Good day, everyone, welcome to the Enphase Energy's first quarter 2023 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask your question, you may press star and then one on your touch tone phones. To withdraw your questions, you may press star and two. Please also note that today's event is being recorded. At this time, I'd like to turn the floor over to Karen Sagot. Ma'am, please go ahead. Good afternoon and thank you for joining us on today's conference call to discuss Enphase Energy's first quarter 2023 results. On today's call are Badri Kothandaraman, our President and Chief Executive Officer, Mandy Yang, our Chief Financial Officer, and Raghu Belur, our Chief Products Officer. After the market closed today, Enphase issued a press release announcing the results for its first quarter, ended March 31st, 2023. During this conference call, Enphase management will make forward-looking statements, including, but not limited to, statements related to our expected future financial performance, the capabilities of our technology and products, and the benefits to homeowners and installers, our operations, including manufacturing, customer service and supply and demand, anticipated growth in existing and new markets, the timing of new product introduction and regulatory matters. These forward-looking statements involve significant risks and uncertainties, and our 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 our most recent Form 10-K and 10-Qs filed with the SEC. We caution you not to place any undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes in expectations. Please note that financial measures used on this call are expressed on a non-GAAP basis, unless otherwise noted, and have been adjusted to exclude certain charges. We have provided a reconciliation of these non-GAAP financial measures to GAAP financial measures in our earnings release furnished with the SEC on Form 8-K, and which can also be found in the investor relations section of our website. Now I'd like to introduce Badri Kothandaraman, President and Chief Executive Officer of Enphase Energy. Badri. Good afternoon, thank you for joining us today to discuss our Q1 2023 financial results. We had a decent quarter. We reported revenue of $726 million, shipped approximately 4.8 million microinverters and 102 megawatt hours of batteries, and generated free cash flow of $223.8 million. Approximately 65% of our Q1 microinverter shipments were IQ8. We exited Q1 at 46% gross margin, 14% operating expense, and 32% operating income, all as a percentage of revenue on a non-GAAP basis. Mandy will go into our financials later in the call. Let's now discuss how we are servicing customers. Our net promoter score worldwide was 75% in Q1 compared to 71 in Q4. Our North American NPS was 77% compared to 74 in Q4. Our average call wait time was 1.2 minutes compared to 1.6 minutes in Q4. We are focusing on root cause fixes of customer issues and improving our business processes rapidly to enhance customer experience. Let's talk about microinverter manufacturing. Our overall supply environment is quite stable. There are no major shortages right now. We began manufacturing at Flex Romania in the first quarter, bringing our quarterly capacity to approximately 6 million microinverters. Our European business is growing rapidly and many customers have asked us for local manufacturing, and we will be able to do that going forward. Let's come to U.S. manufacturing. As we discussed last quarter, the IRA, Inflation Reduction Act, will help bring back high-tech manufacturing to the U.S. and stimulate economy through creation of new jobs. We are opening manufacturing lines with three different manufacturing partners, adding a capacity of 4.5 million microinverters per quarter, bringing our overall global capacity to 10 million microinverters per quarter as we exit 2023. We expect to begin U.S. manufacturing with one partner in Q2 and with the remaining two in Q3. Let's now cover the regions. Our U.S. and international revenue mix for Q1 was 65% and 35%, respectively. In the U.S., our revenue decreased 9% sequentially due to seasonality and macroeconomic conditions, and increased 28% year-on-year. The sell-through of our microinverters in Q1 decreased 21% sequentially compared to Q4, worse than the typical seasonality of 15%. Our microinverter channel inventory at the end of Q1 was relatively normal, while the storage channel inventory was a little elevated. I'll go into details later in the call. In Europe, our revenue increased 25% sequentially and more than tripled year-on-year. Our Europe non-GAAP gross margin is quite healthy, over 45%. Another point to note is that the sell-through of our microinverters in Europe reached an all-time high in Q1. We are now shipping IQ microinverters into France, Netherlands, Spain, and Portugal. In addition to Germany and Belgium, we just recently started shipping IQ batteries to Netherlands, France, Austria and Switzerland. Let me provide some brief comments on Latin America, Australia, and Brazil. In Latin America, revenue decreased 2% quarter-on-quarter and increased more than 70% year-on-year. Our revenue in Australia increased 6% quarter-on-quarter, while our revenue in Brazil more than doubled. We are growing very rapidly in Brazil, and given the big market size, we are expanding the team and prioritizing new products. Let me provide some additional color on the U.S., followed by Europe. We usually recognize revenue when we ship product to distributors and large installers. Most of our installers buy our products from distributors. It is therefore relevant for us to talk about the sell-through of our products from distributors to installers. Since we have a healthy market share in the U.S., our statistics are a meaningful representation of the business trends. As I said earlier on this call, our sell-through of microinverters in the U.S. was 21% lesser in Q1 compared to Q4. Our sell-through in California was only 9% lesser than Q4. There was some impact due to the weather in early Q1, but the NEM 2.0 rush in Q1 more than compensated for it. California installers took advantage of the NEM 2.0 rush and have built up a solar backlog for the next three- four months. We believe installers aren't expanding their crews to accelerate installation. They are laser-focused on their cash flow due to the high interest rate environment and are looking clarity on the NEM 3.0 demand. Sell-through of our batteries in California was 23% lesser in Q1 compared to Q4, as installers focused mainly on solar. We expect this trend to continue for the next three- four months. After that, we see NEM 3.0 as a net positive for California and expect strong demand to resume for solar plus storage. Let's cover the rest of the U.S. The sell-through of microinverters in non-California states was 25% lesser in Q1 compared to Q4. We observed that the sell-through was even lower in states with low utility rates, such as Texas, Florida, and Arizona. In these states, the economics of loan financing has worsened due to rising interest rates. The sell-through performance in the Northeast U.S. was a little better. The sell-through in non-California states was 28% lesser in Q1 compared to Q4. Let's briefly discuss the health of our U.S. customer base and some trends in financing. Our Q1 data shows higher sell-through rates for long-tail installers compared to tier one and two installers. Our installers, in general, are navigating three key challenges. The rapid increase in interest rates over last year. Switch from selling low APR with high dealer fees to selling market rate loans with low dealer fees. third, the delayed payment from the loan originators, or as the industry calls it, reduction of M1 payments. Let's discuss about the second and third challenges. We see the move to high APR and low dealer fee loans as a positive for the industry. The demand for market rate loans remains strong. New capital providers who were not able to buy below market rate loans are now offering solar financing. Installers are adjusting their sales practices for a higher interest rate environment. We are also seeing new lease providers entering the market with focus on servicing the long