Good day and welcome to the Enphase Energy Q2 2024 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 remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Zach Friedman. Please go ahead. Good afternoon and thank you for joining us on today's conference call to discuss Enphase Energy Q2 2024 results. On today's call are Badri Kothandaraman, our President and Chief Executive Officer; Mandy Yang, our Chief Financial Officer; and Raghuveer Belur, our Chief Products Officer. After the market closed today, Enphase issued a press release announcing the results for its Q2 ended June 3rd, 2024. During this conference call, Enphase management will make forward-looking statements including, but not limited to, statements related to our expected future financial performance, market trends, 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 introductions. And regulatory and tax 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. Also, 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, which can also be found in the investor relations section of our website. Now I'd like to introduce Badri Kothandaraman, our President and Chief Executive Officer. Badri. Good afternoon and thanks for joining us today to discuss our Q2 2024 results. We reported quarterly revenue of $303.5 million, shipped approximately 1.4 million microinverters and 120 MWh of batteries, and generated free cash flow of $117.4 million. The end market demand for our products was approximately $396 million in Q2, and we reduced our channel inventory by approximately $92 million. Our overall channel inventory returned to normal levels as we exited Q2. For the Q2, we delivered 47% gross margin, 27% operating expenses, and 20% operating income, all as a percentage of revenue on a non-GAAP basis and including the net IRA benefit. Mandy will go into our financials later in the call. Let's discuss how we are servicing customers. Our worldwide NPS was 79% in Q2, up from 78% in Q1. Our average call wait time was 2.5 minutes in Q2 compared to 1.9 minutes in Q1. We have several AI and machine learning initiatives to drive automation and further reduce wait times. Let's talk about operations. Our global capacity is around 7.25 million microinverters per quarter. 5 million units of those are in the U.S. In Q2, we shipped approximately 574,000 microinverters from our U.S. contract manufacturing facilities that we booked for 45X production tax credits. We expect to ship approximately 1.1 million microinverters from our U.S. facilities in Q3. Our U.S.-made IQ8 Microinverters can help lease/PPA and commercial asset owners qualify for the 10% domestic content ITC adder. I'll discuss more on this later in the call. For batteries, our cell pack suppliers in China have sufficient capacity to support our ramp-up in 2024. We also plan to manufacture batteries in the U.S. starting in Q4 with power conversion, battery management, and enclosures made domestically while using cell packs from China. Let's cover the regions. Our U.S. and international revenue mix for Q2 was 65% and 35% respectively. For more visibility into our business, we are providing regional breakdown and sell-through dollar metrics for Q2. With our channel normalized, we will not be providing detailed sell-through statistics going forward. In the U.S., our revenue increased 32% compared to Q1. The overall sell-through of our products in the U.S. was up 8% in Q2 compared to Q1. Let's discuss the market trends in the U.S. split by non-California states and California. For non-California states, our overall sell-through was up 7% in Q2 compared to Q1. The sell-through for microinverters was up 6%, and the sell-through for batteries was up 10%. In California, our overall sell-through was up 7% in Q2 compared to Q1, indicating that our California business has stabilized. The sell-through of our microinverters was flat, and the sell-through of our batteries was up 14% in Q2 due to the high NEM 3.0 battery attach rates. I'll provide more statistics on NEM 3.0 later in the call. In Europe, our revenue was flat in Q2 compared to Q1. The overall sell-through of our products in Europe was up 3% in Q2 compared to Q1. The sell-through of our microinverters was flat, and the sell-through of our batteries was up 18% in Q2. I'll provide color on some key markets in Europe: the Netherlands, France, and Germany. In the Netherlands, our overall sell-through was down 15% in Q2 compared to Q1. The country's solar demand continues to be challenged by regulatory uncertainty. However, we are beginning to see battery demand pick up. This is a trend we expect to continue, especially as dynamic electricity rates become more prevalent in the Netherlands. We launched our IQ Energy Management software in the Netherlands during Q2. That will allow our installer to offer an Enphase system that can deliver healthy payback even without NEM. The modularity of our batteries allows homeowners to start either with a 3.5 or 5-kWh battery along with their solar systems, making the economics work well. In France, the overall sell-through in Q2 was flat compared to Q1. We recently launched our third-generation battery in France and expect that s olar-p lus- storage system will become increasingly important for this market as the spread between retail electricity rates and feed-in tariff widens. We expect to introduce IQ EV Chargers and IQ Energy Management software in France later in the year. In Germany, our overall sell-through in Q2 was up 7% compared to Q1, building on the growth we reported in the previous earnings call. In June, at Intersolar Munich, we unveiled some exciting products: our three-phase battery backup solution for Germany, Austria, and Switzerland that will increase our served-available market. In addition, we showcased our IQ Balcony Solar Kit, which will also increase our served-available market in Germany by approximately 400 MW a year. We believe Enphase microinverters are ideal for these small systems, and we plan to roll out the balcony solution throughout Europe in the coming quarters. A general comment about Europe: we are still under-penetrated in markets like the U.K., Italy, Spain, Belgium, Luxembourg, Switzerland, Austria, Sweden, and more. Each country has its own challenges and opportunities, but homeowners increasingly seek safety, high quality, savings, and an all-in-one app experience from their home energy system, which aligns well with our strengths. We plan to introduce our entire product portfolio: IQ Microinverters, batteries, IQ EV Chargers, IQ Energy Management software, and the Solargraf installer platform across more European countries and scale our sales and support accordingly. Let's come to Asia. We are making incremental progress in Asia. Our revenue in India, although small, has doubled from a year ago with the introduction of the IQ8 family of Microinverters. We are gaining solid traction in Thailand and the Philippines, where quality and safety are highly valued. In Brazil, we have a good team in place. We work with approximately 600 long-tail installers through the help of some good distribution partners. We are currently shipping our 480-watt IQ8P microinverters into these emerging residential markets to support newer high-power panels. In Australia, there is interest in our Enphase Energy System powered by IQ microinverters and the third-generation battery. We introduced this product approximately a year ago. Later this year, we will be introducing more products into Australia, including the IQ8X microinverters for higher DC input voltage panels and grid-tied batteries. Let me come to NEM 3.0 and provide some statistics there. As I said before, the end customer demand in California for us has stabilized in the Q2. As of last week, 60% of our California installations were NEM 3.0. These systems have a high battery attach rate, over 90%, compared to NEM 2.0 systems, which have an attach rate of 15%. Our data also shows that half of our NEM 3.0 systems are using Enphase batteries, consistent with what I have reported in the last few earnings calls. Taking this data into account, our average revenue per NEM 3.0 system is approximately 1.5x the average NEM 2.0 system. We believe this will contribute to stabilizing our California revenue in the back half of the year. Let me say a few words about market share. In the U.S., our microinverters and batteries have stable market share according to both internal and third-party data. As batteries become more common in California, there is some interest in a centralized inverter solution. Our success continues to be driven by our unique AC-coupled architecture, which offers significant advantages over legacy string inverter systems in terms of performance, reliability, and safety. We strongly believe in this value proposition. Our system will become even easier and faster to install for backup applications with further improvements we are making