have businesses like Solargraf Pro. We have businesses like Pronto now, which are software-type businesses. But if you ask me in reference to upgrade features, etc., the way we think about it is we want to offer more and more and more features, utilizing machine learning and AI but with a view to improve customer experience.
And so the data that we collect, the consumption data, production data, we have -- we're not going to monetize it in the traditional sense. And we are not going to aggregate the data and do strange things with it. Rather, what we are going to do is we are going to look at patterns in the data. We are going to basically develop algorithms.
We are going to do regression. We are going to ensure that we improve the customer experience going forward. This is -- we can do production forecasting. We can do consumption forecasting.
We can do grid services events properly. We can figure out if it's possible to predict the grid stability and provide customers an earlier warning before. So all of those for us are -- belong to the customer experience bucket. And our belief is if we do that properly for customers proactively, they're going to choose us all the time, every time.
Colin Rusch -- Oppenheimer and Company -- Analyst
Got it. That's helpful. And then just with the -- I'd love to get an update on the state of the NOL and when you're going to start having to pay cash taxes. And how should we think about the tax rate as we get into the outyears?
Mandy Yang -- Chief Accounting Officer and Corporate Treasurer
Sure. I can answer that one. So currently, in U.S., we don't pay material income taxes. We still have sizable NOL for the upcoming 10-K.
You'll see on Friday, we are going to file. We have more than $150 million of federal NOL. And also, we have federal and state R&D tax credits. So between this year and next year, we don't expect to pay any significant taxes in the U.S.
Colin Rusch -- Oppenheimer and Company -- Analyst
Great. Thanks so much to you guys.
Badri Kothandaraman -- President and Chief Executive Officer
Thank you.
Operator
Thank you. Our next question comes from the line of Mark Strouse from J.P. Morgan. Your question, please.
Mark Strouse -- J.P. Morgan -- Analyst
Yeah, thanks very much for taking our questions, and Eric, congrats again, very much well deserved. Badri, I wanted to go back to -- you talked a lot about the supply situation on this call. I wanted to go back to the 3Q call though when you talked about specifically the IQ8 and the potential for supply constraints there for just the ASICs given your early read on demand. Can you just give us an update specific to IQ8? Do you still see that as something worth monitoring this year?
Badri Kothandaraman -- President and Chief Executive Officer
Of course, it's always worth monitoring, but the situation is a little bit better. So IQ8, we started ramping IQ8 in late December, so shipped a little in Q4. IQ8 uses -- I mean overlap between IQ8 and IQ7 is quite high except for the ASICs, as you rightly pointed out. We don't see any problems with respect to that ASIC supply right now.
So we would be heavily ramping the mix of IQ8 versus IQ7. That's our preference going forward.
Mark Strouse -- J.P. Morgan -- Analyst
OK. And then with the facility you're looking at in Europe for microinverters later this year, anything you can share yet regarding the potential output of that on microinverters per quarter per year type metric?
Badri Kothandaraman -- President and Chief Executive Officer
We haven't finalized the location or the contract manufacturer yet. We are well under negotiations there. But typically, what we do is when we install a contract manufacturing facility, we put something called as a complete auto line, one full auto line. One full auto line is fixed.
That's about 750,000 microinverters a quarter. So you can model that saying we will have likely a full auto line and we need to finalize the location. We will -- we are going to try our best to get it operational by end of the year, and it will be capable of producing 750,000 microinverters per quarter.
Mark Strouse -- J.P. Morgan -- Analyst
OK, very helpful. Thank you.
Operator
Thank you. Our next question comes from the line of James West from Evercore ISI.
James West -- Evercore ISI -- Analyst
Hey, good afternoon, guys, and congrats on a nice strong finish to the year and also congrats to Eric. And Mandy, I look forward to working with you going forward. I wanted to continue on the path of Europe here. I mean you're pretty excited.
You talked about rapid growth. What do you see driving that growth the most in Europe for you? And what made you kind of make this decision to build a facility in Europe?
Badri Kothandaraman -- President and Chief Executive Officer
Yes. Europe, we are excited at the prospect of growth there. We grew double in 2021 compared to 2020. Europe has been a little bit more advanced than the U.S.
in terms of solar. And basically, the adoption is quite nice there. And we are very strong in Netherlands. We're very strong in France.
