Good day, ladies and gentlemen, and welcome to Enphase Energy's Fourth Quarter 2017 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call may be recorded. I'd now like to introduce your host for today's conference, Ms. Christina Carrabino. Ma'am, you may begin.

Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's fourth quarter and year-end 2017 results. On today's call are Badri Kothandaraman, Enphase's President and Chief Executive Officer; Bert Garcia, Chief Financial Officer; and Raghu Belur, Chief Product Officer. After the market closed today, Enphase issued a press release announcing the results for its fourth quarter and year-ended December 31, 2017. 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 current and future products, advantages of its technology and market trends. These forward-looking statements involve significant risks and uncertainties, and Enphase Energy's actual results and the timing of events could differ materially from these expectations. For a more complete discussion of the risks and uncertainties, please see the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2017, which is on file with the SEC; and the annual report on Form 10-K for the year ended December 31, 2017, which will be filed with the SEC in the first quarter of 2018. Enphase Energy cautions you not to place any undue reliance on forward-looking statements and undertakes no duty or obligations 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, unless otherwise noted, 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 website. Now, I'd like to introduce Badri Kothandaraman, President and Chief Executive Officer of Enphase Energy. Badri?

Good afternoon and thanks for joining us today to discuss our fourth quarter and full year 2017 financial results. We had a profitable quarter. We reported revenue of $79.7 million for the fourth quarter of 2017 at the higher-end of guidance. Our non-GAAP gross margin in the fourth quarter was 24.2% also at the higher-end of guidance. Our non-GAAP operating income was $1.3 million. This, return to profitability represents a significant milestone for the Company. My top priority at Enphase is to build a solid financial foundation by improving operations and fortifying the balance sheet. We are making excellent progress towards achieving our target 30-20-10 financial operating model. We are targeting 30% gross margin, 20% operating expenses and 10% operating income all by the fourth quarter of 2018. In 2017, we sequentially increased our non-GAAP goes margin every quarter from 13.3% in Q1 2017 to 24.2% in Q4 2017. This margin improvement came from the IQ 6 transition, supply chain optimization and pricing management. On supply chain optimization we were laser focused on IQ 6 transition in 2017. We successfully executed on multi-sourcing strategies for our micro inverter components and accessories in addition to reducing overhead costs. In short, we went through a major cultural transformation and developed systematic business processes for achieving world class costs with cross functional teams spanning the entire company. We introduced IQ 7 in the first quarter of 2018. We expect IQ 7 transition to be fully complete in 2018, leading to further improvement in our gross margin. It is important to note that IQ 7, is a worldwide product skew and every one of our regions will transition to IQ 7. This is a notable difference from IQ 6, which was primarily a North American product. Another lever that is instrumental in gross margin…

Thanks Badri. I’ll provide more details related to our fourth quarter and fiscal year 2017 financial results as well as our business outlook for the first quarter. As a reminder, the financial measures that I'm going to provide are on a non-GAAP basis unless otherwise noted. Total revenue for the fourth quarter of 2017 was $79.7 million, an increase of 3% sequentially. Total net revenue per DC watt decreased by 11% in the fourth quarter of 2016, consistent with our expectations for year-over-year reductions in ASPs. Total revenue for 2017 was $286.2 million, representing shipments of approximately of 2.9 million microinverters and 837 megawatts DC, a 1% year-over-year decrease in megawatts shipped. We shipped approximately 221 megawatts DC in the fourth quarter of 2017, a decrease in megawatts of 4% sequentially. The megawatts shipped represented 755,000 microinverters, approximately 73% of which were our new IQ Microinverter Systems. As Badri mentioned, we completed the transition to our IQ 6 products for our North American customers during the third quarter, and as a result, substantially all fourth quarter shipments to these regions were our IQ 6 product. Non-inverter revenue, which includes our AC Battery storage solution, Envoy Communications Gateway and all accessories, increased as a percentage of revenue compared to our prior quarter results. Non-GAAP gross margin for the fourth quarter of 2017 was 24.2% compared to 21.8% for the third quarter. We’re pleased with our progress we’ve made with our gross margin expansion. The increase reflects the transition to our IQ Microinverter System in North America and the improvements to-date we've implemented on our supply chain optimization initiatives and pricing management. Gross margin was negatively impacted by approximately 1% related to expedite fees that we incurred because of industry-wide component shortages. Non-GAAP operating expense increased approximately $1 million sequentially, from $16.9…

Thank you. [Operator Instructions] Our first question comes from Eric Stine from Craig-Hallum. Your line is open.