tail. We think capital will be available for both long tail installers, regardless of the mix of loan and lease. On the reduced M1 payments, loan originators are providing less cash to installers at the time of contract signing and a greater percentage after installation. This creates a working capital challenge for the installers and is forcing them to become more efficient. As the installers adjust to this new reality, we expect the sell-through of microinverters and batteries to incrementally improve in Q2 compared to Q1. Q2 is seasonally stronger and should help the situation even more. Let's come to Europe. Our European business is doing very well. We expect healthy revenue growth in Q2 compared to Q1. Our business is growing much faster than the market. We plan to introduce IQ8 microinverters and IQ batteries into many more countries in Europe throughout the year. Our value proposition is our differentiated home energy management systems, combined with high quality and great customer experience. We are integrating the products from our latest acquisition, GreenCom Networks, into our Enphase Energy System starting in Germany this quarter. This will help network third-party EV chargers and heat pumps with Enphase solar plus storage systems. The benefit to homeowners is the reduced electricity bills due to increased self-consumption, in addition to having control via the Enphase app. Let's talk about new products. I say internally in the company that 2023 is the year of new products. It's coming in good time. We are getting ready to launch our 3rd generation IQ Battery in North America and Australia this quarter. In Australia, we will also launch the IQ8 microinverters. As I previously discussed, the IQ Battery has a modularity of 5 kWh and delivers double the continuous and triple the peak power compared to our prior generation of batteries. The higher charging and discharging rate of our third-generation battery will be uniquely beneficial for NEM 3.0 systems in California through its ability to generate revenue by exporting into the grid at the appropriate time. Our third-generation battery is very easy to install and commission. We are currently piloting these third-generation batteries in Australia and the U.S. with select installers and are very excited about the experience we are about to deliver to our customers. Let's talk about our latest new product for the residential segment in emerging markets. This product, the IQ8P microinverter, will deliver 480 watts of AC power, supporting panels up to 650 watts DC for Brazil, Mexico, Spain, India, and emerging markets. We are on track to release IQ8P into production in the second half of the year. The other variant of IQ8P microinverter with the new three-phase cabling system is well suited for small commercial solar installation ranging from 20-200 kW, such as gas stations, schools, hospitals, churches, and small businesses. These microinverter systems offer the same grid compatibility, high quality, and rapid shutdown capability as our standard residential products. We expect to release this product into the U.S. small commercial solar market in the second half of 2023. Let's discuss EV chargers. We shipped over 8,600 chargers in Q1 compared to 7,600 chargers in Q4. We are now shipping Enphase branded EV chargers from Flex Mexico, helping us increase capacity and reduce costs. We are on track to introduce IQ smart EV chargers in Q2. These chargers will have Wi-Fi connectivity, enabling use cases like green charging and allowing homeowners visibility into operation of their Enphase solar plus storage plus EV charger system through their app. Let's now discuss the installer platforms. We released several updates to our Solargraf design and proposal software, including basic NEM 3.0 functionality, battery design, document management, and other improvements as requested by installers. We have more than 1,000 installers using the software. NEM 3.0 incentivizes homeowners to use solar and battery systems for avoiding energy imports while compensating homeowners for exporting energy when the grid needs it. The updated Solargraf platform offers a simplified experience for designing a NEM 3.0 system by optimizing panel placements, configuring battery sizing, leveraging its modularity, and enhancing system operations for self-consumption and energy export to deliver the best possible payback. We see that solar plus storage under NEM 3.0 can achieve a payback period between six and eight years, depending on the utility. As we said before, the higher power of our third generation battery helps us to export more energy to the grid and maximize savings. Let me conclude. With the residential solar and storage markets growing rapidly in Europe, we are in a great position to significantly accelerate our business. The situation in the U.S. is a little different with NEM 3.0 in California and the macroeconomic challenges in rest of the U.S. Our strategy doesn't change. We are focused on working closely with our installers to address their issues, making new products, and entering new markets and countries. The fundamentals are intact for our industry. The 30% ITC for the next decade, the rising utility rates, the focus on climate change, and the desire for resilience are all going to push the need for solar plus storage more than ever before. With our differentiated products, high quality, and exceptional customer experience, we are in a strong position to capitalize on this trend. With that, I will turn the call over to Mandy for her review of our finances. Mandy? Thanks, Badri, good afternoon, everyone. I will provide more details related to our first quarter of 2023 financial results, as well as our business outlook for the second quarter of 2023. We have provided reconciliations of these non-GAAP to GAAP financial measures in our earnings release posted today, which can also be found in the IR section of our website. Total revenue for Q1 was $726 million, slightly up from the fourth quarter of 2022. We ship approximately 1,957 megawatts DC of microinverters and 102 megawatt hours of IQ batteries in the quarter. non-GAAP gross margin for Q1 was 45.7%, compared to 43.8% in Q4. The increase was driven by increased IQ8 product mix and improved logistics. GAAP gross margin was 45% for Q1. Non-GAAP operating expenses were $98.4 million for Q1 compared to $87.7 million for Q4. The increase was driven by international growth in R&D. GAAP operating expenses were $158.7 million for Q1 compared to $153.7 million for Q4. GAAP operating expenses for Q1 included $56 million of stock-based compensation expenses and $3.7 million of acquisition-related expenses and amortization for acquired intangible assets, and $700,000 of restructuring and asset impairment charges. On a non-GAAP basis, income from operations for Q1 was $233.6 million compared to $229.4 million for Q4. On a GAAP basis, income from operations was $167.7 million for Q1 compared to $157 million for Q4. On a non-GAAP basis, net income for Q1 was $192.3 million compared to $212.4 million for Q4. This resulted in non-GAAP diluted earnings per share of $1.37 for Q1 compared to $1.51 for Q4. GAAP net income for Q1 was $146.9 million compared to GAAP net income of $153.8 million for Q4. This resulted in GAAP diluted earnings per share of $1.02 for Q1 compared to $1.06 for Q4. The decline for both non-GAAP and GAAP net income and earnings per share was driven by our higher effective tax rate, as we are now a significant U.S. cash taxpayer. We exited Q1 with a total cash equivalent and marketable securities balance of $1.78 billion compared to $1.61 billion at the end of Q4. We did not make any open market share repurchases against our $200 million share repurchase authorization. Instead, we spent approximately $72 million to cover withholding taxes for the employee stock vesting in Q1. That reduced the dilutive shares by 338,000 shares. We expect to continue this anti-dilution program throughout the year. In Q1, we generated $246.2 million in cash flow from operation and $223.8 million in free cash flow. Capital expenditure was $22.5 million for Q1 compared to $16.4 million for Q4. The increase was primarily due to investment in R&D