UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35480

Enphase Energy, Inc.

(Exact name of registrant as specified in its charter)


Delaware									20-4645388
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

47281 Bayside Parkway

Fremont, CA 94538

(Address of principal executive offices, including zip code)

~~(877)~~(707) 774-7000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00001 par value per share

ENPH

Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an “emerging growth company.” See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 21, ~~2022,~~2023, there were ~~135,457,275~~136,355,373 shares of the registrant’s common stock outstanding, $0.00001 par value per share.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 1

ENPHASE ENERGY, INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, ~~2022~~2023

TABLE OF CONTENTS


		Page
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of ~~Stockholders’~~Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	3735
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4745
Item 4.	Controls and Procedures	4845

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4946
Item 1A.	Risk Factors	4946
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4948
Item 3.	Defaults Upon Senior Securities	5048
Item 4.	Mine Safety Disclosures	5048
Item 5.	Other Information	5048
Item 6.	Exhibits	5149
	Signature	5250

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 2

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

ENPHASE ENERGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)
(Unaudited)


		As of					As of
		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	495,473	$	119,316	Cash and cash equivalents	$	278,676	$	473,244

Marketable securities	Marketable securities	752,328		897,335		Marketable securities	1,521,816		1,139,599
Accounts receivable, net of allowances of $740 and $1,590 at June 30, 2022 and December 31, 2021, respectively		312,451		333,626
Accounts receivable, net of allowances of $1,322 and $979 at June 30, 2023 and December 31, 2022, respectively						Accounts receivable, net of allowances of $1,322 and $979 at June 30, 2023 and December 31, 2022, respectively	520,306		440,896
Inventory	Inventory	130,266		74,400		Inventory	166,111		149,708
Prepaid expenses and other assets	Prepaid expenses and other assets	45,474		37,784		Prepaid expenses and other assets	73,880		60,824
Total current assets	Total current assets	1,735,992		1,462,461		Total current assets	2,560,789		2,264,271
Property and equipment, net	Property and equipment, net	86,778		82,167		Property and equipment, net	151,657		111,367
Operating lease, right of use asset, net	Operating lease, right of use asset, net	16,987		14,420		Operating lease, right of use asset, net	22,954		21,379
Intangible assets, net	Intangible assets, net	96,887		97,758		Intangible assets, net	85,960		99,541
Goodwill	Goodwill	197,004		181,254		Goodwill	214,290		213,559
Other assets	Other assets	129,153		118,726		Other assets	195,283		169,291
Deferred tax assets, net	Deferred tax assets, net	174,307		122,470		Deferred tax assets, net	234,949		204,872

Total assets	Total assets	$	2,437,108	$	2,079,256	Total assets	$	3,465,882	$	3,084,280
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	90,398	$	113,767	Accounts payable	$	79,075	$	125,085
Accrued liabilities	Accrued liabilities	197,919		157,912		Accrued liabilities	425,285		295,939

Deferred revenues, current	Deferred revenues, current	74,067		62,670		Deferred revenues, current	109,176		90,747
Warranty obligations, current (includes $24,772 and $14,612 measured at fair value at June 30, 2022 and December 31, 2021, respectively)		29,197		19,395
Warranty obligations, current						Warranty obligations, current	36,686		35,556

Debt, current	Debt, current	88,429		86,052		Debt, current	93,383		90,892
Total current liabilities	Total current liabilities	480,010		439,796		Total current liabilities	743,605		638,219
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:

Deferred revenues, non-current	Deferred revenues, non-current	217,095		187,186		Deferred revenues, non-current	354,296		281,613
Warranty obligations, non-current (includes $49,151 and $36,395 measured at fair value at June 30, 2022 and December 31, 2021, respectively)		67,354		53,982
Warranty obligations, non-current						Warranty obligations, non-current	144,029		95,890
Other liabilities	Other liabilities	23,864		16,530		Other liabilities	50,251		43,520
Debt, non-current	Debt, non-current	1,197,786		951,594		Debt, non-current	1,201,114		1,199,465

Total liabilities	Total liabilities	1,986,109		1,649,088		Total liabilities	2,493,295		2,258,707
Commitments and contingencies (Note 10)		0		0
Commitments and contingencies (Note 9)						Commitments and contingencies (Note 9)

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:

Common stock, $0.00001 par value, 300,000 shares authorized; and 135,426 shares and 133,894 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		1		1
Common stock, $0.00001 par value, 300,000 shares authorized; and 136,006 shares and 136,441 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively						Common stock, $0.00001 par value, 300,000 shares authorized; and 136,006 shares and 136,441 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	1		1
Additional paid-in capital	Additional paid-in capital	713,473		837,924		Additional paid-in capital	858,039		819,119
Accumulated deficit		(251,230)		(405,737)
Accumulated earnings						Accumulated earnings	189,539		17,335
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(11,245)		(2,020)		Accumulated other comprehensive loss	(6,852)		(10,882)

Treasury stock, at cost						Treasury stock, at cost	(68,140)		—
Total stockholders’ equity	Total stockholders’ equity	450,999		430,168		Total stockholders’ equity	972,587		825,573
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	2,437,108	$	2,079,256	Total liabilities and stockholders’ equity	$	3,465,882	$	3,084,280

See Notes to Condensed Consolidated Financial Statements.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 3

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ENPHASE ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)
(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022
Net revenues	Net revenues	$	530,196	$	316,057	$	971,488	$	617,811		Net revenues	$	711,118	$	530,196	$	1,437,134	$	971,488
Cost of revenues	Cost of revenues	311,191		188,256		575,510		367,061			Cost of revenues	387,776		311,191		787,421		575,510
Gross profit	Gross profit	219,005		127,801		395,978		250,750			Gross profit	323,342		219,005		649,713		395,978
Operating expenses:	Operating expenses:										Operating expenses:
Research and development	Research and development	39,256		22,708		74,975		44,526			Research and development	60,043		39,256		117,172		74,975
Sales and marketing	Sales and marketing	53,588		25,586		94,932		45,208			Sales and marketing	58,405		53,588		123,026		94,932
General and administrative	General and administrative	32,125		20,107		70,211		40,230			General and administrative	34,397		32,125		70,662		70,211

Restructuring charges											Restructuring charges	177		—		870		—
Total operating expenses	Total operating expenses	124,969		68,401		240,118		129,964			Total operating expenses	153,022		124,969		311,730		240,118
Income from operations	Income from operations	94,036		59,400		155,860		120,786			Income from operations	170,320		94,036		337,983		155,860
Other income (expense), net	Other income (expense), net										Other income (expense), net
Interest income	Interest income	796		98		1,256		171			Interest income	16,526		796		29,566		1,256
Interest expense	Interest expense	(2,168)		(12,506)		(4,904)		(19,835)			Interest expense	(2,219)		(2,168)		(4,375)		(4,904)
Other expense, net		(456)		(633)		(2,597)		(60)
Loss on partial settlement of convertible notes		—		(13)		—		(56,382)
Other income (expense), net											Other income (expense), net	(33)		(456)		393		(2,597)

Total other expense, net		(1,828)		(13,054)		(6,245)		(76,106)

