Good day, ladies and gentlemen, and welcome to the Enphase Energy's acquisition of SunPower Microinverter Business Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference may be recorded. I would now like to introduce your host for today's conference, Ms.
Christina Carabino. Ms. Carabino, you may begin.
Good afternoon, and thank you for joining us today to discuss Enphase Energy's acquisition of SunPower's microinverter business. On the call today from Enphase are Badri Kothandaraman, President and Chief Executive Officer Erik Brenderiz, Chief Financial Officer and Raghu Baloor, Chief Product Officer. After the market closed today, Enphase issued a press release announcing the acquisition, which you can access in the Investors section of our website atwww.inphase.com. We will be showing a slide presentation on this call. And to participate, please go to the Investors section under Events and Presentations of our website at investor.
Enphase.com to listen to the webcast and download a copy of the presentation. Before we get started, let me remind you that today's conference call will include some forward looking statements. The accompanying slide presentation includes our disclosures on forward looking statements that should be read in conjunction with this presentation. The speakers on this call claim the protection of the Safe Harbor provisions contained in the Private Securities Litigation Reform Act of 1995. Enphase Energy cautions you not to place any undue reliance on forward looking statements and undertakes no duty or obligation to update any forward looking statements as a result of new information, future events or changes in its 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. The company has provided reconciliations of these non GAAP financial measures to GAAP financial measures in our press release posted today and in the appendix section of the slide presentation. Now I'd like to introduce Audrey Fafandaraman, President and Chief Executive Officer of Enphase Energy. Audrey?
Good afternoon. Thanks for joining the call today despite the late notice. We have some exciting news for you. You probably saw the press release this afternoon. Please go to the IR section of our website and download the PDF of the investor presentation.
I'm going to go through each page slowly so that you can all follow. So I'm on page 1 right now. That's the title page. And the page 1 basically is the big news of today, Enphase to acquire SunPower's microinverter business. So what we are excited the most is that this 5 year supply agreement is expected to accelerate global adoption of AC modules as the de facto residential solution.
I'm turning over to Slide 2, which is the Safe Harbor slide with regarding the use of forward looking statements. So now I'm going to Slide 3, which talks about today's announcement. On Slide 3, so basically like what I said, Enphase has signed a definitive agreement on June 12, 2018 to acquire SunPower's microinverter business. This advances AC modules as the future of residential solar. It also enhances SunPower's home solar system with Enphase's IQ microinverters.
Enphase is to be the exclusive module level power electronics supplier for SunPower's residential business in the U. S. As per a 5 year supply agreement. This acquisition expects to add $60,000,000 to $70,000,000 annualized revenue in the second half of twenty nineteen at a gross margin of 33% to 35% to Enphase. The acquisition also enables us to add over 140 patients to Enphase's already strong IP portfolio.
These patents come from SunPower's microinverter business, which I will call as the legacy Q3 of 2018 with initial IQ shipments in the Q4. Turning over to Slide 4, the title of the slide is transaction overview for Enphase. So the consideration here is basically $25,000,000 of cash to SunPower and 7,500,000 shares of Enphase common stock to SunPower at close. The cash portion of the financing will come from Enphase's balance sheet, dollars 15,000,000 to be paid at close and $10,000,000 to be paid by December 28, 2018. The closing conditions are subject to qualification of IQ7XS for the SunPower Equinox platform and other customary closing conditions.
We expect this acquisition to close by the end of Q3 2018. We will work with SunPower to manage the ramp down of their legacy product and ramp up of our IQ product. SunPower will be ramping down their legacy product and Enphase will be ramping up IQ. We expect initial IQ shipments in Q4 2018 and we will start to ramp nicely in Q1 of 2019. We expect to see the full potential of the business in the second half of twenty nineteen.
