Good afternoon, everyone, and welcome to the Enphase Energy's third quarter 2025 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please send to a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Zach Friedman. Sir, please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss Enphase Energy's third quarter 2025 results. On today's call are Badri Kofandaraman, our president and chief executive officer, Mandy Yang, our chief financial officer, and Raegu Belor, our chief products officer. After the market closed today, Enphase issued a press release announcing the results of its third quarter ended September 30, 2025. 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, including the TBO market, the timing of new product introductions and enhancements to existing products, and regulatory tax, tariff, and supply chain matters. These forward-looking statements involve significant risks and uncertainties in 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 and our earnings release furnished with the SEC on Form 8K, 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 third quarter 2025 financial results. We had a good quarter. We reported quarterly revenue of $410.4 million, our highest revenue level in 7 million microinverters and a record 195 megawatt hours of batteries. We generated free cash flow of $5.9 million. Our Q3 revenue also included $70.9 million of safe harbor revenue. As we exited Q3, our microinverter channel inventory returned to normal, while our battery channel inventory was slightly elevated due to selling of our new fourth generation battery. For the third quarter, we delivered 49% gross margin above the higher end of our guidance range, 19% operating expense, and 30% operating income, all as a percentage of revenue on a non-GAAP basis and including the net IRA benefit. Mandy will go into her financials later in the call. Our customer service NPS was 77% in Q3 compared to 79% in Q2. The average call wait time was two minutes. To further enhance the customer experience, we are preparing to launch our AI-powered assistant in the Enphase app, which will help customers find answers quickly, troubleshoot issues, and manage their systems more intuitively. Our data engineering team continues to strengthen the intelligence behind our support systems, leveraging analytics and machine learning to identify common issues, predict service needs, and reduce response times across all regions. Let's cover operations. In Q3, we shipped approximately 1.53 million microinverters from our U.S. facilities, booking 45X production tax credits. Our domestically made microinverters help residential lease PPA providers and commercial asset owners to qualify for the 10% domestic content ITC error. We grew our U.S. battery production in Q3, shipping 67.5 megawatt hours compared to 46.9 megawatt hours in Q2. We are now building our fourth generation battery, the IQ Battery 10C, in the U.S. using domestically made microinverters, domestically made thermal and battery management systems, as well as packaging, while only sourcing cell packs from China. These batteries have greater than 45% domestic content and help our least PPA customers qualify for ITC bonuses. We remain on track to source non-China cell packs by the end of this year, scaling in to battery bills in the first half of 26. Therefore, we expect limited exposure to the recent China-related tariffs as our supply chain transitions away from China. In summary, our U.S.-made microinverters and batteries can help customers qualify for domestic content ITC bonuses as well as meet FIAC compliance, even as the criteria becomes increasingly stringent each year, a big differentiator for ENFACE. Let's now cover the regions. Our U.S. and international revenue mix for Q3 was 85% and 15% respectively. In the U.S., our revenue increased 29% in Q3 compared to Q2, primarily due to increased demand as well as higher safe harbor revenue of $70.9 million dollars compared to 40.4 million dollars in Q2. The overall sell-through of our products was up nine percent in Q3 as compared to Q2. In Europe, our revenue decreased by 38 percent in Q3 compared to Q2, while overall sell-through decreased by 27 percent. Europe negatively impacted our Q3 revenue by approximately 25 million dollars compared to Q2, a larger sequential decline than expected. The overall business environment across the region is still challenging, but we are maintaining our discipline on the channel as well as targeting specific growth areas that could drive higher 2026 revenues. I will now provide some color on key markets in Europe. In Netherlands, the solar demand remains soft in Q3. We are making steady progress towards the sizable battery retrofit opportunity we see in 2026 and beyond. The rising solar export penalties and the planned sunset of net metering at the end of 2026 are creating a compelling use case for storage. With an Enphase install base of about 475,000 residential solar systems in Netherlands, we estimate a $2 billion total opportunity for batteries. We recently announced a collaboration with Ascent, one of Netherlands' largest residential energy providers, or REPs, enabling customers to add IQ batteries and participate in Ascent's Smart Steering VPP program. This program is designed to boost self-consumption and lower utility bills. Through the smart steering, participating customers may receive fixed monthly compensation of up to 122 euros, depending on the battery size. Ascent intelligently controls charging and discharging to optimize value for the home and the grid, supporting a more reliable energy system. Building on this momentum, we are advancing additional partnerships and expect battery sales in Netherlands to be a growth driver in 2026 and beyond. In France, the residential demand remained muted in Q3. Many households waited for the October 1st VAT cut of 5.5% for sub-9 kilowatts, but its limited scope and dependence on low-carbon panels reduced the impact. Meanwhile, 2025 policy changes have extended payback period, creating a tougher market for installers. We are focusing on self-consumption, where low export incentives strengthen the value proposition for solar plus battery solutions. In Germany, the residential market remained weak in Q3. Lower export value and stop-start incentives have kept many households on the sidelines, softening demand for both solar and batteries. Even so, our performance was relatively stable, supported by our partnership with leading installers and the strong uptake of the flex-phase battery, which provides both self-consumption as well as three-phase backup. In the UK, residential solar and storage adoption is stable, driven by time-of-use tariffs, low export rates, and a growing focus on resilience and self-consumption. We are deepening ties with our EPs and supporting them with a robust API platform. In Q3, we also added backup capability for our batteries in the UK, which was long overdue and further expanded our resilience offering. Following the July 2025 battery rebate program, with installers bundling PV and batteries and average battery sizes increasing as low export rates push self-consumption. Distribution operators are ruling out dynamic export limits and interoperability standards favoring systems with fast controls and three-phase backup. Against this backdrop, we launched the flex-phase battery in Q3, delivering three-phase backup, as well as flexible power to meet evolving DSO requirements. We also launched IQ8P high-power microinverters for higher-power modules, as well as our newest IQEV chargers, strengthening our position in the strategic market. Let's discuss our outlook for Q4. We are seeing a further ramp in the U.S. demand in Q4, primarily due to homeowners moving to capture the expiring 25D tax credit before the end of this year. In the first three weeks of October, our U.S. sell-through was up over 20% compared to the Q3 average. We anticipate this elevated activity will continue for much of Q4. We also anticipate that our overall sell-through for the company to be between $350 to $400 million in Q4. However, our revenue guidance is in the range of $310 to $350 million. And for IQ batteries, we expect to ship between 140 and 160 megawatt hours. There are two reasons contributing to this lower revenue guidance. First, we had $70.9 million of safe harbor revenue pulled in from Q4 to Q3 as customers wanted the product before the U.S. Treasury guidance in Q3. And second, we are reducing shipments of product to the channel in order to de-stop the channel as we head into 2026. This positions us to enter 2026 with a healthy channel, setting us up for a clean Q1 and beyond. Currently, we are approximately 75% booked to the midpoint of our Q4 revenue guidance. Safe Harbor opportunities are not yet included in our Q4 guidance, but similar to Q3, they present upside opportunity. We are working closely with several TPO partners on safe harbor planning and are well positioned to support both methods of safe harbor, the 5% method as well as the physical work test method based on each partner's preference. Let's look ahead to 2026. While we don't typically guide beyond the next quarter, we are sharing our preliminary views to frame expectations. For Q1-26, we anticipate a larger than normal seasonal decline following the expiration of 25D tax credit