Total other income (expense), net											Total other income (expense), net	14,274		(1,828)		25,584		(6,245)
Income before income taxes	Income before income taxes	92,208		46,346		149,615		44,680			Income before income taxes	184,594		92,208		363,567		149,615
Income tax (provision) benefit		(15,232)		(6,995)		(20,818)		26,369
Income tax provision											Income tax provision	(27,403)		(15,232)		(59,503)		(20,818)
Net income	Net income	$	76,976	$	39,351	$	128,797	$	71,049		Net income	$	157,191	$	76,976	$	304,064	$	128,797
Net income per share:	Net income per share:										Net income per share:
Basic	Basic	$	0.57	$	0.29	$	0.96	$	0.53		Basic	$	1.15	$	0.57	$	2.23	$	0.96
Diluted	Diluted	$	0.54	$	0.28	$	0.91	$	0.49		Diluted	$	1.09	$	0.54	$	2.11	$	0.91
Shares used in per share calculation:	Shares used in per share calculation:										Shares used in per share calculation:
Basic	Basic	135,196		135,094		134,768		133,209			Basic	136,607		135,196		136,650		134,768
Diluted	Diluted	143,725		141,533		143,602		144,022			Diluted	145,098		143,725		145,608		143,602

See Notes to Condensed Consolidated Financial Statements.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 4

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ENPHASE ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)
(Unaudited)
Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
Net income $ 76,976 $ 39,351 $ 128,797 $ 71,049
Other comprehensive income (loss):
Foreign currency translation adjustments (2,570) 1,284 (2,306) 1,490
Marketable securities
Change in net unrealized loss (1,351) — (6,919) —
Less: reclassification adjustment for net losses included in net income — — — —
Net change, net of income tax benefit of $475 and $2,431 for the three and six months ended June 30, 2022, respectively (1,351) — (6,919) —
Comprehensive income $ 73,055 $ 40,635 $ 119,572 $ 72,539


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	157,191	$	76,976	$	304,064	$	128,797
Other comprehensive income (loss):
Foreign currency translation adjustments	431		(2,570)		1,508		(2,306)
Marketable securities



Change in net unrealized gain (loss), net of income tax provision (benefit) of $(193) and $(475) for the three and six months ended June 30, 2023, respectively, and $886 and $(2,431) for the three and six months ended June 30, 2022, respectively.	(549)		(1,351)		2,522		(6,919)
Comprehensive income	$	157,073	$	73,055	$	308,094	$	119,572

See Notes to Condensed Consolidated Financial Statements.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 5

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ENPHASE ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)
(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Common stock and paid-in capital	Common stock and paid-in capital									Common stock and paid-in capital
Balance, beginning of period	Balance, beginning of period	$	666,512	$	751,689	$	837,925	$	534,745	Balance, beginning of period	$	812,619	$	666,512	$	819,120	$	837,925
Cumulative-effect adjustment to Additional paid-in capital related to the adoption of ASU 2020-06	Cumulative-effect adjustment to Additional paid-in capital related to the adoption of ASU 2020-06	—		—		(207,967)		—		Cumulative-effect adjustment to Additional paid-in capital related to the adoption of ASU 2020-06	—		—		—		(207,967)
Issuance of common stock from exercise of equity awards	Issuance of common stock from exercise of equity awards	4,183		3,428		4,587		3,642		Issuance of common stock from exercise of equity awards	556		4,183		596		4,587
Issuance of common stock related to 365 Pronto, Inc. post combination expense										Issuance of common stock related to 365 Pronto, Inc. post combination expense	4,000		—		10,307		—
Payment of withholding taxes related to net share settlement of equity awards	Payment of withholding taxes related to net share settlement of equity awards	(5,463)		(7,813)		(14,807)		(16,998)		Payment of withholding taxes related to net share settlement of equity awards	(12,790)		(5,463)		(84,635)		(14,807)

Equity component of convertible notes issued, net of tax		—		8		—		207,970
Cost of convertible notes hedge related to the convertible notes issued, net of tax		—		—		—		(213,322)
Sale of warrants related to the convertible notes issued		—		—		—		220,800
Equity component of partial settlement of convertible notes		—		(74)		—		(966,557)
Cost of reacquired equity component on partial settlement of convertible notes		—		62		—		962,176

Stock-based compensation expense	Stock-based compensation expense	48,242		15,312		93,736		30,156		Stock-based compensation expense	53,655		48,242		112,652		93,736

Balance, end of period	Balance, end of period	$	713,474	$	762,612	$	713,474	$	762,612	Balance, end of period	$	858,040	$	713,474	$	858,040	$	713,474

Accumulated deficit
Treasury stock, at cost										Treasury stock, at cost
Balance, beginning of period										Balance, beginning of period	$	—	$	—	$	—	$	—
Purchases of treasury stock, at cost										Purchases of treasury stock, at cost	(68,140)		—		(68,140)		—
Balance, end of period										Balance, end of period	$	(68,140)	$	—	$	(68,140)	$	—

Accumulated earnings (deficit)										Accumulated earnings (deficit)
Balance, beginning of period	Balance, beginning of period	$	(328,206)	$	(19,488)	$	(405,737)	$	(51,186)	Balance, beginning of period	$	164,208	$	(328,206)	$	17,335	$	(405,737)
Cumulative-effect adjustment to accumulated deficit related to the adoption of ASU 2020-06	Cumulative-effect adjustment to accumulated deficit related to the adoption of ASU 2020-06	—		—		25,710		—		Cumulative-effect adjustment to accumulated deficit related to the adoption of ASU 2020-06	—		—		—		25,710
Repurchase of common stock										Repurchase of common stock	(131,860)		—		(131,860)		—
Net income	Net income	76,976		39,351		128,797		71,049		Net income	157,191		76,976		304,064		128,797
Repurchase of common stock		—		(200,000)		—		(200,000)

Balance, end of period	Balance, end of period	$	(251,230)	$	(180,137)	$	(251,230)	$	(180,137)	Balance, end of period	$	189,539	$	(251,230)	$	189,539	$	(251,230)

Accumulated other comprehensive income (loss)
Accumulated other comprehensive loss										Accumulated other comprehensive loss
Balance, beginning of period	Balance, beginning of period	$	(7,324)	$	640	$	(2,020)	$	434	Balance, beginning of period	$	(6,734)	$	(7,324)	$	(10,882)	$	(2,020)
Foreign currency translation adjustments	Foreign currency translation adjustments	(2,570)		1,284		(2,306)		1,490		Foreign currency translation adjustments	431		(2,570)		1,508		(2,306)
Change in net unrealized loss on marketable securities, net of tax		(1,351)		—		(6,919)		��
Change in net unrealized gain (loss) on marketable securities, net of tax										Change in net unrealized gain (loss) on marketable securities, net of tax	(549)		(1,351)		2,522		(6,919)
Balance, end of period	Balance, end of period	$	(11,245)	$	1,924	$	(11,245)	$	1,924	Balance, end of period	$	(6,852)	$	(11,245)	$	(6,852)	$	(11,245)
Total stockholders' equity, ending balance	Total stockholders' equity, ending balance	$	450,999	$	584,399	$	450,999	$	584,399	Total stockholders' equity, ending balance	$	972,587	$	450,999	$	972,587	$	450,999

See Notes to Condensed Consolidated Financial Statements.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 6

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ENPHASE ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)


		Six Months Ended June 30,						Six Months Ended June 30,
			2022		2021				2023		2022
Cash flows from operating activities:	Cash flows from operating activities:						Cash flows from operating activities:
Net income	Net income		$	128,797	$	71,049	Net income		$	304,064	$	128,797
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization		30,805		13,154		Depreciation and amortization		34,419		28,102
Net amortization (accretion) of premium (discount) on marketable securities							Net amortization (accretion) of premium (discount) on marketable securities		(17,705)		2,703
Provision for doubtful accounts	Provision for doubtful accounts		131		271		Provision for doubtful accounts		629		131
Asset impairment	Asset impairment		1,200		—		Asset impairment		—		1,200
Non-cash interest expense	Non-cash interest expense		4,025		19,463		Non-cash interest expense		4,140		4,025

Loss on partial settlement of convertibles notes			—		56,382
Deemed repayment of convertible notes attributable to accreted debt discount			—		(15,585)

