Enphase Energy announced on Monday that it will cut its global workforce by approximately 10%, affecting around 350 contractors and employees. This move is part of a restructuring plan aimed at streamlining operations to address excess inventory on a global scale.
Solar Power Economic Condition
CEO Badri Kothandaraman acknowledged that Enphase Energy, a company specializing in microinverters, battery storage, and other products for the solar and alternative energy sector, is undergoing challenging adjustments due to the harsh economic environment it is currently facing.
"Over the last few months, we have made significant efforts to reduce our operating costs, but we have more work to do to right-size our operations and become leaner and more efficient," the executive said in a letter attached to a filing on Monday.
Metering reform in California and high lending rates in the country significantly reduced consumer demand in the nation's largest solar power market. Solar power expansion has decelerated in Europe, resulting in elevated inventory levels for companies like Enphase. This slowdown suggests a challenging market environment, where companies may face increased difficulty managing their stockpiles due to lower demand for solar products.
Enphase announced plans to decrease the capacity of its global microinverter contract manufacturing operations in a regulatory filing. The new capacity target is approximately 7.25 million units per quarter, a reduction from the current capacity of around 10 million units per quarter to better align production with the anticipated demand for microinverters in the market.
Operational and Cost-cutting Strategy
Consequently, Enphase will discontinue operations at its contract manufacturing sites in Timisoara, Romania, and Wisconsin, United States. This strategic decision aligns with the company's effort to optimize its operational footprint in response to the evolving market conditions and production adjustments.
The solar inverter manufacturer plans to reduce expenses by consolidating its global facilities and minimizing its real estate footprint. Additionally, Enphase intends to extend its freeze on hiring and travel through 2024, with certain exceptions. This cost-cutting strategy reflects the company's commitment to financial optimization and strategic resource management in the coming years.
Enphase anticipates finalizing its restructuring plan by the first half of 2024, with adjusted operating expenses of between $75 million and $80 million a quarter. The company foresees a one-time charge for restructuring and asset impairment, totaling approximately $16 to $18 million as part of this plan. This strategic move is designed to position Enphase for future growth and align its operations with evolving market dynamics.
Charges are not anticipated to significantly impact the company's financial results or overall financial condition, according to Enphase. In the after-hours session on Monday, the company's shares saw a slight decline, having finished the regular trading day with a 0.1% increase. Notably, the stock has experienced a 53% decrease in value this year, in contrast to the approximately 23% gains observed in the S&P 500 index.
