Badri Kothandaraman: Yes. I mean, we are pretty conservative when it comes to our guidance. You should see our track record in general. And we do have — like, what I said, we do have a lot of dry powder in terms of new products. This year is the year of new products, and we are going to be releasing new products constantly. And so, we think other than the base business, which we guided on in Q2, there is a lot more to come there. So our guidance is a little bit wider this time, plus/minus $25 million. It is to reflect a slightly more uncertainty compared to the last time. But our Europe business is doing incredibly well. We grew 25% in one quarter from Q4 to Q1. We have doubled — we doubled from 2020 to 2021. From 2021 to 2022, we grew 132%.
I just released my annual letter yesterday. You can see that 132% growth from 2021 to 2022. And so Europe is doing incredibly well for us. We are focused on entering a lot more countries there. We are focused on IQ8 microinverters. We’re focused on IQ Batteries, lots of regions big market over 10 gigawatts compared to the US, which is 5 gigawatts right now. So bottom line, we are pretty conservative.
Eric Stine: Got it. And then I mean, you do have the wide range, but it did seem in your commentary that you do expect improvement versus the first quarter. I mean, so is it fair to say that your expectation would be that the top half of that range?
Badri Kothandaraman: I mean we gave $700 million to $750 million. And there’s nothing else we say — we cannot say, we are in the top half of the range.
Eric Stine: Okay. Got it. Thank you.
Operator: Our next question comes from Joseph Osha from Guggenheim Partners. Please go ahead with your question.
Joseph Osha: Hi, there. I just wanted to return to some of the mechanics around the ramp of onshore manufacturing. Mandy said 50,000 units this quarter. and then two lines by the end of the year. So my first question is, does that 50,000 mean manufactured or shipped for revenue? And then secondly, looking at the end of the year, just wondering if you can tie those comments back to maybe a unit number or a run rate at the end of 2023, not 2024? Thank you.
Badri Kothandaraman: Yeah, 50, 000 microinverters shipped to customers. That’s what we talk about. We always talk about shipments. Then –
Joseph Osha: All right.
Badri Kothandaraman: Therefore, you should take that number, you should take 4.5 million unit number by end of 2024, you can do some kind of an interpolation, you can work with us and a linear interpolation may be fine too.
Joseph Osha: Okay. All right. Probably even a sell-side analysts can handle that math, but — so you’re not giving me a specific number for end of 2023 at the moment, right?
Badri Kothandaraman: Yes. And like what you said, you can really calculate it.
Joseph Osha: Okay. All right. Thank you.
Operator: Our next question comes from Julien Dumoulin-Smith from Bank of America. Please go ahead your question.
Julien Dumoulin-Smith: Excellent. Thank you, guys. Good afternoon. I’ll make it quick here. Just with respect to the commentary on temporary impacts, I just want to clarify that super quickly. Obviously, you’ve got this NEM dynamic for the next couple of quarters or so as you deal with the origination on NEM 2.0. How do you think about that squaring up against this temporary impact on installations? I know, you commented earlier, there’s a transition period on sales. How much of a non-California improvement are you guys thinking about especially in the back half of the year as NEM 3.0 kind of rolls in more meaningfully?
Badri Kothandaraman: I mean, we cannot predict what it’s going to be in the back of — all I know is Q1 is supposed to be seasonally a tough quarter. And on top of it, in Q1, installers had to face all of these uncertainties for the first time, Q1 as well as probably Q4 a little bit. So I think — we said, and we hope this is true, is installers are going to adjust. Everybody is going to adjust. And of course, as long as interest rates are so high, we cannot — we’re not saying that, the numbers are going to return back to where it were. That is going to be stress on those numbers because interest rates were high, but there are going to be some innovation in financing, innovation in loans, innovation in leases that are going to come. It’s going to provide more access to our long tail installers. The demand will unleash only when the interest rates are back to normal. But until then, it will get incrementally better compared to Q1.
Raghu Belur: And the things that we control — we can control, right, for example, helping our installer partners, training them on how to sell NEM 3.0 system. This is where solar graft plays a very key role in helping them to show exactly what and how easy it would be to build a NEM 3.0 system with our R3 battery and show the payback period and bill offsets, et cetera, and how to sell that to the homeowners. And that we are doing right now as we speak. So I think there are things that we control, and then there are the macroeconomic trends. And there will be people who will be, as Badri mentioned, innovating on the finance side.