equipment and U.S. manufacturing. Let's discuss our outlook for the second quarter of 2023. We expect our revenue for the second quarter of 2023 to be within a range of $700 million-$750 million, which includes shipments of 80-100 megawatt hours of IQ batteries. We expect GAAP gross margin to be within a range of 41%-44% and non-GAAP gross margin to be within a range of 42%-45%, which excludes stock-based compensation expenses and acquisition-related amortization. Our guidance numbers do not include any IIF annex. We expect our GAAP operating expenses to be within a range of $155 million-$159 million, including approximately $57 million estimated for stock-based compensation expenses, acquisition-related expenses and amortization, and restructuring charges for site consolidation. We expect our non-GAAP operating expenses to be within a range of $98 million-$102 million. We intend to keep the non-GAAP operating expenses flat in Q2. We will continue investing in product innovation and international growth while making other areas of the company more efficient. Moving to tax. Since we have utilized most of our net operating loss and research tax credit carry forward, we are now a significant U.S. cash taxpayer. We expect GAAP and non-GAAP annualized effective tax rate for 2023 to be at 22% ±1% before any IRA impacts. I'd like to discuss how the advanced manufacturing production credits from the IRA will be reported in our earnings while waiting on the implementation guideline from the U.S. Treasury. Based on the current guidelines, the production credit can be claimed as direct pay or in the form of tax credits. Under direct pay, the production credit will be accounted for as a reduction in cost of goods sold. If tax credits, it will be reported in the tax expense line. Either method will provide us the same dollar impact to our earnings per share as the production credit is nontaxable. We expect the production credit, net of any incremental cost for domestic manufacturing, to be in the range of $20-$30 per microinverter sold to customers. We expect to ship 50,000 made in U.S.A. microinverters to customers this quarter. We plan to have our U.S. contract manufacturing facilities to be fully operational by the end of 2023. We estimate shipments to reach our U.S. capacity of 4.5 million microinverters per quarter by the end of 2024, assuming robust demand. With that, I will open the line for questions. Ladies and gentlemen, at this time, we'll begin the question-and-answer session. To ask a question, you may press star and then one on your touch tone phones. If you are using a speakerphone, we do ask that you please pick up the handset before pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. In the interest of time, we do ask that you please limit yourselves to a single question and one follow-up. You may reenter the question queue if you do have additional questions. At this time, we will pause momentarily to assemble the roster. Our first question today comes from Colin Rusch from Oppenheimer. Please go ahead with your question. Thanks so much, guys. Can you talk a little bit about, you know, channel levels outside the U.S. and how much of the 2Q guidance is really about, you just selling into the channel to get the channel full to serve the markets in both Latin America and Europe? Yeah. Actually, in Europe, our channel is rather light. We've been tight on product in the last few quarters, the channel is light. By light, I mean, you know, we consider channel to be normal between eight and 10 weeks of inventory, and light means less than eight weeks. Basically, that's the situation there. Then with the battery volumes, you know, you know, declining sequentially and continuing into 2Q, can you talk a little bit about how much of that's related to the product cycle you guys are going through, and how much of that is just related to overall underlying demand? Yeah. On batteries, as an executive team, we are hyper-focused on batteries as much as on our microinverters. Our learning curve on batteries has been tremendous. As we speak our, you know, our second-generation batteries are getting better and better every day in both their installation and performance. Our third-generation battery, like what I said, is coming soon into the U.S. and Australia in Q2. That'll be even better with the wired communication CAN and with double the continuous power and triple the peak power, and with enhanced modularity as well as serviceability that helps us in dropping costs, you know, compared to the prior generation. Of course, it's LFP, so it's the safest battery. The demand in the US, that demand being down is temporary. I described the dynamics due to the NEM 2.0 pull-in in California as well as the increased interest rates outside of California. We believe that's a temporary problem. Installers will figure out what to do outside. You know, California, we're incredibly bullish on NEM 3.0. We think our battery is gonna be perfect for NEM 3.0 because the increased power of the battery will give the ability to export more energy during the time when the grid needs it in August and September, and people can get paid handsomely for it. Because of that, you see the payback for a solar plus storage system under NEM 3.0 is approximately six to eight years, depending on which utility you are in. We think, you know, NEM 3.0 will accelerate the attach rate of batteries and, you know, it might take a little bit of time for the industry and for the consumers to realize it, but I have no hesitation that NEM 3.0 will be better for California. Let me come outside the U.S. So far, we've been shipping to Germany and Belgium in Europe. This quarter, I would say in end of March as well as in the beginning of April, we introduced batteries to four more countries. France, Netherlands and, you know, Switzerland. Actually Austria, to correct myself, that was a month or two ago. We just introduced batteries in four countries. We are going to introduce our third generation battery in Australia in Q2 in addition to the U.S. In both Q3 and Q4, we are going to target several more countries in Europe. We'll be in Italy and U.K. by Q4. On the batteries, you know, we're just getting started in Europe, and I think the volumes will start ramping there. In the U.S., it's a matter of time. The rest of the U.S. recovers, the installers start selling batteries again, and in California it'll be a no-brainer with NEM 3.0. The numbers are only gonna get better from here on. It's a long answer. Okay. I just wanted to give you a full picture. All right. Thanks so much, Badri. I'll hop back in the queue. Thanks, guys. Our next question comes from Maheep Mandloi from Credit Suisse. Please go ahead with your question. Hey, good evening, and thanks for taking my questions here. Maybe just on the batteries question, just to elaborate on that. Do you see any opportunity for a lower peak kW battery, which is mostly used to, as a rate arbitrage device versus, a full home backup solution? Just any thoughts on that kind of a device which, where you could use your gen two solutions as well? Yeah. I think both Gen 2 and Gen 3. If you look at Gen 3, as Badri mentioned, this is Raghu, by the way, the power is double the max continuous power of the Gen 2 and 3 x the peak power. The peak power, as a reminder, is what gets used to manage, you know, heavy loads during startup times. To answer your question, the power is can be modified. We can set the limits to what the power needs to be in software. What that does is just makes the whole process very efficient for the installer. They have got 1 SKU to purchase. They can install that one SKU, which would be the 5 kWh SKU, and then they can vary the power depending on what the homeowner's needs are, whether that is going to be a NEM 3.0 system, which could be just one battery with a PV system and it happens to be grid-tied, for example, or, you know, 10 kWh of battery that could be providing partial home backup or you could be doing 20 kWh and doing whole home backup. All of that, the beauty of the system is that it's all can be configured in software and gives you tremendous amount of flexibility and simplicity for the installer. Got it. Got