Change in fair value of debt securities			129		(2,369)

Net (gain) loss from change in fair value of debt securities							Net (gain) loss from change in fair value of debt securities		(3,498)		129
Stock-based compensation	Stock-based compensation		100,861		30,156		Stock-based compensation		113,821		100,861

Deferred income taxes	Deferred income taxes		15,617		(30,127)		Deferred income taxes		(26,796)		15,617
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:						Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable		27,546		(98,531)		Accounts receivable		(83,497)		27,546
Inventory	Inventory		(55,866)		4,008		Inventory		(16,403)		(55,866)
Prepaid expenses and other assets	Prepaid expenses and other assets		(21,352)		(15,194)		Prepaid expenses and other assets		(41,993)		(21,352)

Accounts payable, accrued and other liabilities	Accounts payable, accrued and other liabilities		10,228		46,890		Accounts payable, accrued and other liabilities		107,225		10,228
Warranty obligations	Warranty obligations		22,878		14,025		Warranty obligations		49,269		22,878
Deferred revenues	Deferred revenues		38,094		47,909		Deferred revenues		91,800		38,094
Net cash provided by operating activities	Net cash provided by operating activities		303,093		141,501		Net cash provided by operating activities		515,475		303,093
Cash flows from investing activities:	Cash flows from investing activities:						Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment		(21,066)		(26,368)		Purchases of property and equipment		(66,478)		(21,066)

Investments in private companies			—		(45,000)

Business acquisitions, net of cash acquired	Business acquisitions, net of cash acquired		(27,680)		(55,239)		Business acquisitions, net of cash acquired		—		(27,680)
Purchases of marketable securities	Purchases of marketable securities		(60,061)		—		Purchases of marketable securities		(1,272,908)		(60,061)
Maturities of marketable securities			193,033		—
Maturities and sale of marketable securities							Maturities and sale of marketable securities		911,804		193,033
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities		84,226		(126,607)		Net cash provided by (used in) investing activities		(427,582)		84,226
Cash flows from financing activities:	Cash flows from financing activities:						Cash flows from financing activities:
Issuance of convertible notes, net of issuance costs			—		1,188,439
Purchase of convertible note hedges			—		(286,235)
Sale of warrants			—		220,800

Principal payments and financing fees on debt			—		(1,422)

Partial repurchase of convertible notes			—		(289,312)

Proceeds from exercise of equity awards and employee stock purchase plan	Proceeds from exercise of equity awards and employee stock purchase plan		4,587		3,642		Proceeds from exercise of equity awards and employee stock purchase plan		596		4,587
Repurchase of common stock			—		(200,000)

Payment of withholding taxes related to net share settlement of equity awards	Payment of withholding taxes related to net share settlement of equity awards		(14,807)		(16,998)		Payment of withholding taxes related to net share settlement of equity awards		(84,635)		(14,807)

Net cash provided by (used in) financing activities			(10,220)		618,914
Repurchase of common stock							Repurchase of common stock		(200,000)		—
Net cash used in financing activities							Net cash used in financing activities		(284,039)		(10,220)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents		(942)		(926)		Effect of exchange rate changes on cash and cash equivalents		1,578		(942)
Net increase in cash and cash equivalents			376,157		632,882
Net increase (decrease) in cash and cash equivalents							Net increase (decrease) in cash and cash equivalents		(194,568)		376,157
Cash and cash equivalents—Beginning of period	Cash and cash equivalents—Beginning of period		119,316		679,379		Cash and cash equivalents—Beginning of period		473,244		119,316
Cash and cash equivalents—End of period	Cash and cash equivalents—End of period		$	495,473	$	1,312,261	Cash and cash equivalents—End of period		$	278,676	$	495,473

Supplemental cash flow disclosure:	Supplemental cash flow disclosure:						Supplemental cash flow disclosure:

Supplemental disclosures of non-cash investing and financing activities:	Supplemental disclosures of non-cash investing and financing activities:						Supplemental disclosures of non-cash investing and financing activities:

Purchases of property and equipment included in accounts payable	Purchases of property and equipment included in accounts payable		$	2,783	$	4,175	Purchases of property and equipment included in accounts payable		$	8,310	$	2,783
Purchases of property and equipment through tenant improvement allowance	Purchases of property and equipment through tenant improvement allowance		$	748	$	—	Purchases of property and equipment through tenant improvement allowance		$	—	$	748
Contingent consideration in connection with the acquisition			$	—	$	3,596

See Notes to Condensed Consolidated Financial Statements.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 7

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

Enphase Energy, Inc. (the “Company”) is a global energy technology company. The Company delivers smart, easy-to-use solutions that manage solar generation, storage and communication on one platform. The Company revolutionized the solar industry with its microinverter technology and produces a fully integrated solar-plus-storage solution.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States (“GAAP”). The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Unaudited Interim Financial Information

These accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial reporting. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring items, considered necessary to present fairly the Company’s financial condition, results of operations, comprehensive income, stockholders’ equity and cash flows for the interim periods indicated. The results of operations for the three and six months ended June 30, ~~2022~~2023 are not necessarily indicative of the operating results for the full year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Significant estimates and assumptions reflected in the financial statements include revenue recognition, allowance for doubtful accounts, stock-based compensation, deferred compensation arrangements, inventory valuation, accrued warranty obligations, fair value of investments, debt derivatives, convertible notes and contingent consideration, fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and property and equipment, incremental borrowing rate for right-of-use assets and lease liability. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ materially from those estimates due to risks and uncertainties, including uncertainty in the ongoing semiconductor supply and logistics ~~constraints, and the continuing COVID-19 pandemic.~~constraints.

The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States. The Company filed audited consolidated financial statements, which included all information and notes necessary for such a complete presentation in conjunction with its Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 filed with the SEC on February ~~11, 2022~~13, 2023 (the “Form 10‑K”).

Summary of Significant Accounting Policies

~~There~~Except for the accounting policy for treasury stock added as a result of the common stock repurchased but not yet retired by the Company during the three months ended June 30, 2023, and government grants benefits recognized following the enactment of the Inflation Reduction Act of 2022 (“IRA”), there have been no changes to the Company’s significant accounting policies as described in Note 2, “Summary of Significant Accounting Policies” of the notes to consolidated financial statements included in Part II, Item 8 of the Form ~~10-K, other than as~~10-K.

Treasury Stock, at Cost

The Company accounts for treasury stock at cost per Accounting Standards Codification (“ASC”) 505. This results in a ~~result~~reduction of stockholders’ equity on the Company’s ~~adoption of~~condensed consolidated balance sheet and on the ~~new accounting guidance related to convertible senior notes, effective January 1, 2022, as discussed in “Recently Adopted Accounting Pronouncements” below.~~

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 8

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Company’s condensed consolidated statement of stockholders’ equity. Upon the retirement of treasury stock, the Company reclasses the value of treasury shares to accumulated earnings (deficit). As of June 30, 2023, the Company recorded the repurchase of 420,957 shares not retired as treasury stock.

Government Grants

Government grants represent benefits provided by federal, state, or local governments that are not subject to the scope of ASC 740. The Company recognizes a grant when it has reasonable assurance that it will comply with the grant’s conditions and that the grant will be received. Government grants that are not related to long-lived assets are considered income-based grants, which are recognized as a reduction to the related cost of activities that generated the benefit.