and estimate a company revenue of $250 million. We view Q1 as a cycle trough with conditions improving through the rest of the year. Why are we constructive on the balance of the year? There are three external drivers that could support recovery. First, the U.S. power prices are rising. about 5% this winter, with additional increases expected in 2026. Second, interest rates are declining, easing affordability. Third, new and attractive financing solutions are entering the market to help offset the loss of 25B. Taken together, these drivers could enable a second half of 2026 rebound and set the stage for growth. In addition, we see several Enphase-specific revenue drivers that are expected to fuel growth through 2026. Our fourth-generation battery, the IQ Battery 10C, is positioned to capture share through lower installation costs for backup. We are now entering the 480-volt commercial solar market with our IQ9 and GAN microinverter, which we expect to ship this December and ramp in 2026. We are also leveraging strategic partnerships to capture the battery retrofit opportunity in Netherlands. Our newest IQ EV chargers and upcoming IQ bidirectional EV chargers are poised to expand our market. And our fifth generation battery system paired with IQ9 residential microinverters will drive a step change reduction in system cost in both the U.S. and Europe. While there is uncertainty around 2026, we remain confident in our ability to execute and deliver growth across these vectors. Now let's talk about financing. The industry is moving towards the TPO model in 2026. Enphase supports all the major TPOs today. We are further strengthening these relationships through safe harbor and tax equity support, providing domestic content as well as FIOC-compliant products, offering O&M services, solar graph integration, and helping to implement innovative financing solutions. Looking ahead, we see a strong trend developing in the market towards prepaid lease offerings, which can provide homeowners with the option of ownership after five years. In this model, the TPO captures the 48E tax credit and in turn offers the homeowner an attractive lease prepayment or a lower monthly payment when paired with a loan. This structure makes the economics similar to today's solar loan economics with the 30% 25E tax credit. Furthermore, financing providers like the Enphase system value proposition, which includes not only the Enphase equipment, but support for operations and maintenance, as well as solar graph integration to offer an overall attractive package to consumers. We believe the TPO market is poised to growth in 26 and see multiple ways for Enphase to support the growth. Let's talk about products, starting with IQ batteries. In August, we began shipping our IQ battery 10C, supplied by our manufacturing facilities in the U.S., delivering domestic content, which is significant value in the growing TPO market. As a reminder, we introduced our fourth-generation battery towards the end of June. The fourth generation battery stands out for its smaller footprint, enhanced features, easy installation, and reliability. It delivers 30% more energy density, occupies 62% lesser wall space, and reduces installation cost of backup compared to our prior products. In addition, our fourth generation battery system also includes the IQ Meter Collar, which simplifies backup, and IQ Combiner 6C, which seamlessly integrates solar, batteries, EV chargers, and load control. The IQ Meter Collar is now approved by 39 U.S. utilities, and that list is growing every week. We are making strong progress in building partnership with REPs as well as VPP operators around the world that are looking for flexible distributed energy capacity. Homeowners can receive attractive compensation for installing N-phase batteries as part of these programs. In addition to the Ascent program I mentioned earlier, we signed multiple new contracts with the utilities, including one recently with San Diego Community Power. With advanced APIs, our batteries seamlessly integrate into VPPs in regulated markets like the U.S. and participate in wholesale energy markets in deregulated regions such as Europe and Australia. We are actively engaged currently in over 53 VPP programs worldwide, and this is growing at a strong pace. Let's talk about microinverters. In September, we opened U.S. pre-orders for the IQ9N commercial micro-inverter, our first micro-inverter powered by gallium nitride or GAN. We expect to begin shipping the product in December, as I said earlier. We believe IQ9 marks a major leap in performance and platform flexibility and, most importantly, unlocks a 2-gigawatt market opportunity by enabling us to service 480-volt three-phase commercial systems in the USA for the first time. This represents an approximately $400 million total addressable market for Enphase, which we believe will help drive additional revenue in 2026 and beyond. IQ9 microinverters are expected to meet FIAC compliance as well as domestic content right off the bat, offering a powerful and reliable alternative in a market still dominated by Chinese equipment. Why does GAN matter? GAN replaces legacy silicon power devices to deliver faster switching, better thermal performance, and higher reliability. We have invested over five years in the semiconductor technology, and this rollout sets a new trajectory for cost and performance across our next generation microinverters, batteries, bi-directional EV chargers, and more. Let's talk about EV charging. We are now shipping our latest and greatest IQ EV Charger 2 across 18 European countries, as well as Australia and New Zealand. The charger supports up to 22 kilowatts three-phase charging and works as a standalone unit or fully integrated with N-phase solar and batteries. We have opened U.S. pre-orders and expect Q4 shipments into the U.S. with further expansion planned in additional European markets and India. Let me share an update of our IQ bidirectional EV charger expected to launch in mid-2026. We showcased this 11-kilowatt solution powered by three high-performance GAN-based microinverters of 3.84 kilowatts each at the recent RE Plus trade show. The IQ BiDi EV charger only needs to be paired with the IQ meter collar for a simple, powerful configuration that enables home backup and grid services. Together, these two components offer one of the lowest cost and simplest ways to provide whole-home backup, even without rooftop solar or home batteries. Homeowners can just start with this configuration and expand over time by adding in-phase solar and batteries to build a full energy system. Let's now switch to SolarGraph, our all-in-one platform, purpose-built for installers. We have been rolling out major enhancements, including seamless integration with TPO partners, an express editor that allows installers to quickly adjust proposals on the spot, a powerful custom tariff builder, advanced installer management tools, and a simplified AI-driven design experience. We believe these updates make it easier for installers to service more homeowners at the kitchen table with greater flexibility, speed, and financial transparency. We plan to expand the SolarGraph platform into additional markets and countries and introduce new features to support productivity, sales velocity, and customization for solar installers. Let me conclude. There is a significant change occurring in our markets. The loss of the 25D tax credit is a near-term headwind that will impact our results in early 2026. But we believe there is also tremendous positive change that is bolstering the long-term outlook for our business. We are entering an interest rate reduction cycle, which historically has been the catalyst for residential solar sector. Power price outlooks are surging on the back of AI power demand, as well as overall electrification growth. Utilities are struggling to keep up with this demand, creating bottlenecks and price inflation across the grid that are poised to accelerate. We provide homeowners and commercial businesses with an easy off-ramp from this price inflation with a solution that can be interconnected in 90 days. The U.S. residential and commercial rooftop solar industry brings on nearly 2 gigawatts of new power interconnected to the grid every quarter, With the 48E tax credit expanding to more customers in 2026 through innovative financing solutions like the prepaid leases, we see an attractive value proposition for solar driving recovery in the second half of 2026 and beyond. We are laser focused on the revenue drivers we can control, growing battery sales with our fourth generation battery, expanding into the 480 volt commercial market with GAN microinverters. capitalizing on battery retrofits to our solar install base in Netherlands, ramping our newest EV chargers now and the Bidai EV chargers, which will launch later in 2026. And last, launching our fifth-generation residential batteries along with IQ9 residential microinverters to reduce system costs significantly for residential solar for both U.S. as well as Europe. As always, we remain focused on operational excellence, product reliability and quality, and customer service, delivering best-in-class solutions for our long-term growth markets. With that, I will turn the call over to Mandy for her review of our financial results.