Hi, everyone. Maybe to start with the IQ 7, just to confirm, did you say you're rolling that out in Q2? And as we think about some of the new markets you're entering, I mean, which one should we look to be meaningful contributors first maybe in Europe and also in Asia?

So let me talk about the IQ 7 rollout. We announced that we're rolling out IQ 7 in Q1 of 2018, which is this quarter. So we've already done that in North America. We are going to rollout IQ 7 in the rest of the word in the second quarter of 2018. And let me remind you of all the benefits of IQ 7. So IQ 7 produces 4% more power is about 17% smaller and 19% lighter than IQ 6 providing value to installers. It is a single worldwide skew so that it improves product velocity and operational efficiency which is inventory. And IQ 7 expands our served available market which is primarily in Europe and Asia Pacific. When I'm talking about Europe, I mean Germany and Austria, when I'm talking about APAC, I mean India. And if you note, the rest of the world product is moving from the fifth generation of microinverter to the seventh generation of microinverter, which is IQ 7. So that is gross margin expansion, and IQ 7 ACM will inherit those benefits. The last one which is icing on the cake is IQ 7X. Note that IQ 6 was not compatible to 96-cell modules, and IQ 7X changes that. Our 320 watt AC IQ 7X is comparable to 96-cell modules and it has 97.5% CEC efficiency. So it addresses a huge portion of the market in North America which was not available to us previously in IQ 6.

Okay, got it. That is extremely helpful. I guess talking about the benefits there on the installation side and I guess it's also kind of works for AC module as well. You mentioned the positive feedback from installers. Just curious how that is playing in the market given that it sounds like in response to the tariffs that a lot of installers are choosing to absorb that cost rather than pass it on.

Yes. So let me start with the AC module. So the AC module provides a lot of value by absorbing the field assembly of the module and microinverter into the factory by integration. You know that we announced ACM partnerships with LG, Jinko, SolarWorld and Waaree in 2017. We started shipping microinverters to our ACM partners from June 2017 and they started rating the channel in October of 2017. We have also involved, I mean, been heavily involved along with our partners in training and evangelizing ACM with installers. I'd like to remind you once again that our interviews with installers have indicated up to 20% savings on installation time and 10% savings on logistics. We are working with a number of other module partners and we'll announce them when we are ready. We already told you about the Panasonic partnership as well for IQ 7X ACM, which addresses 96-cell modules. Let me now come to the 201 case. So the 201 case has created some headwinds on our ACM progress. The tariff inadvertently affects the ACM, while the intention of the tariff was only for sales and modules. So we are actually diligently working on getting exclusion on the microinverter portion of the ACM tariff and we are working with the USTR on that.

Okay. Is there – I mean, any thoughts on how long that process could be? Display that one by here.

Well, we are going to submit our response within the allowed time. We are going to actually submit the response in 30 days, the allowed time is 60 days. And after that I think they will probably take another 30 days –

Government process so…

Yes. It is a government process, so it's not going to be available.

Okay, thanks a lot.

Yes.

Thank you. Our next question comes from Jeff Osborne from Cowen and Company. Your line is open.

Hey, good afternoon, guys, and congratulations on the results of margin expansion. I was wondering if you could just touch on the component MOSFET IGBT shortage that you’ve talked about and others have talked about in the space. A two part question; one is how long do you think it will last? And then I think as part of the guidance you talked about that impacting gross margin. Is there anyway to quantify what that impact is?

Yes. So let me give you some color on the components shortages, I'll give you a little bit of history as well. We experienced significant component shortages throughout 2017. These components shortages were mainly on high voltage FETs and on memories. Our gross margin was negatively impacted by 1% to 2% due to expedite fees in Q3 2017 and Q4 2017. In Q1 2018 we see continued pressure on the same components. In fact, we think this component shortage will persist throughout 2018 and even into early 2019. And it is a top priority for us as a management team. We are always working on a three horizon framework to tackle this. In the short-term it’s basically hustle like hell which is blocking and tackling. In the medium-term, create viable options, look at alternate sources, make our design more flexible, even changing layout. And in the long-term, given our improved liquidity provision, creating long-term supply agreements with our partners. So to answer your question, I expect the same 1% to 2% impact to gross margin in Q1 of 2018. And we incorporated that in our guidance.