We are very strong -- Belgium, we just introduced storage in addition to solar that's nicely ramping. Germany is one of the very exciting markets in Europe, which is probably over one gigawatt solar and 80% attach of that for storage. And the reason it's 80% attach is most people do self-consumption because of feed-in tariffs there. They don't have net metering, feed-in tariffs.
So storage is strong. And actually, Italy, we are entering Italy. And through our partner -- Maxeon is our partner as well. And they -- with the help of AC modules, we are going to be ramping on solar in Italy.
And now we are going to add storage in Italy. Spain is very strong, too. Spain is strong. Poland is strong.
U.K. is starting to ramp up. So we have pockets of -- actually, not even pockets. I'd say many countries which are in the process of ramping both solar and storage, and we have plans to introduce storage through the year, one or two countries every quarter this year.
So in general, we are extremely excited. In the Analyst Day, if you see, in 2019, I told you we had a handful of people in Europe, like five or six people. And now that team we have -- probably, we have 35 to 40 people today. We've increased those.
We are going to continuously ramp that team, and they are doing well.
James West -- Evercore ISI -- Analyst
OK. Great, great. And then on the IQ8, you talked about the overall supply issues that you're heavily ramping the mix of IQ8 or you plan to. Does that suggest that perhaps you -- that normal four- to six-quarter adoption period could be on the shorter side?
Badri Kothandaraman -- President and Chief Executive Officer
No, no, no. I said I plan to and not heavily ramping yet, right, because we've just started. We've just started. We shipped it -- late December is when we started ramping.
And typically, our profile, I would call a successful ramp four to six quarters. That's what I call a successful ramp. And we expect IQ8 to fall within that range. Having said that, we do have installers, for example, like Semper Solaris.
We did a press release. Semper Solaris switched to us because of IQ8. And many installers love the sunlight backup feature. They love it.
They may not use it as a significant fraction, but they love the fact that it's got technology and that they can use it if they want to. So they'll buy IQ8 over IQ7.
James West -- Evercore ISI -- Analyst
Right. Got it. Thanks, Badri.
Badri Kothandaraman -- President and Chief Executive Officer
Thank you.
Operator
Thank you. Our next question comes from the line of Kashy Harrison from Piper Sandler. Your question, please.
Kashy Harrison -- Piper Sandler -- Analyst
Good afternoon. Congrats on the quarter, and Eric, congrats on the retirement.
Eric Branderiz -- Chief Financial Officer
Thank you.
Kashy Harrison -- Piper Sandler -- Analyst
A fair question. But if there weren't any logistics-related challenges today, in that theoretical world, do you think that demand would be closing in on your 180 megawatt-hours of cell supply capacity today? Or is that maybe a bit too optimistic?
Badri Kothandaraman -- President and Chief Executive Officer
Well, I'm not going to break out numbers, but the demand is very strong.
Kashy Harrison -- Piper Sandler -- Analyst
OK. And then maybe a question for either Eric or Mandy. So I know margins -- gross margins for batteries aren't as high as the gross margins for the inverters. But I was wondering if you could maybe talk a little bit about the incremental opex associated with battery sales? And basically, I'm wondering if -- since the channels for inverters and batteries are so intertwined, does the gross profit from batteries just go straight into the operating income line with no real impact to opex? Or would you expect an increase in opex as you ramp batteries as well?
Badri Kothandaraman -- President and Chief Executive Officer
Well, we don't look at it like that. We basically -- regardless, you know the company's model on opex. Our baseline is 35, 15, and 20. From time to time, we may be a little bit higher on the opex side, but we will always be well above the operating income.
But we don't think about opex like that. For us, we think about a full system. When we think about a full system, it is a microinverter. It is a battery.
It is a gateway. It is a system controller. And when you combine all of these together -- OK, I -- yes, I forgot load control. I forgot EV charger, generator compatibility.
When I combine all of those, the number of interactions explode. And a number of interactions explode means our R&D has to scale up. And they -- we cannot scale up R&D randomly. It will scale up as a fraction of revenue.
We have been disciplined there. So it's a long-winded answer, but we invest at a system level, and it is not batteries versus microinverter. Everything has to scale up in the company.
Kashy Harrison -- Piper Sandler -- Analyst
Thank you.
Operator
Thank you. Our next question comes from the line of Joseph Osha from Guggenheim Partners. Your question, please.