The anticipated financial impact of the business, like what I said, it accelerates revenue and gross margin improvements. It increases economy of scale and it improves non GAAP EPS and is accretive. The next slide, turning over to Slide 5, is the title of that slide is Equinox Platform, a Complete Home Solar System, complete home solar solution. So SunPower has got a great platform. It is a very powerful and complete home solar solution.
And this offers great value to homeowners, dealers and builders. The elements of the solar solution are basically best in class solar cells with unmatched reliability and efficiency, AC panels with built in microinverters, energy link hardware which is basically the communication hardware and EnergyLink software which is the software used for communication and the racking hardware, which is the Invisi Mount hardware. Here, we have specifically engineered IQ7XS for use in AC modules for SunPower's platform. Moving on to Slide 6. The title of the slide AC Modules Are Key TO Equinox Success.
This slide shows how AC modules have been very successful for SunPower. So this is the data from SunPower talking about the Equinox ramp. And the key thing here, this acquisition is so exciting for both of us because we all believe strongly, both of us believe strongly in AC panels. So AC modules have risen to greater than 80% of SunPower's residential sales. That's the key takeaway here.
And you can see the steady ramp starting from Q1 'sixteen. Both of us believe in the similar value proposition of AC modules, basically installation and commissioning simplicity delivering a lot of time savings. The factory integrated microinverters eliminate need to assemble inverters on-site, increasing quality and reducing inspection. Access to challenging or constrained roofs is easier and it enables easier installer training. Going to Slide 7, the title of the slide is AC Module Powered by Enphase IQ, enhances Equinox.
So we talked about how SunPower has evangelized AC modules. They're actually the leader in AC modules even before us. They have done a great job evangelizing AC modules and now Slide 7 talks about how that AC module is further enhanced by IQ and increasing the performance of Equinox. The Enphase value propositions that you see on the right hand side, I want to mention a few. Like what I said, there is really strong alignment on ACM strategy.
Enphase uses 55 nanometer ASIC for computation and control. That has been the key differentiator in Enphase strategy compared to other microinverters. Because of our ASIC architecture, we are able to do single stage microinverter reducing the number of components in bill of materials. Our ASIC does all the computation and it is predictive in nature. The next is we have 97.5 percent CEC efficiency.
Because our ASIC is single stage, it is highly efficient. Because it is highly efficient, the power dissipation is a lot less. Because the power dissipation is a lot less, we can use a plastic case instead of metal case. So again, what I'm describing is because the architecture is an efficient architecture, many of the elements enhance, they are optimized for both cost and performance. The next one is the 2 wire AC cable.
In the past, we had 4 wires AC cable and now Enphase IQ with 2 wire AC cable results in both ease of use for the installers as well as cost reduction. As noted, Enphase is ideal for long tail installers because it's that's the way we work. Our fundamental value proposition has been high quality and ease of use, backed by the innovation of our ASIC. The next two points, which is basically IQ7 platform is IQ7 platform is compatible to SunPower roadmap and the software architecture accelerated geo expansion are related. Basically, our architecture is software defined.
This means, although the hardware skew does not change, we can easily make software changes to ensure the microinverter becomes compliant to a given region or geography. This enables us to add new geographies much faster, keeping the same hardware platform entirely using the power of our software platform. So bottom line is with Enphase IQ, we ensured high performance, high quality, easy to use solutions for SunPower's customers. Moving on to Slide 8, the title of the slide is incremental benefits of the acquisition. Let me remind you a basic thesis of this acquisition.
We add $60,000,000 to $70,000,000 of revenue as I noted, But the key is that, I mean there are 2 key things. 1 is the gross margin is good, it is 33% to 35%. The other one is that the added spend, the added OpEx is very modest. So let's go through the numbers. So like what I said, we will add $60,000,000 to $70,000,000 in revenue.
This is the estimated annualized incremental revenue for North America in the second half of twenty nineteen. Gross margin is 33% to 35% and that basically comes due to higher panel wattage. Enphase's microinverters, they have a distributed architecture. So the same microinverter can be made compliant to a high power module with very little changes. Therefore, basically optimizing the cost per watt that improves gross margin.
