And by the way, PCS, we can do PCS simply even for NEM 2 expansion systems. That is, if you want to expand your NEM 2 system, as long as you do not export anything beyond your old system, you can still do your NEM 2 system to support your current consumption while exporting energy — maximum energy from the old system. So, NEM 2 expansion is now a lot easier. So, hopefully, I gave you some color on the value that we had. And we are not stopping. We are going to be focused on cost. The batteries are — our customers are cost sensitive. And with every opportunity, we are going to be removing boxes off the wall. Raghu talked about — Raghu was with me, with all of the installers, and we have clear plans on what we are going to do to eliminate more boxes on the wall.
So, we are ultra-sensitive in response to your question. And if we need to drop pricing because we aren’t providing as much value compared to competition, we will do so.
Praneeth Satish: Got it. No, thank you for that very expansive answer. Maybe just one more quick one, again on batteries. So, you said that the channel is normal for batteries. You are at battery sell-through of 128 megawatt hours in Q1 for seasonally weak quarter. The guidance for Q2 has battery shipments at 100 megawatt hours to 120 megawatt hours, and I’m assuming there that sell-in equals sell-through in Q2. So, maybe if you could just talk about what’s driving that slight decrease from 128 megawatt hours to the guidance of 110 megawatt hours? Is that conservatism or are there other factors? Because it seems like there’s a lot of tailwinds in the battery business.
Badri Kothandaraman: That is conservatism. And yes, I knew that you guys would ask me the questions because you’re intelligent. I said, carefully worded, that it is almost there. That’s what I said. But you’re right in general. The battery, we expect to run quite lean on batteries. And so, yes, we are conservative. It does seem that there is some opportunity for upside there.
Praneeth Satish: Got it. Thank you.
Operator: Thank you. And our next question today comes from Philip Shen with ROTH MKM. Please go ahead.
Philip Shen: Hi, everyone. Thanks for taking my questions. Back to Brian’s question earlier on the timing of normalized revenue, Badri, I think you said on the last call, the $475 million would come in the back half of this year. Are we still on track for that? So, the $475 million could be in either Q3 or Q4? And can you walk us through — is it more likely Q4 or Q3, or if there’s a chance that that gets pushed out to Q1? Thanks.
Badri Kothandaraman: Well, Phil, you know that we don’t give guidance for Q3 nor Q4, but I described all of the tailwinds. And we are growing by — from a sell-through demand of $376 million to $400 million. And we described the growth vectors. We are optimistic about all of the growth vectors. And we talked about the puts and takes in Europe. We talked about Netherlands. We talked about France. We talked about Germany. We are extremely bullish there. We are introducing a lot of new products in those regions. We expect — we have done that in the last year. We expect them to take off. Then, we talked about the non-California states where we are seeing them seasonally bounce back up. So — and California — I would say California installers are, like what I said, I was extremely optimistic after my trip.
The last three to four weeks of data also shows good trends. So, while we are talking about a sell-through demand, end customer demand of $400 million in Q2, I expect the numbers to go continuously up in Q3 and Q4.
Philip Shen: Great. Okay. So, very much still on path, but there might be a little bit of risk, but you definitely see a path, it sounds like.
Badri Kothandaraman: Yes, I do.
Philip Shen: Great. Okay. Thank you. Shifting gears to maybe data that might be even ahead of sell-through, our channel work suggests in this challenging US resi time, you guys are gaining a healthy amount of share, whether it’s 5% from one source versus a recent poll that we did, you might be gaining 11% share with 5% of the market, that’s pretty healthy and potentially can make a big difference. And so, wanted to see if you can help us understand what is the activation implied revenue that you might be seeing versus sell-through and obviously compared to the sell-in. So, do you track that in a way that you can articulate what was the activation implied revenue for maybe Q1, maybe what you see for Q2 and beyond? Thanks.
Badri Kothandaraman: Yeah, I mean, we do see reports. We do see sell-side reports. We do see third-party reports. We are focused on highlighting our value and working with installers in these times. These are difficult times, so we’re trying to help them with all the services we have, whether it’s proposal, whether it is permitting, whether it is proper modeling, whether it is leads, or whether it’s simply to understand their RMAs, how can we help them understand their service, understand their labor, understand how to improve their efficiency doing Kaizen with the installer. So, we believe that our relationships with the installers in these times is the single most reason on any market share gain that you’re highlighting. Normally, from sell-through to activations, for us, it will take us about four to eight weeks.
And — but any market share gains, we will start potentially seeing going forward. Because as you know, when installers switched to us, no one switches 100% like that. There is a ramp associated with ramping down what they are using and ramping up the new product. And I would say that will show up definitely as sell-through increases, and we will report that in Q2. I mean, we will report our Q2 results in the Q3 call, that’s what I mean.