Joseph Osha -- Guggenheim Partners -- Analyst
Hi, there. And Eric, we look forward to hearing what your next venture is going to be. Two totally unrelated questions. First, as regards to grid services, you've talked about the progress you're making there.
Are you typically working with someone that aggregates and manages resources like a Stem or an Enbala or an AutoGrid? Or is this a situation where you're providing a functionality all the way to facing off to the utility?
Badri Kothandaraman -- President and Chief Executive Officer
We do both business models. We work, for example, in the ConnectedSolutions program. We work with an aggregator called EnergyHub. And they work with the three utilities in -- the three utilities I talked about.
And we work in that model. But having said that, our relationships are getting better with the utilities. And we are starting to work directly with the utilities. The APS program, you saw that -- you're going to start seeing more announcements.
Like what I said, we have a dozen grid services engagements in the pipe, and many of them are working directly with the utilities. And we do have all of the software capability, all of the VPP capabilities, dispatching and -- dispatching a fleet at an aggregate level. We can provide that software to the utility. And they can utilize that software to control an Enphase fleet.
Joseph Osha -- Guggenheim Partners -- Analyst
OK. So that's interesting. You've got that whole stack. That's very helpful.
Totally unrelated question. Looking at your success in Europe, obviously, that market is growing. If you had to sort of split up your growth there into market growth versus share gain vis-a-vis still some of the fairly large legacy string inverter providers there, I'm wondering how you might think about that.
Badri Kothandaraman -- President and Chief Executive Officer
You're talking about with reference to Europe?
Joseph Osha -- Guggenheim Partners -- Analyst
Yes, yes. Sorry, that was a convoluted question. Let me try it again. How much of your growth do you think is coming from just the market growing in Europe? And how much is coming from taking share?
Badri Kothandaraman -- President and Chief Executive Officer
Yes. I would say mix of both. Obviously, the market is growing, and therefore, we get our fair share, especially in places like Netherlands and France. And primarily, what moves competitors -- or what moves customers to us is our quality and our service.
It's as long as we are able to maintain our target 500 DPPM, which is 0.05% annual failure rate, as long as we are able to maintain it on microinverters, as long as we provide outstanding customer service 24/7 to customers, we think we have the upper edge there. And so that's the big reason why customers move over to us.
Joseph Osha -- Guggenheim Partners -- Analyst
Yes. The reason I'm asking -- and I'll go away in a minute here, is that in the U.S., obviously, it's just down to you and one competitor. In Europe -- and in Europe, it definitely is not. So I'm just wondering if we could plausibly imagine a future in a couple of years where really it's only you and your main competitor and some of these string inverter companies just go away.
Badri Kothandaraman -- President and Chief Executive Officer
Well, I mean, look, we can't predict the future but the reasons are very similar. People are tired of enduring bad-quality product, and that's the single most reason they come to us. We are a little bit expensive, but you cannot be looking at expense. You cannot be looking at pricing in vacuum.
You've got to be looking at the entire cost of ownership. And as long as we maintain our quality, like what I said, that's the most important thing, which we are committed to and the customer experience, that cannot let us down. We'll continue to gain share.
Joseph Osha -- Guggenheim Partners -- Analyst
Thank you. OK, thank you. Thank you very much.
Operator
Thank you. Our next question comes from the line of Ameet Thakkar from BMO Capital Markets. Your question, please.
Ameet Thakkar -- BMO Capital Markets -- Analyst
Good afternoon. Thank you for taking my question. Most of my questions have been asked. But I was just wondering if you guys had any sense or color on how much of the battery capacity you've delivered to date? It's been for customers that are actually retrofitting existing systems versus kind of new solar PV plus storage installations.
And was that included -- the retrofit opportunity, was that included in your, I guess, Analyst Day presentation when you guys talked about a serviceable addressable market of one and a half gigawatt-hours?
Badri Kothandaraman -- President and Chief Executive Officer
It was. And it's hard to track but I would say that is a good, healthy mix of both. That's what I would say. And obviously, when they have Enphase microinverters, they would prefer Enphase batteries.
Ameet Thakkar -- BMO Capital Markets -- Analyst
Great. Thank you for that. Congratulations on the quarter.
Badri Kothandaraman -- President and Chief Executive Officer
Thank you.