Our OpEx is basically $4,000,000 to $6,000,000 a year and this is what I mean by modest incremental spend on added revenue. Net net non GAAP operating income is between $14,000,000 to $21,000,000 incremental for this acquisition. So to summarize it, basically the decent gross margins of 33% to 35% with very minimal OpEx causing all the gross margins to fall through to the bottom line. Two points I'd like to note on Slide 8, which are listed on the right. Enphase base business without this acquisition continues to be on track to hit 30, 2010 by Q4 2018.
The acquisition of this business adds incremental operating income through improved gross margin and minimal additional OpEx. Let's go to Slide 9, the acquisition summary. 5 year partnership between SunPower and Enphase is expected to create high performance, high quality, easy to use home solar systems offering exceptional experience to homeowners, dealers and builders. It helps both companies focus on their core strengths. We expect to add $60,000,000 to $70,000,000 annualized U.
S. Revenue for Enphase in the second half of twenty nineteen. It positions both companies well to expand into international markets. Enphase to support SunPower's module roadmap with a series of new microinverters. We expect to accelerate gross margin improvement and long term earnings growth for Enphase.
And the last bullet is, this is expected to create significant shareholder value from strong EPS accretion as noted in the previous slide. Now I'm going to turn over to the operator for questions.
Thank Our first question comes from Philip Shen with ROTH Capital Partners.
Hey, Badri. Congrats on the deal. Wanted to talk about the revenue opportunity and unpack that a bit more. So just to be clear, if the annualized revenue the back half of 'nineteen is $60,000,000 to $70,000,000 let's say $70,000,000 I'm assuming that's $35,000,000 for the back half of 'nineteen. So just wanted to confirm that.
And then also you talked about ramping up product in the back half of Q4 of this year as well as the first half of twenty nineteen, can you give us a sense for what kind of revenue impact we could see near term as well in Q4 of 'eighteen as well as the first half of 'nineteen? Thanks.
Right. So Phil, first, your assumption is right. Your numbers are also correct. Those numbers are in the second half of twenty nineteen. Okay.
With regarding the ramps, like what I talked about, we will be working with SunPower to ensure that the ramp down of their legacy microinverters and ramp up of our IQ series go flawless and we expect to have initial shipments in the Q4. And we expect to have a nice ramp in Q1 of 2019. Let me remind you that it is in both parties' best interest to get this done faster. But I'm giving the numbers for the second half of 2019 only at this point in time. As you know, ramps are complicated, which is why we don't want to give out numbers for Q4 2018.
Okay, great. You mentioned just now it is in both parties' best interest to get this done faster. It's interesting that they want to effectively get I mean, they just bought this business, call it, 3 years ago. And so and they've had nice success, both from the metrics that you shared and as well as some of the California DG stats data that we track. They've really ramped up their Solar Bridge business nicely.
So why are they I mean, I know you it might be hard for you to speak to it, but insofar as that you can, what is the ramp down driven by? I mean, if the ramp up of the volume of the businesses has been good, what's been a key driver for I think I can understand your interest in accessing this business opportunity. But if you can talk through that and give us some more color around the rationale perhaps from both sides, that would be great.
Yes. I'll try to answer to the best of my abilities here. So basically, I mean what makes sense for both parties is we all focus on our core strengths. And Enphase has got a 300% microinverter team. Our life and blood, we do microinverters.
And it is very well known and I told you also about our innovation, about our ASIC roadmap. This is something that does not come easily. It is based upon a 10 year cycle of learning. And as a consequence, there are lots of opportunities that this partnership will bring in. For example, I talked about the international expansion.
Right now, the chart I showed you for the tremendous success of Equinox that SunPower has had, those all are focused in the U. S. But this partnership will help us expand that to international markets worldwide. In addition, we also bring the support for SunPower's module roadmap with their next generation technology. Don't take that lightly because our platform is again is very easy for us to make changes customized to SunPower platform.