Yes. I was just going to say, I mean, you knew about the shortage in 2017 in the spring I think it started. So I assume that's factored in the 30-20-10 plan or should we discount that by a few points?

No, you should not discount that. It is already factored into our 30-20-10.

Okay. Wanted to double check on that. And then can you just talk about the cadence of OpEx throughout the year? Is the McKinsey study still going on? And how does that progresses the second half evolves?

The McKinsey study is done. It was finished in Q4 of 2017. So let me give you a little bit of color on our OpEx. We have reduced our OpEx significantly from $1.08 million in 2016 to $73 million in 2017. Our current OpEx is a little bit high. It is at 22% of revenue. I would like it to be at a model of 20% consistent with the 30-20-10 operating model. And we have certain investments that we want to make on the IQ 7 – I mean, on the IQ 8 platform which we’re not going to compromise. With that in mind, we also established a R&D center in India, where we do expect to get to our long-term 20% OpEx target and have absolute – and have the adequate capacity.

Perfect. Thank you, that’s all I had.

Okay, thank you.

Thank you. Our next question comes from Brad Meikle from AMPAC. Your line is open.

Hi, gents, how you’re doing? Can you talk a little bit about just with the IQ 7 on the IQ 6 road map? How the things are going with your customers? And how does that – how do you view your market share trending in 2018? And also along with that how do you see the end market growing? Thanks.

Right. IQ 7 like what I said, it produces more power. It is 17% smaller, 19% lighter than IQ 6. So it provides intrinsic value. It’s a single worldwide SKU. And extremely important there is the single hardware SKU and every country is a software profile. So it's a software configurable architecture. And so therefore in terms of product velocity operational efficiency, in terms of managing inventor IQ 7 will be fantastic. IQ 7 increases ours served available market in Europe and Asia Pacific. We are going to – go after new markets in Germany, and as well as Austria, and mainly India. As I told you, the rest of the world is moving from not the sixth generation but the fifth generation till the seventh generation. So you can see the intrinsic gross margin expansion which we are so focused on. Getting to 30-20-10, achieving 10% profit by the end of Q4 2018 is the top most priority for us. And we talked about IQ 7 – I mean, we talked about ACM in general, an IQ 7 based ACM will inherit a lot of these benefits. And now to talk about IQ 7X, that will address about 500 megawatts of market in North America, which was not previously available to us, now it's available. And with our focus on long tail and high performance IQ 7X, it's consistent with our strategy of expanding gross margin.

So how does the IQ 7X compared to the SolarBridge solution that SunPower is shipping today for their 96-cell modules. Could you give us a sense for what the performance characteristics and price differences may be?

Hi, Brad, this is Raghu. I think performance wise it's a much more efficient, the CEC efficiency of the SunPower SolarBridge product I believe it's 95% or 95.5% and we are 97.5%. That’s a pretty substantial improvement in efficiency and efficiency as you know also drives things such as – of course drives energy yield, but also drives the participation and reliability as well. Obviously we are driving our cost down affectively through silicon integration, the IQ 7 actually has a new AC on it compared to even the IQ 6, we went from a 2.8 million gate ASIC to a 3.8 million gate ASIC on the IQ 7 and the IQ 7X has the same ASIC as well. So I can say that we are driving our cost on of course price is a very complex thing to talk about and can’t talk about it on this way.

Excellent, thanks. And I guess that – how quickly do you think that the IP7 could ramp in some of these new geographies like India and Germany.

Well, so let me talk a little bit about the timing of the IQ 7 transition. Like what I said, we have introduced IQ 7 in North America in the first quarter of 2018 already. So IQ 7 is shipping as we speak. We expect to introduce IQ 7 to rest of the world in the second quarter. And we are very careful in ramping our new products because Enphase stands for quality and reliability first. So we want to make sure that we do a lot of beta testing in the rest of the word and then we release the product in a controlled fashion, which is why IQ 7 is a complex transition for the rest of the world. And the entire supply chain of IQ 7 will ramp up in the next six months. While I did talk about the supply constraints, we are mitigating those constraints by qualifying additional sources and making the design flexible and we expect to mitigate those issues in the next four to six months. So that's basically the color on the transition.

Thank you. My last question is on the growth rate of the market. If you look at your regional customers I think are that growing the most rapidly across a sector. They're doing obviously better than SolarCity who has been in decline for the last year or so. Can you characterize what you're seeing in terms of your increases likely to be seen this year for the small and medium sized customers that have been taking share from the larger nationwide TPO installers thanks.