Thanks, Badri, and good afternoon, everyone. I will provide more details related to our third quarter of 2025 financial results, as well as our business outlook for the first quarter of 2025. We have provided reconciliations of this 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 Q3 was $410.4 million. We ship approximately 784.6 megawatts DC of microinverters and a record 195 MWh of IQ batteries in the quarter. Q3 revenue included $70.9 million of safe harbor revenue. As a reminder, we define safe harbor revenue as any sales made to customers who plan to install the inventory over more than a year. Non-gap growth margin for Q3 was 49.2%, compared to 48.6% in Q2. GAP gross margin was 47.8% for Q3, compared to 46.9% in Q2. Non-GAP gross margin without the net IRA benefit for Q3 was 38.9%, compared to 37.2% in Q2. Reciprocal tariffs impacted our gross margins by 4.9% in Q3. GAP and non-GAP gross margin for Q3 also included $42.5 million of net IRA benefits. Non-GAP operating expenses were $78.5 million for Q3, compared to $77.8 million for Q2. GAP operating expenses were $130.1 million for Q3, compared to $133.5 million for Q2. GAAP operating expenses for Q3 included $47.4 million of stock-based compensation expenses, $2.9 million of acquisition-related amortization, and $1.3 million of restructuring assay impairment charges. On a non-GAAP basis, income from operations for Q3 was $123.4 million, compared to $98.6 million for Q2. On a GAAP basis, income from operations was $66.2 million for Q3, compared to $37 million for Q2. On a non-GAAP basis, net income for Q3 was $117.3 million, compared to $89.9 million for Q2. This resulted in non-GAAP diluted earnings per share of $0.90 for Q3, compared to $0.69 for Q2. GAAP net income for Q3 was $66.6 million, compared to $37.1 million for Q2. This resulted in GAAP diluted earnings per share of $0.50 for Q3, compared to $0.28 for Q2. We adjusted Q3 with a total cash, cash equivalents, and marketable securities balance of $1.48 billion, compared to $1.53 billion at the end of Q2. The five-year convertible notes we raised in 2021 are coming due on March 1st next year, and we expect to settle the principal amount of $632.5 million at maturity with our cash on hand. As of September 30, 2025, we have approximately $280 million of production tax credit, or PTC, receivable on our balance sheet, net of income taxes payable. $108 million is related to US-made microinverters shipped to customers in 2024, and $172 million is for shipments made in the first nine months of 2025, as we elected direct pay. The net PTC would be refunded by the IRS through our annual tax return filing. Due to extended IIS processing timelines, we expect to receive 2024's $108 million payment from the IIS in Q2 next year. We expect to receive our 2025 test refund sometime in the first half of 2027, based on the current estimated IIS processing time. As part of our anti-dilution plan, we spent approximately $1.7 million by withholding shares to cover taxes for employees stock vesting in Q3, not reduce the diluted shares by 49,023 shares. There were no repurchases of our common stock in Q3 due to our limited free cash flow generation in the quarter. We are evaluating opportunities to accelerate the monetization of our PTC. Our remaining buyback authorization is approximately $269 million, and we remain confident in our overall business outlook over the long term. In Q3, we generated $13.9 million in cash flow from operations and $5.9 million in free cash flows. Capital expenditure was $8 million for Q3, compared to $8.2 million for Q2. Now let's discuss our outlook for the first quarter of 2025. We expect our revenue for Q4 to be within a range of $310 to $350 million, which includes shipments of 140 to 160 megawatt hours of IQ batteries. The Revenue Guidance doesn't include any safe harbor transactions. Respect GAAP gross margin to be within a range of 40 to 43%, including approximately 5 percentage points of reciprocal tariff impact. Respect non-GAAP gross margin to be within a range of 42 to 45%, including the reciprocal tariff impact. Non-GAAP gross margin includes stock-based compensation expense and acquisition-related amortization. Even the vast majority of our manufacturing occurs in the U.S., and due to fluctuating tariff impacts to our international manufacturing cost baseline, we will no longer be guiding and reporting gross margins without the net IRA credit. As always, gross production test credit earned will be reported in our 10-Q quarterly statement and 10-Q annual financial report filed with the SEC. We expect our GAP operating expenses to be within a range of $130 to $134 million, including approximately $53 million estimated for start-based compensation expenses, acquisition-related amortization, and restructuring and asset impairment charges. We expect our non-GAP operating expenses to be within a range of $77 to $81 million. For 2025, we spend our gap test rate of 18% to 20% and the non-gap test rate of 14% to 16%. With that, I'll open the line for questions.

Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star and then 1 on your touchtone phones. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. We do also ask that you please limit yourselves to one question and a single follow-up. Please note that you may rejoin the question queue if you have additional questions. At this time, we will pause momentarily to assemble the roster. And our first question today comes from Colin Rush from Oppenheimer. Please go ahead with your question.

Thanks so much, guys. You know, can you talk a little bit about the dynamics going into the first quarter next year in terms of the amount of inventory that you feel like is appropriate? Are you still thinking about kind of eight to ten weeks' worth of inventory out in the channel, you know, as you enter into the first quarter of next year?

So, Colin, you may not have heard our comments in the prepared remarks. We anticipate an overall sell-through for the company to be between $350 million to $400 million in Q4, but we are only guiding Q4 revenue from, you know, in the range of $310 million to $350 million. So, therefore, you can do the math, And that represents approximately $45 million of undershipment at the midpoint. So we are very cautious. We want 2026 to have a very healthy setup in the channel. And therefore, our rule of thumb is 8 to 10 weeks. That's our rule of thumb. So we'd like to basically be abundantly cautious and not overload the channel. That's why we gave the revenue guidance from $310 to $350 million. Also, another reason for a reduced Q4 guidance is we had about $70 million of safe harbor pulled in from Q4 to Q3 as customers wanted the product before the U.S. Treasury guidance in Q3. So we beat the guidance handily for Q3, but we are more cautious for Q4.

Thanks. I'll take the clarification offline. With the new battery, can you talk about pricing dynamics? Are you able to push through incremental price increases with the incremental functionality, or are you using some of that functionality as a way to...

In fact, I'm sure you know, over the last two quarters, there have been tariffs. So we pay approximately about a 40-plus percent tariff on the cell packs that are coming from China, as well as, you know, the cost of making batteries in the U.S. is quite expensive. So, but on the other hand, what we have done is not change our pricing and our position is basically to capture share. You see our gross margins are already pretty healthy. Our gross margins for Q3 were 49% despite us including a 5% tariff in that 49%. So our gross margins are good. The way our gross margins will become even better on batteries is we are working on our fifth-generation battery, and that fifth-generation battery will take the cost down significantly. It is a 100-ampere-hour cell pack. It is a much higher energy density, almost 50 percent compared to the fourth-generation battery, and it's got, you know, the power electronics is actually collapsed into one single board, so it's a very elegant form factor. It is a stackable battery. You can put 20 kilowatt hours, and it will appear like a monolithic structure on the wall, not as four boxes. So we are going in the right direction on batteries. The fourth generation, we expect to make a dent with it because what we have done, and we have said this very clearly before, Our third generation battery was very good for grid-tied backup, which is prevalent in California due to an M3. However, our fourth generation battery can do both grid-tied and backup for almost the same cost. The backup comes with a little more, slightly more, because of the addition of the meter collar, which is a few hundred dollars only. And, you know, we introduced that product into the channel. We started shipping in June. Installers basically started originating around that time frame. And it takes installers anywhere from, you know, 60 to 90 days from that origination time to start the installations. In addition, we introduced the domestic content fourth-generation battery in August, manufacturing in the U.S., but we are in a very healthy clip. Just as a statistic in Q3 of our total battery shipments into the U.S., the fourth-generation battery constituted 40% of the overall U.S. shipments.

Thanks, guys.

Our next question comes from Brian Lee from Goldman Sachs. Please go ahead with your question.

Hey, everyone. Good afternoon. Thanks for taking the questions. I had two just kind of around the guidance. One is, you know, the non-U.S. revenue, I know you, Badri, walked through some of the European country statistics, but, I mean, it's really the lowest it's been since 2021, non-U.S. revenue. So I'm just trying to understand a little bit what's going on. I know there's seasonality in Europe. I know the market's weak, but it seems like you're underperforming peers. So is there something company-specific going on, whether it's product shift or market share or pricing? And then can you give us a sense of kind of what the go-forward is? Is 4Q going to be about the same? Is it down further? Just trying to understand what the recovery path looks like given this low base we're at now. And then I had a question on margins as well.

Yeah, you're correct on what you said, that Europe has got seasonality in Q3, so we are seeing a portion of that. But, you know, the markets we are in, basically Netherlands, I described the dynamics to you. It is the end of net metering in Netherlands, so it's an uncertain time for solar. There, what recovery looks like is we just announced a large partnership with Ascent. It's a huge opportunity there. We have 475,000 homes with solar. And unlike the U.S., their energy contracts in Netherlands expire, you know, are only valid for one to three years, for example. So, when they have the new energy contract at that time, their utility bills for people who have bought solar are going to be higher. In order to prevent that situation, there is a very elegant option there, which is buy batteries for self-consumption for the customer, while the utility pays you in order to support imbalance for the utility. So, it's really a beautiful option which should spur our battery sales throughout 2026. So, basically, weak solar market due to net metering going away, but has got the potential to become a strong solar plus battery market. That's in the Netherlands. In France, what has happened is, again, in 2025, the feed-in tariffs. France used to be quite healthy. France used to have net metering. And the feed-in tariff was also quite good, which is the export incentive was not as high as the import incentive, but it was pretty good. That export incentive has now been reduced to a very small amount. So in France, also, self-consumption is the name of the game. And because of that, the market in France has reduced quite significantly. As you know, Enphase has more than 50% market share in France. And so we see that. However, what we are doing there is basically to sell solar plus storage to end consumers. Their payback is going to go up compared to what they had before, but will be manageable of the order of 8 to 10 years. For people who cannot afford to add batteries, we are also coming up with a solution to steer their solar and not export it back to the grid. Steering the solar can be diverting the solar to an EV charger, diverting excess solar to a heat pump, or diverting an excess solar to a hot water heater. We have introduced all of those solutions as well. So in France, it is, you know, the elimination of the 5.5% wet tax for sub-9 kilowatts installation should give a boost, but it is not giving today because of an added criteria of low carbon content panels. The industry is trying to meet that by ramping on low carbon panels. That may take a little bit of time, but we expect the market to recover. However, it is going to be a solar plus battery market. It is not going to be the same as what it was before. Similarly, in Germany, there have been various start stops. There have been reduction of feed-in tariffs. In Germany, our performance is a little better because we work with a couple of the leading installers in Europe who are headquartered in Germany. So, you know, we're doing okay there. In the U.K., we have a strong partnership with one of the top REPs. The same thing there. It's the solar plus storage market. We just introduced backup capability as well. So that market is stable. So really what we are talking about is Netherlands and France. We have clear plans there. I would say because of the big reduction in the time, there is a lot of competition. I do have to acknowledge that competition. So what are we going to do? We believe our response to the competition is innovation. What are we going to innovate on? Our, you know, today our third-generation flex-phase battery is the mainstream battery in Europe. In a couple of quarters from now, we are going to have the fifth-generation battery, which is going to take the costs down significantly, and it is going to add a lot of value. It is an AC coupled battery with modularity, with high quality, with superior serviceability, and now it is going to be stackable with an outstanding cost structure. So in addition to that, we are also going to be introducing IQ9 starting early 2026 for residential microinverters. You know, IQ9 with GAN also can support up to 10% higher power for the same cost structure. So cost for what? For the installers is a big deal, and we are going to make sure that their system cost is reduced significantly. So I talk a lot, but that's how the trajectory looks for us in Europe.