Operator
Thank you. Our next question comes from the line of Praneeth Satish from Wells Fargo. Your question, please.
Praneeth Satish -- Wells Fargo Securities -- Analyst
Hi. Good afternoon. Can you talk about the IQ 8D and how that rollout is progressing? And I guess for the small commercial market, is it enough to win over the installers that serve this market? Or do you need to ultimately partner with someone, like a developer, to really accelerate deployment into the commercial market?
Badri Kothandaraman -- President and Chief Executive Officer
The IQ 8D product is a little bit late, as you know. I thought we would be in production in Q1, but we are a little late. And the reason why we are a little late is we would like to take the time and do the full system. When I say the full system, I mean it is not just a microinverter, which is already qualified and passed compliance.
It is the gateway, the cloud software, the fleet management, the design proposal software, the permitting software. And the reason why we like the small commercial market is because it is an extension of residential market. In residential, we service up to 20 kilowatts. That goes from 20 -- small commercial goes from 20 to 200 kilowatts.
And why is that important? It's -- the same long-tail installers are the ones who participate in the small commercial markets. And that's our focus. That's our focus. That's where we think we add a lot of value because the pain points are the same.
It is quality and service. And we do have to pay attention to those areas. And the challenges will be a little bit different as we go from 20 kilowatts to 200 kilowatts. We have -- we use PLC for communication.
And now when you are doing it with hundreds of microinverters, those will be stretched. But we look forward to -- we are ramping with those installers we already know and do business with. And we can do rapid shutdown as well easily. So that's a major driving force versus other competition.
So in short, it's -- the similar installed base is residential. We have the relationships already. They need rapid shutdown. They need very high quality.
They need great service. And it's a natural extension for us from residential.
Praneeth Satish -- Wells Fargo Securities -- Analyst
Thanks. And just to follow up, what then is your latest timing in terms of IQ 8D?
Badri Kothandaraman -- President and Chief Executive Officer
Yeah. Like what I said, we are going to ship to select installers for a pilot ramp in Q1. So we'll have a small revenue in Q1. But the real ramp will be over the next few quarters.
This is not -- it's not that when I'm ready, I start ramping immediately from day 1. It is -- it will take some time for the market to develop there. So you should expect over the next several quarters is when it will ramp to a healthy level. And we broke down those details in the Analyst Day.
Praneeth Satish -- Wells Fargo Securities -- Analyst
Got it. That's it from me. And congrats, Eric, on the retirement.
Eric Branderiz -- Chief Financial Officer
Thank you.
Operator
Thank you. Our next question comes from the line of Steven Fleishman from Wolfe Research.
Steven Fleishman -- Wolfe Research -- Analyst
Just a question maybe to put NEM 3.0 in some context. Could you give us some sense of what percent of revenue is coming from California in your Q1 forecast or from 2021 actuals?
Badri Kothandaraman -- President and Chief Executive Officer
Yeah. I'm not sure about the exact number. I would estimate something like, yes, 20% of our revenue roughly, overall revenue.
Steven Fleishman -- Wolfe Research -- Analyst
Great. And then a separate question. Just in some of the -- I know BBB has kind of disappeared from focus recently. But some of the versions -- later versions included subsidies for domestic production inverters, including microinverters.
If you -- if we were to ultimately get a bill that had that in there, how quickly could you shift to domestic production?
Badri Kothandaraman -- President and Chief Executive Officer
So the BBB, the one in debate is $0.11 per watt credit for microinverters. And you know that we will never do manufacturing ourselves. We will enlist the help of our contract manufacturers. It's quite attractive to have a made-in-America product with that kind of credit.
And we do have contract manufacturers who are potentially lined up should this happen. Your question on how long it will take, from when we select a contract manufacturer to when we can start ramping in the U.S. would take me six to nine months.
Steven Fleishman -- Wolfe Research -- Analyst
Great. Thank you. Appreciate it.
Badri Kothandaraman -- President and Chief Executive Officer
Thank you.
Operator
Thank you. Our next question comes from the line of Sophie Karp from KeyBanc. Your question, please.
Sophie Karp -- KeyBanc Capital Markets -- Analyst
Hi, good afternoon. Thank you for taking my question and congratulations again on a great quarter. A lot of questions have been answered. Maybe just a couple from me.