to our balancer system. They include our IQ Meter Collar, our fourth generation 10 kWh battery, and the enhanced IQ Combiner, which are all expected to be available in early 2025. Additionally, we believe our AI-based software is essential for helping homeowners maximize savings with a complex tariff structure like NEM 3. Let's come to our Q3 guidance. We are guiding revenue in the range of $370 million-$410 million. We expect to ship between 160-180 MWh of IQ batteries. We anticipate incremental improvement in our U.S. business and a seasonal slowdown in Europe. We are over 85% booked to the midpoint of our overall revenue guidance. This is the healthiest backlog position we have had in the last year. Let's talk about new products, starting with IQ batteries. Our third-generation IQ batteries have been well received, and we have almost converted to the third-generation battery right now. It offers an industry-leading 15-year warranty with differentiated quality, serviceability, modularity, and power capability. We have expanded the IQ Battery 5P, our third-generation battery, into more countries in North America and Europe. We recently started shipping to customers in Canada, Mexico, France, the Netherlands, and Luxembourg. We plan to pilot our fourth generation battery in the U.S. later in the year and begin production in early 2025. This new battery will feature a better cost structure and a smaller form factor thanks to its integrated battery management and power conversion architecture. Additionally, the IQ Meter Collar and the enhanced IQ Combiner will be introduced along with the fourth generation battery to reduce our balancer system cost. As previously mentioned, we have expanded into many new markets with the IQ8 family of microinverters and are now present in 43 countries. We plan to enter many more new countries by the end of the year. We aim to further increase our served-available market by simplifying installations of small solar systems and social housing and rolling out balcony solar solutions to more European countries, starting with Germany. The other variant of IQ8P microinverter with a new three-phase cabling system is well suited for small commercial solar installations ranging from 20-200 kW. We launched this product in North America in December last year and have installed over 200 sites with an average of 45 kW of solar per site. The feedback of this product has been quite positive, and we expect the growth to accelerate in the coming quarters. We recently began shipping IQ8P commercial microinverters from our contract manufacturing facility in Texas. We are now producing both residential and commercial microinverters from our U.S. manufacturing facility. Some of our U.S.-made microinverter SKUs, which, when paired with select U.S.-made solar racking equipment, can allow lease, PPA, and commercial asset owners to qualify for the domestic content bonus credit. This credit is valuable for customers at 10% of the overall project cost. We think this will be a good opportunity for us on both microinverters and batteries. Let me provide an update on IQ9 microinverters with gallium nitride. The IQ9 family will support higher DC input currents up to 18 amperes and higher AC grid voltages, including 480 volts for the small commercial market, which is a brand new market for us. Using gallium nitride high-voltage transistors, these microinverters will deliver higher output power at lower cost. We are on track to launch this product in 2025. Let's discuss EV charging. We showcased our upcoming EV Charger for Europe at Intersolar Munich in June. The charger offers a 22-kW three-phase option and an 11-kW single-phase option. It integrates seamlessly with Enphase solar and batteries, allowing homeowners to optimize costs by using excess solar energy. Green charging, or charging from solar, is what it's called. Other key features include dynamic phase switching from single-phase to three-phase and vice versa, an MID meter for a few countries, ISO 15118 support to talk to the car, OCPP cloud software support, and 1 ampere fine-grained current control to maximize green charging. We plan to introduce this charger in many European countries later in the year. Additionally, we recently launched our most powerful CS-100 EV Charger for commercial fleet electric vehicles in the U.S. Our team is developing a bidirectional EV Charger that will enable V2H and V2G capabilities as part of the Enphase system. The charger will feature modular GaN-based bidirectional inverters, providing up to 11 kW for single-phase applications and 22 kW for three-phase applications. The charger will be compatible with both 400-volt and 800-volt electric vehicles. We are targeting to release this product in late 2025. Let's now cover our IQ Energy Management software. Our software is rapidly evolving to handle the growing complexity of energy markets by using AI and ML for forecasting and optimization. We train our AI models with data from over 4 million systems. In Q2, we launched our latest software in the Netherlands and Belgium to manage dynamic electricity rates, helping homeowners maximize ROI and reduce payback periods as electricity prices fluctuate hourly. We see AI as a crucial technology to scale and enhance our products and services. Let's discuss our installer platform. We recently introduced SolarGraph, our design, proposal, and permitting software platform, to the Netherlands. With built-in support for dynamic electricity rates, SolarGraph software delivers the financial calculations that address the complexities of energy markets in the Netherlands. SolarGraph is also available to residential and commercial installers in the U.S., Canada, Brazil, Germany, and Austria, and we expect to release it to many countries in the coming quarters. Let me conclude. We remain dedicated to delivering best-in-class home energy systems with a strong focus on innovation, quality, and customer experience. Over the last year, we have significantly expanded our global reach and have an exciting pipeline of new products set to launch worldwide in the coming year. We have successfully normalized our channel inventory by the end of Q2. Our customer demand has increased by 5% in Q2 as compared to Q1. Our battery business is also doing very well with growth from quarter to quarter. Our bookings in Q3 are the healthiest that they have been in a year. Our early commitment to U.S. manufacturing is positioning us well with lease, PPA, and commercial asset owners. We also expect the Fed to lower interest rates later in the year, improving solar economics for the U.S. consumers. Our efforts to capture market share in Europe and other international regions are also promising. Despite continued macroeconomic challenges, we are confident in our revenue recovery and remain bullish about our long-term growth prospects. With that, I will turn the call over to Mandy for her review of our finances. Mandy? Thanks, Badri, and good afternoon, everyone. I will provide more details related to our Q2 2024 financial results, as well as our business outlook for the Q3 2024. 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 Q2 was $303.5 million. We shipped approximately 608.3 MW-DC of microinverters and 120.2 MWh of IQ batteries in the quarter. Non-GAAP gross margin for Q2 was 47.1%, compared to 46.2% in Q1. GAAP gross margin was 45.2% for Q2. Non-GAAP gross margin without net IRA benefit for Q2 was 41%, flat from Q1. GAAP and non-GAAP gross margin for Q2 included $18.4 million of net IRA benefit. Non-GAAP operating expenses were $81.7 million for Q2, compared to $82.6 million for Q1. We continue to invest in new products, customer service, and sales. GAAP operating expenses were $135.4 million for Q2, compared to $144.6 million for Q1. GAAP operating expenses for Q2 included $49 million of stock-based compensation expenses, $3.5 million of amortization for acquiring tangible assets, and $1.2 million of restructuring and asset impairment charges. On a non-GAAP basis, income from operations for Q2 was $61.1 million, compared to $39 million for Q1. On a GAAP basis, income from operations was $1.8 million for Q2, compared to a loss of $29.1 million for Q1. On a non-GAAP basis, net income for Q2 was $58.8 million, compared to $48 million for Q1. This resulted in non-GAAP diluted earnings per share of $0.43 for Q2, compared to $0.35 for Q1. GAAP net income for Q2 was $10.8 million, compared to GAAP net loss of $16.1 million for Q1. This resulted in GAAP diluted earnings per share of $0.08 for Q2, compared to GAAP diluted loss per share of $0.12 for Q1. We exited Q2 with a total cash, cash equivalents, and marketable securities balance of $1.65 billion, compared to $1.63 billion at the end of Q1. As part of our $1 billion share repurchase program authorized by our board of directors in July 2023, we repurchased 891,896 shares of our common stock in Q2 at an average price of $112.02 per share for a total of approximately $100 million. We have $648.1 million remaining for further share repurchases. In addition, we spent approximately $7.5 million by withholding shares to cover taxes for employee stock vesting and options in Q2. That reduced the diluted shares by 66,126 shares. We expect to continue this anti-dilution plan. In Q2, we generated $127 million in cash flow from operations and $117.4 million in free cash flow due to our strong working capital management. Capital expenditure was $9.6 million for Q2, compared to $7.4 million for Q1. Capital expenditure increased due to an increase in our U.S. manufacturing spending. Now let's discuss our outlook for the Q3 of 2024. We expect our revenue for Q3 to be within a range of $370 million-$410 million, which includes shipments of 160-180 MWh of IQ batteries. We expect GAAP gross margin to be within a range of 45%-48%. We expect non-GAAP gross margin to be within a range of 47%-50% with net IRA benefit and 39%-42% before net IRA benefit. Non-GAAP gross margin includes stock-based compensation expense and acquisition-related amortization. We expect the net IRA benefit to be between $30 million-$33 million on estimated shipments of 1.1 million units of U.S.