No, appreciate all that additional color. Maybe just one on the margins. And the guidance, you know, at the midpoint non-gap gross margin guidance, 43.5%. I mean, it's lower than you've seen in some time. You did the 49% this quarter. Can you kind of help bridge the gap, why margins are down so much? And then what sort of additional margin decline should we expect on the, you know, the $250 million revenue low point that you telegraphed for Q1 next year?

Yeah. Our margins basically are impacted, as we said, by a 5% reciprocal tariff. That's the straight answer. Without the reciprocal tariff that was introduced in 2025, we would be at 48.5, which is a reasonable number. Now, on which products is that affecting us? It's mainly on batteries for us because the batteries have a 40% tariff. We have diversified our supply chain well enough on microinverters in the last three to five years that our microinverter impact is not that high as compared to batteries. So what does recovery in gross margin look like? The recovery in gross margin is when our battery costs come down. And that is by moving to non-China sources, which we are going to move by early 2026 when we plan to ramp up our non-China batteries, as well as our fifth generation battery, which will result in a step change in costs. So at this time, it is too early for us to talk about our Q1 gross margin. But look, I mean, you can see that we have managed the last two years, in fact, with our gross margins quite stable. Our gross margins have been in the 45 to the 50 range all the time in the last two years where there has been significant pressure in revenue. So we expect to manage like that. It's too early to talk about Q1 guidance.

Just a super quick clarification. So I think 3Q, you said the gross margin result included a 4.9% tariff impact. So you're saying there's an incremental 5 percentage point impact in the 4Q guidance? So it's not flat impact Q2Q, it's an incremental 5%? Just want to clarify that.

Let me say like this. In Q3, we shipped a lot more microinverters because of the $70.9 million safe harbor shipments, which was all microinverters. So therefore, our gross margin was elevated. And yes, that is correct. Our gross margin was 49%. And if we did not have the reciprocal tariff, the gross margin would have been 54%. What we are saying in Q4, our gross margin is 43.5%, and that reflects more a normal mix. We have not yet indicated any safe harbor right now at this point in time. That could change. But with the current mix, we are talking about 43.5%, including a 5% tariff impact. That means without that 5% reciprocal tariff impact, our gross margin would have been 48.5%.

Thank you for the clarification. Appreciate it.

Our next question comes from Phil Shen from Roth Capital Partners. Please go ahead with your question.

Hey, guys. Thanks for taking my questions. I wanted to ask if we could get some more color around the safe harbor approach using the physical work test. But thus far, historically, at least through this Save Harbor season, you guys have done more Save Harbor, I think, or all Save Harbor with the 5% of FMV with your customers. And so with the physical work test that you guys announced or talked about today, can you talk to us about how you're helping your customers satisfy that test? In the past, I've heard something about a customized bracket or something, And so I was wondering how you guys are helping your customers do that. And then from a revenue contribution standpoint, I think typically the physical work test likely is less revenue as it's not buying the full microinverter versus the 5% safe harbor effort. So I just was wondering if you might be able to talk through that as well.

Yeah, I cannot talk about the details because it is customer-specific on the physical work test, but we are in very active discussions with all our TPO partners. And the concept is quite simple. It is a custom product that needs to be done for them with higher performance than the standard product and with a custom component that is not in our normal inventory. So that's the high-level view. So, in fact, it is, you know, if they are comfortable, meaning the TPO partners are comfortable, their tax folks are comfortable, this is not a bad way to do safe forward because it is their cash outlay. At the same time, from our perspective, we do not, you know, like all of that revenue in a lump sum manner, too. It reflects that they only buy that custom component from us, and therefore they will come back to buy the main microinverter from us at a later stage when they really need it. so it's really the best of both worlds it is for us it represents a classic linear revenue you know quarterly revenue with no lump sum which is what we like and then for them it represents a possible 10x reduction in the cash that they have to pay compared to the five percent method so it's it's all goodness and when do they do it you know when do you do the five percent You do the 5%, perhaps, and I'm not an expert in it, if you want to safeguard 2028, 2029, and 2030. And, of course, as always, the 5% as well as the physical work test has to be approved by their tax partners.

Great. Thanks for the color there, Madhuri. Shifting to the prepaid lease concept, we heard from Tesla in their last earnings call that I think they're launching a PPL and was wondering if you can talk through some of the efforts that you might be seeing out there. Is this something that you guys might actually participate in on your side? And on a different topic, CNI, it seems like the outlook might be kind of improving there in the sense that a lot of small resi EPCs that historically were dependent on the 25D, maybe shifting over to the small-scale CNI market, and was wondering if that might be a source of strength for you guys as some of these smaller EPCs, you know, maybe the megawatts are down in resi, but they can gain some of that back in, again, that small-scale CNI.