So bottom line is it just makes sense from the perspective of both parties and which is why we think both parties are motivated enough to move faster than slower.
Great. Quick housekeeping question on 5 year agreement. Does that clock begin when the transaction closes at the end of Q3? And are there any other conditions or options in that agreement to either renew or to expand into new regions as you just mentioned?
That becomes effective after the transaction is closed. And what was your other question, Phil?
Is there a renewal that's available at the end of the 5 years, something like that?
Yes. There is a renewal option available at the end of 5 years, etcetera, subject to agreement by both parties. Yes.
Great. Okay. One last question, Madhur, and I'll pass it on. In terms of with all the legacy product that Solar Bridge has out there, or the SunPower microinverter product, can you quantify how many megawatts that is? And then is there a retrofit opportunity for you?
So let's say there's, I'm guessing 200 megawatts out there. Is there an opportunity for you to potentially retrofit some of that solar bridge product or SunPower microinverter product?
So Phil, I'm not going to quantify the number of megawatts out there. And again, with regarding the retrofit opportunity, I think it's a little bit early to tell. Right now, we are focused on ensuring the acquisition closes. We qualify the product for SunPower's Equinox platform. That's the closing condition.
And we basically are focused on that. And I'm sure we'll look at these as the partnership strengthens between both companies.
Thank you. Our next question comes from Edwin Moke with Needham and Co.
Great. Thanks for taking my question. Congrats for it sounds like a really good deal for you guys. First, just kind of housekeeping on the transaction. Since you're buying this business from SunPower and like you said, there's a ramp down of their micros and ramp up of your IQ7, right?
During that period, do you actually get the revenue from those Micros that you're ramping down for that are SunPower Micros?
No, we do not get the revenue from SunPower Micros. We only get the revenues from the Enphase IQ microinverter shipments that will begin in Q4 2018.
Okay, great. Thanks for clarifying that. And then just kind of like kind of tie back to Phil's question on the legacy product or the SunPower products that was sold historically. Again, going back to the same thing, since you are buying the business, are you responsible for the warrantiers and support for those products and or are those on SunPower's book?
At this point, SunPower is responsible for supporting the warranty of the legacy microinverter products.
Okay, great, great. Yes, I just want to make sure we get that those out there because I'm sure they'll ask. I guess I have 2 other questions. First, on the 5 year agreement, thanks
for providing
kind of margin and revenue outlook was really helpful for us. Just curious, in terms of kind of volume and pricing, how is the agreement structure? Is it just based on kind of estimate demand right now? Or is it some kind of take or pay commitment for volume pricing, etcetera? You can kind of walk through any kind of detail you'd like on that.
Yes. I mean, we are not going to provide any of the financial details like pricing or volumes, but here is what I can say. Basically, we have a 5 year supply agreement and that is based upon a few tenets like exclusivity and certain minimum volume
Okay. Actually, that's helpful to kind of put some framework around that. Last question I have, so you guys have developed this micro specialty for the SunPower module, right? And I noticed on the presentation, SunPower obviously have their own software and the system, right, is part of the whole Equinox platform that they're selling, right? Do you have to like develop specialized software for them?
Number 1. And then I think historically, sort of micros you guys sell, mostly you own the data that generate from the micros, right? In this particular case, does it mean that because it's part of the SunPower platform that you basically hand over all the data for them and you basically just apply the microinverter? Can you kind of walk through a little bit on that detail?
Right. I just want to be clear that SunPower owns the data and we are simply a microinverter and cable supplier to SunPower. So we are here to make them successful and we will do whatever it takes in order to do that. Okay?
Thank you. Our next question comes from Carter Driscoll with B. Riley FBR.