-made microinverters in Q3. We expect our GAAP operating expenses to be within a range of $138 million-$142 million, including approximately $59 million estimated for stock-based compensation expense, acquisition-related amortization, and restructuring. We expect our non-GAAP operating expenses to be within a range of $79 million-$83 million. We expect our GAAP and non-GAAP annualized effective tax rate, excluding discrete items for 2024, to be at 18% ±1% with net IRA benefit. With that, I'll open the line for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press stars and 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press stars and 2. We ask that you please limit yourself to one question and one follow-up question, and you may re-queue for additional questions. At this time, we'll pause momentarily for the first question. Our first question today will come from Philip Shen with Roth Capital Partners. Please go ahead. Hi, everyone. Thanks for taking my questions. First one here on sell-through. Q2 was $396 million. The midpoint of your Q3 guide is $390 million, but batteries are up meaningfully. So I was wondering if you could share what you expect the sell-through to be in Q3. Can you confirm there's no destocking in Q3? And then when do you expect to return to the $450 million-$500 million of normalized revenue? Is it still on the table for back half, or is it potentially more in 2025? Thanks. Yeah. There is no destocking for Q3. And then on the, you should always now think about us as achieving balance between sell-in and sell-through. In other words, we only need to report under shipment or over shipment if we do not have a balance. So now going forward, the channel is balanced, and we are in good shape. So answering your question on the $450 million, we are very optimistic. As you can see, our sell-in revenue in Q2 was $303.5 million. Our sell-in revenue at the midpoint of guidance for Q3 is $390 million. That's a good growth rate, and we are extremely optimistic. So like what I talked about, we have successfully normalized our channel inventory. Our battery business is very healthy. We went from 75.5 million or 75.5 MWh in Q1 to 120 MWh in Q2. Now we are guiding 160 MWh -180 MWh in Q3. California is contributing to it in addition to the other regions. Like what I said, our customer demand in Q2 increased by 5% as compared to Q1. So we are building in a little bit of conservatism there and building in some potential risks into our guidance. That's why we gave you $370-$410. Our Q3 bookings are the healthiest they have been in a year. I told you about over 85% bookings, and that too after removing a bunch of risks that we evaluate continuously on a worldwide basis. Our early commitment to U.S. manufacturing is positioning us well with the lease/PPA and commercial asset owners. This is a definite bluebird for Q4. We expect the Fed to lower interest rates later in the year. So that will also be a tailwind, improving solar economics for U.S. consumers. Our efforts to capture market share in Europe, like what I said, Europe, Q3, there is seasonality. But like what I said, we are under-penetrated in Europe. There are so many countries where we are making good progress. So we feel very optimistic about growth in Q4. And our next question will come from Mark Strouse with J.P. Morgan. Go ahead. Yes. Good afternoon. Thank you very much for taking our questions. So your gross margins continue to be very resilient. I remember leading up to the micro manufacturing, getting ready to scale, you gave guidance as far as kind of the split of the 45X tax credit that you thought you could keep. I'm curious on two things. On the battery side, as that gets ready to ramp in the U.S., if you can give us a split of what that credit might look like for you. Excuse me, with the domestic content, ITC adder language being out there, if a customer is going to get an incremental $0.30-$0.40 per watt, how much of that do you think that Enphase could potentially keep versus passing on to the customer to stimulate demand? Just any pricing strategy comments would be helpful. Thank you. Right. Basically, the first question, we work on gross margins a lot. We have a cost reduction program that is going on continuously for microinverters and batteries. We are making a lot of progress in it. I expect our non-GAAP gross margins without IRA to continuously improve. I'll tell you, the dynamics in the battery business are the cell pack prices are going down. We are making our microinverters, starting to make our microinverters for batteries in the U.S. We are also making some fundamental changes in the architecture and going from the third generation to the fourth generation. Additionally, even in the third generation, the serviceability of the batteries and the system controllers for backup is approximately 90%. 90% serviceability means that you do not need to take batteries off the wall. You basically service them in situ, which means very often a problem becomes simply replacing a board that may be worth only $50 and not taking out a $5,000 battery. That's the advantage of our architecture. It is easily serviceable, and we have made it modular. So gross margins, actually, we are very bullish on gross margins, both with and without IRA. As far as your question on IRA, most of the IRA benefit for us comes from microinverters. We are only now starting to ramp on our batteries. The microinverters inside the batteries are increasingly made in the U.S. Last question is the benefits. It is too early to talk about it. The good news is we have our act together on the domestic content. We are talking to everybody that matters, and we are working out the details with them. Our intention is that this entire incentive may be a good thing ultimately for the end consumer. And I'm not sure what the plans of several lease and PPA providers are, whether they're going to keep it for themselves or are they going to pass it down. I'm sure it is a mix. As far as we are concerned, I mean, we will be for us, it involves setting up even more factories. For example, previously, we weren't manufacturing the enclosure for the microinverters in the U.S. Now we are going to be manufacturing that enclosure in the U.S. We are setting up factories, and we basically will be looking to charge for value. But this is a good thing for the end consumer, especially with incentives we are talking about in the range of $0.40 a watt, which is 10% of project cost. The next question will come from Brian Lee with Goldman Sachs. Please go ahead. Hey, guys. Good afternoon. Thanks for taking the questions. Maybe this is for either Badri or Raghu. Can you talk about the competitive landscape at all? Just thoughts around some reports, Tesla Powerwall 3 gaining traction, and then maybe on the flip side, your most direct MLPE peer having some struggles. Just kind of what's the market share landscape looking like for you? Are you gaining some traction? And then secondarily, as we think about Q4, just some of the moving pieces, is it fair to assume battery shipments continue to grow sequentially into Q4? Badri, you mentioned Europe is seasonal in Q3, but do we take that to mean that it bounces back in Q4? And then can you talk at all about kind of the domestic content demand you are seeing, if you can quantify at all what uplift you might see in Q4? Thanks, guys. Got it. I'm going to give some detailed color on competitive situation, and then Raghu will add more. For the people who did not listen to my prepared remarks, our installers are steadily ramping on NEM 3.0. And we're talking primarily about California here. The battery attach in California is increasing. Our numbers, like what I said, overall, overall worldwide shipments were 75.5 MWh in Q1, growing to 120 MWh in Q2, and guiding 160 MWh-180 MWh in Q3. So battery attach, and a lot of it is coming from California indeed. California, as of last week, 60% of our installations happening. So this is brand new data, fresh data. And we do a lot of installations per week. So this is important. 