falsedesktopENPH2020-09-30000146310120000127{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Large accelerated filer\t☒\tAccelerated filer\t☐\nNon-accelerated filer\t☐\tSmaller reporting company\t☐\n\t\tEmerging growth company\t☐\n", "q10k_tbl_1": "\t\tPage\n\tPART I. FINANCIAL INFORMATION\t\nItem 1.\tFinancial Statements (Unaudited)\t1\n\tCondensed Consolidated Balance Sheets\t1\n\tCondensed Consolidated Statements of Operations\t2\n\tCondensed Consolidated Statements of Comprehensive Income\t3\n\tCondensed Consolidated Statements of Stockholders' Equity\t4\n\tCondensed Consolidated Statements of Cash Flows\t5\n\tNotes to Condensed Consolidated Financial Statements\t6\nItem 2.\tManagement's Discussion and Analysis of Financial Condition and Results of Operations\t30\nItem 3.\tQuantitative and Qualitative Disclosures About Market Risk\t41\nItem 4.\tControls and Procedures\t43\n\tPART II. OTHER INFORMATION\t\nItem 1.\tLegal Proceedings\t44\nItem 1A.\tRisk Factors\t44\nItem 2.\tUnregistered Sales of Equity Securities and Use of Proceeds\t49\nItem 3.\tDefaults Upon Senior Securities\t49\nItem 4.\tMine Safety Disclosures\t49\nItem 5.\tOther Information\t49\nItem 6.\tExhibits\t50\n\tSignature\t52\n", "q10k_tbl_2": "\tAs of\t\n\tSeptember 30 2020\tDecember 31 2019\nASSETS\t\t\nCurrent assets:\t\t\nCash and cash equivalents\t661792\t251409\nRestricted cash\t0\t44700\nAccounts receivable net of allowances of $348 and $564 at September 30 2020 and December 31 2019 respectively\t122386\t145413\nInventory\t37535\t32056\nPrepaid expenses and other assets\t28521\t26079\nTotal current assets\t850234\t499657\nProperty and equipment net\t35187\t28936\nOperating lease right of use asset net\t14487\t10117\nIntangible assets net\t26839\t30579\nGoodwill\t24783\t24783\nOther assets\t51998\t44620\nDeferred tax assets net\t88812\t74531\nTotal assets\t1092340\t713223\nLIABILITIES AND STOCKHOLDERS' EQUITY\t\t\nCurrent liabilities:\t\t\nAccounts payable\t48148\t57474\nAccrued liabilities\t52203\t47092\nDeferred revenues current\t41738\t81783\nWarranty obligations current (includes $7560 and $6794 measured at fair value at September 30 2020 and December 31 2019 respectively)\t10760\t10078\nDebt current\t103670\t2884\nTotal current liabilities\t256519\t199311\nLong-term liabilities:\t\t\nDeferred revenues noncurrent\t115757\t100204\nWarranty obligations noncurrent (includes $18188 and $13012 measured at fair value at September 30 2020 and December 31 2019 respectively)\t33019\t27020\nOther liabilities\t14387\t11817\nDebt noncurrent\t256452\t102659\nTotal liabilities\t676134\t441011\nCommitments and contingencies (Note 9)\t\t\nStockholders' equity:\t\t\nCommon stock $0.00001 par value 200000 shares and 150000 shares authorized; and 126270 shares and 123109 shares issued and outstanding at September 30 2020 and December 31 2019 respectively\t1\t1\nAdditional paid-in capital\t540738\t458315\nAccumulated deficit\t(124177)\t(185181)\nAccumulated other comprehensive loss\t(356)\t(923)\nTotal stockholders' equity\t416206\t272212\nTotal liabilities and stockholders' equity\t1092340\t713223\n", "q10k_tbl_3": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNet revenues\t178503\t180057\t509586\t414301\nCost of revenues\t83522\t115351\t285543\t270937\nGross profit\t94981\t64706\t224043\t143364\nOperating expenses:\t\t\t\t\nResearch and development\t15052\t11085\t40120\t29213\nSales and marketing\t14645\t9551\t38788\t26038\nGeneral and administrative\t13525\t9895\t37810\t28358\nRestructuring charges\t0\t469\t0\t1468\nTotal operating expenses\t43222\t31000\t116718\t85077\nIncome from operations\t51759\t33706\t107325\t58287\nOther expense net\t\t\t\t\nInterest income\t110\t894\t1483\t1698\nInterest expense\t(5993)\t(2286)\t(15100)\t(7388)\nOther expense net\t(1031)\t(943)\t(1302)\t(6904)\nChange in fair value of derivatives\t0\t0\t(44348)\t0\nTotal other expense net\t(6914)\t(2335)\t(59267)\t(12594)\nIncome before income taxes\t44845\t31371\t48058\t45693\nIncome tax benefit (provision)\t(5483)\t(272)\t12946\t(1211)\nNet income\t39362\t31099\t61004\t44482\nNet income per share:\t\t\t\t\nBasic\t0.31\t0.25\t0.49\t0.39\nDiluted\t0.28\t0.23\t0.44\t0.35\nShares used in per share calculation:\t\t\t\t\nBasic\t126109\t122123\t125084\t114720\nDiluted\t141820\t133611\t140207\t131114\n", "q10k_tbl_4": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNet income\t39362\t31099\t61004\t44482\nOther comprehensive income (loss):\t\t\t\t\nForeign currency translation adjustments\t797\t155\t567\t(173)\nComprehensive income\t40159\t31254\t61571\t44309\n", "q10k_tbl_5": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nCommon stock and paid-in capital\t\t\t\t\nBalance beginning of period\t534868\t449803\t458316\t353336\nCumulative-effect adjustment to additional paid in capital(1)\t0\t0\t0\t27\nIssuance of common stock from exercise of equity awards\t541\t303\t4708\t2925\nPayment of withholding taxes related to net share settlement of equity awards\t(9069)\t(2348)\t(52042)\t(4438)\nConversion of convertible notes due 2023 net\t0\t0\t0\t58857\nEquity component of convertible notes\t0\t25\t116300\t35114\nCost of convertible notes hedge related to the convertible notes\t0\t0\t(117108)\t(36313)\nSale of warrants related to the convertible notes\t0\t0\t96351\t29818\nStock-based compensation expense and other\t14399\t5784\t34214\t14241\nBalance end of period\t540739\t453567\t540739\t453567\nAccumulated deficit\t\t\t\t\nBalance beginning of