In August 2022, the U.S. enacted the IRA, which includes extension of the investment tax credit as well as a new advanced manufacturing production tax credit (“AMPTC”), to incentivize clean energy component sourcing and production, including for the production of microinverters. The IRA provides for an AMPTC on microinverters of 11 cents per alternating current watt basis. The AMPTC on microinverters decreases by 25% each year beginning in 2030 and ending after 2032. The Company recognized the benefit of credits from AMPTC as a reduction to cost of revenues in the condensed consolidated statement of operations for the microinverters manufactured in the United States and sold to customers in the three and six months ended June 30, 2023. Such credit is also reflected as a reduction of income tax payable on the Company’s condensed consolidated balance sheets within accrued liabilities.

Recently Adopted Accounting Pronouncements

In ~~August 2020,~~October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting ~~Standards~~Standard Update (“ASU”) 2020-06, “Debt - Debt with Conversion and Other Options (subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (subtopic 815-40)” (“ASU 2020-06”), which reduces the number of accounting models in subtopic ASC 470-20 that require separate accounting for embedded conversion features. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the effective interest rate of convertible debt instruments will be closer to the coupon interest rate. Further, the diluted net income per share calculation for convertible instruments will require the Company to use the if-converted method. The treasury stock method should no longer be used to calculate diluted net income per share for convertible instruments.

The Company adopted ASU 2020-06 in the annual period beginning January 1, 2022, on a modified retrospective basis. Upon adoption of ASU 2020-06, the Company is no longer required to bifurcate the conversion feature related to the issuance of $575.0 million ~~aggregate principal amount of its 0.0% convertible senior notes due 2028 (the “Notes due 2028~~”) ~~and $632.5 million~~ ~~aggregate principal amount of its 0.0% convertible senior notes due 2026 (the “Notes due 2026~~”) in equity. Instead, the Company combined the previously separated equity component with the liability component, which together is now classified as debt, thereby eliminating the subsequent amortization of the debt discount. Similarly, the portion of issuance costs previously allocated to equity was reclassified to the carrying value of debt and amortized over the remaining terms of the convertible senior notes. Accordingly, the Company recorded a net decrease to additional paid-in capital by $207.9 million, net of tax to remove the equity component separately recorded for the conversion features associated with the convertible senior notes and equity component associated with the issuance costs, an increase to the carrying value of its convertible debt instrument by $244.5 million to reflect the full principal amount of the convertible senior notes outstanding net of issuance costs, a decrease to deferred tax liability of $62.3 million, and a decrease to accumulated deficit by $25.7 million, net of tax in the Company’s consolidated balance sheet with no impact on the Company’s consolidated statements of operations.

Also upon adoption of ASU 2020-06, the Company is no longer utilizing the treasury stock method for earnings per share impact for 0.25% convertible senior notes due 2025 (the “Notes due 2025”), the Notes due 2026 and the Notes due 2028 (together, the “Convertible Senior Notes”). Instead, the Company is applying the if-converted method when reporting the number of potentially dilutive shares of common stock as the Company may at its election, settle its Convertible Senior Notes through payment or delivery, as the case may be, in cash, shares of its common stock or a combination of cash and shares of its common stock. Further, the Company under the relevant sections of the indentures, irrevocably may elect to settle principal in cash and any excess in cash or shares of the Company’s common stock for its Convertible Senior Notes. If and when the Company makes such election, there will be no adjustment to the net income and the Company will use the average share price for the period to determine the potential number of shares to be issued based upon assumed conversion to be included in the diluted share count.

~~Recently Issued Accounting Pronouncements~~

~~Not Yet Effective~~

~~In October 2021, the FASB issued ASU~~ 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers" (“ASU 2021-08”). ASU 2021-08 requires an acquirer ~~in a business combination~~ to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, “Revenue from Contracts with Customers,” as if it had originated the contracts. This should generally result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. The Company adopted ASU 2021-08 is effective ~~for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted.~~January 1, 2023. The ~~Company does not expect the~~ adoption of ASU 2021-08 todid not have ~~a significant~~an impact on ~~its~~the Company’s condensed consolidated financial ~~statements and plans to adopt the standard effective January 1, 2023.~~statements.

~~Enphase Energy, Inc. | 2022 Form 10-Q | 9~~

~~Table of Contents~~

~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

2. REVENUE RECOGNITION

Disaggregated Revenue

The Company has one major business activity, which is the design, manufacture and sale of solutions for the solar photovoltaic ~~(“PV”)~~ industry. Disaggregated revenue by primary geographical market and timing of revenue recognition for the Company’s single product line are as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022

		(In thousands)									(In thousands)
Primary geographical markets:	Primary geographical markets:									Primary geographical markets:
U.S.	U.S.	$	422,628	$	254,576	$	792,120	$	502,358	U.S.	$	417,582	$	422,628	$	890,543	$	792,120

International	International	107,568		61,481		179,368		115,453		International	293,536		107,568		546,591		179,368
Total	Total	$	530,196	$	316,057	$	971,488	$	617,811	Total	$	711,118	$	530,196	$	1,437,134	$	971,488

Timing of revenue recognition:	Timing of revenue recognition:									Timing of revenue recognition:
Products delivered at a point in time	Products delivered at a point in time	$	511,865	$	302,100	$	936,014	$	590,971	Products delivered at a point in time	$	684,122	$	511,865	$	1,385,774	$	936,014
Products and services delivered over time	Products and services delivered over time	18,331		13,957		35,474		26,840		Products and services delivered over time	26,996		18,331		51,360		35,474
Total	Total	$	530,196	$	316,057	$	971,488	$	617,811	Total	$	711,118	$	530,196	$	1,437,134	$	971,488

Enphase Energy, Inc. | 2023 Form 10-Q | 9

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Contract Balances

Receivables, and contract assets and contract liabilities from contracts with customers, are as follows:


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022

		(In thousands)					(In thousands)
Receivables	Receivables	$	312,451	$	333,626	Receivables	$	520,306	$	440,896

Short-term contract assets (Prepaid expenses and other assets)	Short-term contract assets (Prepaid expenses and other assets)	26,537		23,508		Short-term contract assets (Prepaid expenses and other assets)	38,073		32,130
Long-term contract assets (Other assets)	Long-term contract assets (Other assets)	78,139		69,583		Long-term contract assets (Other assets)	122,982		100,991

Short-term contract liabilities (Deferred revenues, current)	Short-term contract liabilities (Deferred revenues, current)	74,067		62,670		Short-term contract liabilities (Deferred revenues, current)	109,176		90,747
Long-term contract liabilities (Deferred revenues, non-current)	Long-term contract liabilities (Deferred revenues, non-current)	217,095		187,186		Long-term contract liabilities (Deferred revenues, non-current)	354,296		281,613

The Company receives payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets include deferred product costs and commissions associated with the deferred revenue and will be amortized along with the associated revenue. The Company had no asset impairment charges related to contract assets infor the six months ended June 30, ~~2022.~~2023.

Significant changes in the balances of contract assets (prepaid expenses and other assets) as of June 30, ~~2022~~2023 are as follows (in thousands):


Contract Assets
Contract Assets, beginning of period	$	~~93,091~~133,121
Amount recognized	~~(13,156)~~(17,658)
~~Increase~~Increased due to shipments	~~24,741~~45,592
Contract Assets, end of period	$	~~104,676~~161,055

Contract liabilities are recorded as deferred revenue on the accompanying condensed consolidated balance sheets and include payments received in advance of performance obligations under the contract and are realized when the associated revenue is recognized under the contract.

