Good day, ladies and gentlemen, and welcome to the Enphase Energy Fourth Quarter 2012 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we'll have a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, today's conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. David Niederman, Investor relations. Sir, you may begin.

Good afternoon and thank you for joining us on today's conference call to discuss Enphase Energy's fiscal fourth quarter and full-year 2012 results. This call is also being broadcast live over the web and can be accessed in the Investor Relations section of Enphase Energy's website at www.enphaseenergy.com. With me on today's call are Paul Nahi, Enphase Energy's Chief Executive Officer; and Kris Sennesael, Chief Financial Officer. After the market closed today, Enphase issued a press release announcing the results for its fiscal fourth quarter and year ended December 31, 2012. If you would like a copy of the release, you can access it online at the Company's website. During the course of this conference call, Enphase’s management will make forward-looking statements, including but not limited to statements related to Enphase Energy's financial performance, market demands for its micro inverters, advantages of its technology, market trends, and future financial performance. These forward-looking statements are based on the Company's current expectations and inherently involve significant risks and uncertainties. Enphase Energy's actual results and the timing events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties. Factors that could cause results to be different from these statements include factors that Company describes in this press release of today, especially under the section entitled Forward-Looking Statements' as well as those detailed in the section entitled “Risk Factors” of this Company's reports on form 10-Q and yet to be filed 10-K. Copies of these documents may be obtained from the SEC or by visiting the Investor Relations section of our website. Enphase Energy cautions you not to place 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 these expectations. Please note that the financial measures that we use on this call are expressed on a non-GAAP basis unless otherwise noted, and has been adjusted to exclude certain charges. We provide a reconciliation to these non-GAAP financial measures to GAAP financial measures in our earnings release posted today which can also be found in the Investor Relations section of our website. Now, I'd like to introduce Paul Nahi, Chief Executive Officer of Enphase Energy. Paul?

Thanks David, and welcome to everyone joining us for our fourth quarter and full-year 2012 earnings call. I'll give a general overview of our Q4 performance, Kris will take us through the financials, and then we'll go to the Q&A. But first, I'm going to start by reflecting on 2012, our first year as a public company. In 2012, Enphase made substantial progress as we executed on our strategy, achieving strong topline growth along with increasing gross margins. We closed 2012 with $217 million in revenue, a 45% increase year-over-year in what has been a challenging environment for our sector. During the year, we completed the successful transition to our third-generation products, continued to gain market share in the U.S. residential and commercial markets, and established a European presence selling into France, Italy, the Benelux region, and the U.K. We're pleased with the market share gains in those geographies during the last 12 months and the growing acceptance of our microinverter technology globally. Based on our analysis of market research data, we believe we ended the year with the number one market share position in our core U.S. residential market. We estimate to have had in excess of 35% market share in 2012 and just over 45% exiting Q4. This underscores our major success in both the traditional cash market as well as the fast-growing third-party financed market, where we established strong partnerships with several key players in this space. As a result, we sold over 1.5 million microinverters in 2012 compared to 1 million in 2011 and passed the 3 million units sold milestone during the fourth quarter. We continue to execute very well on our gross margin expansion strategy, improving gross margins from approximately 10% in 2010, to 20% in 2011, to over 25% in 2012, while most…

Thank you, Paul. First, I will start with providing some more detail on the financial results for the fourth quarter of 2012, and then I will turn to the business outlook. As a reminder, the financial measures that I'm going to provide are on a non-GAAP basis unless otherwise noted. As Paul mentioned, total revenue for the fourth quarter was $57.6 million, slightly above the high end of our revenue guidance. This is an increase of 1% year-over-year, but if we normalize for the 1603 related revenue at the end of 2011, it is up 14% year-over-year. On a sequential basis, revenue was down 5% compared to our record revenue level of $60.8 million in the third quarter of 2012, mainly driven by a reduction in revenue in Canada and Europe as a result of the (indiscernible) rate changes in those areas, and a reduction of inventory levels in the channel in the U.S. as distributors were reducing inventory levels in front of a seasonally softer first quarter. During the fourth quarter, we shipped approximately 384,000 microinverters or approximately 83 megawatts. Also in the fourth quarter, Enphase set a new gross margin record of 28%, an improvement of 510 basis points compared to the 22.9% in the fourth quarter of 2011 and an increase of 110 basis points compared to the 26.9% in the third quarter of 2012. This improvement was driven by our ongoing cost reduction efforts, combined with a relatively stable pricing environment for Enphase microinverter systems. Operating expenses in the fourth quarter were $20.3 million, with R&D at $7.8 million, sales and marketing at $7 million, and G&A at $5.5 million. These non-GAAP operating expenses did not include $1.5 million in stock-based compensation expenses and $400,000 in severance costs. During the fourth quarter, we made some changes…

(Operator Instructions) Our first question comes from Vishal Shah from Deutsche Bank. Your line is open.