Thanks. Got it. Yeah, there has been a lot of talk about PPL or prepaid lease in the industry. We have heard independently of us that a few companies are looking at PPL and going to offer PPL. We are also working with a few partners closely. Our opinion, this is our opinion only, we think that the PPL with a loan could be very attractive. The consumer has the option of ownership after year five. The TPO gets the 48D tax credit, while the consumer gets a lower monthly payment with no escalator. So this has the economics of a loan structure with the 25D tax credit. I believe that there is a promise for this structure in order to, you know, revive, you know, we all talked about the 25D loan market will go away, but with, you know, the prepaid lease with the loan may help that market to be revived. That's our opinion. Of course, it is going to take some time to introduce this, to get everybody comfortable. But our job, what's our job in it? Our job is to support our TPO partners. Our job is to basically bring our long tail of installers and give them access to such a structure. Our job is to help them in O&M, operations and maintenance, because we are really the right people to do it. Our job is to help them in solar graph, where modeling of such a prepaid lease can be done in a relatively simple manner. And in addition to things like safe harbor support or tax equity support, we are looking forward to work with our partners to bring that structure. While all the communication will come from those partners, it will not come from us. Our job is to help and support them.

Just a quick follow-up on that as it relates to your job. You mentioned tax equity support. So could that mean you could provide some of your tax liability? And from a financial standpoint, how much might you guys contribute to this effort?

Yes, we are not going to give a number. Also, you asked about – yeah, I realize I forgot to answer the question on CNI. CNI, we're very excited. It's the first time Enphase has done a 480 volt three-phase. Look at the small CNI market, 80% is 480, 20% is the 208 volt three-phase. With gallium nitrite, we are now able to do the 480 volt market. It's 480 volt line-to-line, 277 line-to-neutral. the advantages of the microinverter are the same. Exceptional reliability, exceptional thermal performance, rapid shutdown compliant, U.S. manufacturing, domestic content, FIAC compliant. So really an excellent product, and we are going to be selling and marketing this very aggressively, and we expect this to make a dent. As far as what you said, we are also seeing the same thing. Some of our residential installers are also considering to get into the small commercial solar opportunities because that is a more stable market right now.

Our next question comes from Praneeth Satish from Wells Fargo. Please go ahead with your question.

Thanks. Maybe just starting on the Q126 outlook of $250 million, can you provide any more detail on how you're sizing the expected decline in the U.S. post-25D? So is that based on consultant forecasts, or I seem to recall you have kind of a real-time feed of demand, And so are you seeing any change over the last few weeks now that it's presumably too late to secure the 25D credit?

Yeah, I mean, we're not going to give you any numbers on that. We thought we would give you a preliminary look, and that look is $250 million. That's not guidance, but that's a preliminary look. The way our forecasting, let me describe the forecasting process, is we run a process in the company which is a rolling six-quarter forecasting, and we look at it on a monthly basis. So every month, the job of every sales guy is to go look at his accounts, bottoms up, talk to his customers, and then roll up the view for the headquarters, and then we have a meeting about it and decide what to do. So I'm not saying we have, you know, we have 100% certain view, but we usually understand the trends reasonably, and we can make some informed decisions. And that is how we decided to give you our preliminary look today.

Got it. And then maybe just following up on that, on the battery side, can you comment on why in the Q4 guidance it's showing a 50-megawatt-hour drop? And then for the Q126 outlook, recognizing it's preliminary, but is that based on the Q4 battery level, or does it assume any pickup market share gains tied to the 10C launch?

Yeah, I think it's mainly a function of getting into 2026 with a healthy channel. That's it for the 140 to 160 guide. For Q1, we expect to do well in batteries. Batteries, we don't expect batteries to be impacted too much next year. and that is because the batteries are still in reasonable shape as far as 48E is concerned. The batteries have a much longer lease of life and we are well positioned in batteries. We have FIAC compliance. We have domestic content. Our IQ meter caller is now qualified with 39 utilities, is arguably similar to our leading competitor there, and we are able to cut costs of installations for backup quite significantly. We're very excited about the battery. The installation times are also pretty small. I'm talking physical installation time as compared to the third-generation battery. The only thing about the batteries is the tariffs are high, and we have not made any, we have not increased prices. We have held the pricing. We want to gain more share there. The tariffs are high, and I described how we are going to improve the gross margins of batteries. I'm not going to go there again, but that's our strategy.

Thank you.

Our next question comes from Christine Cho from Barclays. Please go ahead with your question.

Thank you for taking my question. And just a follow-up on that $250 million revenue number for 1Q, would you say that this is kind of what you're expecting sell-through to be, or would you expect some de-stocking to continue in the first half of next year?

I would expect equilibrium there is what I would expect. I would expect maybe slightly higher, but it's too early for me to say.

Slightly higher what? Yes, sell through slightly higher than $250. Okay. And then apologies if I just missed this, but with the prepaid lease structure that you've been talking about to us that you're going to launch with partners, when should we expect an update with more detail? And with respect to safe harbor for, you know, this entity, should we think that, you know, it's going to be physical work test here or would it be 5%? And if the latter, how would you and the partners go about forecasting, you know, annual demand for this product just given that there hasn't been great historical data to lean on?

Yeah, I mean, that's a lot of loaded questions there. So, quite simple. The prepaid lease will be announced by our partners, and we are not going to tell you an exact date. You'll see it when you see it. That's one. Hopefully in Q4. Yeah, hopefully in the current quarter. Number two is, again, too early for me to talk about, say, Farber Physical Work Test, or 5%, but let me give you some general color. We are talking with all TPO partners about both farms. You know, there was a misconception that Enphase will not do 5% physical work test. They will only, or, sorry, Enphase will not do physical work test. We'll do only 5% safe harbor. That is not true. We do whatever the TPO partner wants and whatever the TPO partner is comfortable with. So options of physical work tests, and I already described in detail when people use physical work tests and when people use 5%. So we work with all TPO partners. We work on both methods of safe harbor, and we plan to do that even with the PPO.

And our next question comes from Dylan Nisano from Wolf Research. Please go ahead with your question.

Yeah, thanks for taking my question. I appreciate the early look into 1Q26. I guess my question is, are you expecting to have to take any further actions to reduce OPEX heading into that? And can you just give us some color around what kind of OPEX model you're considering for 2026, just given the uncertainty around how demand could ramp through the year?

