Badri Kothandaraman
President and Chief Executive Officer at Enphase Energy
Good afternoon and thanks for joining us today to discuss our fourth quarter 2021 financial results. We had a good quarter. We reported revenue of $412.7 million, shipped approximately 3 million microinverters, and 100.2-megawatt hours of IQ batteries. Achieved non-GAAP gross margin of 40.2%, and generated free cash flow of $84.1 million.
We started production shipments of our IQ8 Microinverters for customers in North America during Q4, and we have been very pleased with customer feedback so far. We exited the fourth quarter at approximately 40, 17, 24. This means 40% gross margin, 17% operating expenses, and 24% operating income, all as a percentage of revenue on a non-GAAP basis. As a reminder, our baseline financial model is 35, 15, 20. We will go into detail about our financials later in the call.
Let's now discuss how we are servicing customers. Our Q4 NPS worldwide was 69% compared to 67% in Q3. Our North American NPS was 73% compared to 71% in Q3. Our average call wait time increased to 8.9 minutes in Q4 compared to 5.5 minutes in Q3 as we onboarded new installers and fielded more calls on our batteries. The ramp of our batteries has significantly increased call volumes as new installers learn how to commission the system and homeowners learn about the system's features. We are not happy about the higher wait time and we are working on it to reduce it under a minute through staffing and training. During Q4, we also increased the number of field service technicians in the US and Europe to provide onsite help to our installers, particularly on batteries.
Let's talk about manufacturing. Our operations team did a great job flexing manufacturing as 2021 played out. As we have discussed in the past earnings call, the global supply chain situation -- the global supply chain is still under a little bit of stress, but our situation has been stable, primarily due to diligent supplier management and qualification of alternate suppliers during the past year. Our supply of AC FET drivers is at a very healthy level and we have five sources for AC FET drivers. For ASICs used in our microinverters, our supply was quite healthy in Q4 and we continue to manage it closely as we ramp IQ8. And we have two foundry sources for our ASICs. With the growing demand for our microinverters, we remain vigilant regarding the global supply chain and logistics.
Given our strong demand, we added a fully automated line in Q4, bringing quarterly capacity to 2.25 million microinverters in Mexico. We had already added a second fully automated line earlier in 2021 at our contract manufacturer, Salcomp in India, bringing that quarterly capacity to about 1.5 million microinverters. Along with our existing capacity in China, we can now do a little more than 5 million microinverters per quarter in total for all microinverters worldwide.
We are also planning to add a contract manufacturing facility for microinverters in Europe by the end of this year. We see rapid growth in the region and would like to service customers better. Let's now talk about batteries. Our two sources for battery cell packs have increased that capacity to 180-megawatt hours per quarter from 120-megawatt hours. Our existing cell pack suppliers are capable of adding even more capacity if needed and we are continuing discussions with additional cell packs suppliers as well. As always, there were a few components that we are managing to ensure we don't have a supply disruption. There is never a dull day for our operations team in these times. Our lead times for batteries are still long today at approximately 14 weeks to 16 weeks, primarily due to logistics challenges, which are global. The lead times should come down once global shipping and port congestion conditions improve.
Let's move on to the regions. Our US and international revenue mix for Q4 was 82% and 18%, respectively. For 2021, we achieved record revenue across all regions with more than 78% growth year-on-year. Our US and international revenue mix for the full year was 80% and 20%, respectively. In the US, the revenue increased 74% year-on-year. We reported record revenue and sell-through from our distribution partners to installers for both microinverters and batteries in Q4. Our microinverter channel inventory was at a healthy level at the end of Q4, but our storage channel inventory remained tight due to strong demand and logistics challenges. We expect microinverter channel inventory to remain healthy in Q1 and storage channel inventory to improve.
