Good day, ladies and gentlemen, and welcome to the Enphase Energy’s Third Quarter 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time (Operator Instructions). As a reminder this conference may be recorded. I would now like to turn the conference over to our host of today's call, Ms. Christina Carrabino. You may begin.

Thank you. Good afternoon and thank you for joining us on today’s conference call to discuss Enphase Energy’s third quarter results for the period ended September 30, 2014. This call is also being broadcast live over the Web, and can be accessed in the Investors section of Enphase Energy’s Web site at www.enphase.com. 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 third quarter ended September 30, 2014. We are providing an accompanying presentation with our earnings call that you can access in the Investors section of our Company’s Web site. During the course of this conference call, Enphase management will make forward-looking statements, including, but not limited to, statements related to Enphase Energy’s financial performance, market demands for its microinverters, advantages of its technology, market trends, future products 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 of 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 the Company describes in its press release of today, especially under the section entitled Forward-Looking Statements, as well as those detailed in the section entitled Risk Factors of the Company’s report on Form 10-Q for the quarter ended June 30, 2014. Additional information will also be set forth in those sections in Enphase Energy’s quarterly report on Form 10-Q for the quarter ended September 30, 2014 which will be filed with the SEC in the fourth quarter of 2014. Copies of these documents may be obtained from the SEC or by visiting the Investors section of the Company’s Web site. 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 its expectations. Also, please note that certain financial measures used on this call are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. The Company has provided reconciliations 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 Web site. Now, I’d like to introduce Paul Nahi, Chief Executive Officer of Enphase Energy.

Thank you. Good afternoon and thank you for joining us on today’s conference call to discuss Enphase Energy’s third quarter results for the period ended September 30, 2014. This call is also being broadcast live over the Web, and can be accessed in the Investors section of Enphase Energy’s Web site at www.enphase.com. 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 third quarter ended September 30, 2014. We are providing an accompanying presentation with our earnings call that you can access in the Investors section of our Company’s Web site. During the course of this conference call, Enphase management will make forward-looking statements, including, but not limited to, statements related to Enphase Energy’s financial performance, market demands for its microinverters, advantages of its technology, market trends, future products 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 of 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 the Company describes in its press release of today, especially under the section entitled Forward-Looking Statements, as well as those detailed in the section entitled Risk Factors of the Company’s report on Form 10-Q for the quarter ended June 30, 2014. Additional information will also be set forth in those sections in Enphase Energy’s quarterly report on Form 10-Q for the quarter ended September 30, 2014 which will be filed with the SEC in the fourth quarter of 2014. Copies of these documents may be obtained from the SEC or by visiting the Investors section of the Company’s Web site. 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 its expectations. Also, please note that certain financial measures used on this call are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. The Company has provided reconciliations 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 Web site. Now, I’d like to introduce Paul Nahi, Chief Executive Officer of Enphase Energy.

Good afternoon and thanks for joining us today to discuss our third quarter 2014 financial results. As usual I’ll start with my opening remarks and touch on some key highlights and then Kris will take us through the third quarter financials and the outlook for the fourth quarter. After that, we will open up the call for Q&A. We are extremely pleased with our financial results for the third quarter of 2014. We reported record financial results including revenue of $99.1 million, an increase of 60% year-over-year and up 21% sequentially. We also reported gross margin of 33% and impressive bottom-line results including positive operating income and net income and non-GAAP diluted earnings of $0.08 per share. Kris will review the fine points regarding our third quarter financials but I will stay that I’m thrilled with our record breaking results. These results reflect the increase in global demand for Enphase microinverter systems and our ability to execute on our balanced profitable growth strategy. Our overall strong business momentum included the continued surging demand in our core U.S. residential market, as well as market share gains in the residential and commercial solar markets in the UK and Australia. During the third quarter of 2014, we shipped the 170 megawatts AC an increase of 81% year-over-year. Since inception, we shipped over 1.3 gigawatts of Enphase microinverter systems. We are the highest volume inverter company in the world with more than 6.4 million units shipped. Enphase Systems have produced over 2.4 terawatt-hours of clean energy. The global demand for solar continues to grow rapidly according to the International Energy Agency or IEA the world added more solar PV capacity during 2013 than in the previous four decades. The total global installed capacity was over 150 gigawatts in early 2014. The IEA envisions solar…