60% is NEM 3.0, 40% is NEM 2.0. Battery attach, we are noticing, is obviously very high for NEM 3.0, greater than 90% compared to NEM 2.0. The good news is half of our NEM 3.0 solar is still attached to Enphase batteries. This data has been consistent for the last two or three quarters. One more point for you to note is we provide a strong value proposition for grid-type batteries. This data I did not say in the prepared remarks, but our NEM 3.0 batteries, over 70% are grid-tied. Our grid-tied batteries are very easy to install. Many customers just prefer two 5 kWh batteries. No extra balance of system. No complexity. The existing combiner box can be used. We have something called Enphase Power Control Software that will make sure that we can do a lot of things in software and do not need to add any more hardware than what is necessary. No main panel upgrades are required because of Enphase Power Control Software. I talked to you about 24x7 support, easy serviceability, highest warranty in the industry, 15-year warranty. We are able to do that because of our architecture. We don't use fans. We have air cooling. No single point of failure. For backup, backup is a little more complex. There is going to be more dollars the user has to shell out because a useful backup probably is about 20 kWh battery. For backup, we are streamlining our balance of systems. We are going to have a new 10 kWh battery, and we are basically embedding the neutral. So we are eliminating the system controller, and we are enhancing our combiner there. We are reducing the number of things they have to buy. And basically, we'll have a best-in-class solution there. On the PV side, I didn't explicitly say the advantages over a string inverter are numerous. First of all, obviously, high power production, enhanced power production could range anywhere from 2% to 15% more. Safe AC architecture, no high-voltage DC on your roof. That's the single most important factor, for example, that some people in Europe select our product. It's simply because no high-voltage DC on the roof. Per panel monitoring, I was in Austria and Switzerland recently. Per panel monitoring was, they say, "We want to see everything that is happening." Per panel monitoring is very important for them. 25-year warranty versus inverters we may be talking about are 10-year warranty. I mean, 25-year warranty matters. And obviously, the domestic content readiness. So domestic content readiness, of course, our competition will also be ready. And we believe that we have a good solution there, and we are going to make it even better for both microinverters and batteries. So we will be able to capture some value there. So those are all of the percent takes on the competitive situation. I'll have Raghu qualify the competitive situation more, but I'll answer the other question. Battery, do we expect Q4 growth? At this point, it's early for me to guide anything, but we do expect Q4 growth. And domestic content, how much of the Q3 number includes domestic content? Little to zero. Domestic content is a conversation that we are having, and we expect it to pan out in the Q4. Raghu, talk about anything more. Yeah. I think, as Badri mentioned, we have a very strong value proposition. And really, this has been the value proposition from the very onset of the company is that compared to centralized big box solutions, you just have much better performance, better reliability as reflected in the 25-year warranty, and no high-voltage DC anywhere, so much greater safety. But the value proposition becomes even more important when you think about the new tariff structures like NEM 3.0, which is all about arbitrage and required batteries. And this is where, as we said, for a homeowner, if they can get just a 10 kWh battery, right, grid-tied, which means you connect it into the existing combiner box, your value proposition for NEM 3.0 significantly improves. So our battery, the modularity of our battery, the high power, and the fact that it can be done in 10 kWh with 2 of the IQ Battery 5P makes it a very, very good fit. But you also mentioned that for backup, yeah, there's a lot of work that we are doing to make it as easy to install as the grid-tied solution as well. So we have always said decentralization is the key. Distributed architecture is just always win in the long run for cost performance and reliability reasons. Our next question will come from Andrew Percoco of Morgan Stanley. Please go ahead. Great. Thanks so much for taking the question. I did just want to come back to the $450 million-$500 million run rate that you guys were talking about earlier this year. You guys have obviously done a good job at clearing out the channel inventory. But it just feels like over that time period, demand has stayed relatively stable at about $400 million or so on a per quarter basis. So I'm just kind of curious where you think the growth is going to come from here. If we look at the Q4 and then into 2025, I know you guys don't officially guide that far out, but what markets are you expecting the growth to come from in Europe or in the U.S.? And I guess how much of that will be battery-driven versus micro-driven? Thank you. Right. So I think maybe you were not there in the prior when I answered a question a couple of questions ago. So let me go through those points. As you rightly said, we do not guide Q4, but we are very optimistic based upon what we are seeing. We have successfully normalized our channel inventory by the end of Q2. Our customer demand increased by 5% in Q2 as compared to Q1. Our battery business is doing phenomenally well. 75.5 in Q1, 120 in Q2, midpoint of guidance 170 in Q3, and we naturally expect it to do well. Our Q3 bookings are the healthiest that they have been in a year. These are the leading indicators for you. Our early commitment to U.S. manufacturing is positioning us well with respect to the commercial asset owner, at least PPA and commercial asset owners. So that one is a huge opportunity for the commercial asset owners, and we expect to offer solutions to them there. And we expect them to be highly value-added solutions, which can drive demand. Additionally, we are hearing that the Fed will lower interest rates this year at least once, improving solar economics for U.S. consumers. On the international side, I talked at length about Netherlands. I talked at length about France. I talked about Germany. And there, I think in Netherlands, we just introduced SolarGraph software platform that enables the installers to sell effectively at the kitchen table, incorporating things like the dynamic tariffs and absence of NEM 3.0. I mean, absence of NEM. So we just introduced our 5 kWh battery, the latest and greatest battery into Netherlands. We plan to introduce our EV Chargers there towards the end of Q3 and early Q4. Coming to France, I mean, France is doing phenomenally well for us. Despite all of this, France has stayed very, very healthy. We just introduced our third-generation battery in France. We are going to introduce solutions for IQ Energy Management, meaning software is what we said for effectively managing steering a hot water heater in France. We also expect to introduce the same IQ EV Chargers there as well. In Germany, we're doing well. Our overall sell-through in Q2 was up compared to Q1. At the June Intersolar Munich, we unveiled our three-phase battery backup. This is our three-phase solution with backup. And it's a highly differentiated solution. It's the smallest size battery with three-phase capability. In addition, that battery is going to have phenomenal round-trip efficiency because we are innovating on turning off the unused microinverters when the consumption of the user is pretty low. That enhances the efficiency and avoids waste. So round-trip efficiency is going to be better than competition. So that battery is going to open up a nice time in Germany, Austria, and Switzerland, where there are large homes and three-phase backup. Backup, by the way, is simply an emotional requirement. They really do not have outages, but it is a requirement. It is a requirement because people are worried because of incidents like Ukraine. So additionally, we are launching balcony solar into Germany in Q3. And the IQ balcony solar product that we introduced at Intersolar in June, that was the hit of our show. That's what we consider the hit of our show because that one is a beautiful product. It produces. There are two panels, and this balcony gateway basically