Good afternoon, gentlemen. Also echo my congratulations. I know you're not giving you have given quite a bit of details, but I know you've got in particular guidance for 1Q 'nineteen. Is it possible the ramp would be taken off to buck seasonal the seasonality in the Q1 you could actually grow 1Q 'nineteen over 4Q 'eighteen?
Well, like what I said, the ramps are complicated and often difficult to proceed. I mean, yes, difficult to predict. And that is why I basically went out of my way and gave you guys guidance on what the full business will mean to us in the second half of twenty nineteen. But having said that, since I told you that initial shipments will begin in Q4 twenty eighteen, I expect Q1 twenty nineteen to be a nice ramp. And we will provide guidance with respect to that when we reach there, but that's what we know right now.
Okay. That's helpful. Thank you.
Is it possible that kind of
the go to market strategy, particularly in the U. S, could you target if the California mandate for example were really to progress you could actually go after a new segment, maybe like the homebuilders and partner with some of those, if that were the case? Or is that a little too early?
Yes, absolutely. Yes, absolutely. I mean the way I think about this partnership, it is a long term partnership, but there are 4 vectors. One is basically you can see that SunPower's AC attach rate. In other words, the AC modules as a percent of their total residential business is increasing every quarter in the graph that you saw.
We expect that attach rate to keep increasing. That's number 1. The next one we expect is what I talked about in terms of the international markets. Our software defined architecture helps us to enter international regions relatively easily. The third one is what you pointed out, which is very powerful again.
With the new mandate on the homes coming in 2020, this represents an opportunity that both of us are excited about. And the last one is basically SunPower has got a clear module roadmap, the next generation technology module roadmap. And we are excited about the possibility of basically designing and supplying microinverters for that next generation technology. And we believe that is also a growth vector. These are long term growth vectors that I'm talking about.
Is there just a follow-up to that, Badri. Is there a specific marketing spend in the different regions that you've committed to individually to each company?
Each company, no, we have not yet committed to any kind of spend at this point in time. But those details are going to be there. They are going to be worked out once the acquisition closes.
And then just my last question, is it natural roadmap to eventually use IQ8 in respect of solution?
Well, it's difficult to predict and that decision I cannot be making it alone. It has to be in conjunction with SunPower. We will do whatever SunPower wants. This we are here to make the Equinox platform and the next generation platform successful. So we will do anything that they want.
If they want IQ8, we will provide them with IQ8. No problem.
Thank you. Our next question comes from Colin Rusch with Oppenheimer.
Thanks so much. And actually on the topic of IQ8, I wanted to understand the impact of the IP portfolio on the IQ8 and the evolution of that design and how you think that will roll through the product roadmap that you have in front of you?
Yes. I mean, like what I said, we added about 140 patents to Enphase's IP portfolio. And some of that technology is pretty good because, yes, remember, SunPower's legacy microinverter, I mean, they created a business from scratch and they created the AC module business as well from scratch. And we are going through those patents to see if some of those are applicable for IQ8. But in terms of IQ8, we have a clear strategy that we are not changing right now because it is around the corner.
Like what I said, the Ensemble technology in IQ8 has been proven with the ASIC and we expect to release an off grid product in Q4 2018.
Okay. And that actually is
a nice segue into my next question around microgrids and your ability to do islanding and some of SunPower supply chain or I should say sales channel into emerging markets. Can you talk a little bit about how quickly you think that sort of microgrid and islanding sort of functionality goes forward? And will you be looking at smaller systems and micro grid applications in emerging markets as part of the sales program?
Yes, absolutely. We will be looking at smaller systems. We will be looking at micro grids. And that's why we are getting our off grid IQ8 platform ready. We will also follow it up with a grid agnostic platform in We will do whatever it takes to make SunPower's platform successful.
So we will partner jointly on such opportunities if they also recognize the value of the thing.
Okay, great.
I'll take the rest of it offline.
Yes.
Thank you. Our next question comes from Eric Stine with Craig Hallum.
Hi, Badri.