~~Enphase Energy, Inc. | 2022 Form 10-Q | 10~~

~~Table of Contents~~

~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Significant changes in the balances of contract liabilities (deferred revenues) as of June 30, ~~2022~~2023 are as follows (in thousands):


Contract Liabilities
Contract Liabilities, beginning of period	$	~~249,856~~372,360
Revenue recognized	~~(35,474)~~(51,360)

~~Increase~~Increased due to billings	~~76,780~~142,472

Contract Liabilities, end of period	$	~~291,162~~463,472

Enphase Energy, Inc. | 2023 Form 10-Q | 10

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Remaining Performance Obligations

Estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period are as follows:


		June 30, 2022			June 30, 2023
		(In thousands)			(In thousands)
Fiscal year:	Fiscal year:			Fiscal year:
2022 (remaining six months)		$	38,983
2023		68,667
2023 (remaining six months)				2023 (remaining six months)	$	55,492
2024	2024	62,924		2024	105,360
2025	2025	55,770		2025	97,787
2026	2026	40,141		2026	81,815
2027				2027	62,174
Thereafter	Thereafter	24,677		Thereafter	60,844
Total	Total	$	291,162	Total	$	463,472

3. OTHER FINANCIAL INFORMATION

Inventory

Inventory consists of the following:


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022

		(In thousands)					(In thousands)
Raw materials	Raw materials	$	25,559	$	25,429	Raw materials	$	30,993	$	34,978
Finished goods	Finished goods	104,707		48,971		Finished goods	135,118		114,730
Total inventory	Total inventory	$	130,266	$	74,400	Total inventory	$	166,111	$	149,708

Accrued Liabilities

Accrued liabilities consist of the following:


	June 30, 2023		December 31, 2022

	(In thousands)
Customer rebates and sales incentives	$	219,814	$	153,916
Income tax payable	81,271		16,146
VAT payable	35,511		19,852
Liability due to supply agreements	35,368		17,341
Freight	18,653		35,011
Salaries, commissions, incentive compensation and benefits	14,575		18,009



Operating lease liabilities, current	5,773		5,371
Post combination expense accrual	—		9,138

Liabilities related to restructuring activities	186		714
Other	14,134		20,441
Total accrued liabilities	$	425,285	$	295,939

4. GOODWILL AND INTANGIBLE ASSETS

The Company’s goodwill as of June 30, 2023 and December 31, 2022 were as follows:

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 11

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Accrued Liabilities~~

~~Accrued liabilities consist of the following:~~

June 30,
2022 December 31,
2021
(In thousands)
Salaries, commissions, incentive compensation and benefits $ 14,670 $ 13,062
Customer rebates and sales incentives 116,647 79,038
Freight 17,788 20,522
Operating lease liabilities, current 3,804 3,830
Liability due to supply agreements 12,278 14,653
Contingent consideration — 3,710
Post combination expense accrual 7,585 8,602
VAT payable 10,952 7,231
Other 14,195 7,264
Total accrued liabilities $ 197,919 $ 157,912

~~4. BUSINESS COMBINATIONS~~

~~Acquisition of SolarLeadFactory, LLC. (“SolarLeadFactory”)~~

On March 14, 2022, the Company completed the acquisition of 100% of the shares of SolarLeadFactory, a privately-held company. SolarLeadFactory provides high quality leads to solar installers. As part of the purchase price, the Company paid approximately $26.1 million in cash on March 14, 2022.


Goodwill	June 30, 2023		December 31, 2022

	(In thousands)
Goodwill, beginning of period	$	213,559	$	181,254
Goodwill acquired	—		33,354
Currency translation adjustment	731		(1,049)
Goodwill, end of period	$	214,290	$	213,559

The ~~acquisition has been accounted for~~Company’s purchased intangible assets as ~~a business combination under~~of June 30, 2023 and December 31, 2022 were as follows:


	June 30, 2023								December 31, 2022
	Gross		Additions		Accumulated Amortization		Net		Gross		Additions		Accumulated Amortization		Net

	(In thousands)


Intangible assets:
Other indefinite-lived intangibles	$	286	$	—	$	—	$	286	$	286	$	—	$	—	$	286

Intangible assets with finite lives:

Developed technology	51,044		—		(22,166)		28,878		38,650		12,394		(17,260)		33,784
Customer relationships	55,106		—		(24,607)		30,499		41,021		14,085		(19,702)		35,404
Trade names	37,700		—		(11,403)		26,297		37,700		—		(7,633)		30,067
Order backlog	600		—		(600)		—		600		—		(600)		—

Total purchased intangible assets	$	144,736	$	—	$	(58,776)	$	85,960	$	118,257	$	26,479	$	(45,195)	$	99,541

During the ~~acquisition method, and accordingly, the total purchase price is allocated to the tangible and identifiable~~three months ended June 30, 2023, intangible assets acquired ~~and liabilities assumed based on their respective fair values on the acquisition date.~~

~~In addition~~increased by less than $0.1 million due to the ~~purchase price summarized above, the Company will be obligated~~impact of foreign currency translation.

Amortization expense related to ~~issue up~~finite-lived intangible assets were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(In thousands)
Developed technology	$	2,455	$	2,010	$	4,910	$	3,876
Customer relationships	2,454		2,067		4,908		3,825
Trade names	1,885		1,885		3,770		3,770
Order backlog	—		323		—		600
Total amortization expense	$	6,794	$	6,285	$	13,588	$	12,071

Amortization of developed technology is recorded to ~~approximately $10.0 million in shares~~cost of ~~common stock~~sales, amortization of ~~the Company payable in the second quarter of 2023, subject~~customer relationships and trade names are recorded to ~~achievement~~sales and marketing expense, and amortization of certain ~~operational targets. As the additional payments require continuous employment of certain key employees of SolarLeadFactory and are subject~~customer relationships is recorded as a reduction to ~~other conditions, these payments are being accounted for as post-combination expense and will be recognized ratably over the one-year period presuming conditions will be met.~~

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date, which are subject to change within the measurement period as the fair value assessments are finalized (in thousands):


~~Cash and cash equivalents~~	$	~~1,426~~
~~Net tangible assets acquired~~	~~813~~
~~Intangible assets~~	~~11,200~~

~~Goodwill~~	~~12,612~~
~~Net assets acquired~~	$	~~26,051~~

The excess of the consideration paid over the fair values assigned to the assets acquired and liabilities assumed represents the goodwill resulting from the acquisition. Goodwill is primarily attributable to expected synergies in the Company’s solar offerings and cross-selling opportunities. The entire goodwill amount is expected to be deductible for U.S. federal income tax purposes over 15 years.revenue.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 12

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Intangible assets consist primarily~~The expected future amortization expense of developed technology and customer relationships. Developed technology intangible attributable to developed technology includes a combination of unpatented technology, trade secrets, computer software and research processes that represent the foundation for the existing and planned new products to facilitate the generation of new content. ~~Customer relationships intangible relates to SolarLeadFactory’s ability to sell current and future offerings, as well as products built around the current offering, to its existing customers.~~

~~The following table shows the fair value of the separately identifiable intangible assets at the time of acquisition and the period over which each intangible asset will be amortized:~~

Preliminary Fair Value Useful Life
(In thousands) (Years)
Developed technology $ 3,600 5
Customer relationships 7,600 5
Total identifiable intangible assets $ 11,200

~~Pro forma financial information has not been presented for the SolarLeadFactory acquisition as the impact to the Company’s condensed consolidated financial statements was not material.~~

The Company incurred and accrued costs related to acquisition of $0.4 million that were recorded in general and administrative expenses in the accompanying condensed consolidated statements of operations for the six months ended June 30, 2022.