period\t(163539)\t(332946)\t(185181)\t(346302)\nCumulative-effect adjustment to accumulated deficit(1) and other\t0\t0\t0\t(27)\nNet income\t39362\t31099\t61004\t44482\nBalance end of period\t(124177)\t(301847)\t(124177)\t(301847)\nAccumulated other comprehensive income (loss)\t\t\t\t\nBalance beginning of period\t(1153)\t414\t(923)\t742\nForeign currency translation adjustments\t797\t155\t567\t(173)\nBalance end of period\t(356)\t569\t(356)\t569\nTotal stockholders' equity ending balance\t416206\t152289\t416206\t152289\n", "q10k_tbl_6": "\tNine Months Ended September 30\t\n\t2020\t2019\nCash flows from operating activities:\t\t\nNet income\t61004\t44482\nAdjustments to reconcile net income to net cash provided by operating activities:\t\t\nDepreciation and amortization\t12750\t11551\nProvision for doubtful accounts\t254\t408\nNon-cash interest expense\t13516\t4173\nFinancing fees on extinguishment of debt\t0\t2152\nFees paid for repurchase and exchange of convertible notes due 2023\t0\t6000\nStock-based compensation\t34214\t14000\nChange in fair value of derivatives\t44348\t0\nDeferred income taxes\t(14507)\t0\nChanges in operating assets and liabilities:\t\t\nAccounts receivable\t23533\t(56139)\nInventory\t(5479)\t(13964)\nPrepaid expenses and other assets\t(10451)\t(8634)\nAccounts payable accrued and other liabilities\t(9200)\t18656\nWarranty obligations\t6681\t3330\nDeferred revenues\t(24509)\t10781\nNet cash provided by operating activities\t132154\t36796\nCash flows from investing activities:\t\t\nPurchases of property and equipment\t(11707)\t(7368)\nNet cash used in investing activities\t(11707)\t(7368)\nCash flows from financing activities:\t\t\nIssuance of convertible notes net of issuance costs\t312420\t127481\nPurchase of convertible note hedges\t(89056)\t(36313)\nSale of warrants\t71552\t29819\nFees paid for repurchase and exchange of convertible notes due 2023\t0\t(6000)\nPrincipal payments and financing fees on debt\t(2269)\t(45658)\nProceeds from exercise of equity awards and employee stock purchase plan\t4708\t2925\nPayment of withholding taxes related to net share settlement of equity awards\t(52042)\t(4438)\nNet cash provided by financing activities\t245313\t67816\nEffect of exchange rate changes on cash and cash equivalents\t(77)\t(435)\nNet increase in cash and cash equivalents\t365683\t96809\nCash cash equivalents and restricted cash-Beginning of period\t296109\t106237\nCash and cash equivalents-End of period\t661792\t203046\nSupplemental disclosures of non-cash investing and financing activities:\t\t\nPurchases of fixed assets included in accounts payable\t2132\t926\nAccrued interest payable unpaid upon exchange of convertible notes due 2023\t0\t833\n", "q10k_tbl_7": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\n\t(In thousands)\t\t\t\nPrimary geographical markets:\t\t\t\t\nUnited States\t139924\t150686\t420315\t328281\nInternational\t38579\t29371\t89271\t86020\nTotal\t178503\t180057\t509586\t414301\nTiming of revenue recognition:\t\t\t\t\nProducts delivered at a point in time\t166729\t170152\t475707\t384888\nProducts and services delivered over time\t11774\t9905\t33879\t29413\nTotal\t178503\t180057\t509586\t414301\n", "q10k_tbl_8": "\tSeptember 30 2020\tDecember 31 2019\n\t(In thousands)\t\nReceivables\t122386\t145413\nShort-term contract assets (Prepaid expenses and other assets)\t16973\t15055\nLong-term contract assets (Other assets)\t48792\t42087\nShort-term contract liabilities (Deferred revenues)\t41738\t81783\nLong-term contract liabilities (Deferred revenues)\t115757\t100204\n", "q10k_tbl_9": "Contract Assets\t\nBalance on December 31 2019\t57142\nAmount recognized\t(12942)\nIncrease\t21565\nBalance as of September 30 2020\t65765\n", "q10k_tbl_10": "Contract Liabilities\t\nBalance on December 31 2019\t181987\nRevenue recognized\t(78614)\nIncrease due to billings\t54122\nBalance as of September 30 2020\t157495\n", "q10k_tbl_11": "\tSeptember 30 2020\n\t(In thousands)\nFiscal year:\t\n2020 (remaining three months)\t11888\n2021\t39344\n2022\t34296\n2023\t28483\n2024\t23259\nThereafter\t20225\nTotal\t157495\n", "q10k_tbl_12": "\tSeptember 30 2020\tDecember 31 2019\n\t(In thousands)\t\nAccounts receivable\t122734\t145977\nAllowance for doubtful accounts\t(348)\t(564)\nAccounts receivable net\t122386\t145413\n", "q10k_tbl_13": "\tThree Months Ended\tNine Months Ended\n\tSeptember 30 2020\t\n\t(In thousands)\t\nBalance at beginning of the period\t296\t564\nNet charges to expenses\t70\t254\nWrite-offs net of recoveries\t(18)\t(470)\nBalance at end of the period\t348\t348\n", "q10k_tbl_14": "\tSeptember 30 2020\tDecember 31 2019\n\t(In thousands)\t\nRaw materials\t7148\t4197\nFinished goods\t30387\t27859\nTotal inventory\t37535\t32056\n", "q10k_tbl_15": "\tSeptember 30 2020\tDecember 31 2019\n\t(In thousands)\t\nSalaries commissions incentive compensation and benefits\t5494\t5524\nCustomer rebates and sales incentives\t19965\t24198\nFreight\t3861\t4908\nOperating lease liabilities current\t4245\t3170\nOther\t18638\t9292\nTotal accrued liabilities\t52203\t47092\n", "q10k_tbl_16": "\tSeptember 30 2020\t\t\tDecember 31 2019\t\t\n\tGross\tAccumulated Amortization\tNet\tGross\tAccumulated Amortization\tNet\n\t(In thousands)\t\t\t\t\t\nGoodwill\t24783\t0\t24783\t24783\t0\t24783\nIntangible assets:\t\t\t\t\t\t\nOther indefinite-lived intangibles\t286\t0\t286\t286\t0\t286\nIntangible assets with finite lives:\t\t\t\t\t\t\nDeveloped technology\t13100\t(4730)\t8370\t13100\t(3093)\t10007\nCustomer