This is [Susie Min] (ph) calling on behalf of Vishal Shah. Thanks for taking my question. I wanted to get a better sense of the cadence of revenues. I know you said Q1 will be seasonally weak, but would we see kind of a pickup in Q2 going through Q4 or would it be very back ended for the year, and then I have a follow-up question?

The normal seasonal trend is Q1 is a soft quarter due to weather and other seasonal trends, and then if we just talk about normal seasonality, we see a strong sequential growth in second quarter followed by further growth into the third quarter, and then typically there is also growth in the fourth quarter, although it slows down a little bit as the channel is preparing themselves for a softer first quarter.

Great, thank you. And how should we think about your target for profitability, as you said you're improving margins and that's been great as well as the revenue pickup in the next couple of quarters? Is that something we can expect in the second half of 2013 or is 2014 more of a target?

We do not provide full-year guidance, but we just provide guidance one quarter at a time, but as you can see from the numbers, we definitely are making strong progress towards profitability and sustainable positive cash flow. So, we are very pleased with the progress that we make, and we do have line of sight to profitability and positive cash flows without giving a specific timing on that.

Sorry, may I ask one more question? Just on the OpEx, I mean, you guys did a great job of reducing costs. Is that something that we can expect to stay at those levels or should we just mimic kind of growing but slower than expected revenue growth?

Yes, so for the first quarter, we are very clear in terms of our guidance. We expect Q1 to be approximately flat compared to the fourth quarter, but then also looking forward for the rest of the year, it's definitely our target to keep operating expenses as flat as possible.

Our next question comes from Pavel Molchanov from Raymond James. Your line is open.

Hey guys, thanks for taking the question. I noticed that the blended ASP was almost $0.70 this quarter, up about $0.04, a pretty big increase from Q3. Anything in particular that accounts for that?

The blended ASP for Enphase is a little bit challenging to calculate, in part because we include cabling, the communications unit which we call Envoy, as well as different product mixes. So, I wouldn't read much into that number. What I would say is that we have been very successful in reducing prices in 2012, and we expect to have built-in further reduction in prices in 2013 for the full year.

So, I guess since you're not giving guidance for the full year in this current quarter, what sequential ASP decline should we expect?

We're not guiding specifically to ASP. What I would say is that, when we do an ASP reduction, we will certainly let you know, but for the time being, we have not announced anything in terms of price reduction.

(Operator Instructions) Our next question comes from Scott Reynolds from Jefferies. Your line is open. Scott Reynolds – Jefferies: Thanks for taking my questions and congratulations on a good quarter. I don't get to say that very often in solar land. So, I was wondering overall in 2013, does the Company have some type of expectations that they are looking at for growth in the key markets that they address, and potentially how we should think about overall market shares trending for Enphase in 2013?

Sure. So, as we mentioned, we exited the year with tremendous market share in the U.S. In fact, I don't really know of any other solar company that has had this kind of market share. However, I think what we're seeing is a very clear and undisputable trend towards microinverters on the global rooftop market, and as a result, I think what we're going to see is an increased utilization of microinverters across the globe. We clearly lead this space, and I fully expect us to maintain and increase our lead in the markets that we're in and the markets that we're going to be in.

And maybe I would like to add there that looking into 2013, we -- and industry analysts, they expect U.S. residential market to grow 20% to 30% on a year-over-year basis. Obviously, there is going to be some price erosion that will partially offset that growth, but we will definitely continue to push hard to grow our market share as we have been able to do that in the past. In addition to that, we are continuing with our geographical expansion and continue to grow our share outside of the U.S. in Canada and Europe. Those markets nowadays are somewhat challenged, so it's a little bit unpredictable what the growth rates are going to be in those markets, but we definitely continue to expand our geographical reach in those markets.

Thank you. Our next question comes from Sanjay Shrestha. Your line is open.