~~5. GOODWILL AND INTANGIBLE ASSETS~~

~~The Company’s goodwill as of June 30, 2022 and December 31, 2021 are as follows:~~

Goodwill June 30,
2022 December 31,
2021
(In thousands)
Goodwill, beginning of period $ 181,254 $ 24,783
Goodwill acquired 16,378 156,390
Currency translation adjustment (628) 81
Goodwill, end of period $ 197,004 $ 181,254

~~The Company’s purchased~~ intangible assets as of June 30, ~~2022~~2023 is presented below (in thousands):


	June 30, 2023

Fiscal year:
2023 (remaining six months)	$	13,585
2024	24,538
2025	23,032
2026	19,473
2027	5,046

Total	$	85,674

5. CASH EQUIVALENTS AND MARKETABLE SECURITIES

The cash equivalents and ~~December 31, 2021 are as follows:~~marketable securities consist of the following:

June 30, 2022 December 31, 2021
Gross Additions Accumulated Amortization Net Gross Additions Accumulated Amortization Net
(In thousands)
Intangible assets:
Other indefinite-lived intangibles $ 286 $ — $ — $ 286 $ 286 $ — $ — $ 286
Intangible assets with finite lives:
Developed technology 38,650 3,600 (12,834) 29,416 13,100 25,550 (8,958) 29,692
Customer relationships 41,021 7,600 (15,273) 33,348 26,421 14,600 (11,448) 29,573
Trade names 37,700 — (3,863) 33,837 — 37,700 (93) 37,607
Order backlog 600 — (600) — — 600 — 600
Total purchased intangible assets $ 118,257 $ 11,200 $ (32,570) $ 96,887 $ 39,807 $ 78,450 $ (20,499) $ 97,758


	As of June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash Equivalents		Marketable Securities

	(In thousands)
Money market funds	$	134,398	$	—	$	—	$	134,398	$	134,398	$	—
Certificates of deposit	49,544		3		(76)		49,471		—		49,471
Commercial paper	119,203		—		(306)		118,897		—		118,897
Corporate notes and bonds	339,972		29		(3,148)		336,853		—		336,853
U.S. Treasuries	354,112		35		(398)		353,749		—		353,749
U.S. Government agency securities	666,104		166		(3,424)		662,846		—		662,846
Total	$	1,663,333	$	233	$	(7,352)	$	1,656,214	$	134,398	$	1,521,816


	As of December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash Equivalents		Marketable Securities

	(In thousands)
Money market funds	$	165,407	$	—	$	—	$	165,407	$	165,407	$	—
Certificates of deposit	31,874		13		(130)		31,757		—		31,757
Commercial paper	148,832		10		(171)		148,671		50,764		97,907
Corporate notes and bonds	168,887		2		(3,313)		165,576		—		165,576
U.S. Treasuries	301,349		8		(132)		301,225		4,094		297,131
U.S. Government agency securities	554,035		—		(6,807)		547,228		—		547,228
Total	$	1,370,384	$	33	$	(10,553)	$	1,359,864	$	220,265	$	1,139,599

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 13

Table of Contents

ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Amortization expense related to finite-lived intangible assets are as follows:~~
Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
(In thousands)
Developed technology $ 2,010 $ 891 $ 3,876 $ 1,690
Customer relationships 2,067 1,532 3,825 2,462
Trade names 1,885 85 3,770 147
Order backlog 323 — 600 —
Total amortization expense $ 6,285 $ 2,508 $ 12,071 $ 4,299

~~Amortization~~The following table summarizes the contractual maturities of ~~developed technology is recorded to cost of sales~~the Company’s cash equivalents and ~~customer relationships and trade names is recorded to sales and marketing expense.~~

~~The expected future amortization expense of intangible assets~~marketable securities as of June 30, 2023:


	Amortized Cost		Fair Value

	(In thousands)
Due within one year	$	1,357,928	$	1,352,679
Due within one to three years	305,405		303,535
Total	$	1,663,333	$	1,656,214

All available-for-sale securities have been classified as current, based on management's intent and ability to use the funds in current operations.

6. WARRANTY OBLIGATIONS

The Company’s warranty obligation activities were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(In thousands)
Warranty obligations, beginning of period	$	146,034	$	83,579	$	131,446	$	73,377
Accruals for warranties issued during period	16,344		11,311		32,515		20,221

Changes in estimates	(10,363)		17,063		(6,635)		21,975
Settlements	(5,092)		(6,590)		(13,986)		(12,471)
Increase due to accretion expense	3,907		1,828		7,452		3,343
Change in discount rate(1)	31,797		(9,609)		31,797		(9,609)

Other	(1,912)		(1,031)		(1,874)		(285)
Warranty obligations, end of period	180,715		96,551		180,715		96,551
Less: warranty obligations, current	(36,686)		(29,197)		(36,686)		(29,197)
Warranty obligations, non-current	$	144,029	$	67,354	$	144,029	$	67,354

(1) See Note 7, “Fair Value Measurements” for additional information about the monetary impact for change in the discount rate.

Changes in Estimates

During the three months ended June 30, 2023, the Company recorded a $10.4 million decrease in warranty expense from change in estimates, of which $14.4 million related to a decrease in product replacement costs related to Enphase IQ™ Battery systems and $2.1 million related to decrease in product replacement costs for all other products, partially offset by $6.1 million for increasing the warranty period for the Enphase IQ Battery from 10 years to 15 years. During the three months ended June 30, 2022, the Company recorded $17.1 million in warranty expense from change in estimates, of which $13.3 million related to continuing analysis of field performance data and diagnostic root-cause failure analysis primarily for Enphase IQ Battery storage systems and $3.8 million due to an increase in labor reimbursement rates.

During the six months ended June 30, 2023, the Company recorded a $6.6 million decrease in warranty expense from change in estimates, of which $20.5 million related to a decrease in product replacement costs related to Enphase IQ Battery systems and $2.1 million related to decrease in product replacement costs for all other products, partially offset by $6.1 million for increasing the warranty period for the Enphase IQ Battery from 10 years to 15 years, and by $9.9 million related to continuing analysis of field performance data and diagnostic root-cause failure analysis primarily for Enphase IQ Battery storage systems and prior generation products. During the six months ended June 30, 2022, the Company recorded $22.0 million in warranty expense from change in estimates, of which $13.3 million related to continuing analysis of field performance data and diagnostic root-cause failure analysis primarily for Enphase IQ Battery storage systems, $4.9 million is ~~presented below (in thousands):~~

June 30,
2022
Fiscal year:
2022 (remaining six months) $ 11,926
2023 24,096
2024 21,299
2025 19,984
2026 16,425
Thereafter 2,871
Total $ 96,601
related to an increase in expedited freight costs and replacement costs and $3.8 million due to an increase in labor reimbursement rates.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 14

Table of Contents

ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~6. CASH EQUIVALENTS AND MARKETABLE SECURITIES~~

~~The cash equivalents and marketable securities consist of the following:~~

As of June 30, 2022
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash Equivalents Marketable Securities
(In thousands)
Money market funds $ 432,946 $ — $ — $ 432,946 $ 432,946 $ —
Certificates of Deposit 3,126 — (24) 3,102 — 3,102
Commercial paper 121,294 — (224) 121,070 — 121,070
Corporate notes and bonds 144,438 1 (3,189) 141,250 — 141,250
U.S. Treasuries 39,551 1 (8) 39,544 — 39,544
U.S. Government agency securities 456,128 — (8,766) 447,362 — 447,362
Total $ 1,197,483 $ 2 $ (12,211) $ 1,185,274 $ 432,946 $ 752,328

As of December 31, 2021
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash Equivalents Marketable Securities
(In thousands)
Money market funds $ 35,789 $ — $ — $ 35,789 $ 35,789 $ —
Certificates of Deposit 16,001 — (2) 15,999 6,000 9,999
Commercial paper 215,964 — (114) 215,850 26,997 188,853
Corporate notes and bonds 199,244 — (872) 198,372 760 197,612
U.S. Treasuries 14,999 — (1) 14,998 — 14,998
U.S. Government agency securities 487,743 — (1,870) 485,873 — 485,873
Total $ 969,740 $ — $ (2,859) $ 966,881 $ 69,546 $ 897,335