Yeah, I just point you to how we have managed OPEX again in the last two years of the downturn. So this quarter, for example, with almost half the revenue that we once had, we are talking about 49% gross margin. the OPEX was approximately 19% and 30% their operating income. So we are laser-focused on operating income, laser-focused on operational excellence. So our run rate today is $80 million a quarter, non-GAAP. It is safe to say we are going to be looking at our expenses to trim down spending in order to track revenue. and it's also safe to say that we won't compromise on any innovation activity or anything that affects customers' adversities.

Okay. Thanks for that. And then just my follow-up, if we can go back to the conversation around the PPL. Badri, I think you were saying that how Enphase is well-suited to offer the O&M service. Can you just clarify, is that expected to be like an enhanced revenue stream for you guys? And if so, could you just kind of level set us on what that could look like in terms of margins or how much you could get?

Yeah, it is too early for me to talk about any numbers there. But the concept is quite simple. We, if the TPO partner uses our equipment, we are the best ones to do operations and maintenance. We have a very big data analytics team who basically looks at problems, identify trends, fix problems online, and if necessary, send our field service technicians on site. There is a reason why our NPS is 77% with a call wait time of two minutes. So we are really the best. In our partnership with the TPOs, they find this one attractive. Like, for example, in a market like Puerto Rico, for example, if we are able to come in and help in terms of O&M for batteries, That's something that TPOs would welcome, and similar opportunities elsewhere. So it also helps us to structure partnerships where, you know, we might offer incentives on the ONR. So each TPO partnership is unique. We cannot generalize it, and at the same time, it's too early for us to give you color on the numbers. In addition, there is SolarGraph as well. Now we have been in the design and proposal and permitting business. SolarGraph has become very robust. We have worked on the platform for three years. We have a lot of installers using the platform. And we are building all of the TPO partners. they all can be accessed through the platform. Similarly, the PPL can be accessed through the platform and can be sold at the kitchen table by the installer. Of course, there is a lot of work that needs to happen for that, but we are there in order to do that work. So solar graph integration, operations and maintenance, safe harbor support, and tax equity support on an as-needed basis. Those are the benefits that we offer.

Thank you.

Our next question comes from Julian Dumoulin-Smith from Jefferies. Please go ahead with your question.

Hey, thanks, team, very much. Appreciate it. Look, maybe to follow up on this 250, obviously you guys are speaking to the year-over-year trends here. How do you think about that annualizing? What's the early expectation about the offsets here, like be it PPL plus loan or what have you, that would otherwise mitigate it? You describe it as a seasonal trend and an exacerbated seasonal trend of 1Q. But what's to suggest that that doesn't persist? I mean, if you adjust your 1Q25 for the safe harbor, it looks like it's down almost 20%, which is kind of consistent with industry trends that are contemplated for the full year 26. Can you speak to maybe the cadence of 26, what you're seeing? You talk about these early strong developing trends on PPL. Is that supposed to mitigate in the back half of next year, for instance?

Yeah, I mean, it's impossible now for me to provide any quantification, but what we said is the following. We, in fact, said we are constructive on the balance of the year. We said there are three external drivers that support recovery. One is the power pricing, which you are aware. It is increasing by 5% this winter with additional increases expected in 2026. AI is going to make these increases even more. Second, the interest rates are declining, easing the affordability. I think there is multiple interest rate cuts for next year. Third is the PPL, new attractive financing solutions that are entering the market to help offset off the loss of the 25D. And really the PPL with the loan could help there to offset the loss of the loan portion of the 25D. these drivers could enable a decent recovery in the second half. That's what we think. That's our view. Then, in addition, we see several Enphase-specific revenue drivers. I'm very excited about the progress with the fourth-generation battery. 40% of our shipments in Q3 into the U.S. belong to the fourth generation. Installers are just getting their hands on and starting to install the product. And we are qualified now at 39 utilities with the meter collar. The meter collar is indeed a differentiated install because it reduces the cost of backup significantly. Next one, we are entering the 480 volt commercial market, which we didn't have, with the IQ9 GAN microinverter, which we expect to ship in December, which is a couple of months from now. This is going to further ramp in 26, so that's in phase specific. Third is the strategic partnerships that we recently announced to capture the battery retrofit opportunity in Netherlands. Fourth, our newest IQ EV chargers, along with the bidirectional EV chargers. The bidirectional EV charger alone is a game changer. That is a beautiful way to do vehicle-to-home, which is backup, old home backup, and vehicle-to-grid, which is grid services, with a very simple product, a collar and a charger. The charger has got our three of our GAN microinverters in there. It's an 11-kilowatt charger. It taps directly into the DC port of the car. We are working with a couple of OEMs there, and we will announce them when we get ready. Then the last one really is the most exciting one. It's our fifth generation battery. I can't stop talking about it. Our fourth generation battery uses a 64 ampere hour cell. Our fifth generation battery uses a 100 ampere hour cell. Energy density is 50% higher. It's a very compact form factor. Although each modular unit is a 5 kilowatt hour, There can be four 5-kilowatt-hour batteries, 20-kilowatt-hours, which can be stacked one on top of the other. It's got excellent serviceability, which means you never need to remove the entire battery of the wall. You can simply remove the battery at fault, replace either the battery management circuit or the microinverter. You can just simply do a swap. So most important there, the system cost is going to drop a lot because our architecture helps us to reduce the cost significantly. And we are going to pass that cost on to the homeowner while maintaining our gross margin there because the cost is low. Similar, IQ9, for example. IQ9, the first flavor that we are releasing this December is 427 watts. The next one that's coming is 548 watts. That will come in middle of the year. the 427-watt product, we are able to achieve the same dollar cost structure for 10% more wattage. So therefore, we expect to drive those costs continuously down. And also, the more power for the microinverter, we do get more PTC. So those all are going in the right direction. So there is a lot of Enphase-specific drivers. There are the three general market drivers. The combination, we see revenues growing in the back house.

Excellent, guys. Quick follow-up there, if I can. Just that response to the earlier comment. Just with respect to the battery in the Netherlands, can you comment a little bit around what the total opportunity is? How would you quantify the 475,000 household and the potential for battery retrofit? How would you begin to quantify that for 26, 27 in terms of the rate of adoption there?