In Europe, revenue more than doubled year-on-year. I am very pleased with our team's performance and excited about the growth in 2022. During 2021, we expanded into Italy with solar microinverters and introduced batteries in Germany and Belgium. We do plan to introduce batteries in other countries in Europe, steadily, throughout 2022. In Asia-Pacific region, revenue increased 80% year on year. Heading into 2022, we look to capitalize on the industry's recovery from COVID restrictions as well as recent regulatory changes that are favorable to our software-defined AC architecture. We plan to introduce batteries in Australia in the second half of 2022.
In Latin America, revenue increased 77% year-on-year. We remain quite bullish about our solar plus storage business in Puerto Rico and expect steady growth there in the next few quarters. We are also very pleased with the progress we are making in Brazil as we started ramping IQ7+ microinverters, installers in Q4.
Now that we covered all the regions, let's discuss the overall bookings for Q1. Our overall customer demand for Q1 is quite robust for both microinverters and batteries and exceeds the higher end of our guidance range. The component availability is certainly better than what we experienced last year. We are primarily left with logistics challenges which are global in general and not very specific to Enphase. We are quite optimistic that our supply will catch up to demand during the year.
Let's talk about our storage systems. We shipped 100.2-megawatt hours of IQ batteries, which was a significant 53% increase from Q3. As I mentioned, our lead times are little long at around 14 weeks to 16 weeks, mainly due to logistics challenges. We expect to ship between 110-megawatt hours and 120-megawatt hours of batteries in Q1. This represents a 15% growth from Q4. Due to the increase in logistics costs, which are significant, and increase in component cost driven by inflation, we are implementing a modest price increase on our batteries beginning March of 2022.
Let's talk about installer training on battery. By the end of Q4, we trained approximately 4,845 installer personnel, representing approximately 2,000 and plus -- 2,000-plus installation companies. Our hands-on storage training continued through the use of mobile vans and regional training centers in the fourth quarter. We are continuing the work on commissioning times for installers while adding features such as load control and generator compatibility to our batteries. We expect to introduce batteries in North America and Australia with a modularity of 5-kilowatt hour and double the continuous than peak power in the second half of 2022. We believe this will not only enhance the customer experience significantly, it will also bring down the cost.
Let's talk about new products. We started production shipments of IQ8 Microinverters for customers and North America in Q4 -- late Q4. The IQ8 fundamentally changes the paradigm for solar technology, which otherwise requires a grid connection to operate. IQ8 can form a micro-grid during a power outage using only sunlight, providing backup power even without a battery. For homeowners who want a battery, there are no sizing restrictions for pairing an Enphase battery with an IQ8 solar system. We also expect to introduce IQ8 Microinverters internationally in the second half of 2022.
Let's now talk about the IQ8D full system for small commercial solar application. We have achieved compliance on the 640-watt AC microinverter for North America and we are now focused on getting the full system and installer platform ready. We expect pilot shipments of the full system to select installers in this quarter, Q1, with volume shipments beginning in Q2.
Let's go to ClipperCreek, an acquisition we completed in Q4. ClipperCreek offers EV charging solutions for residential and commercial customers in the US. They have been a pioneer in the EV charging market since 2006 and have sold more than 110,000 Level-2 charging stations, AC charging stations, since inception. The business is very healthy and the gross margins are in line with Enphase.
The ClipperCreek brand has a reputation for quality -- high quality and great service, which we like a lot. Let me outline our plans for ClipperCreek. We plan to transfer manufacturing to our contract manufacturing facility in Mexico by the end of this year, so that we can rapidly scale the business and support demand. We are also looking forward to introducing the products imminently to distribution and installation partners in the US. In addition, we plan to introduce connectivity in every charger we'll be shipping to enable EV charging with the Enphase app. This will enable charging on a schedule, tariff optimization, and charging with green electrons from an Enphase solar-plus storage home energy system. For the long term, we plan to work on bi-directional charging and grid services integration for vehicle to home and vehicle to grid applications.