I'll probably give you a little bit of color on market share in North America. We believe we are holding share in North America. And the way we think about market share, let me actually elaborate on that. Our top priority is to build a solid financial foundation. We are focused on consistent profitability than growing market share at any cost. We are consciously walking away from empty caloried business that is very low margin businesses. Our products are actually ideal for long tail installers who value our ease of use high quality. And we are introducing high performance products such as IQ 7X, IQ 7 based ACM which are ideal for the long-term I mean long tailed markets. So, we expect the long tail markets to grow significantly and we have the ideal products for that. And we expect that to be a significant expansion in our gross margin.

Thank you. Our next question comes from Philip Shen from Roth Capital Partners. Your line is open.

Hi guys, good work on the steady execution. First question, is on the IQ 7 roll out, just to put a finer point on things Badri, would it be possible to give us a sense of what the mix of products might be by quarter. Historically, you guys have done that with prior generations of a product release, by when do you think we could see a 100% IQ 7 mix for example. And all along, the way what the quarters possibly look like in Q2, Q3 and so forth. Thanks.

So I'll just give you some color on the IQ 6 transition, then I'll talk about IQ 7 transition so you get the full picture. The IQ 6 transition took us three to four quarters to complete. The IQ 7 platform it uses the same accessories as IQ 6 for North America. However the IQ 7 platform is brand new in the rest of the world. It is a huge learning curve for the rest of the world. We think therefore in combination the IQ 7 transition will take us approximately three to four quarters. We expect to complete the IQ 7, transition by the fourth quarter of 2018. Like, what I said we have already started shipping in North America in this quarter. We expect to introduce it in rest of the word in Q2 of 2018 and we are confident of meeting our 30-20-10 by Q4 of 2018.

Great and then you mentioned a couple times earlier already that there's possibly meaningful margin benefit as the rest of the world converts to IQ 7 since they're coming from the me Gen Fiber and 250 so can you quantify in some fashion what that margin benefit might be.

Yes, I am going to talk about gross margin in general. So we have three levers on gross margin. The pricing management, the supply chain optimization, and IQ 7 transition. On pricing management, we are focused like what I said in the prepared remarks on transactional control. In 2017, and then 2018 will be about offering high value products like IQ 7X and IQ 7 based ACM. On supply chain optimization, we are focused not only on the micro inverter but also focused heavily on cost reducing the accessories as well as reducing our overhead. And note that a significant portion of our revenue does come from accessories. So it's important for us to control cost there. In terms of overhead, we are looking at all aspects which is variance, logistics warranty and are tackling those. The last one is obviously IQ 7 transition, which has clearer benefit in terms of BOM reduction, in terms of SAM expansion in terms of IQ 7X but it is not the only thing in our gross margin expansion. So bottom line we are changing the way we work on pricing and cost. It is not just about IQ 7, in combination of these three things, which is Pricing Management supply chain optimization and IQ 7 transition we will get to the 30-20-10 by Q4 2018.

Great, one last one here for me. I think if you look at the blended company numbers the blended ASP from Q3 was about $0.38 and in Q4 $0.41 if my numbers are right there. So you actually have had some degree of perhaps price increase and some of our discussions with customers have been that you've been able to actually been raising some pricing out there perhaps not the MSRP necessarily but reducing the rebates out there. So historically, we see a 7% to 10% price erosion year-on-year, clearly we're not in that situation now. In fact it might be going the other way. How do you expect, and I know pricing discipline and management is a core part of your strategy as you just mentioned but as you look at ahead, do you expect ASPs to continue to rise or should we just should we expect a flat kind of curve ahead.

Right that's a good question. Our revenue includes a mix of inverter and non-inverter sales. But non-inverter revenue was up sequentially as a percentage of our mix compared to Q3. Our non-inverter revenue when I defined that, that's basically your accessories which is Envoy, Combiner box and the AC battery. So you got to be careful in looking at those numbers to draw a conclusion. But what we are doing is very clear. We are walking away from empty calorie businesses. We are focused on profitability, as a company. We will achieve 30-20-10 by Q4 of 2018. So having said that, I believe we maintain pricing flat for the last couple of quarters. And what's our strategy in 2018? We have modeled a 2% reduction every quarter in 2018. So that's what we've modeled and all our financials, all our operating plan 30-20-10 et cetera takes into account that. And we are focused like what I said on value creating products like IQ 7X like IQ 7 based ACM, like IQ 8, which will come in 2019, which is an enormous differentiator for us. So that's our focus.