First, how do you envision your year shaping up, setting aside, I guess, the unpredictable events such as the outcome of NEM or any major disruptions? You move so fast that seasonality almost doesn't matter. But should we be expecting maybe some pocket of relative softness somewhere throughout the year based on your seasonal patterns?
Badri Kothandaraman -- President and Chief Executive Officer
I think our business is fairly diversified that -- between the different states in Europe, between not just shipping solar -- sorry, different states in the U.S. and not just shipping solar only. But you're seeing that solar plus storage is also -- many different states are now -- the attach rates are continuing to grow up well beyond California. It's like California, Florida, Texas, Puerto Rico, Hawaii, East Coast, etc.
Grid services is becoming -- the business of grid services is also continuing to grow. We talked about how fast Europe is growing over the year, more storage. We'll start shipping storage into newer countries in Europe as well. So in general -- and, as well as countries like Brazil is continuing to grow.
So what you're seeing is our business being more and more diversified not only within the U.S. -- not only within California but outside of California, other states in U.S. and Europe as well. So while we may see these occasional road bumps like a NEM 3 issue here in California, I think the business is pretty robust anymore that we'll be able to absorb those bumps.
Sophie Karp -- KeyBanc Capital Markets -- Analyst
Thank you. And as a follow-up question, maybe if you can talk a little bit about what your views are now on M&A. You recently did a transaction but very small. Is there anything out there, I guess, that you'd use potential attractive opportunities in some spaces or some technologies that you may look into potentially doing more deals this year?
Badri Kothandaraman -- President and Chief Executive Officer
Well, I mean we have a strategy. That strategy is basically selling best-in-class products for home energy systems to homeowners through our installers and distribution partners enabled by digital platform, so components of a home energy system. If you see, we have solar, we have storage, we have grid services compatible to generators. We have load control.
We didn't have EV before we bought EV chargers. We think EV chargers is a -- you have to -- they need to be managed. And we bought them for that reason. We have fuel cell partnerships.
There's nothing much to talk about it yet. We'll talk about it when we are ready there. That's on the home energy system. So we'll continue to add more and more things at a product level there if it is aligned with our strategy.
And I'm not -- I cannot talk about any specific companies right now. On the installer digital platform, there are six pieces which I mentioned in the Analyst Day, which is lead management, which is an interesting area for us. And we'll inform -- I mean we'll keep you informed when our plans are finalized there. So that's a potential area.
Design and proposal software, we bought a company, Solargraf Pro. And we are making it -- meaning Sofdesk, and we are making it a lot better by introducing shading, by introducing storage, 3D, all bells and whistles. So we are making that better. Then permitting services.
Our team in Noida service is nearly 30% of the entire North American solar business -- solar permitting business. They do that today. And we are going to make that better in terms of injecting more automation set. Then we'll come to commissioning software.
There, it's homegrown, and there is no way we are going to buy a company for that. It's got hundreds of man-years of work in it, and we are going to make that continuously better. We have a very large team there. Then comes the Enlighten mobile app.
Yes, this is the homeowner app, monitoring, fleet management, etc., which again, enormous investments, hundreds of man-years, and we will grow organically there. O&M, you saw the investments that we made in 365 Pronto. These are software platform. That's how we like it.
We're not going to get into the O&M itself. We're not going to have trucks and ladders, but we are going to enable transactions with a two-sided marketplace, customers on one hand, service providers on the other hand. And we connect both of them, the two-sided marketplace. So the two components we have to be thinking of is best-in-class home energy systems, best-in-class digital -- installer digital platform.
And whatever acquisitions we need for that, we will do, but those will likely be small acquisitions. They'll be tuck-in. There is no silver bullet there.
Sophie Karp -- KeyBanc Capital Markets -- Analyst
Got it. Thank you so much.
Badri Kothandaraman -- President and Chief Executive Officer
Thank you.
Operator
Thank you. Our next question comes from the line of Tristan Richardson from Truist. Your question, please.
Tristan Richardson -- Trusit Securities -- Analyst
Hi, good evening, guys. Really appreciate all the commentary tonight. Just one from me on the EV charging product. Now that you've had that under the umbrella a few months, curious about the innovation pipeline there and whether it'd be vehicle-to-grid or vehicle-to-home and the potential there to develop that product or -- and if so, could that be margin-accretive? Or are you seeing more of the EV charging product complementary to just your core Ensemble strategy?