connects to those two panels. Then you're allowed to export up to 800 watts into the wall socket in Germany. People can even add; they can go from two to four panels till only exporting 800 watts, but there is an auxiliary socket on the balcony gateway where you can plug in additional loads and make use of the extra solar. Furthermore, if there is a backup, meaning if there is a power outage, there is a relay in the gateway that will automatically open and disconnect the connection to the wall socket, but still maintains powering the appliance connected into the auxiliary socket. So sunlight backup is available for ultra-low cost there. We expect balcony solar. That's a TAM of 400 MW. We expect 400 MW just in Germany. We expect to replicate that solution everywhere into Europe. That's what we introduced at Intersolar. Of course, our EV Charger, I talked about it. We are going to introduce our EV Charger in all the countries there. And then I made a statement in my prepared remark that we are strong in France. We are strong in Netherlands. We are strong in Germany. We are still under-penetrated in UK, Italy, Spain, Belgium, Luxembourg, Switzerland, Austria, Sweden, and more. And we plan to introduce our entire product portfolio, the same things I talked about: microinverters, batteries, EV Chargers, energy management software, balcony solar, and SolarGraph. And what do homeowners want? They want the same things. They want safety, no high-voltage DC. They want high-quality system to work. They want savings because they have these dynamic rates. And they want an all-in-one experience, all-in-one app. They don't want one thing from one supplier, one thing from another supplier, and it doesn't work for them. They don't want to go to two apps, three apps. No. They want to do an all-in-one app. So a lot of new products are coming. Many of them or some of them will be available in Q3. Some of them will be available in Q4. But like what I said, they are all going to propel us in the right direction. And our next question will come from Colin Rusch with Oppenheimer. Go ahead. Thanks so much. Can you talk about the guidance for the batteries? How much of that is for the growth from new geographies and channel fill, and how much is coming from existing markets? And then as you think about introducing the IQ9 and the evolution of module sizes and efficiency, can you speak to the product market fit and any potential headwinds you have for bringing that product to market? Yeah I mean, we usually don't break out the regions, but I will tell you we expect Europe is a little bit seasonal. So I think maybe a little down to flat in Europe, but a lot of the growth is coming from U.S. and a lot of growth in California on batteries. And Colin, your second question? The product market fit, given the evolution of module efficiency, form factor, etc., any headwinds you're expecting as you bring that to market? Right. IQ9, actually, I can talk about IQ9 now. Yeah, IQ9, we are working very hard on IQ9. IQ9 is going to be GaN based. And GaN is a very interesting technology. It allows us to offer higher power for the same cost structure. So what will we offer? What will Enphase offer for IQ9? Our first product will be focused on the commercial market where today we do not play, which is the 480-volt small commercial market. So we will introduce a 427-watt product for the small commercial market, three-phase. It will have an outstanding cost structure. The key innovation in GaN is instead of 4 silicon FETs that we have, we will have 2 bidirectional GaN switches. So that is how you save cost. Another way you save cost is if you run those switches at high frequency, even double the frequency, 100 kHz becomes 200 kHz or 300 kHz, there is opportunity to drop the main transformer size big, and therefore the cost structure big. So our internal goals are to make the cost on an absolute basis for this product the same as IQ8, which means cost per watt would be automatically much lower. On the heels of the 427 watts, we will also offer a 548-watt that will be for emerging markets as well as for some places in Europe. That will be available for both the residential as well as commercial customers. So a lot of plans. We expect to have the first IQ9 into market in 2025. Great product market fit, right? I mean, you asked that question. We are seeing that the module power is continuing to go up. And so our plans, in fact, we have the platform already developed that can address, for the foreseeable future, any increase in power and uniquely benefits Enphase. Because as the power continues to go up, you can build that same system with fewer number of modules. You don't need now, if you were doing it with 20 modules before, now you can do it with 18 modules, right? As opposed to a big box inverter, it doesn't matter. A 7-kW inverter is a 7-kW inverter. So we have some unique benefits when it comes to the direction in which the modules are going. And we have the platform now, in fact, with IQ8 and getting better with IQ9 to address any increase in module power. And our next question will come from James West with Evercore ISI. Please go ahead. Hey, good afternoon, Badri. A quick question about the countries that you've highlighted where you're under-penetrating in Europe. What is the strategy to increase penetration? Is that the new products? Is it adding more sales and installers? That's the first question. The second question is around the commercial products business and kind of what you see as the outlook there. Yeah. It's quite simple. It is to introduce new products systematically into all of those regions, which we are. We are following it up. For example, almost every region has IQ8 microinverters today. Some of the regions will need three-phase batteries and even single-phase batteries with backup that will be available by the end of the year. Then IQ EV Chargers, what I told you similarly, will be available again in Q4. We are steadily releasing the SolarGraph platform in all of them to make sure we have a lot of revenue coverage there in those countries. The SolarGraph platform helps us to enhance the value proposition that the installer can provide the homeowner at the kitchen table. The last bit is the IQ Energy Management software. Places where there are dynamic electricity rates, there aren't that many now. Germany, Sweden, Norway, Netherlands, those are the 4, but I'm sure that that's a phenomenon that will come. And every region will have its own thing there, time of use or an NEM 3.0 type tariff or a dynamic tariff. And even imbalance in some countries on how we can help in imbalance, which are much more instead of a day instead of us getting day ahead tariff, we may be getting information a few minutes ahead. So we are getting ready for all of that. But the short answer is more sales, more FAE coverage, great customer service 24 by 7, and making sure all our products are available there. And handholding the installers, training them well is something that we do. And we need to continue to do that for all of these regions. So I don't expect a step function, but I expect steady growth as we introduce products over the years. And our next question will come from Julien Dumoulin-Smith with Jefferies. Go ahead. Hey, guys. Thank you very much. Appreciate the time. Yeah. Can you guys hear me? Hopefully. Thank you very much. Just wanted to kick off here first. Just expectations on SunPower in Q3 here. Just wanted to make sure and confirm that it's been adjusted for kind of expectations on whatever happens there. And then maybe just more holistically, as you think about that Q4, I know you're providing Q3 guide here, but how do you think about the domestic content? You talked about the value proposition being split, but how do you think about that impacting sort of more of a step function recovery in the resi market here? I mean, clearly, we've seen a little bit of a drag out in backlog adds in California, for instance. I mean, how do you think about that adding to overall volumetric health as we close out the year with that additional 10%? Yeah. Thank you. So first one, with respect to SunPower, we're not going to comment on customer specifics here. But as usual, what we do is when we give you guidance, we always take risks everywhere in the world, globally. And we have exactly done that in the guidance that we gave you. That's one. On the domestic content, again, it is early to tell, but we like what we are seeing. We believe we'll start to see some output of the domestic content in Q4. That will be positive, hopefully, for the industry because it is a large incentive. That incentive can be used to propel demand, to improve economics for the PPA providers, improve economics for the industry, making sure installers also their situation gets robust. So I think it'll benefit everybody in some way or the other. And we are happy to provide those