Julien Dumoulin-Smith: When you said temporary here and demand being down — just to clarify that super quickly, I know you only guide one quarter forward. I’m just trying to understand how temporary?
Badri Kothandaraman: What we said is in California, the point of sales, which is sell-through data can show as much decline because in California, the installers have their hands full with NEM 2.0 installations for the next three to four months. And now in this time, which is when the originations are happening for NEM 3.0, this is the time where we are working with those installers and helping them understand and pitch the value of NEM 3.0 to homeowners. So that’s in California. Outside California, the situation is purely dominated by high interest rate environment. So there, we are talking about installers, first of all, getting used to working with reduced cash flow, number one; innovation on loans, which is they need to start selling high APR loans with lesser dealer fee, lease — people offering leases to long tail installers, those innovations will — we expect those innovations to start to come.
But like what I told you, the demand will get unleashed to its original levels when the interest rates come back to normal. But until then, we expect the sell-through in non-California states to incrementally improve as installers get used to the situation. That’s what we said.
Julien Dumoulin-Smith: Excellent. Thank you, guys.
Operator: Our next question comes from Pavel Molchanov from Raymond James. Please go ahead with your question.
Pavel Molchanov: Thanks for taking the question. Just one for me. In the 10-Q, you broke out revenue between products and services, and this may have been the first time you’re doing that. Should we look at that $24 million service line as essentially the software slice of the revenue mix, or does that signify something else?
Badri Kothandaraman: We’ll give you more color on those basically, maybe in the — after call. We wanted to break down, yes, some of the software acquisitions. We have done a few acquisitions on the installer platform. We have done a few on the EV charging side as well. Yeah, just to remind you, we have — starting with the front end lead generation, we acquired a company called SolarLeadFactory that basically helps in providing leads to installers. And with that company, we are able to at least understand a little bit the origination side of things. And the name of the game for us there is to — lead quality is a very big pain point for the industry. The statistics on leads are pretty bad, which is of every 100 leads that are sold, only two leads or three leads go and become a contract.
So we would like to change that by software, by making sure that, that experience on lead management is done right. To take that 2% or 3% number to a 10% number. So that’s the first acquisition. The second acquisition is Solargraf. Solargraf is design and proposal. Design and proposal means you have a home energy management system. That consists of solar storage, EV charger and especially as the tariffs get complex, it becomes difficult for anybody to estimate your savings. So it is vital that there is software that basically estimates what a homeowner can save and provide him most accurate payback calculations depending on its consumption. So that’s Solargraf, and that is now helping us a lot. 1,000 installers are using it with NEM 3.0, it is helping us to sell the NEM 3.0 more clearly to our installers and show them the value of a solar plus storage system.
So that’s the second one that we bought. That’s Solargraf design and proposal software. The third one is permitting services. Installers have to submit a lot of paper work in order to submit to the local AHJ. Our thought is making that process entirely seamless through software, and it should not take more than an hour. After they submit us, meaning it should take a maximum of an hour, and there should be no — there should be manual checks, but nothing manual about it. So we are taking that acquisition, and we are driving it to fully automated permit plans at creation. That’s number three. On the platform side, we already do the monitoring. We already have commissioning, app, et cetera. So that’s ongoing. I’m not going to talk about that. The last bit is basically O&M.
O&M is operations and maintenance. Here, I mean, the term is kind of a misnomer. But this company, we bought 365 Pronto. They basically have a marketplace — once again, software company. One end of the marketplace are customers who want to do an O&M, who want an O&M job to be done. The other one — the other side of the marketplace are service technicians or installers who are capable of doing that job. So that is maybe 300-plus installers logging in on the other side, and there is people submitting O&M jobs. And we try to match the two. And once again, it is a software play and can be effective for a lot of jobs like, for example, replacing a main panel, like installing your EV charger. There was a drive to cellular modems, 3G going away and 4G coming in, jobs like that, which the installers really don’t have an extended crew, 365 Pronto is their extended group.
They come in, they basically pay us a service charge and they get their jobs done. So a lot of companies there. That’s our digital platform. All of them are catered towards servicing our installers, to make installers’ lives easier. So we’ll work with you to explain it a little better.