~~The following table summarizes the contractual maturities of the Company’s cash equivalents and marketable securities as of June 30, 2022:~~

Amortized Cost Fair Value
(In thousands)
Due within one year $ 1,023,275 $ 1,017,129
Due within one to three years 174,208 168,145
Total $ 1,197,483 $ 1,185,274

~~All available-for-sale securities have been classified as current, based on management's intent and ability to use the funds in current operations.~~

~~Enphase Energy, Inc. | 2022 Form 10-Q | 15~~

~~Table of Contents~~

~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

7. ~~WARRANTY OBLIGATIONS~~

~~The Company’s warranty activities were as follows:~~

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
(In thousands)
Warranty obligations, beginning of period $ 83,579 $ 54,553 $ 73,377 $ 45,913
Accruals for warranties issued during period 11,311 3,319 20,221 7,213
Changes in estimates 17,063 4,269 21,975 11,924
Settlements (6,590) (2,757) (12,471) (5,687)
Increase due to accretion expense 1,828 1,104 3,343 2,047
Other (10,641) (550) (9,895) (1,472)
Warranty obligations, end of period 96,551 59,938 96,551 59,938
Less: current portion (29,197) (15,009) (29,197) (15,009)
Non-current $ 67,354 $ 44,929 $ 67,354 $ 44,929

~~Changes in Estimates~~

In the three months ended June 30, 2022, the Company recorded $17.1 million in warranty expense from change in estimates, of which $13.3 million relates to continuing analysis of field performance data and diagnostic root-cause failure analysis primarily for Enphase IQ™ Battery storage systems and $3.8 million is due to an increase in labor reimbursement rates. In the three months ended June 30, 2021, the Company recorded $4.3 million in warranty expense from change in estimates, of which $2.9 million relates to the timing of cost reduction assumptions for replacement products and $1.4 million relates to continuing analysis of field performance data and diagnostic root-cause failure analysis primarily for its prior generation products.

In the six months ended June 30, 2022, the Company recorded $22.0 million in warranty expense from change in estimates, of which $13.3 million relates to continuing analysis of field performance data and diagnostic root-cause failure analysis primarily for Enphase IQ™ Battery storage systems, $4.9 million is related to an increase in expedited freight costs and replacement costs and $3.8 million is due to an increase in labor reimbursement rates. In the six months ended June 30, 2021, the Company recorded $11.9 million in warranty expense from change in estimates, of which $7.7 million relates to continuing analysis of field performance data and diagnostic root-cause failure analysis primarily for its prior generation products, $2.9 million relates to the timing of cost reduction assumptions for replacement products and $1.3 million relates to the other cost assumption changes.

8. FAIR VALUE MEASUREMENTS

The accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

•Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of such assets or liabilities do not entail a significant degree of judgment.

•Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

~~Enphase Energy, Inc. | 2022 Form 10-Q | 16~~

~~Table of Contents~~

~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

•Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The following table presents assets and liabilities measured at fair value on a recurring basis using the above input categories:


		June 30, 2022						December 31, 2021							June 30, 2023						December 31, 2022

		(In thousands)													(In thousands)
		Level 1		Level 2		Level 3		Level 1		Level 2		Level 3			Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets:	Assets:													Assets:
Cash and cash equivalents:	Cash and cash equivalents:													Cash and cash equivalents:
Money market funds	Money market funds	$	432,946	$	—	$	—	$	35,789	$	—	$	—	Money market funds	$	134,398	$	—	$	—	$	165,407	$	—	$	—
Certificates of deposit		—		—		—		—		6,000		—

Commercial paper	Commercial paper	—		—		—		—		26,997		—		Commercial paper	—		—		—		—		50,764		—
Corporate notes and bonds		—		—		—		—		760		—

U.S. Treasuries														U.S. Treasuries	—		—		—		—		4,094		—
Marketable securities:	Marketable securities:													Marketable securities:
Certificates of deposit	Certificates of deposit	—		3,102		—		—		9,999		—		Certificates of deposit	—		49,471		—		—		31,757		—
Commercial paper	Commercial paper	—		121,070		—		—		188,853		—		Commercial paper	—		118,897		—		—		97,907		—
Corporate notes and bonds	Corporate notes and bonds	—		141,250		—		—		197,612		—		Corporate notes and bonds	—		336,853		—		—		165,576		—
U.S. Government agencies		—		447,362		—		—		485,873		—
U.S. Treasuries	U.S. Treasuries	—		39,544		—		—		14,998		—		U.S. Treasuries	—		353,749		—		—		297,131		—
U.S. Government agency securities														U.S. Government agency securities	—		662,846		—		—		547,228		—

Other assets	Other assets													Other assets
Investments in debt securities	Investments in debt securities	—		—		40,913		—		—		41,042		Investments in debt securities	—		—		60,275		—		—		56,777

Total assets measured at fair value	Total assets measured at fair value	$	432,946	$	752,328	$	40,913	$	35,789	$	931,092	$	41,042	Total assets measured at fair value	$	134,398	$	1,521,816	$	60,275	$	165,407	$	1,194,457	$	56,777

Liabilities:	Liabilities:													Liabilities:
Accrued liabilities
Contingent consideration		$	—	$	—	$	—	$	—	$	—	$	3,710

Warranty obligations	Warranty obligations													Warranty obligations
Current	Current	—		—		24,772		—		—		14,612		Current	$	—	$	—	$	27,282	$	—	$	—	$	30,740
Non-current	Non-current	—		—		49,151		—		—		36,395		Non-current	—		—		123,258		—		—		75,749
Total warranty obligations measured at fair value	Total warranty obligations measured at fair value	—		—		73,923		—		—		51,007		Total warranty obligations measured at fair value	—		—		150,540		—		—		106,489
Total liabilities measured at fair value	Total liabilities measured at fair value	$	—	$	—	$	73,923	$	—	$	—	$	54,717	Total liabilities measured at fair value	$	—	$	—	$	150,540	$	—	$	—	$	106,489

Enphase Energy, Inc. | 2023 Form 10-Q | 15

Table of Contents

ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Notes due 2028, Notes due 2026 and Notes due 2025

The Company carries the Notes due 2028 and Notes due 2026 at face value less issuance costs on its condensed consolidated balance ~~sheets, and~~sheets. The Company carries the Notes due 2025 at face value less unamortized discount and issuance costs on its condensed consolidated balance sheets. As of June 30, ~~2022,~~2023, the fair value of the Notes due 2028, Notes due 2026 and Notes due 2025 was ~~$568.2~~$543.6 million, ~~$611.9~~$594.7 million and ~~$256.5~~$261.6 million, respectively. The fair value as of June 30, ~~2022~~2023 was determined based on the closing trading price per $100 principal amount as of the last day of trading for the period. The Company considers the fair value of the Notes due 2028, Notes due 2026 and Notes due 2025 to be a Level 2 measurement as they are not actively traded. Refer to Note 8, “Debt,” for additional information about the Company’s outstanding debt.

Investments in debt securities

In January 2021, the Company invested approximately $25.0 million in a privately-held company. The Company concluded the investment qualifies as an investment in a debt security, as it accrues interest and principal plus accrued interest becomes payable back to the Company at certain dates unless it is converted to equity at a pre-determined price. As the investment includes a conversion option, the Company has elected to account for this investment under the fair value option and any change in fair value of the investment is recognized in “Other income (expense), net” in the Company’s condensed consolidated statement of operations for that period. Further, the Company has concluded that the Company’s investment in a debt security is considered to be a Level 3 measurement due to the use of significant unobservable inputs in the valuation model. The fair value was

~~Enphase Energy, Inc. | 2022 Form 10-Q | 17~~

~~Table of Contents~~

~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

determined using discounted cash flow methodology and assumptions include implied yield and change in estimated term of investment being held-to-maturity.