Great. That color and detail is very helpful. I’ll pass it on.

Thank you. Our next question comes from Colin Rusch from Oppenheimer. Your line is open.

Thanks so much guys, you talked a little bit about the high voltage sets. Can you talk specifically about silicone carbide sourcing and any sort of mitigation that you're doing around TV demand for those materials to mitigate any sort of price increases.

So, yes this is a Raghu. As Badri mentioned about industry wide components shortage on the high voltage sets and memory as well. We actually do not use silicon carbide diodes in this IP generation of the product.

Ever so that's hook-on and then can you talk a little bit about the pricing dynamics and the AC module offering and how that’s supporting your price dynamics as you go through the balance of 2018.

Right. So in terms of the AC modules, so basically I talk to you about the interviews with installers. And in the interviews with installers, that so far indicated up to 20% savings in installation time, up to 10% savings in logistics. And these are clear value levers for the AC module that offer clear benefits to the installers. And therefore, when we discuss pricing – our partners it basically takes into account this value. And we make sure that we share some of this value with the installers as well.

Okay, I'll take the rest of it offline thanks guys.

Thank you. [Operator Instructions] Our next question comes from Edwin Mok from Needham & Company. Your line is open.

Hi guys, thanks for taking my question. So first just since we talked about ACM just a follow-up, is there a way to think about how much your volume has been on each side it sounds like 440 ships on products ACM already right and with IQ 7 coming do you have a target percentage of the sale that will come from ACM that you see exiting this year.

Hi Edwin, its Burt. So we're not breaking out discretely volumes for ACM at this point but as we've mentioned we are very excited about the progress we're making and as noted in our recent announcement with Panasonic, I think there is equal excitement with some of our partners that this is a product category that has tremendous upside and tremendous promise. So, again as this develops, we'll continue to talk about and give you guys as much color as possible. At this point, we're not breaking it out.

Okay, that's fair. And then for the quarter, your non-inverter sales went up, right. Is that the way to think about and maybe you can help us by explaining what part of your non-inverter sales was – what product was driving that growth, is it just still happen if you are buying more combiner box this quarter or do you have growth in battery this quarter. I think the progress has been helpful a little bit and maybe just kind of tied to battery. What are you guys seeing in the market as adoption and what do you think can change that…

Yes, we are seeing an uptick in ACB sales, compared to the previous quarter. And the uptick we are seeing quarter-on-quarter comes from both Europe as well as Australia. And solar plus storage is extremely central to our strategy as we develop IQ 8 and we remain committed to it. With regarding the other portion on the accessories, yes, we ship a little bit more combiner boxes as well as on voice in Q4 of 2017. Yes, that's correct.

Okay, great. That’s helpful. And then last question, I have on the 30-20-10 model, right. If I look at this quarter OpEx, in your OpEx guidance as you said your OpEx ticking up a little bit right, that would push your revenue to hit your 30-20-10 number to kind of like $19 million range, right. If that would be 20% OpEx being $18 million, is that how we are thinking about the 30-20-10 model now. I just want to make sure, I understand that correctly.

Yes, so that’s certainly one way to look at it, of course we aren’t going to be providing guidance beyond the next quarter. But yes, I mean if you just do the simple math, I think you could probably back into it that way. Again, the most important thing is we are absolutely committed and confident in our ability to get to 30-20-10, I think that’s kind of bottom line, if you haven’t pick that up, that is definitely what we're focused on.

Okay, great. That’s all I have. Thank you.

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

Thanks for the taking the question, you alluded to the tariff issue on AC module imported into the U.S. I’m curious just mechanically, how would you get an exemption for a product that is physically attached to an imported module that is otherwise covered by the tariff. I mean, it seems like just administratively that might be a bit of a half of now?