So I was just wondering on the IQ7XS and the qualification there, I mean, can you just give us a sense of the hurdles, I mean, if there are any? Or is that something as a closing condition that we should view as kind of a foregone conclusion, just need to get through?
Well, it is yes, I can I cannot predict the future, but what we have done is we have qualified such AC modules for a number of partners? And we have our own standard qualification procedures. We have our own quality criteria. SunPower possibly has better quality criteria than us. So we are working very closely with SunPower.
But I don't anticipate any big roadblocks at this point in time.
Okay. Good to hear. And then last one for me. Just to clarify, so this 5 year agreement is exclusive to the U. S.
Is this I mean to get into international markets, does this require a different agreement or does this current 5 year agreement have some add on provisions, so that it's a pretty seamless transition or how should we think about the actual actually getting into those international markets?
Yes. I mean, it is actually pretty simple. I think there is no Equinox platform for the international markets. And given that Equinox has been so successful, I and I cannot speak for SunPower though, but we believe it's a logical choice. And we believe Enphase's IQ with its software And like what I said, we will do whatever it takes to make them And like what I said, we will do whatever it takes to make them successful.
And international expansion is one of the cornerstones of this agreement that both of us thought that that is something that is valuable for us.
Okay, thanks.
Thank you. Our next question comes from Pavel Molchanov with Raymond James.
Thanks for taking the question guys. You have some existing partnerships with Chinese module suppliers in particular. What's their response to your collaboration with SunPower?
Well, we are here to make all our module partners successful. That's the bottom line. So we are open to working with all of our ACM partners. SunPower is such an example of a significant ACM partner, But we will be working with other ACM partners in significant relationships
as well.
Okay. And can you talk about the manufacturing supply chain and the is there in house production that you are getting as part of this deal and what's going to happen to the manufacturing supply chain post the closing?
We are not taking any of the manufacturing or supply chain of the legacy microinverter products from SunPower. We are basically going to ramp up IQ and use the existing IQ supply chain to service SunPower's business.
Okay, clear enough. Appreciate it.
Thank you. Our next question comes from Brad Meikle with Williams Research. Mr. Michael, your line is open. Okay.
So we'll move on to our next question, which is Amit Dayal with H. C. Wainwright.
Thank you. Good afternoon, Badri. Congrats on the transaction. Most of my questions have been asked. Just wanted to get your perspective maybe at a higher level of how this positions you competitively in terms of maybe taking additional market share here in the US.
Previous caller's question about working with other partners in tandem alongside SunPower now with this relationship. How do you see sort of maneuvering your way to maybe taking more market share?
Well, in order to step back and think about market share, we can look at 2017 numbers. We believe that SunPower's microinverter share in the U. S. In 2017 was roughly about 9%. And Enphase is about 26% to 27%.
So on a pro form a basis, the 2017 market share, if you combine both businesses would be roughly 36%. And that is to provide you with the flavor of the market share. However, like what I said, the there are a few drivers for this deal. One is the AC attach rate that is going up, which I already talked about. The second is the new home builds in California.
That's another one on which we would be partnering closely with SunPower. The 3rd is international opportunities due to our software configurable architecture. The 4th is supporting SunPower's module roadmap with a series of new microinverters that we will design. All of these are the 4 vectors that we expect to leverage in our partnership.
Awesome. Just one last one. Does this impact any the road map, I guess, that you have had sort of planned out yourself now or will you stay sort of consistent with what you already had
set up? There is no change to the IQ8 roadmap that we have planned. That is that the IQ8 release is imminent. We talked about IQ8 for off grid in Q4 2018 and we talked about grid agnostic derivative products in the first half of twenty nineteen. We don't expect any impact to our product roadmap due to this.
Awesome. That's all I have. Thank you so much.
Thank you. Our next question comes from Philip Shem with ROTH Capital Partners.
Hey, thanks for the follow-up. Wanted to ask one on the purchase price with 25,000,000, 7,500,000 shares, roughly 60,000,000 in overall value. How did you guys come up with the purchase price? Because the legacy business is going to go away. You do get the patents.