it. Just second question from me on ASPs. If you could just talk about how to think about ASP trends here. You talked about inventory being slightly light in Europe, but as we kind of come out through the rest of this year and some of these component shortages and logistic issues slow down, do you expect any reduction in ASPs in Europe or the US markets? Thanks. We don't see any drop in pricing. In fact, you see our gross margin sequentially up a couple of% from Q4 to Q1. Also I broke out the gross margins in Europe because some of you had been asking me. The gross margins in Europe are incredibly healthy. They are over 45%. The gross margin in the US is incredibly healthy. You know, pricing is stable. For us, gross margin means both price as well as cost. We do value-based pricing, which is basically price products based upon the value they bring compared to the next best alternative. Like, you know, in batteries it may be increased power, increased safety. In microinverters it may be increased quality, increased service. That's on the pricing side. On the cost side, we have a world, you know, a task force that runs all the time called world-class costs. We are constantly discovering ways to save, you know, a cent in the microinverter. For example, based on last year's shipments, last year we shipped 15 million microinverters, you know, in 2022. One cent reduction for us means $154,000. It's very important for us. Even $0.01 reduction, even half a cent reduction is important for us, so we take it extremely seriously. On batteries, with the third generation battery, which has got higher modularity, has increased serviceability, now I think we can reduce the overhead contribution and costs to a minimum. On batteries, the gross margin of every generation will get better than the prior generation. Long answer again, but, you know, ASPs, we do not see much change, and our cost programs are going well. Got it. No, appreciate it, and thanks for taking my questions here. Thanks. Our next question comes from Corinne Blanchard from Deutsche Bank. Please go ahead with your question. Hey, thank you for taking my question. Could you comment a little bit on competition in Europe versus China-based company and maybe like the risk of margin erosion in that market? Yeah. This is Raghu again. You know, competition is strong everywhere. It's always been. It's not nothing new, both here in the U.S. as well as in Europe. For us, we are always striving to make sure that we are providing value and providing a highly differentiated solution. If you look at the solutions that we provide, both here as well as the U.S., from a product point of view, I'll talk about other stuff as well. From a product point of view, you know, we are truly a distributed architecture that gives us much better performance, much better reliability. Because it's a low voltage DC system, both solar and batteries, et cetera, it's arguably much safer as well, in addition to being very simple to install, maintain, and manage. The second thing we also look at very closely is that providing very high quality, high reliability products. That's again, a big differentiator, and it starts with the architecture as well as all of the work that we do in delivering a very high quality product. Finally, it's customer service. Just take making sure that, you know, as Badri mentioned, if you look at what our NPS is, look at what our call wait times are. If somebody calls us, you know, we answer the phone immediately. It's one phone call to make because typically they're buying the entire Enphase system. Delivering the best customer experience both for our installer part, for our distributor partners, installer partners, as well as, for the homeowner. For the homeowner, they have just one app to look at, they have the control of their entire system in the palm of their hand. To summarize, it's highly differentiated products, high reliability products, and great customer experience. That's how we manage, that's how we deal with the competition. It's reflected in our pricing and gross margin, as Badri mentioned. Okay. Thank you. A follow-up on a little bit different topic, but coming back to California, you mentioned there's about a three-four months backlog from the push that was done in one Q. I know you do not provide like, you know, further than next quarter guidance, but do you, do you expect like, sequential improvements throughout the year, meaning the second half of the year, better than the first half? Just trying to get a view there. It's hard for me to say right now, but I know that NEM 3.0 has got great fundamentals in California. You know, contrary to what I've, you know, I've read from the reports, you know, it is a change. Selling from NEM 2.0 to NEM 3.0 requires the installers to adapt. Now the storage attached is going to be a lot more. It is a change in selling. It is a change they are not used to yet. The next three- four months will be probably well spent in training the installers on how to sell NEM 3.0, because with NEM 3.0 now, the consumption of the homeowner is important. NEM 3.0 has got tariffs for 24 hours during the day, times 365 days a year, so 8,000+ points, 8,000+ data points. It's very important. Your consumption profile is important. Your savings obviously depends on the consumption profile. We need to make a few things clear to the homeowner, and we need to clearly tell him that basically, you know, him or her, that self-consumption, you know, you're going to do self-consumption most of the time. Which means what? Your consumption is going to be met by either solar and/or storage. During the months of August and September, we have all seen blackouts in California. During the months of August and September, why? Because the demand on the grid is higher than supply. If in August and September, the, you know, under NEM 3.0, you get paid for actually helping the grid. You get paid handsomely. At that time, battery is gonna be your best friend. You're gonna be making a lot of money on batteries. I think, you know, my personal opinion is NEM 3.0, of course, it requires a lot of evangelizing, a lot of selling, but NEM 3.0 will be a catalyst for solar plus storage, like Germany. If you go look at Germany, you know, Germany, the solar market is over 2 GW, maybe 3 GW right now. The attach rate is over 80%. That's a pure self-consumption market. The tariff structure is similar. It's I think the import rate is EUR 0.41 per kWh, and the export is something like EUR 0.11 per kWh. very similar construct. I think the result will be the same. Of course, it's not gonna be overnight. It's gonna take time. great for the long term. Thank you. Our next question comes from Brian Lee from Goldman Sachs. Please go ahead with your question. Hey, Badri and team. thanks for taking the questions. Maybe just to follow up on that one. Just if we drill down on storage specifically, you know, that hasn't really grown here for a number of quarters and you're guiding sequentially down there on shipments. I know NEM 3.0 sounds like you're gonna take a little bit of time to filter through the market, but do you anticipate that your storage volumes will grow sequentially at any point moving through the rest of this year? That'd be my first question, and then I have a follow-up. Yeah. I think the storage volumes are going to go, you know, Q2 is probably the low. They're going to grow from here on, and simply because of one reason. We are going to be introducing batteries to a lot more countries. We just introduced to four countries. You know, and we're going to be introducing the third generation battery in Q2, this quarter. Then we are going to be introducing the third generation battery into multiple countries in Europe. NEM 3.0 is a part of the equation, but not the only thing in the equation. Eventually, the installers are gonna figure out how to sell batteries in rest of the US despite the high interest rates. Like what I said, I think we are turning the corner on batteries. We have understood how to enhance the customer experience. Even our second-generation batteries are best in class right now. The third-generation batteries will obviously make things even better with double the power. You know, double continuous, triple peak. yep. Understood. Q2 is the low point, that's helpful. Just my follow-up would be, I, you know, appreciate the additional commentary about sell-in versus sell-through and providing that context. I was a little bit confused as to, you know, what it means for channel inventory situation and kind of what you're expecting. 