Badri Kothandaraman -- President and Chief Executive Officer
Yeah. So I'm going to articulate a little bit on what we are doing tactically maybe for the next few months, and then Raghu will talk about the vision on V2H and V2G. So we're very happy with the acquisition of ClipperCreek. They already make very high-quality level 2 chargers.
They have shipped 110,000 of them, healthy revenue growing and the market is growing at a 40% CAGR, like what we told you at the Analyst Day, and very nice gross margins, profitable business. So we're very happy there. All we want there is -- immediately, we want to do three things. Give them a lot of scale.
Scale means only a contract manufacturer can do it properly, so professionalize that. That's number one. Number two is introduce ClipperCreek chargers to our installers and distributors. And obviously, we need to make sure that the supply chain is robust there.
And that's why I said that we need to transfer to contract manufacturing first. Number three, which is important, is I'd like every ClipperCreek charger shipped from the contract manufacturer to have connectivity in it. And that connectivity is extremely important because we need to make these chargers intelligent. They need to be able to support -- optimize tariff.
They need to be able to support charging on a schedule. They should help support green electrons. If a homeowner says, "I want to utilize solar for my EV charging," he should be able to pick that preference immediately and make that happen. It should be able to work with our Ensemble system seamlessly.
So connectivity will help us on those fronts. So those are the three actions that we are thinking immediately. And then comes -- international expansion is another one which I should have said. That's in our short-term focus, which is -- Europe is a very big market for EV.
So it's obvious that we need to be in Europe. So we're going to be starting to ramp heavily on that front, ramp our plants there. The last one is bidirectionality. So Raghu is going to talk about that.
Raghu Belur -- Chief Products Officer
Yeah. I think as Badri mentioned, integrating EV into Ensemble where you're treating EV purely as a load brings a lot of value for the homeowner because you can really control. You can decide on what the source of the electrons are, the duration, the rate, etc., so a lot of value in the energy management system. But beyond that, EV just as -- should not be looked at simply as a load.
There's an opportunity to do reverse power flow there, which is fully bidirectional, where you can use the EV for -- both for things such as grid services, as well as for resiliency. So the grid services part would be the vehicle-to-grid part, and then the resiliency part would be the vehicle-to-home part. In the event of an outage, you have this extra significant amount of source there, which is about 100 kilowatt-hours. Can that participate and keep your home -- keep the home microgrid sustained in the event of an outage? So both of those, both vehicle-to-grid and vehicle-to-home, requires some development.
And that development includes whether -- decisions have to be made whether you're going to deliver that energy with DC or AC. It doesn't -- and for us, it doesn't matter. We are open to doing it with both AC or DC. Our IQ8 is capable of delivering -- of providing a DC interface into the car or an AC.
In addition to that, there are a few other things, challenges that need to be solved. Like standards development still needs to complete. There are a couple of standards, CCS and CHAdeMO, today but I think there are -- IEEE standards are being developed to figure out how to do this bidirectional power flow. And finally, grid interaction is pretty complex because now the EV has to be fully compliant to all the advanced grid function requirements.
So we are diving deep into it. We are laying out the full plan. But regardless of whether we do it through an AC-to-AC interface or an AC-to-DC interface, our IQ8s are capable of providing both of those. And I think bringing the EV onto the Ensemble platform and providing -- and not just being a smart load but also being a very intelligent source brings a lot of value for our customers.
Tristan Richardson -- Trusit Securities -- Analyst
Raghu, Badri, thank you. And Eric, all the best to you.
Eric Branderiz -- Chief Financial Officer
Thank you.
Operator
Thank you. Our next question comes from the line of Eric Stine from Craig-Hallum. Your question, please.
Eric Stine -- Craig-Hallum Capital Group -- Analyst
Hello. Just sneaking one in here on ClipperCreek. I know you just touched on that but just curious. I mean based on the nature of that product, when you do roll that out to the installer network, I mean how do you see that play out maybe compared to the storage product? And then curious, how do you think of this -- or how should we think of it in terms of attach rates or maybe capture rate of spend per home? Just anything like that to guide us going forward.