Philip Shen: Okay. Thanks very much, Badri. I’ll pass it on.
Badri Kothandaraman: Yeah.
Operator: And the next question comes from Christine Cho with Barclays. Please go ahead.
Christine Cho: Good evening. Thank you for taking my question. So, I’m going to ask the sell-through question a different way. It’s $400 million in 2Q and expect it to get to somewhere between $450 million to $500 million by year-end. So, let’s just take the midpoint, $75 million. Can you just give us an idea combining all of the comments that you gave us individually, but that $75 million, how much of it is driven by Europe versus US? Is it like half-half? Is it more Europe? Is it more US? And then, how much of it is driven by microinverters versus batteries? And then, when you guys say that de-stocking will be done by end of 2Q, are you assuming back to the eight to 10 weeks, is that what you’re considering normalized levels of inventory?
Badri Kothandaraman: Yeah, so let me answer all of them. We expect — I mean, Europe as well as the US have healthy growth vectors for us. We do expect 50-50 from North America and Europe. Your other question was…
Christine Cho: MIs versus batteries.
Badri Kothandaraman: Tell me again. Micro versus…
Raghu Belur: Battery.
Badri Kothandaraman: Battery. Yeah, micro versus battery. I would say considering that non-California states, the battery attach isn’t high. So, micro versus battery, I would still say 60-40 on micros, micros versus battery is what I would say. And the last one you asked is that eight to 10 weeks. The way we measure our weeks on hand is typically backward looking is what we say is over the quarter, this was the sell-through rate, this is the inventory you have on hand today, divide the inventory by the sell-through rate, you get the weeks on hand. One of the interesting ways that I would expect distributors will measure it will be forward-looking weeks of inventory, which is, if the demand, for example, in the last two or three weeks shows a significant uptick, that weeks on hand would be existing amount they have in front of them divided by that increased rate in the last two to four weeks.
And so, those numbers, in good times, the forward-looking inventory weeks on hand will be lower than the backward looking weeks on hand. And so, for us, we are consistent in the way we measure it. We always look at — whenever I tell you weeks on hand, I will tell you that, okay, this is the sell-through for the quarter that what happened in, for example, Q1, this is what happened in Q1. This was the inventory at the end of Q1. That inventory, channel inventory, divided by the sell-through gives the weeks on hand. And our number rule of thumb or our general number has been always eight to 10 weeks. If you’re on the upswing, forward-looking weeks on hand could be smaller than that.
Christine Cho: Right. Okay. That’s an interesting nuance I did not realize that you were looking backwards. My second question, you said in your prepared remarks that 50% of your NEM 3.0 systems are attaching your battery. You also mentioned you are meeting with a whole bunch of installers — you met with a whole bunch of installers in California. Do you have a sense of whether the installers using your product are leaning more towards load shifting or backup? And I’m not sure if you answered this with Praneeth’s question and I just missed it, but can you also give us a sense of where you are in the development of your meter collar and when we should expect you to roll one out?
Badri Kothandaraman: That’s right, load shifting is a significant fraction of our installs. That’s right. And then, the second is, when is the meter collar coming out? So, just for the benefit of the audience, basically California has something called meter main combos. These meter main combos have both the meter and the main panel integrate into one structure. And when you have to insert backup, everybody knows you have to do ugly things like ripping your loads apart. You have to put a backup switch in between. Therefore, there’s a lot of labor that is actually spent in doing that. Typically, a day or two is spent in relocating all of those loads and then putting a system controller in between the meter and the main load center.
With the meter collar, it’s a very elegant way where you have that switch at the meter. It’s a device that comes around the meter. It’s got the MID, which is the microgrid interconnect switch relay, right there at the meter, at the collar, and that basically means you don’t spend any labor relocating those loads. Our version of the meter collar is coming out shortly. It will be piloting by the end of the year.
Operator: Thank you. And our next question today comes from James West at Evercore ISI. Please go ahead.
James West: Hey, Badri. Real quick one for me. Based on your conversations in California over the last three or four weeks as you met with the installer base and you talked about how they — you talked earlier about how they cut costs pretty significantly, is there any concern at all about if growth does come back as you see it, that their ability to respond to that growth?
Badri Kothandaraman: No, I think they’re all much more savvy than what we think, especially the long tail. The people I met are representative of the segments we service. They — typically they do between 1 megawatt and 5 megawatts a year. That means you can probably see they generate revenues between $5 million and $15 million — or $5 million and $20 million a year, annual revenue. They have teams usually two to three crews or even one to two crews, very lean team. Company is less than 50 people. And core employees are relatively less. They use contractors if they have to, and they have become very smart in managing money as well. They know that they shouldn’t be — they should be lean in these times. They don’t waste money.