relationships\t23100\t(4917)\t18183\t23100\t(2814)\t20286\nTotal purchased intangible assets\t36486\t(9647)\t26839\t36486\t(5907)\t30579\n", "q10k_tbl_17": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\n\t(In thousands)\t\t\t\nDeveloped technology and patents and licensed technology\t545\t546\t1637\t1638\nCustomer relationships\t702\t636\t2103\t1907\nTotal amortization expense\t1247\t1182\t3740\t3545\n", "q10k_tbl_18": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\n\t(In thousands)\t\t\t\nWarranty obligations beginning of period\t37907\t32994\t37098\t31294\nAccruals for warranties issued during period\t1939\t1571\t4229\t3741\nChanges in estimates\t3869\t3884\t7294\t5387\nSettlements\t(3274)\t(3780)\t(9122)\t(8282)\nIncrease due to accretion expense\t832\t562\t2410\t1663\nOther\t2506\t(607)\t1870\t821\nWarranty obligations end of period\t43779\t34624\t43779\t34624\nLess: current portion\t(10760)\t(8757)\t(10760)\t(8757)\nNoncurrent\t33019\t25867\t33019\t25867\n", "q10k_tbl_19": "\tSeptember 30 2020\tDecember 31 2019\n\t(In thousands)\t\n\tLevel 3\tLevel 3\nLiabilities:\t\t\nWarranty obligations\t\t\nCurrent\t7560\t6794\nNon-current\t18188\t13012\nTotal warranty obligations measured at fair value\t25748\t19806\nTotal liabilities measured at fair value\t25748\t19806\n", "q10k_tbl_20": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\n\t(In thousands)\t\t\t\nBalance at beginning of period\t21132\t14856\t19806\t11757\nAccruals for warranties issued during period\t1939\t1571\t4229\t3741\nChanges in estimates\t1279\t2676\t2877\t3536\nSettlements\t(1940)\t(2074)\t(5444)\t(4534)\nIncrease due to accretion expense\t832\t562\t2410\t1663\nOther\t2506\t(607)\t1870\t821\nBalance at end of period\t25748\t16984\t25748\t16984\n", "q10k_tbl_21": "\t\t\tPercent Used (Weighted Average)\t\nItem Measured at Fair Value\tValuation Technique\tDescription of Significant Unobservable Input\tSeptember 30 2020\tDecember 31 2019\nWarranty obligations for microinverters sold since January 1 2014\tDiscounted cash flows\tProfit element and risk premium\t15%\t14%\n\tCredit-adjusted risk-free rate\t13%\t16%\n", "q10k_tbl_22": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\n\t(In thousands)\t\t\t\nRedundancy and employee severance and benefit arrangements\t0\t469\t0\t1568\nLease loss reserves (benefit)\t0\t0\t0\t(100)\nTotal restructuring charges\t0\t469\t0\t1468\n", "q10k_tbl_23": "\tSeptember 30 2020\tDecember 31 2019\n\t(In thousands)\t\nConvertible notes\t\t\nNotes due 2025\t320000\t0\nLess: unamortized discount and issuance costs\t(68510)\t0\nCarrying amount of Notes due 2025\t251490\t0\nNotes due 2024\t132000\t132000\nLess: unamortized discount and issuance costs\t(30488)\t(35815)\nCarrying amount of Notes due 2024\t101512\t96185\nNotes due 2023\t5000\t5000\nLess: unamortized issuance costs\t(112)\t(143)\nCarrying amount of Notes due 2023\t4888\t4857\nSale of long-term financing receivable recorded as debt\t2232\t4501\nTotal carrying amount of debt\t360122\t105543\nLess: current portion of convertible notes and long-term financing receivable recorded as debt\t(103670)\t(2884)\nLong-term debt\t256452\t102659\n", "q10k_tbl_24": "Convertible note embedded derivative\t\n(In thousands)\t\nFair value as of March 9 2020\t68700\nChange in the fair value\t(23600)\nFair value as of March 31 2020\t45100\nChange in the fair value\t71200\nFair value as of May 20 2020\t116300\n", "q10k_tbl_25": "\tThree Months Ended September 30 2020\tNine Months Ended September 30 2020\n\t(In thousands)\t\nContractual interest expense\t200\t449\nAmortization of debt discount\t3110\t6922\nAmortization of debt issuance costs\t380\t848\nTotal interest cost recognized\t3690\t8219\n", "q10k_tbl_26": "\tConvertible notes hedge\tWarrants liability\n\t(In thousands)\t\nFair value as of March 9 2020\t89056\t71552\nChange in the fair value\t(41171)\t(32915)\nFair value as of March 31 2020\t47885\t38637\nChange in the fair value\t69223\t57715\nFair value as of May 20 2020\t117108\t96352\n", "q10k_tbl_27": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\n\t(In thousands)\t\t\t\nContractual interest expense\t330\t330\t990\t422\nAmortization of debt discount\t1645\t1523\t4828\t1939\nAmortization of debt issuance costs\t166\t165\t498\t210\nTotal interest cost recognized\t2141\t2018\t6316\t2571\n", "q10k_tbl_28": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\n\t(In thousands)\t\t\t\nContractual interest expense\t50\t43\t150\t1176\nAmortization of debt issuance costs\t10\t10\t30\t235\nTotal interest costs recognized\t60\t53\t180\t1411\n", "q10k_tbl_29": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\n\t(In thousands)\t\t\t\nOperating lease costs\t1274\t1161\t3776\t2909\n", "q10k_tbl_30": "\tSeptember 30 2020\tDecember 31 2019\n\t(In thousands)\t\nOperating lease liabilities current (Accrued liabilities)\t4245\t3170\nOperating lease liabilities noncurrent (Other liabilities)\t12417\t9542\nTotal operating lease liabilities\t16662\t12712\nSupplemental lease information:\t\t\nWeighted average remaining lease term\t5.6 years\t5.5 years\nWeighted average discount rate\t8.1%\t8.6%\n", "q10k_tbl_31": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\n\t(In thousands)\t\t\t\nCash paid for amounts included in the measurement of lease liabilities:\t\t\t\t\nOperating cash flows from operating leases\t1252\t1019\t3411\t2613\nNon-cash investing activities:\t\t\t\t\nLease liabilities arising from obtaining right-of-use