What happened
Shares of Enphase Energy (ENPH -3.89%) rose as much as 43.3% today after the company reported fourth-quarter and full-year 2019 operating results. The solar hardware leader met the top end of Q4 guidance for revenue and gross margin. It was the company's first quarterly period with at least $200 million in revenue.
Even more impressively, the business generated full-year 2019 operating income of $102 million, compared to only $1.6 million in the previous year. Enphase Energy expects for the momentum to continue in the first quarter of 2020, but management has already begun preparing investors for slightly reduced operating margin as it ramps up investments to support its fledgling energy storage portfolio.
As of 1:24 p.m. EST, the renewable energy stock had settled to a 39.3% gain.
Image source: Getty Images.
So what
Enphase Energy took advantage of changing electrical codes, improved technology, and healthy growth for small-scale solar installations to deliver its best year of operations yet.
|
Metric |
2019 |
2018 |
Change |
|---|---|---|---|
|
Revenue |
$624.3 million |
$316.2 million |
97% |
|
Gross profit |
$221.2 million |
$94.4 million |
134% |
|
Gross margin |
35.4% |
29.9% |
550 basis points |
|
Operating expenses |
$118.5 million |
$92.8 million |
27% |
|
Operating income |
$102.7 million |
$1.6 million |
N/A* |
|
Operating margin |
16.4% |
0.5% |
N/A* |
|
Cash flow from operations |
$139.0 million |
$16.1 million |
762% |
Data source: Press release. *Number is very large and of little contextual value.
Given the healthy demand for small-scale solar projects, the annual reductions in value of the investment tax credit (ITC) for solar infrastructure, and the launch of the company's energy storage products, investors should be confident that the operational momentum will continue.
Now what
It's important to note that Enphase Energy has been careful to temper investor expectations. In the fourth quarter of 2019, the company achieved a non-GAAP gross margin of 37%, reported that non-GAAP operating expenses represented 12% of revenue, and delivered a non-GAAP operating margin of 25%. That's 37%, 12%, and 25%. However, the company is targeting 35%, 15%, and 20%, respectively.
The main difference is that Enphase Energy expects to ramp up operating expenses throughout 2020 to support the launch of its energy storage products, which will take a bite out of non-GAAP operating margin relative to what has been achieved in recent quarters. That won't mark the end of the world, but it's something for investors to remember when the company's margin slips in future quarters.