Thank you, Paul. And I fully agree, the third quarter financial results are a remarkable achievement and prove that our business model works very well. I am proud, happy and excited to be part of the Enphase family that is able to deliver those strong financial results and we’re all committed to continuing to drive further improvements. Let’s first get into some of the details related to our financial results for the third quarter of 2014 and as a reminder the financial measures that I am going to provide are on a non-GAAP basis, unless otherwise noted. During the third quarter, we saw continuous strong growth in the overall solar market, as well as an increase in demand for Enphase microinverter systems, resulting in the acceleration of our revenue growth. Total revenue for the third quarter of 2014 was $99.1 million, an all-time revenue record. With $99.1 million revenue, we exceeded our revenue outlook of $93 million to $98 million that we provided last quarter. Revenue for the third quarter of 2014 increased 60% compared to the third quarter of 2013 and was up 21% compared to the second quarter of 2014. As Paul mentioned, the large year-over-year and sequential revenue growth was driven by strong overall demand for solar in our core U.S. residential markets, as well as the growing demand for Enphase microinverter systems and increased contributions from the UK and Australian markets. We shipped 170 megawatts AC or 195 megawatt DC during the third quarter of 2014, an increase of 81% on a year-over-year basis. The 170 megawatts shipped represents approximately 760,000 microinverters, of which, 90% was our fourth-generation microinverter systems. We also continue to see a stronger adoption of higher power panels that are being paired with our higher power microinverters. As a result the Enphase…

and:

Thank you. (Operator Instructions) And our first question comes from Phil Shen. Your line is open.

Although you have guidance for 2015 perhaps you can provide us your view of 2015 and what do you see in Q1 so far and what do you expect as we go through the year? ROTH Capital Partners: Although you have guidance for 2015 perhaps you can provide us your view of 2015 and what do you see in Q1 so far and what do you expect as we go through the year?

So Phil we only provide guidance one quarter at a time, so I’m not going to provide any specific guidance for 2015. In general of course we do expect that the normal seasonality that we have seen in the last couple of years will continue during 2015 meaning that Q1 is typically a seasonally down quarter, followed by a strong sequential growth in the second quarter, more growth in the third quarter and then kind of a flattish quarter going into the fourth quarter. So, we definitely expect seasonality to be the same in 2015 as 2014.

As for my follow-up, can you give us a sense for what your expectations are for the ramp of the commercial product in 2015 and perhaps you can speak in terms of megawatts or unit volumes or mix? ROTH Capital Partners: As for my follow-up, can you give us a sense for what your expectations are for the ramp of the commercial product in 2015 and perhaps you can speak in terms of megawatts or unit volumes or mix?

I can’t really speak in terms of megawatts or unit volumes what I can say is this that, in the small commercial market we already have close to a 38% market share. I think our commercial customers have been waiting for this product. We finally have for the first time a purpose-built commercial inverter, so I’m very optimistic about its reception and its uptake, but I’m going to refrain from giving any specific megawatt data.

Our next question comes from Josh Baribeau of Canaccord. Your line is open.

I was wondering if you could just help us out with some of the moving pieces in the gross margin guidance with revenues basically flat year-on-year at the midpoint down about 100 bps, just wondering if you could like I said kind of provide a little bit more via moving pieces there? Canaccord Genuity: I was wondering if you could just help us out with some of the moving pieces in the gross margin guidance with revenues basically flat year-on-year at the midpoint down about 100 bps, just wondering if you could like I said kind of provide a little bit more via moving pieces there?

Yes, Josh let me start with just reiterating that I’m very happy with the progress we’ve been making on gross margins over the last couple of years moving margin from 10% to 20% to 30% now two quarters in a row being at 33%, I’m really happy with the progress that we’ve been able to make there. You know that our long-term target model is 35% to 40% and we are committed and confident that we will make and continue to make progress towards that long-term target model. Having said that, the progression between today and hitting our long-term target model might not be linear, the road might be bumpy and so there might be quarter-to-quarter certain fluctuations there. The main reason for that is when you look at gross margin of course there is two sides to the equation, one of them is pricing the other one is product cost. On pricing, we definitely see some increased pricing pressure in the market there and of course we’re going to be smart about that, but we also if pricing pressure is becoming too high we would definitely will continue to take pricing actions. On the other hand, we’ve product cost reductions, we will continue to innovate and to innovation we’ll continue to add features and functions to our product while at the same time continuing to drive down the product cost. The key here is that the timing of the pricing actions and the timing of the product cost reductions of course does not necessarily fall in the same quarter and as a result of that the road going forward might be a little bit bumpy.

And then can you just also address some of the issues of potential customer concentration, as well as the effect of them potentially using other technologies, as well as the microinverters and just your overall share expectations? Canaccord Genuity: And then can you just also address some of the issues of potential customer concentration, as well as the effect of them potentially using other technologies, as well as the microinverters and just your overall share expectations?