assets\t3798\t0\t6739\t4834\n", "q10k_tbl_32": "\tLease Amounts\n\t(In thousands)\nYear:\t\n2020 (remaining three months)\t1345\n2021\t5436\n2022\t4155\n2023\t3518\n2024\t2523\n2025 and thereafter\t2686\nTotal lease payments\t19663\nLess: imputed lease interest\t(3001)\nTotal lease liabilities\t16662\n", "q10k_tbl_33": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\n\t(In thousands)\t\t\t\nCost of revenues\t1294\t497\t3237\t1114\nResearch and development\t4248\t1411\t9430\t3255\nSales and marketing\t3952\t1541\t9504\t3900\nGeneral and administrative\t4905\t1996\t12043\t5013\nRestructuring\t0\t331\t0\t718\nTotal\t14399\t5776\t34214\t14000\n", "q10k_tbl_34": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\n\t(In thousands)\t\t\t\nStock options RSUs and PSUs\t13781\t5546\t32415\t13528\nEmployee stock purchase plan\t618\t230\t1799\t472\nTotal\t14399\t5776\t34214\t14000\n", "q10k_tbl_35": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nWeighted average grant date fair value\t**\t**\t38.45\t9.16\nExpected term (in years)\t**\t**\t3.8\t3.8\nExpected volatility\t**\t**\t86.4%\t89.1%\nAnnual risk-free rate of return\t**\t**\t0.1%\t2.1%\nDividend yield\t**\t**\t-%\t-%\n", "q10k_tbl_36": "\tNumber of Shares Outstanding\tWeighted- Average Exercise Price per Share\tWeighted- Average Remaining Contractual Term\tAggregate Intrinsic Value (1)\n\t(In thousands)\t\t(Years)\t(In thousands)\nOutstanding at December 31 2019\t4097\t2.18\t\t\nGranted\t11\t64.17\t\t\nExercised)\t(1062\t2.41\t\t56357\nCanceled)\t(82\t6.94\t\t\nOutstanding at September 30 2020\t2964\t2.19\t3.8\t238224\nVested and expected to vest at September 30 2020\t2964\t2.19\t3.8\t238224\nExercisable at September 30 2020\t2349\t2.22\t3.7\t188809\n", "q10k_tbl_37": "\tOptions Outstanding\t\t\tOptions Exercisable\t\nRange of Exercise Prices\tNumber of Shares\tWeighted- Average Remaining Life\tWeighted- Average Exercise Price\tNumber of Shares\tWeighted- Average Exercise Price\n\t(In thousands)\t(Years)\t\t(In thousands)\t\n0.70 -- $1.11\t687\t4.3\t0.82\t554\t0.82\n1.29 -- $1.29\t1000\t4.0\t1.29\t750\t1.29\n1.31 -- $1.31\t709\t3.5\t1.31\t563\t1.31\n1.37 -- $14.58\t557\t3.1\t5.44\t479\t5.96\n64.17 -- $64.17\t11\t6.6\t64.17\t3\t64.17\nTotal\t2964\t3.8\t2.19\t2349\t2.22\n", "q10k_tbl_38": "\tNumber of Shares Outstanding\tWeighted- Average Fair Value per Share at Grant Date\tWeighted- Average Remaining Contractual Term\tAggregate Intrinsic Value (1)\n\t(In thousands)\t\t(Years)\t(In thousands)\nOutstanding at December 31 2019\t4263\t7.19\t\t\nGranted\t1262\t40.76\t\t\nVested)\t(1705\t6.87\t\t78855\nCanceled)\t(84\t20.78\t\t\nOutstanding at September 30 2020\t3736\t18.37\t1.13\t308555\nExpected to vest at September 30 2020\t3736\t18.37\t1.13\t308555\n", "q10k_tbl_39": "\tNumber of Shares Outstanding\tWeighted- Average Fair Value per Share at Grant Date\tWeighted- Average Remaining Contractual Term\tAggregate Intrinsic Value (1)\n\t(In thousands)\t\t(Years)\t(In thousands)\nOutstanding at December 31 2019\t955\t9.83\t\t\nGranted\t989\t31.12\t\t\nVested)\t(1450\t10.20\t\t52144\nCanceled\t0\t0\t\t\nOutstanding at September 30 2020\t494\t51.10\t0.4\t40793\n", "q10k_tbl_40": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\n\t(In thousands except per share data)\t\t\t\nNumerator:\t\t\t\t\nNet income\t39362\t31099\t61004\t44482\nNotes due 2023 interest and financing costs net\t44\t39\t133\t1046\nAdjusted net income\t39406\t31138\t61137\t45528\nDenominator:\t\t\t\t\nShares used in basic per share amounts:\t\t\t\t\nWeighted average common shares outstanding\t126109\t122123\t125084\t114720\nShares used in diluted per share amounts:\t\t\t\t\nWeighted average common shares outstanding\t126109\t122123\t125084\t114720\nEffect of dilutive securities:\t\t\t\t\nEmployee stock-based awards\t6330\t9200\t7123\t8937\nWarrants (issued in conjunction with Notes due 2024)\t4013\t100\t3251\t0\nNotes due 2024\t4468\t1288\t3849\t385\nNotes due 2023\t900\t900\t900\t7072\nWeighted average common shares outstanding for diluted calculation\t141820\t133611\t140207\t131114\nBasic and diluted net income per share\t\t\t\t\nNet income per share basic\t0.31\t0.25\t0.49\t0.39\nNet income per share diluted\t0.28\t0.23\t0.44\t0.35\n", "q10k_tbl_41": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\n\t(In thousands)\t\t\t\nEmployee stock-based awards\t36\t11\t64\t112\nWarrants (issued in conjunction with Notes due 2025)\t2342\t0\t2832\t0\nNotes due 2025\t854\t0\t1458\t0\nTotal\t3232\t11\t4354\t112\n", "q10k_tbl_42": "\tThree Months Ended September 30\t\tChange in\t\tNine Months Ended September 30\t\tChange in\t\n\t2020\t2019\t$\t%\t2020\t2019\t$\t%\n\t(In thousands except percentages)\t\t\t\t\t\t\t\nNet revenues\t178503\t180057\t(1554)\t(1)%\t509586\t414301\t95285\t23%\n", "q10k_tbl_43": "\tThree Months Ended September 30\t\tChange in\t\tNine Months Ended September 30\t\tChange in\t\n\t2020\t2019\t$\t%\t2020\t2019\t$\t%\n\t(In thousands except percentages)\t\t\t\t\t\t\t\nCost of revenues\t83522\t115351\t(31829)\t(28)%\t285543\t270937\t14606\t5%\nGross profit\t94981\t64706\t30275\t47%\t224043\t143364\t80679\t56%\nGross margin\t53.2%\t35.9%\t\t\t44.0%\t34.6%\t\t\n", "q10k_tbl_44": "\tThree Months Ended September 30\t\tChange in\t\tNine Months Ended September 30\t\tChange in\t\n\t2020\t2019\t$\t%\t2020\t2019\t$\t%\n\t(In thousands except percentages)\t\t\t\t\t\t\t\nResearch and development\t15052\t11085\t3967\t36%\t40120\t29213\t10907\t37%\nPercentage of net revenues\t8%\t6%\t\t\t8%\t7%\t\t\n", "q10k_tbl_45": "\tThree