solutions. And our product right now, we basically set certain select products that we have today combined with racking qualify even today for domestic content. We are making that better by increasing our domestic content, which is manufacturing enclosures for microinverters and getting that ready in the Q4. So once that is in play, then we will be able to increase the percentage of domestic content available there. And we'll be able to service customers better. But I'm very excited by it. I think this, along with potentially the Fed rates, has got the potential to propel the market significantly in Q4. Our next question will come from Eric Stine with Craig-Hallum. Please go ahead. Hey, thanks for sneaking me in here at the end. Just curious, you mentioned that 60% of your installs were NEM 3.0. I'm just curious how long you think it takes. I know it's dragged on for some time. How long until you think you're through NEM 2.0? And then just thinking about the high attach rates, what do you think any way to ballpark where your energy storage volumes may be when that time com es? Yeah. I mean, just if history were to tell you something, I think last time I told you approximately 50% 3 months ago. So right now it is 50%. Right now it is 60%, 6-0. So I don't know the answer. Maybe another 2, 3 quarters is when NEM 2.0 will eventually go. And yes, I mean, I think the Raghu talked about grid-tied batteries. They provide the right economics. The bill offset if you have one 5 kWh battery improves from something like 55%-70%. If you have two 5 kWh batteries, it can go from it can go to 85%-90%. So the sweet spot is two 5 kWh batteries. And that's for people who choose grid-tied. Now, there are people who choose backup too. It's what we talked about earlier. So we do expect full conversion to NEM 3.0 to drive the battery attach. So there is still mathematically, if you see, only 60% is converted. Now, of course, many things play into this, like the health of the installers, etc. So I cannot guide a number, but I think we are quite positive because, first of all, our revenue growth in California has stabilized compared to Q1. In fact, it was up, I said, by 7% from Q1 to Q2. And I gave you the split-up, which means microinverters were flat and battery was up by, I think I said, 14%. So it is generally good news, but it is one quarter. We have to be cautious. We remain optimistic that this is going to drive our battery growth, battery business significantly. And our next question will come from Jordan Levy with Truist Securities. Please go ahead. Good afternoon. Appreciate y'all squeezing me in here. Maybe just a quick one for me. Appreciate all the details y'all have continued to provide on U.S. manufacturing and your outlook there. Just wanted to get your thoughts. Obviously, a lot going on on the geopolitical front, the upcoming election, both here in the U.S. and in Europe. I just wanted to see how you're thinking about the risks there from maybe an IRA perspective and then over in Europe. We think that, of course, we don't control what happens there, right? But we feel like we have a very sound business. Our value proposition of a product is excellent. And the business stands alone, independent of these incentives. So now, specifically talking about the IRA, obviously, we have brought high technology manufacturing back to the U.S., and we are doing more of that now. We're creating jobs. We are making investments. And this, we believe, is something that is expected to be supported regardless of who is in the government. So we think we are doing all the right things. We share with you things like gross margin with and without the IRA. So we're giving you a lot of details about our business regardless of incentives. So I think what happens, the outcome, it remains to be seen. It's not in our control, but I think we have done all the right things. Yeah. Absolutely. And then just a quick follow-up. I noticed you gave the number of certified battery installers and saw some really nice growth there this quarter. I'm just wondering what initiatives are kind of driving those installer certifications and where we should expect that number to kind of trend toward. Yeah. I mean, those are reflective of the number of countries we are entering and the training that we are providing. We have a very active training department worldwide, and we have an Enphase University. Of course, battery installations aren't simple, although the grid-tied installations are getting there. So it does need some training. And we have a lot of installers getting trained both in Europe and in the U.S. The IQ Battery 5P is a good product. It solved some of the earlier deficiencies that we had in terms of low power and wireless connectivity, etc. All of those are fixed. So it's being well received globally, not just the U.S. And now we are following it up with the three-phase battery to address the market. So that's what you're seeing. You're seeing that's our strength, training not just big installers, focusing on all the installers. For example, when I was in Austria and Switzerland about a month ago, in Switzerland, I met about seven installers in a couple of days. And these are anywhere from 1 MW to 5 MW. Those are our installers. We celebrate them. We make sure that we provide them the correct guidance. We're not perfect. Many times, there are problems, but once we know, we solve the problems quickly. I think what you're seeing is this transformation from solar to energy. I think you should expect this trend to continue. We have talked about it, but now it's really turning into a reality where if you look at a number of markets have made this transition from solar to solar plus battery plus EV Charger plus heat pump. So you can see how our products are aligning with that transformation. We are doing everything from continuing on our inverter side, going IQ8 to IQ9 to match module power increases. You're looking at what we are doing on our battery with the 5P battery and then the next generation 10 kWh battery, introducing the three-phase battery for backup, introducing EV Chargers, introducing all of the software. So you're seeing that the trainings that we now need to do to get people more comfortable with selling systems is also on the increase. And all of this is good for us because this is what our DNA is: building hardware-software systems, building software systems that are software-defined. And this is a unique advantage for us. And our next question will come from Christine Cho with Barclays. Please go ahead. Thank you for taking firstly squeezing me in. In California, I think you said your customers who are getting your inverters are attaching your battery 50% of the time. Is this that different in California versus the rest of the U.S.? I think you said 70% of your batteries are grid-tied and is great for NEM 3.0, the rate arbitrage. But outside California, I would think batteries are primarily used for backup and not for rate arbitrage. So curious if you find that your market share for batteries is higher in California versus the rest of the U.S. You're correct that outside the U.S., batteries are used for backup. But there are some places in the U.S. where there are a lot of grid services where you do have a lot of incentives simply for using the battery and helping the grid out, especially during summer. And Massachusetts is an example. The Duke Power Pair program is an example. So you're generally right, though. In the NEM world, the grid is the battery. Therefore, when people add a battery, they really need it for some kind of security, emotional security. That's why it is with backup for most places in the U.S. In California, it is a function of rates. It's not NEM any longer. It's NEM 3.0. And therefore, there it makes sense. It's a pure economics game there in California. And so grid-tied batteries make a lot of sense there. Market share, coming to the market share, I don't know the answer to that, but I would say the market share between outside California as well as in California is probably equivalent. Okay. And then I know you gave your sell-through numbers quarter-over-quarter, but would we be able to get your sell-through for storage in MWh for Q2? And I know that you said the channel is clear in general, but would you say that the weeks of inventory for batteries is also currently your standard 8 to 10 weeks? Well, the batteries have an opposite problem. I'm very tight on batteries. I can tell you that the weeks on hand in the U.S. is less than 8 weeks. That's a good problem for us to have. We do need to make sure the installers have enough inventory. We're always going to stay in the guardrail of 8-10 weeks in general. That's where we'd like to get to, but the batteries are very tight right now in the channel, meaning the channel is, I would say, short of batteries. Our next question will come from Praneeth Satish with