Badri Kothandaraman -- President and Chief Executive Officer
Yeah. I mean regarding the introduction to our installers, we think they will lap it up. They would love it because solar plus storage plus EV charging infrastructure setting up in your home, they would love that because they think that expense -- I mean with a fully installed -- maybe with all installation and EV charger installs will cost you $1,500. And if you couple it with solar plus storage, it might even be lower.
And there is obviously tax credit, etc., that are there. So we think it's a general positive. And that's why we are excited to introduce it to our installers and distributors and globally as well.
Eric Stine -- Craig-Hallum Capital Group -- Analyst
Got it. So I mean really, in terms of thinking about the growth, it's more about, as you said, getting the contract manufacturer in place, getting the supply chain in place rather than the limitations being training installers and attach rates or educating the customer. I mean this is really about just getting the manufacturing side in place.
Badri Kothandaraman -- President and Chief Executive Officer
Yeah. That's right. It's a relatively simple product to install some education but not terribly complicated. And of course, we've got to get the secret sauce right, which is make sure that it is comparable to an Ensemble system and provides that intelligence to the homeowner.
And in terms of thinking about the business, you -- I don't need to tell you, but you can correlate the business directly to the growth of EV. So if the EVs grow at 40%, for example, CAGR, these will grow even faster than that. And so it's -- yes, it's going to be a healthy CAGR. And we need to get our manufacturing straight.
That's why we are moving contract manufacturing in-house.
Eric Stine -- Craig-Hallum Capital Group -- Analyst
OK. Thank you.
Operator
Thank you. Our final question for today comes from the line of Pavel Molchanov from Raymond James. Your question, please.
Pavel Molchanov -- Raymond James -- Analyst
Thanks for taking the question. Just one from me also about ClipperCreek. You mentioned that installer awareness and skill set is not a constraint. But in practical terms, what portion of your existing kind of installation customers are -- have any historical background in installing charging equipment in homes? Is there a number or a percentage that you can provide?
Badri Kothandaraman -- President and Chief Executive Officer
Yeah. I wouldn't be able to provide it now, but I would say that there is probably a 20% to 30% overlap. That's my guess.
Pavel Molchanov -- Raymond James -- Analyst
OK. Very good.
Raghu Belur -- Chief Products Officer
And bear in mind that installing is a supply equipment. And so they already have the main panel open when they're installing solar plus storage. And so coming in and installing a piece of equipment on the wall and drawing a conduit on a -- and a 40 amp -- and landing it on a 40-amp circuit is going to be pretty straightforward. It's what -- it's the kind of work that they do already with solar and storage.
So I don't see a huge jump in requirement in training or skill set to do that.
Pavel Molchanov -- Raymond James -- Analyst
OK. I appreciate it.
Badri Kothandaraman -- President and Chief Executive Officer
Thank you.
Operator
Thank you. This does conclude the question-and-answer session of today's program. I'd now like to hand the program back to Badri Kothandaraman for any further remarks.
Badri Kothandaraman -- President and Chief Executive Officer
Yeah. Thank you for joining us today and for your continued support of Enphase. We look forward to speaking with you again next quarter. Thank you.
Operator
[Operator signoff]
Duration: 90 minutes
Call participants:
Karen Sagot -- Head of Investor Relations
Badri Kothandaraman -- President and Chief Executive Officer
Eric Branderiz -- Chief Financial Officer
Mandy Yang -- Chief Accounting Officer and Corporate Treasurer
Philip Shen -- ROTH Capital Partners -- Analyst
J.B. Lowe -- Citi -- Analyst
Brian Lee -- Goldman Sachs -- Analyst
Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst
Raghu Belur -- Chief Products Officer
Colin Rusch -- Oppenheimer and Company -- Analyst
Mark Strouse -- J.P. Morgan -- Analyst
James West -- Evercore ISI -- Analyst
Kashy Harrison -- Piper Sandler -- Analyst
Joseph Osha -- Guggenheim Partners -- Analyst
Ameet Thakkar -- BMO Capital Markets -- Analyst
Praneeth Satish -- Wells Fargo Securities -- Analyst
Steven Fleishman -- Wolfe Research -- Analyst
Sophie Karp -- KeyBanc Capital Markets -- Analyst
Tristan Richardson -- Trusit Securities -- Analyst
Eric Stine -- Craig-Hallum Capital Group -- Analyst
Pavel Molchanov -- Raymond James -- Analyst