Months Ended September 30\t\tChange in\t\tNine Months Ended September 30\t\tChange in\t\n\t2020\t2019\t$\t%\t2020\t2019\t$\t%\n\t(In thousands except percentages)\t\t\t\t\t\t\t\nSales and marketing\t14645\t9551\t5094\t53%\t38788\t26038\t12750\t49%\nPercentage of net revenues\t8%\t5%\t\t\t8%\t6%\t\t\n", "q10k_tbl_46": "\tThree Months Ended September 30\t\tChange in\t\tNine Months Ended September 30\t\tChange in\t\n\t2020\t2019\t$\t%\t2020\t2019\t$\t%\n\t(In thousands except percentages)\t\t\t\t\t\t\t\nGeneral and administrative\t13525\t9895\t3630\t37%\t37810\t28358\t9452\t33%\nPercentage of net revenues\t8%\t5%\t\t\t7%\t7%\t\t\n", "q10k_tbl_47": "\tThree Months Ended September 30\t\tChange in\t\tNine Months Ended September 30\t\tChange in\t\n\t2020\t2019\t$\t%\t2020\t2019\t$\t%\n\t(In thousands except percentages)\t\t\t\t\t\t\t\nRestructuring charges\t0\t469\t(469)\t(100)%\t0\t1468\t(1468)\t(100)%\n", "q10k_tbl_48": "\tThree Months Ended September 30\t\tChange in\t\tNine Months Ended September 30\t\tChange in\t\n\t2020\t2019\t$\t%\t2020\t2019\t$\t%\n\t(In thousands except percentages)\t\t\t\t\t\t\t\nInterest income\t110\t894\t(784)\t(88)%\t1483\t1698\t(215)\t(13)%\nInterest expense\t(5993)\t(2286)\t(3707)\t162%\t(15100)\t(7388)\t(7712)\t104%\nOther expense net\t(1031)\t(943)\t(88)\t9%\t(1302)\t(6904)\t5602\t(81)%\nChange in fair value of derivatives\t0\t0\t0\t**\t(44348)\t0\t(44348)\t**\nTotal other expense net\t(6914)\t(2335)\t(4579)\t(196)%\t(59267)\t(12594)\t(46673)\t(371)%\n", "q10k_tbl_49": "\tThree Months Ended September 30\t\tChange in\t\tNine Months Ended September 30\t\tChange in\t\n\t2020\t2019\t$\t%\t2020\t2019\t$\t%\n\t(In thousands except percentages)\t\t\t\t\t\t\t\nIncome tax benefit (provision)\t(5483)\t(272)\t(5211)\t**\t12946\t(1211)\t14157\t**\n", "q10k_tbl_50": "\tNine Months Ended September 30\t\n\t2020\t2019\n\t(In thousands)\t\nNet cash provided by operating activities\t132154\t36796\nNet cash used in investing activities\t(11707)\t(7368)\nNet cash provided by financing activities\t245313\t67816\nEffect of exchange rate changes on cash\t(77)\t(435)\nNet increase in cash and cash equivalents\t365683\t96809\n", "q10k_tbl_51": "\tPayments Due by Period\t\t\t\t\n\tTotal\t2020 (remaining three months) (1)\t2021-2022\t2023-2024\tBeyond 2024\n\t(In thousands)\t\t\t\t\nNotes due 2024 principal and interest\t137112\t6020\t2535\t128557\t0\nNotes due 2025 principal and interest\t323602\t0\t1600\t1600\t320402\nTotal\t460714\t6020\t4135\t130157\t320402\n", "q10k_tbl_52": "\t\t\tIncorporation by Reference\t\t\t\nExhibit Number\tExhibit Description\tForm\tSEC File No.\tExhibit\tFiling Date\tFiled Herewith\n3.1\tAmended and Restated Certificate of Incorporation of Enphase Energy Inc.\t8-K\t001-35480\t3.1\t4/6/2012\t\n3.2\tCertificate of Amendment of the Amended and Restated Certificate of Incorporation of Enphase Energy Inc.\t10-Q\t001-35480\t3.1\t8/9/2017\t\n3.3\tCertificate of Amendment of the Amended and Restated Certificate of Incorporation of Enphase Energy Inc.\t10-Q\t001-35480\t2.1\t8/6/2018\t\n3.4\tCertificate of Amendment of the Amended and Restated Certificate of Incorporation of Enphase Energy Inc.\t8-K\t001-35480\t3.1\t5/27/2020\t\n3.5\tAmended and Restated Bylaws of Enphase Energy Inc.\tS-1/A\t333-174925\t3.5\t3/12/2012\t\n4.1\tSpecimen Common Stock Certificate of Enphase Energy Inc.\tS-1/A\t333-174925\t4.1\t3/12/2012\t\n4.2\tIndenture dated August 17 2018 between Enphase Energy Inc. and U.S. Bank National Association.\t8-K\t001-35480\t4.1\t8/17/2018\t\n4.3\tForm of 4.00% Convertible Senior Note due 2023 (included in Exhibit 4.2).\t8-K\t001-35480\t4.1\t8/17/2018\t\n4.4\tIndenture dated June 5 2019 between Enphase Energy Inc. and U.S. Bank National Association.\t8-K\t001-35480\t4.1\t6/5/2019\t\n4.5\tForm of 1.00% Convertible Senior Note due 2024 (included in Exhibit 4.4).\t8-K\t001-35480\t4.1\t6/5/2019\t\n4.6\tIndenture dated March 9 2020 between Enphase Energy Inc. and U.S. Bank National Association.\t8-K\t001-35480\t4.1\t3/9/2020\t\n4.7\tForm of 0.25% Convertible Senior Note due 2025 (included in Exhibit 4.1).\t8-K\t001-35480\t4.2\t3/9/2020\t\n10.1\tOffer Letter by and between Enphase Energy Inc. and Jamie Haenggi dated August 21 2020\t\t\t\t\tX\n31.1\tCertification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).\t\t\t\t\tX\n31.2\tCertification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).\t\t\t\t\tX\n32.1*\tCertification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.\t\t\t\t\tX\n101.INS\tXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.\t\t\t\t\t\n101.SCH\tXBRL Taxonomy Extension Schema Document.\t\t\t\t\tX\n101.CAL\tXBRL Taxonomy Extension Calculation Linkbase Document.\t\t\t\t\tX\n101.DEF\tXBRL Taxonomy Extension Definition Linkbase Document.\t\t\t\t\tX\n101.LAB\tXBRL Taxonomy Extension Label Linkbase Document.\t\t\t\t\tX\n101.PRE\tXBRL Taxonomy Extension Presentation Document.\t\t\t\t\tX\n104\tCover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).\t\t\t\t\tX\n"}{"bs": "q10k_tbl_2", "is": "q10k_tbl_3", "cf": "q10k_tbl_6"}None
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other
Item 6. Exhibits
Exhibits
EX-10.1
a2020q310-qexx101.htm
EX-31.1
a2020q310-qexx311.htm
EX-31.2
a2020q310-qexx312.htm
EX-32.1
a2020q310-qexx321.htm
Enphase Energy Earnings 2020-09-30
Balance Sheet
Income Statement
Cash Flow
Assets, Equity
Rev, G Profit, Net Income
Ops, Inv, Fin
Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-35480
Enphase Energy, Inc.