I'm not going to quantify it right now, but I will tell you a way to think about it. It's 475,000 homes. If each of them were to get, let us say, a 7.5 kilowatt hour battery, we are talking about 3 gigawatt hours, I think. And then if you, but if you say there is only a 10% attach of that, you can do the math. And so it's significant. And what we need to do is to make that 10% happen through strong partnerships. And that's not a done deal. It's not easy to do. 10% take rate is tough to do because customers have their own way of deciding what is good for them. What we need to do is these VPP partnerships. One of the big drivers of demand there is a utility like the partnership that we announced, Ascent, paying consumers for their battery, paying consumers up to 122 euros a month for a battery, which is 20 kilowatt hour battery, I think. That's a big deal. Programs like that can significantly reduce the payback, but they need to be with other utilities, too. This is one utility. It is the largest utility, but it needs to be with the others, too. So a lot more things coming there, but we are excited by this opportunity. It's a tremendous opportunity for us.

Once again, if you would like to ask a question, please press star and then one using a touchstone telephone. To withdraw your questions, you may press star and two. Our next question comes from Mahit Mandeloy from Mizuho. Please go ahead with your question.

Hi, this is David Benjamin. I'm from Mahit. Thanks for taking our question. I know we talked about Europe. Can you talk a little bit about the international markets outside? Specifically, in the past, there was some enthusiasm about Japan. Where does that stand today? Is there still a strong outlook there?

Yeah, we introduced a product into Japan in April. That's when we introduced the product. We are very excited by that market. What is the driver there? Tokyo, you know, Tokyo has got a mandate that all new construction needs to have solar. And what's unique about Tokyo is small roofs of the order of 2 to 3 kilowatts, irregular sizes, shading, and therefore microinverter is really a beautiful opportunity there. It is the best product for the Tokyo roofs. In fact, Japan has recognized that, and we do, you know, the homeowner gets an incentive for the microinverters, which is, I think, almost 13 cents a watt, if I remember. So it's a big incentive. But all of you know that the Japanese market is slow to react. We have a great partner. Our partner is Itochu, and now we are working with that partner to train a lot of installers. We are in the training phase. We are meeting with several of them. We have established an entity in Japan. We will have a big office there. we will have approximately 10 plus people in Japan by early next year so we are making all of the necessary investments there we are making further a couple of more new products for Japan in order to do sunlight backup which is a feature that they would like to do so a lot more to come the revenue growth will be slow and steady there. Don't expect any hockey sticks. Similarly, in Australia, you know, Australia is actually a great, great story. And from July, there is a rebate from the government. It's very similar. It's not a tax credit, but it's a rebate. But it's similar to the 30 percent amount that we are used to in the U.S. So that significantly reduces the cost of batteries. That is causing people to buy a lot more batteries than what they would. The attach rate in Australia has gone from approximately 10 to 20 percent to 80 to 90 percent, and we are starting to see that in both our sell-through data, activations data. How are we reacting there? We are introducing, or we just introduced the flex-phase battery, which can do three-phase backup, which is required in Australia. Flexphase battery also has got the ability to adjust the power according to DSO requirements. Many of them originally felt the power of our battery was too high for Australia. That is, a 5 kilowatt hour battery has got 3.84 kilowatts of power, and that scales. So we now have options that can help them scale the power all the way, even to half of that amount. And that is taken care of during commissioning of the battery for the newest three-phase battery. So we have introduced that new product in Q3. You know, we are ramping up on that. Our teams are very excited. They are, in fact, right now at a trade show in Australia. In addition to that, we introduced our IQ8P product, which is IQ8P, is a 480-watt AC. as the panels start to become more than 500 watts our 384 watts AC products is no longer enough therefore we introduced a 480 watts AC and that's been received very well we introduced our latest IQ EV chargers there and now we are planning to introduce hot water heater capabilities so they have the entire ecosystem it's one system it can be N-phase solar, it can be N-phase battery and phase EV chargers, hot water capability, it's a complete system. So we are very excited. We hope to make a dent there shortly.

Thanks very much. And then I know there's also a lot of enthusiasm around Balcony Solar. Are you still continuing to see that growth in that product?

Yeah, Balcony Solar, we just introduced the product. We've had some hiccups in Balcony Solar, and we resolved all of them. We are ready to ramp again. We are going to be introducing several variants of that product, more focused towards the end consumer. B2C is an area where we need to learn a little bit more, and we are doing exactly that. We are launching an e-commerce team. We are doing aggressive things there. We hope to ramp on that throughout 2026.

And our next question comes from Vikran Maghri from Citi. Please go ahead with your question.

Good evening, everyone. Bhatia, I wanted to understand the framework to think about 2026 revenues or outlook. Historically, previously you've mentioned that installs in the U.S. may be down 20% year-on-year. But when I look at the inventory reduction in third quarter, so far $45 million and potentially more inventory reduction in first quarter of next year, it seems like you're preparing for a 30%, 25% to 30% decline in installs from an inventory reduction standpoint. Is that, one, my understanding of inventory reduction right? Do you know more about the outlook today than you did before? That's why the inventory reduction is so high, or there is conservatism in that inventory reduction? And then finally, is it a function of new product launches so you're clearing the channel? And I'm trying to compare what you've said historically about declining U.S. residential installs year-on-year versus the magnitude of the deduction you're looking for in the channel. Thank you.

If anybody tells you that they know what is going to happen in Q1, they're wrong. You know that. It's not many people know. But what we gave you a preliminary view of our number, $250 million. However, you should think about historically Q1 has been down. Even for a normal, let's say there is no 25D happening, Q1 is historically down by 15% as compared to the prior quarter Q4. This time there is additional pressure from 25D. So, the industry as a whole expects anywhere between 20% and 30% reduction in the overall market. And that range numbers because different folks believe different things. But the reduction comes from one thing. The reduction comes from the fact that the cash and the loan market are the ones to see that decline. Because for them, the 25D, 30% tax credit is going away. That is why financing structures, financing solutions like the prepaid lease with a loan can alter that trajectory, can alter that assumption. So right now, we are assuming that Q1 will be stressed, but the numbers we have seen on the prepaid lease with the loan make us believe that a portion of the loan market, which was thought to be gone, has got a good chance to come back. Got it. Thank you.

And ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor 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.

And ladies and gentlemen, the conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your lines.