Hi, this is Raghu. So let me give you some color on that. So clearly the ACM is the very natural technological evolution to the standalone microinverter and because of the value that it provides by absorbing all the field assembly into the factory. Now the 201 case has inadvertently affected the ACM by the ad valorem ruling. But if you go back to what being tend to the 201 was it was limited to certain modules and inverters should be outside the scope of 201. However, the government has unintentionally created this situation so of course increasing the cost of our micro by 30%, only in an ACM case, incentivizes the string inverter technology as an example. So doing that is very bad for innovation and step backwards in terms of the advancement of technology and clearly that was not what the intent of the government was, right. So what's the good news here is the USTR has now published a process for exclusion and that process for exclusion is a detailed explanation and reasoning for exclusion via a questionnaire. And they have given us some time to go submit all of the details behind it. And they've given us 60 days to do it and we're going to turn around and do it in the next 30 days. We also looked at the mechanics of how this exclusion can take place, if you think about how the customs and border patrol, how they would tariff it. There's actually some precedents here back in the days memory devices had the similar issue and they established a process for separating out the two values and then taxing or tariffing the value appropriate to the right component. In our case, it would be the DC module. Then the unlikely event that such an exclusion is not granted, we have an alternate path. So one of the key features of our ACM solution is that micro is detachable from the module. So what this means that the module can be connected to the microinverter after importing the DC module into the U.S. So while this will increase the cost a little bit but it will be much less than the 30% of the tariff.

Okay, interesting. So that's plan B I suppose.

Yes.

Regarding the battery, when you talk about your margin structure including the 30-20-10 target, what assumptions does that make for the profitability of the battery or is it just so small in your sales mix that it doesn't really matter either way?

Well, although we are seeing an uptick in the ACB sales, it is still a small percentage of our sales mix. We are working like what I said we are working on IQ 8. And IQ 8 as a platform will have a new AC Battery configuration. And that will come out in 2019, it will have a great cost structure but for now it is the low percentage of our sales.

Okay, understood. Appreciate it guys.

Thank you. Our next question comes from Vishal Shah from Deutsche Bank. Your line is open.

Hi, thanks for taking my question. Can you talk about the margin profile of your shipments in the U.S. versus the international markets? And also in the first quarter or the first half of the year, what percentage of your shipments will be to the U.S. market?

Yes, so hey, [indiscernible]. So broadly speaking, our shipments – our products shipments in rest of world are perhaps slightly less margin reach than the U.S. products, just are very, very small though and its really related to the configuration of those products. So again not significant differences there, with respect to the mix. U.S. versus rest of the world, it's still about 70/30.

So you still expect U.S. shipments to be 30% in the first half?

That's right.

Is the industry showing any signs of slowdown post the 201 case until you get some clarity on the ACM ruling or not really?

So we're not seeing much impact on U.S. Reg related to the 201 trade case. As Raghu mentioned, there is a little bit of uncertainty with respect to the ACM product. With respect to again to that exclusion but as you mentioned, we're working very, very quickly to work through that and to relieve that uncertainty. But no, we're not seeing a big impact at all with respect to 201 at this point.

And what percentage of your Q4 shipments were from ACM?

We're not breaking that out as I had mentioned before.

Okay. And then as far as the non-inverter revenues, if I can say like, how should we think about the margin profile of that part of the business. And when do you think it's going to be meaningful enough for you to report a separate percentage of the mix?

So in terms of when we think we're going to have enough data or when we're going to start breaking out its percentage of mix. That's a good question, I'm not sure we're prepared to do at this point. What was your first question, Vishal, remind me.

What is the margin profile of that business relative to your inverters, I mean is it similar margin or better margin?

Yes, again, sorry Vishal, we're not prepared to break out the margin differential between the inverter and non-inverter.

Okay. And one final question, as you approach this 30-20-10 model, how should we think about the cash inflation profile of the business. I mean are you going to be cash flow positive for the rest of the year through every single quarter or that was going to take some time?

So if you've noticed over the last several quarters, our cash has been improving, holding aside even the $20 million recent investment. Our cash has been improving in the sense that we've been reducing burn sequentially every quarter. We see that improving in 2018, again a lot of the work we've done to restructure the company continues and will continue to bear fruit into 2018. Again we talk about it as a process, not an event and that process will continue into 2018. And we will yield benefits certainly not only in terms of profitability but in terms of cash flow as well. We've said I think pretty consistently that we believe 2018 will be a year where we get sustainably profitable. And I think that follows through the cash as well.

Good. Thank you.

Yes, you bet.

Thank you. [Operator Instructions] And I am showing no further questions from our phone lines. I would now like to turn the conference back over to Badri Kothandaraman for any closing remarks.

So thank you for joining us today. We have stabilized our cash position and are very pleased to be profitable in the fourth quarter of 2017. And we are working hard to achieve our 30-20-10 model in Q4 2018 and creating a solid financial foundation. We look forward to speaking with you again in the next couple of months.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, you may all disconnect. Everyone have a wonderful day.