Sure. So, clearly there are some customers who -- we’ve many customers who are 100% Enphase some of these Enphase with other products and it would not be surprising to us and we’ve I think signaled for quite sometimes that one of our biggest customers has indicated that they wanted to bring on a second source. So there is nothing here that’s either new or surprising. I think what’s very important for Enphase is that, when we look at the universal customers that we’re addressing, we’re increasing the number of customers that we’ve everyday both U.S. domestically as well as internationally and now with the advent of the commercial product we’re addressing yet an entirely new customer segment. So, I think that if we look at customer concentration it’s actually going down considerably from Q2 to Q3 and we expect that trend overtime to continue.

Okay, and then lastly for me, can you help us out with maybe sort of which directionality of how you think the Gen 5 residential inverter or, as well as the margin profile of Gen 5 as well as some of the commercial products that’s you’ve introduced that might look relative to corporate average? Canaccord Genuity: Okay, and then lastly for me, can you help us out with maybe sort of which directionality of how you think the Gen 5 residential inverter or, as well as the margin profile of Gen 5 as well as some of the commercial products that’s you’ve introduced that might look relative to corporate average?

Sure, so what we’ve said in the past and what continues to be true is that with every subsequent generation of microinverter we see a cost reduction and that’s during the course of the development and of course to the life of that microinverter we don’t see that trend changing anytime soon, that’s really part of the high-tech story and this is very similar to what Kris was saying that we fully expect with every generation of product we’re going to introduce new features and new functions such as bidirectional power flow, such as reactive power and we’ll see cost reduction as well and again overtime we expect that to be accretive to gross margin.

And our next question comes from Colin Rusch of Northland. Colin your line is open.

Guys can you just give us an update on two things, one what percentage of your sales came from the Gen 4 products and then also just a clarification on the price pressure, are you seeing that from microinverters or are you seeing that from straining orders or a combination of both? Northland Capital Markets: Guys can you just give us an update on two things, one what percentage of your sales came from the Gen 4 products and then also just a clarification on the price pressure, are you seeing that from microinverters or are you seeing that from straining orders or a combination of both?

So Gen 4 was approximately 90% of our total [Audio Gap] converted now and I do expect in the fourth quarter to have close to 100% of our revenue coming from the 4 generation. Within the 4 generation, we have two products 215 and 250. The 250 was approximately 25% of that 4 generation mix.

And in reference to the second part of your question about sort of where the competitive pricing pressure is coming from, we still haven’t seen a viable microinverter competitor. We also know that there have been several variance of microinverters from both large and small companies, but none of yet posed a very significant competitive challenge. However, there are a lot of other products string inverters that are competing and several of them are competing by lowering their price that will pose some competition in the future, but it’s primarily from standard string inverters.

And then just a follow-up in terms of the percentage of your sales that your fine sizing ways to the cabling products as well as Envoy, can you just walk us through any changes there and then kind of an absolute percentage in terms of the cabling solution, was there some sort of anomaly this quarter in terms of the cabling session given the 6% price decline and I think there is a lot of folks that who want to understand the nitty-gritty on where those price declines came and all of that contributed to that? Northland Capital Markets: And then just a follow-up in terms of the percentage of your sales that your fine sizing ways to the cabling products as well as Envoy, can you just walk us through any changes there and then kind of an absolute percentage in terms of the cabling solution, was there some sort of anomaly this quarter in terms of the cabling session given the 6% price decline and I think there is a lot of folks that who want to understand the nitty-gritty on where those price declines came and all of that contributed to that?

No, I think the third quarter was pretty much in line with previous quarter in terms of inverters and cables and Envoys in terms of the mix there.

Our next question comes from Edwin Mok of Needham & Company. Your line is open.

First question I have is in terms of channel additions in the inventory have you seen any change with strong demand, are you seeing through tying up in the channel or do you think that channel comp within the inventory? Needham & Company: First question I have is in terms of channel additions in the inventory have you seen any change with strong demand, are you seeing through tying up in the channel or do you think that channel comp within the inventory?

So as you know Edwin, we monitor the channels very-very tightly by skew and we do this all over the world. I would say in general we have kept the channels fairly stable. I don’t think you would see a significant from this quarter to last.

