Demand Outlook and Guidance
Q: How is demand expected to trend, and what is your guidance?
A: In Q1, our sell-through demand was $376 million, with reported revenue of $263.3 million. We under-shipped by $113 million to reduce channel inventory. For Q2, we're guiding revenue of $290 million to $330 million, with estimated sell-through of $400 million, implying an under-shipment of $90 million. We expect sell-through to continuously increase in the second half due to improving markets in Europe and the U.S., and new product introductions.

Gross Margin Outlook
Q: Why is gross margin guidance lower for Q2?
A: We guided non-GAAP gross margins of 39% to 42% for Q2 without the IRA credit, slightly lower due to an increased mix of battery products. As our battery to microinverter ratio increases, initial battery margins are lower, but we're improving margins through cost reductions, U.S. manufacturing for tax credits, and new integrated architectures.

Battery Business Performance
Q: How is your battery business performing?
A: Our battery sell-through in Q1 was 128 megawatt-hours, only 8% down from Q4's 140 megawatt-hours, outperforming seasonal trends. We guided Q2 battery shipments of 100 to 120 megawatt-hours. The battery channel is lean, and we expect continued growth as every market transitions to solar plus storage.

Market Share Gains
Q: Are you gaining market share in the U.S. residential market?
A: We believe we're gaining market share due to our strong relationships with installers, providing value-added services like proposal tools, permitting, and training. Installers switching to us ramp up over time, and we expect these gains to reflect in future sell-through increases.

California Market and NEM 3.0
Q: How is NEM 3.0 affecting your business in California?
A: California was a wildcard in Q1, with sell-through down 30%, but we're increasingly confident. Load shifting is significant, with 50% of NEM 3.0 systems attaching our battery. Our upcoming meter collar product will simplify installations, piloting by year-end.

New Product Development (IQ9)
Q: Can you provide an update on IQ9 development?
A: IQ9 will come in 427W and 548W versions, using gallium nitride technology for higher power and efficiency with a smaller form factor. Pilots start later this year, with commercial release in first half of 2025. Ramp-up to full production typically takes 4 to 6 quarters.

Inventory Management Improvements
Q: How are you improving channel visibility to prevent inventory issues?
A: We're implementing metrics across the sales process using tools like Solargraf, tracking leads through activations. Regular reviews and statistical controls help us balance sell-in and sell-through, avoiding over-shipment.

Capital Allocation and Share Repurchases
Q: What's your approach to share repurchases and cash allocation?
A: In Q1, we spent about $100 million on share repurchases and anti-dilution measures. We plan to continue repurchasing shares as long as the stock remains attractive.

Competitive Landscape and Pricing Strategy
Q: How do you compete with products like Tesla's Powerwall 3 on pricing?
A: We focus on the value we offer, including safety, reliability, and superior technology. With our fourth-generation battery, we'll continue to reduce costs and improve margins, adjusting pricing if needed to provide more value compared to competitors.

European Market Growth
Q: What drives demand in Europe, particularly in Germany?
A: Self-consumption is key due to feed-in tariff inversion, where buying electricity costs more than selling excess. VPP programs and home energy management systems enhance ROI, with opportunities expanding as EVs become bidirectional assets.

SunPower Relationship
Q: Any updates on your exclusivity arrangement with SunPower?
A: Our relationship with SunPower remains strong; it's business as usual. We are in discussions and will update when there's a signed contract.

Sourcing of Gallium Nitride Components
Q: Are you concerned about sourcing gallium nitride components?
A: We have reliable sources for gallium nitride transistors from existing suppliers and are not worried about sourcing issues.

Installer Capacity in California
Q: Can installers in California handle growth if demand returns?
A: Yes, installers are savvy and nimble, managing lean operations and adapting with financing options like leases and PPAs. We're confident they can respond to increased demand.