Wells Fargo. Please go ahead. Thanks. Just two quick questions on domestic content here. First, you mentioned that the domestic content uplift with lease/PPA providers will mostly come in Q4. There's no benefit included in the Q3 guidance. But your inverters qualify today, assuming you use domestic racking. So I guess the first question is, could we see any benefit in Q3 or maybe the tail end of Q3? And then secondly, SolarEdge's inverter is also on track to be qualifying in Q4. So to the extent you do pick up any market share gains in Q3 or Q4 tied to domestic content with some of the larger lease PPA providers, do you think those gains will sustain into 2025? Yeah. Number one, first question is right now our guidance doesn't comprehend any domestic content for Q3. But you're right. It could be that some of them may use what is already available. I don't know. But our guidance doesn't comprehend that yet. For Q4, yeah, all of our competitors will probably come with their own domestic content. So we need to continue to offer the right value to our customers. And for us, the way we see it is MLPE. We have the opportunity to climb up in domestic content quite a bit by making sure our enclosures are also made in the U.S. And so that can take us to a good number where you only need less percentage from racking or elsewhere. So we're focused on getting that out by the end of Q3 and early Q4. And then we expect the demand to go up there. And our next question will come from Kashy Harrison with Piper Sandler. Please go ahead. Good evening, everybody. And thanks for taking the questions. Badri, just maybe following up on your commentary that the global channel is normal exiting Q2, you flagged at a prior question that batteries are less than 8 weeks. And so I was just wondering if you could help us think through, are there any other notable geographic differences between U.S. and micros for sorry, U.S. and Europe for micros and storage that we should be thinking through, just trying to understand the health of the channel by product, by geography? Yeah. I mean, look, I gave you a global number. Our global number is healthy. That's what I gave you. Of course, there is, if I start giving you country by country, there will be some variability. I also mentioned that the batteries is a good problem that we are trying to fix, which means, I mean, it's not a good problem for customers. We got to fix it to make sure that the channel has enough inventory. But we are focused on that 8-10 weeks. Some regions might have close to 8 weeks. Some regions might have close to 10 weeks. We are focused on that range. We will never allow that to exceed that range. We have statistical process controls in place where we talk about it, and we actually will not ship more into the channel. Like what I said, we've normalized the channel on a global basis, and we plan to keep it that way. It's why going forward, we will not be talking about sell-through. Our next question will come from Dylan Asano with Wolfe Research. Please go ahead. Hey, good afternoon. Just on the Q2 bookings being the healthiest they've been in over a year, can you say how much higher that 85% is compared to last quarter or last year? Do you feel like your visibility into forward demand has improved at all as the channel's cleared? We don't really give numbers there, but we are talking about Q3 bookings, not Q2. Q3 bookings are over 85%. And that's a healthy number. And that too, after considering some puts and takes and considering the risks, number is a good number. We do not have the visibility for Q4 right now because our lead time is of the order of eight weeks. So by definition, distributors will only book within that lead time. And our next question will come from Ameet Thakkar with BMO Capital Markets. Go ahead. Hi, good afternoon. I just had one quick question. I'm kind of just thinking about the balance sheet longer term. You guys have, I think, $730 million of convertible debt that will come to you, kind of call it over the next 20 months. You obviously have a very advantageous liquidity position. Can you just talk to us a little bit about how you think about the balance sheet longer term? You're buying back shares now. I mean, in terms of kind of, would you just plan on kind of delivering the business, or are you thinking about maybe accessing the traditional corporate bond market or some bank debt things? Yeah. I mean, look, obviously, our first priority is to take into account the needs of the business, invest in the right things. If we need anything like the domestic content factory investment, we will do that. Second one, which we are actively looking, is are there any new verticals and M&A areas that we can get inorganically in software, in power conversion, even in batteries? We're always looking at that. The third is if we find one and two are ready, meaning we don't have many opportunities, or we have done what we can, and then we repurchase shares as long as the share price is below a conservatively estimated income. And we have done that exactly. In the last few quarters, we have done systematically. We have bought back our shares, $100 million per quarter. And like what Mandy said, her team is excellent at free cash flow, even in a tight macroeconomic situation. Our free cash flow is $117 million. And we manage cash well. It's important for us. We'll continue to look at these three things I said, and we'll make decisions along with our board on a quarterly basis. Mandy, do you want to add something? Yeah In terms of the maturities, right, we only have about $102 million of principal amount due March next year, and that we could easily pay off out of our own cash, right? The 2026 convert, that is $632 million, still 20 months away. So we have a lot of optionalities there a year from now, right? Whether we pay off or partially refinance, right? The current rate environment, we are not going to do anything earlier than that. And our next question will come from Jonathan Kees with Daiwa Capital Markets. Please go ahead. Oh, great. Thanks for working me in. Great to get to ask questions. I wanted to ask if two things. One is a higher level, and second is more housekeeping. Badri, if you can help me understand, you're bullish in terms of your prospects. You're quite encouraged in terms of your markets that you talk about, the Americas, Germany, Netherlands, and then the other parts of the country, and that they're very promising. I guess I'm trying to tie that in with you have a peer in Europe who brought down the numbers for the year and cited a reduction in demand, specifically for residential and for commercial and industrial utilities supply. And this is back in June. And then your MLPE peer, a couple of months back, had said things are still looking kind of gloomy in Europe. And yeah, they've since announced another forced reduction. That's important for their staff, their employees. So I know these are peers, but I guess I'm trying to tie in your outlook there, your bullish outlook with what's happening with these data points. Did the market just take off? In terms of the last couple of months, did it really improve? Was this like a hockey stick? Did it just take off there, or are you just doing something different from everybody else? No, I think the key is you need to understand in Europe every country, the dynamics. And for us, like what I said, I probably said it 5x already in the call. We are underpenetrated in Europe. We are very strong in Netherlands, strong in France. We're strong in Germany. I gave detailed color on those markets. We're managing inventory well with our distributors and installers. We have a lot of opportunities in other countries where we are not, where we are underpenetrated, and we are introducing new products there. So for us, it's a we are still into learning about Europe and penetrating into Europe. So we have a lot more market left. Like for example, we just introduced our balcony solar for Germany. And installers love that because they don't have access to a high-quality solution like that. Now they have access, and we can take that to every country. The three-phase battery, for example, same deal. The IQ EV Charger, if you see, I was like what I said, when I went to Switzerland and Austria, actually Switzerland, very interesting. They are willing to pay a very high price for their EV Charger. And they just want deep integration, smart EV Charger. Integrate that with solar plus storage plus EV Charger with software and manage heat pumps. We need to get better at all of that, but that's the opportunity for us. And every market is unique. We have to be our strength is to work with long-tail installers. We are not in the utility space. Unlike some of the news that you've heard, we are not yet in large-scale commercial. We are scratching the surface on small commercial, but we are firmly implanted on the residential