'Cause it almost sounds like, you know, with sell-through being down much more than sell-in, that maybe inventory levels in the U.S. are elevated. I know you said it was on battery storage, but not micros. When do you expect maybe sell-in and sell-through to kind of match up more aligned? I guess what is sort of the viewpoint on, you know, whether there's some inventory drawdown that's impacting near-term sort of, you know, volume opportunity? Thanks, guys. If you see mathematics, right? If you see one week of channel inventory equals roughly 7.5%, right? Of the quarter, right? If you split the quarter into 13 weeks, one week is basically 7.5%. If let's say if in one quarter, if the sell-through is, let's say, 15% down, that equates to two weeks of inventory. It is nothing over the top. It is if your normal channel inventory is somewhere around 10 weeks or eight-10 weeks, you know, this would result in a slight instead of eight weeks, you would be at 10 weeks. That's what you're talking about. Now having said that, we expect sequentially better sell-through. You know Q1 is usually bad for sell-through due to a combination of, you know, weather plus now there is a macroeconomic effect on top of it. Q2 is seasonally better, plus with the installers getting a little bit more adjusted to the situation, things are going to be incrementally better in terms of sell-through in Q2 onwards. Okay, appreciate that. Thank you. Our next question comes from Philip Shen from ROTH MKM. Please go ahead with your question. Hey, guys. Thanks for taking my questions. The first one's on pricing as a follow-up to a prior question. You know, our checks suggest pricing through the U.S. resi ecosystem is coming down rapidly. U.S. resi solar module pricing is down 15-30+%. You know, Powerwall pricing is down meaningfully. Some of your inverter peers have lowered inverter pricing. We've heard that you guys may have lowered pricing as well for specific, larger customers on a one-off basis. I think, Badri, you just mentioned that you don't see any drop in pricing, can you give us some more color on how you expect to maintain price, especially in this more difficult environment? Can you talk about price specifically in Q3 and 4? If you expect it to hold, how does it hold? If, if there is some risk, maybe talk about that risk. Thanks. You can see our numbers. Our gross margin is two percentage points better in Q1 than Q4. It basically comes because of our disciplined, you know, pricing management, plus the conversion for us to IQ8. IQ8 comes with an outstanding cost structure. you know, right now we are at 65% converted to IQ8. We expect to be at nearly 90% converted to IQ8 by Q3. you know. We have an active cost reduction, you know, effort going on. Even if we do, you know, one-off deals, for example, in order to, you know, accelerate our market share, these are not going to cause a dent, you know, for us. We expect pricing to be generally stable. The same thing is true on batteries. On batteries, we are learning rapidly. We are learning a lot on costs, especially the overhead costs on the battery returns. The serviceability of batteries are tough if you ask anybody in the industry. I think we are getting better and better at those, basically improving the battery quality by root cause corrective action, by understanding defects, by eliminating the defects, by putting in permanent corrective actions in place. Also, you know, building in serviceability into our new products. Why take down a, you know, $3,000 product from the wall? Why not take down a $40 board from the wall instead? Why not repair it in situ? Why not service, you know, right there in 30 minutes? There's a lot of money to be taken out of batteries from a cost perspective. That's what we are doing. Great. Really appreciate that color. As a follow-up there, Badri, to what degree do you think you may be giving up on some volume? You know, I think Tesla is a string inverter. They're ramping up, and I think they're selling inverters only. Yes, I know your technology is meaningfully better, does many things that they can't do. In this tough economic environment, installers may be prioritizing, you know, costs. You know, with a high gross margin where you are now, you may be able to maintain some share without giving much on price, but still, keeping some of that volume. How, how do you make that trade-off between price and volume as we get through the next few quarters? Yeah, I don't. For me, it is high quality leads to high price. Why? Because it's the entire cost of ownership. Installers have become smarter. Basically, they understand it is not about just the price of the inverter. The time, the money it costs them to go and address a failure is so huge compared to a few dollars more on the inverter for high quality. High quality is what we focus on, and installers have realized that. They are continuing to work with us. You can see the latest EnergySage reports for the data, and the data is there. We don't plan on changing our strategy there. Great. Thank you so much for the color. Our next question comes from Andrew Percoco from Morgan Stanley. Please go ahead with your question. Great. Thanks so much for the time. I just wanted to follow up, Badri, with some of your prepared remarks around the health of the customer base, you know, specifically the long tail. Can you just maybe talk about what you're seeing from some of those customers, talk a little bit about working capital needs? Just when it comes to the financing environment, you know, the confidence level and their ability to get financing. Then maybe on the other side of that, to the extent the core, you know, long tail doesn't perform as expected, what's the optionality to sell to some of the larger players in the market? What might that mean for pricing and margins? Yeah. Just to recap what I said, and it's good for everyone to hear it again, is our overall sell-through of microinverters in the U.S. was 21% lesser in Q1 compared to Q4. California was only 9% out of that because we understand the situation with NEM 2.0. The NEM 2.0 rush basically compensated for any weakness, you know, weakness due to the macro. In the rest of the U.S., the sell-through dropped by 25% compared to Q4. The most notable drops were seen in the states with the lowest utility rates. You know, Texas, Florida, Arizona. Then we did an analysis on, you know, how did the long tail installers do in comparison with the tier 1 and 2 installers. We found in our analysis, the sell-through rate of long-tail installers was quite better compared to the tier 1 and 2 installers. I'm not exactly sure of the reasons. I can only speculate. Maybe they're local. They do a better job of servicing the client. Maybe they deal with high-valued clients. We thought, you know, we thought from the questions we had that the long-tail was gonna be a little more stressed, but we found the opposite in our data. Having said that, I mean, all installers are affected by three things, like what we said. The interest rates are high. That's the first thing. Basically, it's getting, you know, more difficult to. You know, solar with loans is getting a little more difficult to sell. Basically earlier they used to do low APR loans with high dealer fees, and that was common, whether it's long tail or tier one and, yeah, tier one and two installers. Now they are switching to, you know, higher APR with lesser dealer fees, sometimes no dealer fees. The cash flow issue, that is the milestone one payment is a lot reduced now. That's causing stress. You know, our expectation was some of the tier one, two installers may be able to handle that situation better than long tail, but we didn't, you know, the data didn't indicate that. For us, the data said that the long tail is okay, is holding up. We think it is a matter of time. We think the