(Exact name of registrant as specified in its charter)
Delaware
20-4645388
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
47281 Bayside Parkway
Fremont, CA94538
(Address of principal executive offices, including zip code)
(877) 774-7000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.00001 par value per share
ENPH
Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an “emerging growth company.” See the definitions of “large accelerated filer,” “accelerated filer, ” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 20, 2020, there were 126,332,567 shares of the registrant’s common stock outstanding, $0.00001 par value per share.
ENPHASE ENERGY, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020
Accounts receivable, net of allowances of $348 and $564 at September 30, 2020 and December 31, 2019, respectively
122,386
145,413
Inventory
37,535
32,056
Prepaid expenses and other assets
28,521
26,079
Total current assets
850,234
499,657
Property and equipment, net
35,187
28,936
Operating lease, right of use asset, net
14,487
10,117
Intangible assets, net
26,839
30,579
Goodwill
24,783
24,783
Other assets
51,998
44,620
Deferred tax assets, net
88,812
74,531
Total assets
$
1,092,340
$
713,223
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
48,148
$
57,474
Accrued liabilities
52,203
47,092
Deferred revenues, current
41,738
81,783
Warranty obligations, current (includes $7,560 and $6,794 measured at fair value at September 30, 2020 and December 31, 2019, respectively)
10,760
10,078
Debt, current
103,670
2,884
Total current liabilities
256,519
199,311
Long-term liabilities:
Deferred revenues, noncurrent
115,757
100,204
Warranty obligations, noncurrent (includes $18,188 and $13,012 measured at fair value at September 30, 2020 and December 31, 2019, respectively)
33,019
27,020
Other liabilities
14,387
11,817
Debt, noncurrent
256,452
102,659
Total liabilities
676,134
441,011
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.00001 par value, 200,000 shares and 150,000 shares authorized; and 126,270 shares and 123,109 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
1
1
Additional paid-in capital
540,738
458,315
Accumulated deficit
(124,177
)
(185,181
)
Accumulated other comprehensive loss
(356
)
(923
)
Total stockholders’ equity
416,206
272,212
Total liabilities and stockholders’ equity
$
1,092,340
$
713,223
See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY
(In thousands) (Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Common stock and paid-in capital
Balance, beginning of period
$
534,868
$
449,803
$
458,316
$
353,336
Cumulative-effect adjustment to additional paid in capital(1)
—
—
—
27
Issuance of common stock from exercise of equity awards
541
303
4,708
2,925
Payment of withholding taxes related to net share settlement of equity awards
(9,069
)
(2,348
)
(52,042
)
(4,438
)
Conversion of convertible notes due 2023, net
—
—
—
58,857
Equity component of convertible notes
—
25
116,300
35,114
Cost of convertible notes hedge related to the convertible notes
—
—
(117,108
)
(36,313
)
Sale of warrants related to the convertible notes
—
—
96,351
29,818
Stock-based compensation expense and other
14,399
5,784
34,214
14,241
Balance, end of period
$
540,739
$
453,567
$
540,739
$
453,567
Accumulated deficit
Balance, beginning of period
$
(163,539
)
$
(332,946
)
$
(185,181
)
$
(346,302
)
Cumulative-effect adjustment to accumulated deficit(1) and other
—
—
—
(27
)
Net income
39,362
31,099
61,004
44,482
Balance, end of period
$
(124,177
)
$
(301,847
)
$
(124,177
)
$
(301,847
)
Accumulated other comprehensive income (loss)
Balance, beginning of period
$
(1,153
)
$
414
$
(923
)
$
742
Foreign currency translation adjustments
797
155
567
(173
)
Balance, end of period
$
(356
)
$
569
$
(356
)
$
569
Total stockholders' equity, ending balance
$
416,206
$
152,289
$
416,206
$
152,289
(1)
Includes the adoption of Accounting Standards Update (“ASU”) 2018-07, “Compensation - Stock Compensation: Improvements to Non-employee Share-Based Payment Accounting” on January 1, 2019.
See Notes to Condensed Consolidated Financial Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1.
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
Enphase Energy, Inc. (the “Company”) isa global energy technology company. The Company delivers smart, easy-to-use solutions that manage solar generation, storage and communication on one intelligent platform. The Company revolutionized the solar industry with its microinverter technology and produces a fully integrated solar-plus-storage solution.
Basis of Presentation and Consolidation
The accompanying condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States (“U.S.”), or GAAP. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Unaudited Interim Financial Information
These accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for interim financial reporting. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring items, considered necessary to present fairly the Company’s financial condition, results of operations, comprehensive income, stockholders’ equity and cash flows for the interim periods indicated. The results of operations for the three and nine months endedSeptember 30, 2020 are not necessarily indicative of the operating results for the full year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Significant estimates and assumptions reflected in the financial statements include revenue recognition, allowance for doubtful accounts, stock-based compensation, inventory valuation, accrued warranty obligations, fair value of debt derivatives, fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and property and equipment, incremental borrowing rate for right-of-use assets and lease liability, probable loss recovery of tariff refunds, legal contingencies, and tax valuation allowance. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ materially from management’s estimates using different assumptions or under different conditions.
