Investors sent shares of Enphase Energy (ENPH), a maker of solar home energy solutions, nearly 8-percent higher after hours following an earnings release that beat estimates and provided stronger than expected guidance. But a deeper dive in the company’s promptly filed quarterly report may eventually result in some buyer’s remorse.

While revenue grew 67.7%, Enphase increased its warranty expense estimate 299.6% the bulk of which the company says is related to:

“...continuing analysis of field performance data and diagnostic root-cause failure analysis primarily for Enphase IQ™ Battery storage systems…”.

System performance complaints aren’t uncommon with customers citing abnormally high parasitic loss, or the amount of energy it takes to power the system.

The size of the warranty expense increase suggests to us Enphase’s root–cause failure analysis may have identified a fix that may be more expensive than the company originally accrued for. Over the last six months, Enphase’s warranty expense estimate increase was more modest, rising 84% though still outpacing revenue growth of 57.2%.

Though the sharp spike in warranty expense is the equivalent of just 3.2% of Enphaes’s sales in the quarter, it’s worth monitoring when you consider the potential for overly rosy product claims made by third parties. Enphase offers a platform of tools designed to help installers design, permit, install, monitor, and maintain solar and battery systems.

Enphase recently rounded out the platform with its acquisition of SolarLeadFactory, which claims to have identified two million potential customers looking to install solar panels and systems.

Two months ago, DuDil confirmed via public records requests that SolarLeadFactory is under investigation by California’s Attorney General:

“To the extent that your request seeks consumer complaints and investigative files, we must deny your request. Investigative records are confidential law enforcement records of the Attorney General. Government code section 6254, subdivision (f) expressly exempts from disclosure investigatory and security files of the Attorney General including complaints about unlawful practices…”

We have no information that suggests a connection between the sudden rise in warranty expense and the scrutiny by law enforcement. We have contacted competing lead generation firms to see how installers are positioning Enphase’s battery storage system and will update subscribers if we develop new information.