industry as a whole is going to adjust. Of course, there are a few installers who may actually, you know, find it difficult. In general, the industry is going to adjust to the new loan structures. Probably it's a big opportunity for more people to come in to the market to offer loans and leases to long tail installers. You know, leases to long tail installers hasn't been rampant till now, but that's an opportunity that we see already a few players come in. I think it's gonna be interesting to watch the situation in the next few quarters. I think this is a resilient industry, and I believe things are only gonna get better from here. Q1, as I indicated, is usually the worst quarter of the year due to seasonality. That, you know, Q2 is usually a good quarter in terms of seasonality. With the adjustments installers are making in running their business, we expect things to be incrementally better. Got it. That, that's helpful. Maybe just last one from me on NEM 3.0, officially took effect, I guess, a week or so ago. Any kind of first indications from the installers in terms of what they're seeing in terms of, to your point, some of the friction points around quoting and installation? Are they, you know, any indications of how much, growth might slow in California now that it's officially taken effect? I know it's only a weekend, but any color that you have there would be helpful. It's only a week, as you said. We have talked to a number of installers. All of them are optimistic that their solar plus storage business can boom. They are all, we shared Solargraf with them. We shared the designs. We showed them three examples per utility. We showed them how a pure solar case looks. We showed them that solar now in west-facing roofs is not bad. We showed them solar plus storage is actually better than NEM 2.0 or equivalent. Now actually storage has got meaningful savings right now. Earlier with NEM 2.0, storage didn't have value in terms of savings but had a lot of value on resilience. You know, storage provides economic advantage in addition to resilience. Installers are getting it. As I said, they do have a little time on their hands in order to start accelerating the originations. I think, you know, the data is there that supports it. We do expect like in Germany, we do expect grid-tied batteries to become popular too. 'Cause imagine, you have 8 kW solar system. The crew is already there. They're installing the solar system, and all I need to do is to install one of Enphase's 5 kWh battery. That battery is not big. It is small. It can be done very quickly on the wall. There is no partial home, whole home, nothing to worry about. There is no work on the main panel. It's a simple 5 kWh battery. It provides savings right away. You know, selling needs to pick that up. I'm sure they can sell it. Understood. Thanks so much for the time. Thank you. Our next question comes from Jordan Levy from Truist Securities. Please go ahead with your question. Thanks, all. Thanks for all the commentary. Just a quick one, for me to follow up on a question of share. I'm just curious with the EU's Green Deal Industrial Plan, if you've seen any shift in the competitive environment over there, any, you know, pop-ups of mom and pops trying to sell into the market or anything like that. No, we haven't seen. I think the competitive environment is what has been there, and it's consistent. As I, as I mentioned earlier on the call that given our differentiated solution, our reliability, customer service, et cetera, you know, we compete very effectively. I don't think that environment has changed, if I understood your question correctly. Would you say that's true both on the battery and micro side? Yeah, it's a solution play, right? That's the most important. Short answer, yes, it's a solution play. You know, when people buy solar there, if you look at countries like Germany as an example, when they say I'm installing a solar system, what they really mean is they're installing solar and batteries and IQ EV chargers and heat pumps. I think we have to provide the complete solution if you want to be an effective player in, particularly in Europe. Great. Thanks so much for that. Our next question comes from Mark Strouse from JP Morgan. Please go ahead with your question. Yes, good afternoon. Thanks for taking our questions. It getting late in the day here, so I'll just stick to one and take the rest offline. I wanted to come back to the OpEx. The guidance for 2Q is kind of flattish quarter-over-quarter. Just from a high level, not necessarily looking for specific guidance, but from a high level, I mean, to the extent that the macro continues to deteriorate, you know, California transition might take longer than expected, how should we think about OpEx going forward and kind of balancing near-term profitability with, you know, a lot of the investments that you're making in geographic and product expansion and everything else? You should always think about OpEx at 15% of sales. That's the general model. All I said in Q2 that we're not gonna be compromising on innovation, we're not gonna be compromising on international growth. We're gonna make generally the company better in other areas. You know, our baseline is 15%, yeah, of revenue, and we don't plan on exceeding that. Okay, fair enough. Thank you. Our next question comes from Christine Cho from Barclays. Please go ahead with your question. Thank you for taking my questions. For the U.S. manufacturing, I think you guys just said, in your prepared remarks, shipments should be $4.5 million per quarter by the end of 2024, assuming robust demand in the U.S. In the event that your U.S. demand is less than that, would you still want to utilize that capacity and export the product and back out some of your production elsewhere? How should we think about that? Yeah, we will most likely do that. You know, we don't do things just for profitability. We do have contract manufacturing plants that are worldwide. We have worked hard to establish a balanced manufacturing strategy. We just need to be careful in looking through and making sure that we make the best decision for both profitability and balancing manufacturing. Okay. Then, you know, on the IQ8 rollout, you know, that's been slower than expected. Could you just go into some more detail into what's driving that? Is it on the supply side with any of the components, or is it on the demand side as customers sound like they've had to work through inventory, you know, over the last quarter or two? I think on the last quarter call you said you expected it to jump to 80% in 2Q. Is that still the expectation? Then just with the gross margins, you know, it's very high this quarter and, you know, the IQ8 drove that, but your 2Q guidance is lower and batteries are lower, so that's gonna be less of a drag. Is this just conservatism or is there anything one-off that we should be aware about in 1Q or 2Q? There's nothing one-off. You're right. We are originally I thought 90% by Q2. Last earnings call, I told you 90% by Q3. That's the number, 90% by Q3. 