You have a 5 year right to their U. S. Business. There's a partnership that can build. But tangibly, what how do you guys come up with the purchase price?
And then what kind of return on capital do you see on that investment? And did you factor that into the overall calculus? Thanks.
Right. So yes, Phil, I mean, we did a lot of work before our Board of Directors approved. But stepping back, what are we buying? We bought some great technology that was very useful to ramp a business to significant levels and SunPower did that and they evangelized the AC modules. That's 1.
We are getting 140 patents as you noted. We are getting some access to great people in R and D. That's number 3. We are also getting the access to customer relationships. That's number 4.
And we have significant opportunities for future international business expansion. So we take all of these 5 and then we basically look at how to value it. There are a lot of methods that we use in valuation. The first method is net present value. You compute net present value for a period of 5 years, you use discounted cash flow techniques and basically come out with your valuation.
That is one method. The other one is valuing it based upon price to sales. The third one, value based upon EBIT, which is EV over EBIT or EV over EBITDA. We did it using at least 4 or 5 such methods and we showed it to our Board and we feel very good about the price we paid for the transaction. And what makes even more sense is that this deal adds $60,000,000 to $70,000,000 at very good gross margins, 33% to 35%.
And the most important thing is very minimal OpEx. So all of the gross margin dollars fall through nearly all of the gross margin dollars fall through to the bottom line.
Great. Thanks for the color on that, Badri, and I'll pass it on.
Thank you. Our next question comes from Brad Michael with Williams Research.
Hey, Badri. Congrats on getting the deal done. It sounds like a great deal to me at under one times revenues.
What
do you think it's going to do what do
you think it's going to
do to your brand just overall in terms of having more scale and being able to be in the high efficiency module?
Well, I mean, as you know Brad, we are getting healthier as a company. Even without this transaction, we are on track to do 30, twenty, ten. The elements of this transaction are there are lots of growth vectors that we actually outlined. And financially, like what you noted, it makes a lot of sense due to the strong EPS accretion. So yes, we are very excited about it and we will do whatever it takes to make our partners like SunPower successful.
Thanks. It seems like the revenue, the numbers of 60 to 70 seem to be on the low side given that the resi business is tracking to 4,450 megawatts a year in the U. S. I'm not entirely surprised to see that type of conservatism from you guys, but I guess I wanted to ask about that. And then also if you look at SunPower, they've got a similar sized commercial business.
Do you think that you'll be able to get into any of that on the small, midsized commercial side? And can you elaborate more on what you feel like are the international opportunities that you've mentioned a couple of times?
Right. So the first one, can you just remind me the first half of the question again?
Brad? Yes. Just around international volumes and expansion and the conservatism, it seems like given the run rate of 400, 500.
So Brad, it's pretty simple. We are talking about the solar industry here. And we are talking about the industry being hit by tariffs, etcetera. So based upon the forecast that SunPower gave us, based upon our judgments there, we believe what we came up is very reasonable for the residential business. So we are very comfortable with that.
That's number 1. The second one is at this point in time we don't have any plans to address the C and I market. That's number 2. 3rd is with regarding the international opportunities, I think there is this is something that we will have to discuss with SunPower in detail. But I mean, I see some obvious choices are Japan, Europe, Australia.
Those are the markets which value high quality, high performance, easy to use product, which both SunPower and Enphase are known for.
Thanks, Badri. I appreciate it. All right.
Thank you.
Ladies and gentlemen, thank you for participating into the question and answer portion of today's call. I would now like to turn the call back to Mr. Badri Kothanduraman.
So we announced the acquisition of SunPower's microinverter business. We are very excited by this. The fact that this is very accretive in terms of EPS is very exciting. I look forward to working on closing this transaction. So thank you to all of you for joining the call.
Bye.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect and have a wonderful day.