This is [Jacqueline] (ph) on behalf of Sanjay. I was wondering, given the traction you've had with your microinverter product, could you talk about the overall competitive dynamics on the product front, and what are you seeing from your competitors?

Sure. Well, we've had competition for a while right now, although it hasn't had a material effect on our sales. This has been primarily from smaller companies. For the first time, we are seeing competition from some of the larger companies. In fact, one of our larger competitors is investing very heavily in sales, in marketing, in outreach, both domestically and internationally for their new microinverter product, and it hasn't had any material effect on our sales. What I think we're seeing quite frankly is the challenge associated with the development of a microinverter. It's a very sophisticated technology. I think while many of our competitors are trying to develop one, I think the challenges associated with the development of a reliable product that can be introduced on a global scale has proved to be, I think, a more significant problem than they anticipated.

Great. Thank you. And with the improving outlook for various financing structures, especially within the residential market, are you beginning to see any meaningful uptick in demand from this segment?

Would that be demand from the finance segment?

From the residential market.

We are. And I think you're correct in assuming that some of that growth, if not much of that growth is being driven by financing. As Kris had mentioned, we are seeing or we are anticipating a 20% to 30% increase in the U.S. market this year. I think a large part of that will be driven by financing, and financing itself I think is also changing in its very nature as well. So we're going to see multiple types of financing in addition to the traditional cash sales.

Great. Thank you for the color.

Our next question is a follow-up from Scott Reynolds from Jefferies. Your line is open. Scott Reynolds – Jefferies: Thanks. Just a follow-up to Susie's question. What do you guys see for overall breakeven levels for revenue? I know it's lumpy quarter-to-quarter on your gross margin side, but how should we think about that?

Our breakeven model calls for revenue at approximately $80 million. We have a gross margin of 30% and obviously OpEx stand at 30%, you get to a breakeven from a non-GAAP operating income point of view. Scott Reynolds – Jefferies: Alright, thank you.

Thank you. Our next question comes from Edwin Mok from Needham & Company. Your line is open. Edwin Mok - Needham & Company: Thanks for taking my question. I remember last quarter you guys talked about channel inventory. Sorry I called in late, you might have mentioned that, where is channel inventory right now, and how do you guys see that progress throughout the year?

So, it's very typical for us to see channel inventories drop at the end of Q4, as the channel prepares for a slower quarter in Q1. What we really like to see is a slow build-up in that channel from Q1 through the rest of the year, Q1, Q2, and Q3. We are on track to do that in a very modest way. So, I don't think – there is nothing unusual happening right now. It feels like a normal trend. Edwin Mok - Needham & Company: Okay, that's helpful. And then, just going back to gross margin, I think previously you guys talked about transition to the third-generation product which will help gross margin rate because of improved design. I was wondering can you give us some yardstick in terms of when do you think you can say get to 50% of your product being third-generation, you know some kind of metric that you think about how that could help gross margin?

So, the third-generation product is a product that we are currently shipping and we're almost exclusively third-generation product right now. We have announced that we will be shipping a fourth-generation product later on this year. Our fifth-generation product is up and running in the lab as well, but the fourth-generation product, when it's introduced, will actually be introduced in parallel with our existing third-generation product, and we really can't yet speak to when the transition fully to the fourth-generation product will occur. Edwin Mok - Needham & Company: Does that transition require a lot of requalification on the customer side or is it not that hard to make a transition from one generation to the next?

Well, our experience so far, having done this three times, has been that with each generation of products, we've been able to increase quality, increase the feature set, decrease the price, and decrease the cost. So it's been very, very readily received by all of our customers. So, I don't anticipate this transition to be any different. Edwin Mok - Needham & Company: Great. That’s all I have, thank you.

Thank you. I show no further questions at this time, and would like to turn the conference back to Mr. Paul Nahi for closing remarks.

Thank you. So, 2012 was a great year for Enphase. Looking forward to 2013, I'm excited about the opportunity to continue driving topline growth and market share gains in our existing markets while continuing our geographical and market segment expansion. In addition, we'll continue our relentless development of next-generation technologies to further increase performance and drive down costs. This, in combination with a focus on balanced growth, will drive the leverage in the model towards healthy profit levels and positive cash flow. Thank you everyone for joining us today, and we look forward to speaking with you again next quarter.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may all disconnect at this time.