So not much change there, and then I guess a question on strong growth in UK and Australia, there it looks like it was a pretty great numbers and then maybe you can give us some idea in terms how we kind of think about those markets as we go in 2015 or in this level growth is sustainable and certainly in Australia, are you talking about Australia driving the growth or is it because of your expansions in New Zealand that was driving that growth maybe you can give some color on that would be great? Thank you. Needham & Company: So not much change there, and then I guess a question on strong growth in UK and Australia, there it looks like it was a pretty great numbers and then maybe you can give us some idea in terms how we kind of think about those markets as we go in 2015 or in this level growth is sustainable and certainly in Australia, are you talking about Australia driving the growth or is it because of your expansions in New Zealand that was driving that growth maybe you can give some color on that would be great? Thank you.

Sure, so let me take that last question first. In the APAC region, Australia was primarily driving the growth. We are still relatively new to New Zealand and New Zealand is going to be a bit of smaller market, but our penetration and our market share growth in Australia has been very-very impressive. In response to the question about do I expect that to continue into 2015? Without giving any direct guidance, we really have spent a good part of 2014 building up the infrastructure in Australia making sure the right people were in place and making sure we have the distribution channels established, making sure that the installers were being trained. We’ll continue doing a lot of that in 2015 but I feel a lot of the ground work has been completed. So I expect to see some very significant growth in Australia in 2015 and I would say something very similar about the UK as well. The UK growth as you have mentioned is very impressive. We have a great team out there which is doing extremely well. And we do now have much stronger brand recognition great relationships with installers and distributors and will be able to leverage a lot of this in 2015.

And our next question comes from the Krish Sankar of Bank of America Merrill Lynch. Your line is open.

A couple of them, Paul or Kris, what do you expect the mix of where the resi, commercial to be in Q4? Bank of America Merrill Lynch: A couple of them, Paul or Kris, what do you expect the mix of where the resi, commercial to be in Q4?

Currently, that is still 85, 15 and I don’t expect that to be drastically changing in Q4. We are really excited about the new commercial product that we have available and we will more aggressively target the commercial market not only small commercial but also medium and large commercial. Having said that it will take some time until we will be able to drive meaningful revenue there, the sales cycles are pretty long and so you have to make sure you get designed-in in some of those larger projects and so that will take some time. So far we are in beta testing and the product is being installed, its very well received by the market the installers and players in commercial market have been waiting for this product for the long time and we will start shipping it beginning 2015.

And then I mean I understand that you guys are definitely doing a lot of good work in cost reduction, but look at your Q3 or your Q4 revenue 85% resi, 15% commercial how will the gross margin look if at that revenue run rate the split was more like 70% resi and 30% commercial, will the gross margin be how many like a rough estimate how many basis points higher or lower? Bank of America Merrill Lynch: And then I mean I understand that you guys are definitely doing a lot of good work in cost reduction, but look at your Q3 or your Q4 revenue 85% resi, 15% commercial how will the gross margin look if at that revenue run rate the split was more like 70% resi and 30% commercial, will the gross margin be how many like a rough estimate how many basis points higher or lower?

We can’t give specific guidance like that however, what I can say is we have as a Company we are still in the very early days in terms of technology development for microinverters. There is a tremendous amount of innovation that we are currently working on and will be working on that as I mentioned will not only increase features and functions but will also reduce cost. So overtime I expect as Kris have said we are more confident than ever that our target gross margins and that aggregate corporate gross margins 35 to 40 points will be met. In the short-term will you see some bumps in the road absolutely that to be expected but I think when you look at our cost reduction road map and if you look at where we are estimating prices to be we remain very confident that the long-term potential 35 to 40 points has never been as clear as it is today.

And then last question from my end I understand that you did say that from a microinverter standpoint there is really no one who is as good as you guys I’m just kind of curious so look at your ASP on a dollar per watt basis I mean both year-over-year and sequentially it is down quite a bit. So I’m kind of curious like are you actually cutting prices to gain more share or there is something that’s going on a pressure from your customers to cut the pricing. Bank of America Merrill Lynch: And then last question from my end I understand that you did say that from a microinverter standpoint there is really no one who is as good as you guys I’m just kind of curious so look at your ASP on a dollar per watt basis I mean both year-over-year and sequentially it is down quite a bit. So I’m kind of curious like are you actually cutting prices to gain more share or there is something that’s going on a pressure from your customers to cut the pricing.