The worldwide spread of the COVID-19 virus has resulted in a global slowdown of economic activity which decreased demand for a broad variety of goods and services, including from our customers, while also disrupting sales channels and marketing activities for an unknown period of time and may continue to create significant uncertainty in future operational and financial performance. The Company expects this to have negative impact on its sales and its results of operations. In preparing the Company’s condensed consolidated financial statements in accordance with GAAP, the Company is required to make estimates, assumptions and judgments that affect the amounts reported in its financial statements and the accompanying disclosures. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, judgments or revise the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Summary of Significant Accounting Policies
There have been no significant changes to the Company’s significant accounting policies in Note 2. “Summary of Significant Accounting Policies,” of the notes to consolidated financial statements included in Item 8 of the Company’s 2019 Annual Report on Form 10-K other than the inclusion of the commitments and contingencies policies below.
Commitments and Contingencies
In the normal course of business, the Company is subject to loss contingencies and loss recoveries, such as legal proceedings and claims arising out of its business as well as tariff refunds. An accrual for a loss contingency or loss recovery is recognized when it is probable and the amount of loss or recovery can be reasonably estimated.
See Note 9. “Commitments and Contingencies” below for additional information.
Recently Issued Accounting Pronouncements Not Yet Effective
In August 2020, the FASB issued Account Standard Update (“ASU”) 2020-06, “Debt - Debt with Conversion and Other Options (subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (subtopic 815-40),” which reduces the number of accounting models in ASC 470-20 that require separate accounting for embedded conversion features. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the effective interest rate of convertible debt instruments will be closer to the coupon interest rate. Further, the diluted net income per share calculation for convertible instruments will require the Company to use the if-converted method. The treasury stock method should no longer be used to calculate diluted net income per share for convertible instruments. The amendment will be effective for the Company beginning after December 15, 2021 and early adoption is permitted. The Company is evaluating the accounting, transition and disclosure requirements of the standard.
Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” to reduce diversity in practice in accounting for the costs of implementing cloud computing arrangements that are service contracts. ASU 2018-15 allows entities to apply the guidance in the ASC 350-40, “Intangibles–Goodwill and Other–Internal-Use Software,” to determine which implementation costs are eligible to be capitalized as assets in a cloud computing arrangement that is considered a service contract. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively and are required to make certain disclosures in the interim and annual period of adoption. The Company adopted the new standard effective January 1, 2020 on a prospective basis and the adoption of this guidance did not have a material impact on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with a current expected credit loss (CECL) model which will result in earlier recognition of credit losses. On January 1, 2020, the Company on a prospective basis adopted Topic 326, the measurement of expected credit losses under the CECL model is applicable to financial assets measured at amortized cost, including accounts receivable. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2.
REVENUE RECOGNITION
Disaggregated Revenue
The Company has one business activity, which is the design, manufacture and sale of solutions for the solar photovoltaic (“PV”) industry. Disaggregated revenue by primary geographical market and timing of revenue recognition for the Company’s single product line are as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
(In thousands)
Primary geographical markets:
United States
$
139,924
$
150,686
$
420,315
$
328,281
International
38,579
29,371
89,271
86,020
Total
$
178,503
$
180,057
$
509,586
$
414,301
Timing of revenue recognition:
Products delivered at a point in time
$
166,729
$
170,152
$
475,707
$
384,888
Products and services delivered over time
11,774
9,905
33,879
29,413
Total
$
178,503
$
180,057
$
509,586
$
414,301
Contract Balances
Receivables, and contract assets and contract liabilities from contracts with customers are as follows:
September 30, 2020
December 31, 2019
(In thousands)
Receivables
$
122,386
$
145,413
Short-term contract assets (Prepaid expenses and other assets)
The Company receives payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets include deferred product costs and commissions associated with the deferred revenue and will be amortized along with the associated revenue. The Company had no asset impairment charges related to contract assets in the three and nine months endedSeptember 30, 2020.
Significant changes in the balances of contract assets (prepaid expenses and other assets) during the period are as follows (in thousands):
Contract Assets
Balance on December 31, 2019
$
57,142
Amount recognized
(12,942
)
Increase
21,565
Balance as of September 30, 2020
$
65,765
Contract liabilities are recorded as deferred revenue on the accompanying condensed consolidated balance sheets and include payments received in advance of performance obligations under the contract and are realized when the associated revenue is recognized under the contract.
Significant changes in the balances of contract liabilities (deferred revenues) during the period are as follows (in thousands):
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Contract Liabilities
Balance on December 31, 2019
$
181,987
Revenue recognized
(78,614
)
Increase due to billings
54,122
Balance as of September 30, 2020
$
157,495
Remaining Performance Obligations
Estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period are as follows:
September 30, 2020
(In thousands)
Fiscal year:
2020 (remaining three months)
$
11,888
2021
39,344
2022
34,296
2023
28,483
2024
23,259
Thereafter
20,225
Total
$
157,495
3.
OTHER FINANCIAL INFORMATION
Accounts Receivable, Net
The Company receives payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional.
Accounts receivable, net consist of the following:
The Company maintains allowances for doubtful accounts for uncollectible accounts receivable. Management estimates anticipated losses from doubtful accounts based on financial health of customers, days past due, collection history and existing economic conditions. The following table sets forth activities in the allowance for doubtful accounts for the periods indicated.
Three Months Ended
Nine Months Ended
September 30, 2020
(In thousands)
Balance, at beginning of the period
$
296
$
564
Net charges to expenses
70
254
Write-offs, net of recoveries
(18
)
(470
)
Balance, at end of the period
$
348
$
348
Inventory
Inventory consist of the following:
September 30, 2020
December 31, 2019
(In thousands)
Raw materials
$
7,148
$
4,197
Finished goods
30,387
27,859
Total inventory
$
37,535
$
32,056
Accrued Liabilities
Accrued liabilities consist of the following:
September 30, 2020
December 31, 2019
(In thousands)
Salaries, commissions, incentive compensation and benefits
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4.