Let me go to grid services. In December, we announced our participation in Arizona Public Service, APS Residential Battery Grid Services Program. The program offers homeowners who install Enphase -- Enphase batteries in APS' territory the chance to participate and earn money through one-time upfront incentives. We believe this new program from APS will help accelerate the adoption of Enphase systems in Arizona. We have previously discussed our participation in the Connected Solutions Program and Hawaiian Electric Battery Bonus Grid Services Programs. As a reminder, Connected Solutions is an incentive program implemented by three utilities in Connecticut, Massachusetts, and Rhode Island to reduce electrical demand during high use periods. The Hawaiian Electric Battery Bonus Grid Services Program offers incentive for homeowners on the Island of Oahu, who install a new home battery.
We also have about a dozen new grid services engagements in the pipeline and we look forward to working with more utilities and aggregators in the months ahead. Let's talk about the installer digital platform. We are working to release Solargraf Pro later this quarter to improve the installer experience with an all-in-one solar and storage design and proposal tool that incorporates shading analysis, the ability to detect abstractions on the roof, and 3D modeling of homes, all driven by AI. The product is currently being piloted by key installers, yeah, some of our top installers, and will be released later this quarter. The former solar business of DIN Engineering, now Enphase Noida, provides proposal and permitting services. There, we have added significant resources to accelerate automation and we expect to offer enhanced permitting services in the second half of the year.
As part of our efforts to further strengthen the installer digital platform, we acquired 365 Pronto in Q4. The company offers the predictive software platform dedicated to simplifying maintenance by matching cleantech asset owners to a local and on-demand workforce of service providers. The software platform will provide our installers the ability to service their own O&M contract.
Let me now give you an update on our Enphase Installer Network or EIN. We have now onboarded approximately 1,130 installers to our EIN worldwide through a highly selective process focused on installation quality and an exceptional homeowner experience. Next, I would like to comment on the California NEM 3 Proposed Decision or PD which was announced originally in December. In our opinion, the PD in its current form unfairly penalized the solar only systems by imposing fixed charges, significantly reducing export compensation, and retroactively changing the length of the original NEM contract. The PD was meant to encourage the transition from solar only to solar-plus storage. While we believe this transition is a correct, long-term goal to meet California's energy targets, storage is not yet fully mature for a 100% attach in terms of cost, in terms of supply, in terms of permitting, warranty, and training. We would like to see a modified PD where the fixed charges are removed, the original length of the existing NEM contracts are restored, and a multi-year glide path is established to gradually reduce the export compensation. We are working diligently with various stakeholders to try and influence a better outcome in order to eliminate any market disruptions and create a win-win for all rate payers and utilities.
In summary, we are pleased with our overall performance. As a reminder, our strategy is to build the best-in-class home energy systems and deliver them to homeowners through our installation and distribution partners, enabled by an installer digital platform. With our recent acquisitions, we are now able to offer more complete home energy systems to our partners comprising of solar, batteries, grid services, load control, EV chargers, and even compatibility with most third party generators. We can also now offer design and proposal software, permitting services, installation and commissioning software, fleet management and monitoring software, and finally, O&M services for our installers through the digital platform.
I would like to thank our employees for their hard work towards strategy and continued dedication to advancing a sustainable future for all. Before I turn the call over to discuss our financials, I want to inform you that Eric is retiring from Enphase. His last day at Enphase will be February 14. He has been a great partner to me over the last three-and-a-half years, and the financial leadership helped drive a sustained profitability and shareholder value. We would like to thank him for his service and wish him well as he takes time to spend with this family.
I'm pleased to announce that Mandy Yang, our Chief Accounting Officer and Corporate Treasurer has accepted the role of CFO, effective February 15. With Mandy as our CFO, we will have a seamless transition as we continue to deliver growth and operational excellence. Eric will be in a -- in an advisory capacity with Enphase through June 30 to assist with this transition.
With that, I will hand the call over to Eric for his review of our financial results. So, Eric?