80% by Q2 will be okay. We are, for example, in Europe, 50% of our volumes are IQ8 right now. Right now. We are introducing IQ8 to many more countries as we speak. Yesterday we introduced IQ8s to Spain and Portugal. Soon we will introduce to Poland, Germany, et cetera. We plan on doing the bulk of those introductions in this quarter, most of them. There will be some spillover in Q3 for a few, but we very much want to achieve 90% in Q3. That's our target. Our next question comes from Kashy Harrison from Piper Sandler. Please go ahead with your question. Good afternoon. Just one quick one from me. You know, you're currently sitting on, call it $600 million of net cash, generated around $225 million of free cash flow during the quarter. Just wondering, you know, what your thoughts are on using the free cash generated this year to perhaps more aggressively repurchase stock. Thank you. I mean, we have stated our strategy. It is unchanged. Basically, first make sure that we have plenty of cash for the needs of the business. The capital that we need for, you know, our portion of U.S. manufacturing, et cetera, we're doing exactly that. The next one we look at is we look at are there any, you know, M&As that we should be taking advantage of now. We look at a number of companies on a weekly basis, in the areas of batteries, even in power conversion, in software, in home energy management, EV charging. We look at many areas and, you know. That's the second priority. The third one is if we basically, you know, if we have cash left over from number one and number two, we will buy back stock assuming the share price, you know, is below a conservatively, you know, estimated intrinsic value. We will do that. Our board looks at it very carefully and, you know. That's our strategy. Thank you. Our next question comes from Eric Stine from Craig-Hallum. Please go ahead with your question. Hi, everyone, one here at the end from me. You know, I know lot of moving parts. You've got a big revenue range on one hand, less seasonality on the other. Channel inventory that you've detailed. You know, I'm just curious if you'd be willing to, you know, kind of go through a scenario that gets you to the high end of that revenue range and a scenario that gets you to the low end of that range, and maybe how that breaks down between the U.S. and international. Yeah. I mean, we are pretty conservative when it comes to our guidance. You should see our track record in general. We do have, like what I said, we do have a lot of, you know, dry powder in terms of new products. This year is the year of new products, we are going to be releasing new products constantly. We think, other than the base business which we guided on in Q2, there is a lot more to come there. Our guidance is a little bit wider this time, you know, plus minus $25 million. It is to reflect a slightly more uncertainty compared to the last time. Our U.S., you know, our Europe business is doing incredibly well. You know, we grew 25% in one quarter from Q4 to Q1. We doubled from 2020 to 2021. From 2021 to 2022, we grew 132%. I just released my annual letter yesterday. You can see that. 132% growth from 2021 to 2022. Europe is doing incredibly well for us. We are focused on entering a lot more countries there. We are focused on IQ8 microinverters. We're focused on IQ batteries. You know, lots of regions, big market, over 10 GW, you know, compared to the US, which is 5 GW right now. You know, bottom line, we are pretty conservative. Got it. I mean, you do have the wide range, but it did seem in your commentary that you do expect improvement versus the first quarter. Is it fair to say that, you know, your expectation would be the top half of that range? I mean, we give guidance. We give guidance, 700-750, you know, there's nothing else for us. We cannot say we are in the top half of the range. Okay. Got it. Thank you. Our next question comes from Joseph Osha from Guggenheim Securities. Please go ahead with your question. Yeah. Hey there. I just wanted to return to some of the mechanics around the ramp of onshore manufacturing. You know, Mandy said, you know, 50,000 units this quarter, and then two lines by the end of the year. My first question is, does that 50,000 mean manufactured or shipped for revenue? Secondly, looking at the end of the year, just wondering if you can tie those comments back to maybe a unit number or a run rate at the end of 2023, not 2024. Thank you. Yeah. 50,000 microinverters shipped to customers. That's what we talk about. Okay. We always talk about shipments. All right. You should take that number. You should take 4.5 million unit number by end of 2024. You can do some kind of an interpolation. You can work with us and, you know, linear interpolation may be fine too. Okay. All right. Probably even a sell side analyst can handle that math. You're not giving me a, you're not giving me a specific number for end of 23 at the moment, right? Yes. Like what you said, Dana, you can really calculate it. Okay. All righty. Thank you. Our next question comes from Julien Dumoulin-Smith from Bank of America. Please go ahead with your question. Excellent. Thank you, guys. Good afternoon. I'll make it quick here. just with respect to the commentary on temporary impacts, I just wanna clarify that super quickly. obviously, you've got this NEM dynamic for the next two quarters or so as you deal with the origination on NEM 2.0. How do you think about that squaring up against this temporary impact on installations? I know you commented earlier there's a transition period on sales. How much of a non-California improvement are you guys thinking about, especially in the back half of the year as NEM 3.0 kind of rolls in more meaningfully? I mean, we cannot predict what is, what is gonna be in the back half. All I know is Q1 is supposed to be seasonally, you know, a tough quarter. On top of it, in Q1, installers had to face all of these uncertainties for the, for the first time. Q1 as well as probably Q4 a little bit. I think we said, and we hope this is true, is, installers are going to adjust. Everybody's going to adjust. You know, of course, as long as interest rates are so high, we cannot, you know, we're not saying that the numbers are gonna return to back to where it were. You know, there is gonna be stress on those numbers because interest rates are high. There are gonna be some innovation in financing, innovation in loans, innovation in leases that are going to come. It's gonna provide more access to our long tail installers. The demand will unleash only when the interest rates are back to normal. You know, until then, it'll get incrementally better, you know, compared to Q1. There are things that we control, we can control, right? For example, helping our installer partners, training them on how to sell NEM 3.0, NEM 3.0 systems. That is where Solargraf plays a very key role in helping them to show exactly how easy it would be to build an NEM 3.0 system with our R3 battery and show the payback period and bill offsets, et cetera, and how to sell that to the homeowners. That we are doing right now as we speak. I think there are things that we control, and then there are the macroeconomic trends and, you know, there'll be people who will be, as Raghu Belur mentioned, innovating on the finance side. When you said temporary here and demand being down, just to clarify that super quickly. I know you only guide one quarter forward. I'm just trying to understand how temporary? What we said is in California, the point of sales, which is sell-through data, didn't show as much decline because in California, the installers have their hands full with NEM 2.0 installations for the next three-four months. Now in this time, which is when the originations are happening for NEM 3.0, this is the time where we are working with those installers and helping them understand and pitch the value of NEM 3.0 to homeowners. That's in California. Outside California, the situation is purely dominated by high interest rate environment. There we are talking about installers, first of all, getting used to working with reduced cash flow, number 1. Innovation on loans, which is they need to start selling high APR loans with lesser dealer fee. Lease, you know, people offering leases to long tail installers. Those innovations will, you know. We expect those innovations to start to come. Like what I told you know, the demand will get unleashed to its original levels when the interest rates come back to normal. Until then, we expect the sell-through in non-California states to incrementally improve as installers get used to the situation. That's what we said. Excellent. Thank you, guys. Our next question comes from Pavel Molchanov from Raymond James. Please go ahead with your question. Thanks for taking the question. Just one from me. In the 10-Q, you broke out revenue between products and services, and this may have been the first time you're doing that. Should we look at that $24 million service line as essentially the software slice of the revenue mix, or does that signify something else? We'll give you more color on those, basically maybe in the after calls. We wanted to break down some of the software acquisitions. We have done a few acquisitions on the installer platform. We have done a few on the EV charging side as well. Just to remind you, we