side. On the residential side, our strengths are supporting all of the installers, managing inventory tightly, helping our distribution partners, and growing steadily. That's why our sell-through in Europe, we talked about sell-through, was up 3% from Q1 to Q2. Netherlands was down 15%, but France was flat, Germany was up 7%, and you had a bunch of growing countries which weren't present before. So long answer, but we are very optimistic there about all of these countries and our plans to introduce robust solutions to each other. And our next question will come from Maheep Mandloi with Mizuho. Please go ahead. Hi, this is David Benjamin from Maheep. I've got a quick question. Thanks for squeezing me in. I was wondering if you could clarify the timing on IQ9. Is that a H2 or H2 launch? And then on Europe, we were hearing about 5%-10% decline in pricing in Europe. I was wondering if you had any comments on the pricing competition there in Europe. Yeah. I mean, on IQ9, we think it'll be in the H2 of the year, and not too much beyond Q2, though. That's what we think. And then on the other one, pricing comment, no, we are not planning to do. We don't have any plans today to change our pricing. And our next question will come from Dimple Gosai with Bank of America. Go ahead. Thank you. Appreciate you taking the time. Can we just elaborate on that, please? I think on the last scope, Badri, I think you guys spoke about being open to price concessions if needed. And I think the market, from what we're hearing from our peers, is becoming increasingly promotional. So just how your strategy might differ between the two markets, US and Europe, on ASP strategy? Yeah. I mean, look, we have done the same thing for six years or seven years. Our strategy is no different. We have something called. We do have special pricing adjustments based upon the installers, their volume, value that we provide. So there isn't anything extraordinary we are planning to do. At the end of the day, Enphase products need to add value compared to the next best alternative. And we are focused on that. The moment we feel we don't add value, we will take the appropriate action. But at this point in time, there is nothing very different going on between the U.S. and Europe. The pricing situation is relatively stable, in my opinion. And our next question will come from Austin Moeller with Canaccord Genuity. Go ahead. Hi. It's Andrew Steinhardt on for Austin. Thanks for squeezing me in. Two-part question. I'm sorry if I missed this on the first part. Is the U.S. battery facility on target to be up and running in Q3 in line with previous guidance? And then second, does the Q3 net IRA benefit guide of $30 million-$33 million include the forecasted sales for the IQ8P commercial inverters in the U.S. and the new U.S. battery manufacturing facilities operation? Thank you. Yeah. To answer, we are a little late on the battery manufacturing. We only expect it to begin in Q4. And that is because we are changing our approach due to the domestic content guidance from the Treasury. There are a few more things we have to manufacture in the U.S. We're already going to do power conversion, battery management in the U.S. We need to pull in the enclosure and the chassis also, which we are working on. So that's going to take us to the Q4. And with regard to your question on the $30 million-$33 million, yes, it includes IQ8P through, and it does not include I mean, it does include the microinverters for the batteries as well. And our next question will come from Graham Price with Raymond James. Please go ahead. Hi. Good afternoon. Just one quick one for me on the Netherlands. Sell-through was down 15% quarter-over-quarter. You mentioned Europe overall was up 3%. So just wondering, what impact does the slowdown in the Netherlands have on your normalized overall EU revenue? I mean, you're seeing it already. This is the impact it is having. Our Europe numbers were flat from Q1 to Q2, and sell-through was only up by 3%. But there is an opportunity here. While Q3 will still be seasonally weak, there is an opportunity to turn Netherlands into having a very high battery attach. And that is what we are working on. We do have several hundred thousand homes in Netherlands as an install base, and we just introduced SolarGraph software platform. We're going to be working with installers to help them sell this to consumers better at the kitchen table because right now, consumers are a little spooked on the exact regulatory uncertainty. They don't know when NEM is going to go. They're worried about penalties from the energy providers. We can take care of penalties by doing intelligent things like with the IQ software, IQ Energy Management. For example, you'll find this in our investor deck now, but when you let's say, for example, when there is excess energy that the grid has, and it doesn't need any more solar, it can provide an intelligent signal or a day-ahead tariff. That's called a negative tariff. Negative tariff means that you don't produce PV. You actually are paid to consume and charge your battery. You're paid to consume power. You don't export PV. You curtail PV. And business models like that are going to come. Many of the utilities would want some of that capability because many times they are losing several $ millions dealing with this imbalance. We do have a unique opportunity to assist there because we have a nice installed base. We can add a 5 kWh battery, and we can assist there. So I think Netherlands will, it might remain weak for some time, but I clearly see good potential, actually enormous potential for batteries in that market. And I talked about other regions as well. And we have several new products for the region: the IQ EV Charger, balcony solar, three-phase battery, SolarGraph everywhere. So we're going to be introducing a lot of products in Europe. And our next question will come from Tom Curran with Seaport Partners. Please go ahead. Thank you. Badri Kothandaraman, are you still expecting to hit the battery gross margin target of 35% at some point in the H2 here? So let's say before calendar 2024. Then my second question, sticking with batteries in California under NEM 3.0, when it comes to the 50% of your NEM 3.0 systems that are attaching a rival's battery, I think we've been assuming that's mainly been Tesla Powerwall 3 with maybe a smattering of SolarEdge's home battery and then Franklin's Franklin Home Power systems in there. Has there been any interesting changes in that 50%? And how is your strategy evolving for trying to capture a higher portion of that? Yeah. We talked about it, but let me clarify. The gross margin on batteries is we don't really break the gross margin between batteries and inverters. But our battery margins are doing healthy. Cell pack pricing is coming down rapidly. Our serviceability is increasing. That means service costs, warranty costs are going down. And then we have some benefit from the IRA where we make microinverters for the batteries in the U.S. So those three contribute to a very good GM, improving GM on the batteries sequentially, quarter over quarter. And then we do have architecturally fourth generation battery where we are cutting down the form factor by doing some deep integration of battery management and power conversion. And we are cutting the number of boards on that from the third generation to the fourth generation significantly. And so that one also helps us architecturally. So that will continuously improve our gross margin. And then to answer the other question, we cannot name who is the other 50%, but that 50% attached for Enphase to NEM 3.0 solar systems has remained steady, like what I reported in the last two or three quarters. It's been steady. I cannot confirm the rival names. I can say one thing. Our plan is to we talked about our plans today. We are 70%, over 70% of those installations are grid-tied. We are going to be introducing a brand new battery, a meter collar, and an advanced system controller. The battery will be 10 kWh. So that means the modularity will be 10 kWh and not 5. Also, the battery will have a neutral in it, which means that we are eliminating the system controller and fewer boxes. We are enhancing the combiner to have a lot of bells and whistles. So the installer feedback is taken, and they can connect even EV Chargers. It's just enhanced functionality there. So I think we are well on our way there. We expect to introduce our fourth generation system, which is the battery, the collar, the enhanced combiner in the Q1 2025. We expect that to do well. This will conclude our question and answer session. I'd like to turn the conference back over to Badri Kothandaraman for any closing remarks. Yeah. Thank you for joining us today and for your continued support of Enphase. We look forward to speaking with you again next quarter. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.