That’s a difficult question to answer what the nature of this market is that prices will come down year-on-year that’s not Enphase specific I think that is true for every part of the channel whether it’s customer acquisition cost whether it’s racking, whether it’s modules, whether it’s inverters. We certainly do our part to continue that. Will we use pricing strategically in some accounts, sometimes, will we always respond to pricing pressure from competitors, not always, but what we’re trying to do is keep a balanced portfolio that allows us to overtime continue to increase gross margins while growing our share as much as possible. This really underscores the balanced profitable growth strategy that we have. A decision to go big on growth at the expensive of gross margin would be a very easy one to make. A decision to get to our target gross margins at the expensive of growth is equally easy. What we’re faced with everyday it is a balance between the two and making decisions on growing our top-line as much as possible while seeing growth in the bottom-line as well.

And our next question comes from Vishal Shah of Deutsche Bank. Your line is open. If your phone is on mute, please un-mute your line, if you are using speaker phone please lift your handset. I’m not receiving any response from the Shah line. I’m going to go to the next question. Our next question comes from Carlos Newall of Raymond James. Your line is open Carlos.

I am speaking in for Pavel clearly your pricing seems to be holding up quite well despite the pressure in the U.S. inverter market related to the U.S. trade war with China, what do you see enabling the residential inverter market to sustain such high pricing when utility grade pricing is under such pressure? Raymond James: I am speaking in for Pavel clearly your pricing seems to be holding up quite well despite the pressure in the U.S. inverter market related to the U.S. trade war with China, what do you see enabling the residential inverter market to sustain such high pricing when utility grade pricing is under such pressure?

Well I think the residential pricing has been under a lot of pressure, it’s a different price point obviously than the utility scale inverters, but I think we’re seeing pricing pressure and we’ll continue to see pricing pressure, again not just in the inverters but along the entire value chain for resi, commercial and utility scale. The fact is the dynamics of the utility scale market are different than the residential market, the type of products and technologies are different which lends itself to a different cost point and the different price point. But I think we can assume that going forward as we have over the past seven-eight years that we will continue to see prices in all segments continue to come down.

And our next question comes from Pierre Maccagno of Dougherty.

So, regarding most of your growth could you characterize it as mostly from your established customers or from new customers or how would you divide that?

So, regarding most of your growth could you characterize it as mostly from your established customers or from new customers or how would you divide that?

That’s actually a great question, it’s actually very exciting for us that our existing customers particular the ones in the U.S. residential market because the U.S. residential market is doing so well really are experiencing some tremendous amount of organic growth, it’s very exciting to watch their success and that’s certainly has been great for Enphase but in addition to that in the U.S. residential market in the U.S. commercial market in overseas, we continue to add new customers every single day. Big customers and small customers really in the residential space, in the commercial space our rate of increase in new customers continues to impress us and continues to grow and as we move into new geographies as we continue to go deeper into the geographies we’re in, I expect that rates to actually increase. So, it’s a bit of a mix bag but the good news for us is that both existing customers are doing extremely well and we’re adding to that customer list every day.

At this point how many customers do you have more or less?

At this point how many customers do you have more or less?

I actually don’t have a count but it’s in the many thousands.

Also regarding your SG&A, it was down as a percentage of revenue quite significantly, and so any explanation for that or going forward are you just seeing lower SG&A as a percentage of revenue?

Also regarding your SG&A, it was down as a percentage of revenue quite significantly, and so any explanation for that or going forward are you just seeing lower SG&A as a percentage of revenue?

Well, it’s clearly the leverage in our operating expenses that we’re seeing here at work we had nice sequential revenue growth year-over-year revenue growth and we were able to leverage the infrastructure that we have especially in G&A but also to a certain extent in sales and marketing.

And my last question here is regarding the transition to the M250, when do you expect that to be fully transitioned and in terms of ASPs or gross margins is there a much of a difference between the 215 and the 250?

And my last question here is regarding the transition to the M250, when do you expect that to be fully transitioned and in terms of ASPs or gross margins is there a much of a difference between the 215 and the 250?

Yes, it will take multiple quarters till that transition is fully completed. The main driver there is the adoption of higher power modules which is progressing but at a slow speed. So, we expect that adoption to continue over the next couple of quarter. For us that is a gross margin tailwind because the gross margin profile of the M250 is slightly higher than with the M215 and so we would benefit from the adoption of the higher power microinverter.

(Operator Instructions) I’m showing no further questions on the phone line. I’d now like to turn the call back over to Paul Nahi, CEO of Enphase Energy.

Thank you all for joining our call. The solar market represents an enormous growth opportunity. Our proven high technology business model combined with a balanced profitable growth strategy allows us to take advantage of this explosive market. Enphase has the technologies required for the next generation solar. I’m very proud of our third quarter financial results. And I’m looking forward to speaking with you again next quarter.

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation and have a nice day.