have, you know, starting with the front end, lead generation, we acquired a company called SolarLeadFactory that basically helps in providing leads to installers. With that company, we are able to at least understand a little bit the origination side of things. The name of the game for us there is to, you know, lead quality is a very big pain point for the industry. You know, the statistics on leads are pretty bad, which is of every 100 leads that are sold, only 2 leads or 3 leads go and become a contract. We would like to change that by software, by making sure that, you know, that experience on lead management is done right to take that 2% or 3% number to a 10% number. That's the first acquisition. The second acquisition is Solargraf. Solargraf is design and proposal. Design and proposal means you have a home energy management system that consists of solar, storage, IQ EV Charger, and, you know, especially as the tariffs get complex, it becomes difficult for anybody to estimate your savings. It is vital that there is software that basically estimates, you know, what a homeowner can save and provide him most accurate payback calculations depending on his consumption. That's Solargraf, and that is now helping us a lot. 1,000 installers are using it with NEM 3.0. It is helping us to sell the NEM 3.0 more clearly to our installers and show them the value of a solar plus storage system. That's the second one that we bought. That's, you know, Solargraf design and proposal software. The third one is permitting services. Installers have to submit a lot of paperwork in order to submit to the local AHJ. Our thought is making that process entirely seamless through software. It should not take more than an hour after they submit us, meaning it should take a maximum of an hour, you know, there should be manual checks, but nothing manual about it. We are taking that acquisition, and we are driving it to fully automated permit plan set creation. That's number three. On the platform side, we already do the monitoring. We already have a commissioning app, et cetera. That's homegrown. I'm not gonna talk about that. The last bit is basically O&M. O&M is operations and maintenance. Here, I mean, the term is kind of a misnomer, but this company, we bought 365 Pronto. They basically have a marketplace. Once again, software company. One end of the marketplace are customers who want to do an O&M, who want an O&M job to be done. The other side of the marketplace are service technicians or installers who are capable of doing that job. There is, you know, maybe 300+ installers logging in on the other side, and there is people submitting O&M jobs. We try to match the two, and once again, it is a software play and can be effective for a lot of jobs. Like for example, replacing a main panel, like installing your EV Charger. You know, there was a drive to cellular modems, 3G going away and, you know, 4G coming in. Jobs like that, which the installers really don't have an extended crew, 365 Pronto is their extended crew. They come in, they basically pay us a service charge, and they get their jobs done. A lot of companies there, that's our digital platform. All of them are catered towards servicing our installers. It's to make installers' lives easier. We'll work with you to explain it a little better. Very, very useful context. Appreciate that. Thank you. Our next question comes from Jeff Osborne from TD Cowen. Please go ahead with your question. Hey, Badri. thanks for squeezing me in. Just two quick ones. Given the channel inventory is somewhat normalized, and I imagine your lead times are down, I was just curious what level of visibility you folks are getting from the distributors, and if that's changed. Yeah, as you can imagine, when in good times, we will have nine-month visibility. In bad times, we will have approximately three-month visibility. Those are the ranges. Got it. I think in the prior several earnings calls, you had talked about being booked above the high end of guidance in response to, I think, Joseph Osha's question. Forget who it was that asked, but is that not the case anymore? I mean, I am not saying that, you know, we have to be sensitive to installers. we, you know, even though our orders are non-cancelable, you know, for that quarter, you know, the installer situation, considering their cash situation is important. you know, we might accommodate, push out, you know, push out requests, et cetera. that's why even if we are fully booked, I don't, you know, I didn't, you know, I answered his question that way. Got it. Thank you. That's all. Our next question comes from Sophie Karp from KeyBank. Please go ahead with your question. Hi, thank you for taking my question as well. I wanted to ask you about kind of California versus the rest of the country, where the challenges are distinctly different, and these seems like in California it's transition to NEM and rest of the country is more about interest rates and versus utility rates equation. If you were to kinda speculate about where you're gonna see the most meaningful improvement as it relates to your business in the second half of the year, would that kinda driver be the rest of the country or California kinda adjusting to new, the new NEM regime that is gonna pull you forward a little bit? Thank you. A hard question for me to answer. I expect the rest of the country to get incrementally better, as we go. I do expect, you know, I do see NEM 3.0. I do see that there is a simple, clear value proposition. I do see California having very high utility rates. I do see a clear payback of 6 to 8 years with solar plus storage. But I also do see a time, you know, it'll take us some time, maybe not much, to train installers in order to sell NEM 3.0. I'm optimistic on both fronts, actually. Okay. If I may, on the battery, like the third generation battery, was it fair to say that this is gonna be the main product for California market? At this point, are you still training installers to use the current generation of the battery? Just kinda curious how you think about this, like, double transitioning, if you will, right? The new NEM regime and the new battery that's like, we're just start training them on the new generation of battery 'cause it's a high value proposition product, or how should we think about the timing of this? Right. Both batteries are equally good in terms of quality, in terms of commissioning now, in terms of performance. The nice thing about the generation 3 is the double, the continuous power. What happens because of that, it allows you to export the same amount of energy in half the time. Therefore, when you have, for example, when you have 1 particular hour in California where your rates are gonna be high, you maximize it with our battery. Yes, to answer the question, over the long term, I would expect this battery with the high charging rate to uniquely help California. Okay. Thank you. Thank you. Our next question comes from Biju Perincheril from Susquehanna. Please go ahead with your question. Thanks. Thanks for taking my question. Badri, you have some internal sort of top of the funnel indicators from the software platform that you just went through. Can you sort of talk about the trends that you are seeing from there, in as far as solar demand is concerned? Yeah, I mean, we usually talk about them if they are meaningful enough. You know, right now our Solargraf platform, it is over 1,000 installers. We'll break out a lot more trends as we go through the year, but it's safe to say that, you know, that platform showed, I'm not sure how statistically representative that is, but that platform did show the originations in California for Q1 were quite high. It also showed that the originations outside California in Q1 was a little better than Q4. Ladies and gentlemen, with that, we'll be concluding today's question and answer session. I would like to turn the conference call back over to Badri Kothandaraman for any closing remarks. Thank you for joining us today and for your continued support of Enphase. We look forward to speaking with you again next quarter. Bye. Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining today's conference call. You may now disconnect.