GOODWILL AND INTANGIBLE ASSETS
The Company’s goodwill and purchased intangible assets as of September 30, 2020 and December 31, 2019 are as follows:
September 30, 2020
December 31, 2019
Gross
Accumulated Amortization
Net
Gross
Accumulated Amortization
Net
(In thousands)
Goodwill
$
24,783
$
—
$
24,783
$
24,783
$
—
$
24,783
Intangible assets:
Other indefinite-lived intangibles
$
286
$
—
$
286
$
286
$
—
$
286
Intangible assets with finite lives:
Developed technology
13,100
(4,730
)
8,370
13,100
(3,093
)
10,007
Customer relationships
23,100
(4,917
)
18,183
23,100
(2,814
)
20,286
Total purchased intangible assets
$
36,486
$
(9,647
)
$
26,839
$
36,486
$
(5,907
)
$
30,579
Amortization expense related to finite-lived intangible assets are as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
(In thousands)
Developed technology, and patents and licensed technology
$
545
$
546
$
1,637
$
1,638
Customer relationships
702
636
2,103
1,907
Total amortization expense
$
1,247
$
1,182
$
3,740
$
3,545
Amortization of developed technology, patents and licensed technology is recorded to sales and marketing expense. The developed technology acquired from the Company’s acquisition of SunPower Corporation’s (“SunPower”) microinverter business in August 2018 was embedded in the microinverters that SunPower sold to its customers. The Company does not actively use the developed technology acquired from SunPower and holds the developed technology to prevent others from using it. Accordingly, the Company accounts for the developed technology as a defensive intangible asset and amortizes the associated value over a period of six years from the date of acquisition.
The master supply agreement (“MSA”) entered into with SunPower in August 2018 provides the Company with the exclusive right to supply SunPower with module level power electronics for a period of five years, with options for renewals. The exclusivity arrangement extends throughout the term of the MSA, which comprises all of the expected cash flows from the customer relationship intangible asset, and was a condition to, and was an essential part of the acquisition of SunPower’s microinverter business by the Company. As the fair value ascribed to the customer relationship intangible asset represents payments to a customer, the Company amortizes the value of the customer relationship intangible asset as a reduction to revenue using a pattern of economic benefit method over a useful life of nine years.
The Company’s warranty activities were as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
(In thousands)
Warranty obligations, beginning of period
$
37,907
$
32,994
$
37,098
$
31,294
Accruals for warranties issued during period
1,939
1,571
4,229
3,741
Changes in estimates
3,869
3,884
7,294
5,387
Settlements
(3,274
)
(3,780
)
(9,122
)
(8,282
)
Increase due to accretion expense
832
562
2,410
1,663
Other
2,506
(607
)
1,870
821
Warranty obligations, end of period
43,779
34,624
43,779
34,624
Less: current portion
(10,760
)
(8,757
)
(10,760
)
(8,757
)
Noncurrent
$
33,019
$
25,867
$
33,019
$
25,867
Changes in Estimates
For the three and nine months endedSeptember 30, 2020, the Company recorded additional warranty expense of $3.9 million and $7.3 million, respectively, based on continuing analysis of field performance data and diagnostic root-cause failure analysis primarily relating to its prior generation products.
6.
FAIR VALUE MEASUREMENTS
The accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
•
Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of such assets or liabilities do not entail a significant degree of judgment.
•
Level 2—Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
•
Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Level 1. The Company considers all highly liquid investments, such as certificates of deposit and money market instruments with maturities of three months or less at the time of acquisition to be cash equivalents. For all periods presented, its cash balances consist of amounts held in non-interest-bearing and interest-bearing deposits and money market accounts and are within Level 1 of the fair value hierarchy because they are valued using quoted market prices for identical instruments in active markets. As of September 30, 2020, cash and cash equivalents balance includes money market funds of $651.6 million.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Level 2.
Convertible Notes due 2025 Derivatives
On March 9, 2020, the Company issued $320 million aggregate principal amount of 0.25% convertible senior notes due 2025 (the “Notes due 2025”). Concurrently with the issuance of Notes due 2025, the Company entered into privately-negotiated convertible note hedge and warrant transactions which in combination are intended to reduce the potential dilution from the conversion of the Notes due 2025. On May 20, 2020, at the Company’s annual meeting of stockholders, the stockholders approved an amendment to its certificate of incorporation to increase the number of authorized shares of the Company’s common stock. As a result, the Company satisfied the share reservation condition (as defined in the relevant indenture associated with the Notes due 2025). The Company will now be able to settle the Notes due 2025, convertible notes hedge and warrants through payment or delivery, as the case may be, of cash, shares of its common stock or a combination thereof, at the Company’s election. Accordingly, on May 20, 2020, the embedded derivative liability, convertible notes hedge and warrants liability were remeasured at a fair value of $116.3 million, $117.1 million and $96.4 million, respectively, and were then reclassified to additional paid-in-capital in the condensed consolidated balance sheet in the second quarter of 2020 and are no longer remeasured as long as they continue to meet the conditions for equity classification. See Note 8. “Debt” for additional information related to these transactions.
The fair value of the Convertible notes embedded derivative was estimated using Binomial Lattice model and the fair value of Convertible notes hedge and Warrants liability was estimated using Black-Scholes-Merton model. The significant observable inputs, either directly or indirectly, and assumptions used in the models to calculate the fair value of the derivatives include the Company’s common stock price, exercise price of the derivatives, risk-free interest rate, volatility, annual coupon rate and remaining contractual term.
Notes due 2025andNotes due 2024. The Company carries the Notes due 2025andNotes due 2024(as defined below) at face value less unamortized discount and issuance costs on its condensed consolidated balance sheets. The fair value of the Notes due 2025 and Notes due 2024 of $506.9 million and $408.8 million, respectively, was determined based on the closing trading prices per $100 principal amount as of the last day of trading for the period. The Company considers the fair value of the Notes due 2025 and Notes due 2024 to be a Level 2 measurement as they are not actively traded.
Level 3.
Warranty Obligations.
The following table presents the Company’s warranty obligation that were measured at fair value on a recurring basis and its categorization within the fair value hierarchy.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Fair Value Option for Warranty Obligations Related to Microinverters Sold Since January 1, 2014
The Company estimates the fair value of warranty obligations by calculating the warranty obligations in the same manner as for sales prior to January 1, 2014 and applying an expected present value technique to that result. The expected present value technique, an income approach, converts future amounts into a single current discounted amount. In addition to the key estimates of failure rates, claim rates and replacement costs, the Company used certain Level 3 inputs which are unobservable and significant to the overall fair value measurement. Such additional assumptions included a discount rate based on the Company’s credit-adjusted risk-free rate and compensation comprised of a profit element and risk premium required of a market participant to assume the obligation.
The following table provides information regarding changes in nonfinancial liabilities related to the Company’s warranty obligations measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the periods indicated.