In September 2021, the Company invested approximately $13.0 million in secured convertible promissory notes issued by the stockholders of a privately-held company. The investment qualifies as an investment in a debt security and will accrete interest and principal plus accrued interest that becomes payable at certain dates unless it is converted to equity at a pre-determined price. As the investment includes a conversion option, the Company has elected to account for this investment under the fair value option and any change in fair value of the investment is recognized in “Other income (expense), net” in the Company’s condensed consolidated statement of operations for that period. ~~Further,~~Principal plus accrued interest receivable of the investment approximates the fair value.

In December 2022, the Company ~~has concluded that the Company’s~~took a non-voting participating interest of approximately $15.0 million in a loan held by a privately-held company. The debt security qualifies as an investment in a debt security and interest will be payable on a monthly basis. The principal becomes repayable at a certain date when a qualified equity investment or a junior debt is ~~considered a Level 3 measurement due to the use of significant unobservable inputs~~raised, or as long as certain applicable payment conditions are satisfied. The accreted interest is recognized in “Other income (expense), net” in the ~~valuation model.~~Company’s condensed consolidated statement of operations for that period. Principal plus unpaid accrued interest receivable of the investment approximates the fair value.

Investment in debt securities ~~are~~is recorded in “Other assets” on the accompanying condensed consolidated balance sheet as of June 30, 2023 and December 31, 2022. The changes in the balance in investments in debt securities during the period ~~are~~were as follows:

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
(In thousands)
Balance at beginning of period $ 39,926 $ 26,437 $ 41,042 $ —
Investment — 20,000 — 45,000
Fair value adjustments included in other (expense) income, net 987 932 (129) 2,369
Balance at end of period $ 40,913 $ 47,369 $ 40,913 $ 47,369

~~Contingent consideration~~

The estimated fair value of the contingent consideration incurred in connection with the Company’s acquisition of Sofdesk Inc. is considered a Level 3 measurement due to the use of significant unobservable inputs. These unobservable inputs include probability assessment of expected future customer count over the period in which the obligation is expected to be settled. The value was determined using a discounted risk-neutral expected (probability-weighted) cash flow methodology. The resulting expected contingent consideration payment is discounted back to present value using the Company’s cost of debt. The fair value of contingent consideration arrangement is reassessed quarterly based on assumptions used in the Company’s latest projections and input provided by management. Any change in the fair value estimate, which could include accretion of interest expense due to passage of time as well as any changes in the inputs to the model, is recorded in the Company’s condensed consolidated statement of operations for that period.


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(In thousands)
Balance at beginning of period	$	58,521	$	39,926	$	56,777	$	41,042

Fair value adjustments included in other income (expense), net	1,754		987		3,498		(129)

Balance at end of period	$	60,275	$	40,913	$	60,275	$	40,913

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 1816

Table of Contents

ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~The following table reflects the activity for the Company’s contingent consideration liabilities measured at fair value using Level 3 inputs for the six months ended June 30, 2022:~~

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
(In thousands)
Balance at beginning of period $ — $ 3,540 $ 3,710 $ —
Addition — — — 3,500
Fair value adjustments included in other income (expense), net — 56 15 96
Paid — — (3,725) —
Balance at end of period $ — $ 3,596 $ — $ 3,596

Warranty ~~obligations.~~obligations

Fair Value Option for Warranty Obligations Related to Products Sold Since January 1, 2014

The Company estimates the fair value of warranty obligations by calculating the warranty obligations in the same manner as for sales prior to January 1, 2014 and applying an expected present value technique to that result. The expected present value technique, an income approach, converts future amounts into a single current discounted amount. In addition to the key estimates of ~~failure rates, claim~~return rates and replacement costs, the Company used certain Level 3 inputs which are unobservable and significant to the overall fair value measurement. Such additional assumptions ~~included a discount rate~~are based on the Company’s credit-adjusted risk-free rate (“discount rate”) and compensation comprised of a profit element and risk premium required of a market participant to assume the obligation.

The following table provides information regarding changes in nonfinancial liabilities related to the Company’s warranty obligations measured at fair value on a recurring basis using significant unobservable inputs designated as Level 3 for the periods indicated:


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022

		(In thousands)								(In thousands)
Balance at beginning of period	Balance at beginning of period	$	61,586	$	33,319	$	51,007	$	28,736		Balance at beginning of period	$	119,508	$	61,586	$	106,489	$	51,007
Accruals for warranties issued during period	Accruals for warranties issued during period	11,120		3,319		19,890		7,213			Accruals for warranties issued during period	16,344		11,120		32,369		19,890
Changes in estimates	Changes in estimates	14,692		2,755		18,591		5,338			Changes in estimates	(12,925)		14,692		(11,680)		18,591
Settlements	Settlements	(4,668)		(1,910)		(8,724)		(3,825)			Settlements	(6,179)		(4,668)		(14,013)		(8,724)
Increase due to accretion expense	Increase due to accretion expense	1,828		1,104		3,343		2,047			Increase due to accretion expense	3,907		1,828		7,452		3,343
Change in discount rate											Change in discount rate	31,797		(9,609)		31,797		(9,609)
Other	Other	(10,636)		(550)		(10,185)		(1,472)			Other	(1,912)		(1,026)		(1,874)		(575)
Balance at end of period	Balance at end of period	$	73,923	$	38,037	$	73,923	$	38,037		Balance at end of period	$	150,540	$	73,923	$	150,540	$	73,923

Quantitative and Qualitative Information about Level 3 Fair Value Measurements

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the significant unobservable inputs used in the fair value measurement of the Company’s liabilities designated as Level 3 ~~are~~were as follows, of which the monetary impact for change in discount rate is captured in ~~“Other”~~“Change in discount rate” in the table above:

Percent Used
(Weighted Average)
Item Measured at Fair Value Valuation Technique Description of Significant Unobservable Input June 30,
2022 December 31,
2021
Warranty obligations for products sold since January 1, 2014 Discounted cash flows Profit element and risk premium 16% 15%
Credit-adjusted risk-free rate 16% 12%

~~Enphase Energy, Inc. | 2022 Form 10-Q | 19~~

~~Table of Contents~~

~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Percent Used

(Weighted Average)

Item Measured at Fair Value

Valuation Technique

Description of Significant Unobservable Input

June 30,
2023

December 31,
2022

Warranty obligations for products sold since January 1, 2014

Discounted cash flows

Profit element and risk premium

17%

16%

Credit-adjusted risk-free rate

13%

Sensitivity of Level 3 Inputs - Warranty Obligations

Each of the significant unobservable inputs is independent of the other. The profit element and risk premium are estimated based on the requirements of a third-party participant willing to assume the Company’s warranty obligations. The ~~credit‑adjusted risk‑free~~discount rate ~~(“discount rate”)~~ is determined by reference to the Company’s own credit standing at the fair value measurement ~~date. Increasing~~date, which improved in the three and six months ended June 30, 2023 contributing to the 5% decline in discount rate and associated increase in warranty expense in the same period captured in “Change in discount rate” in the table above. Under the expected present value technique, increasing the profit element and risk premium input by 100 basis points would result in a ~~$0.6~~$1.1 million increase to the liability. Decreasing the profit element and risk premium by 100 basis points would result in a ~~$0.6~~$1.1 million reduction of the liability. Increasing the discount rate by 100 basis points would result in a ~~$2.5~~$9.2 million reduction of the liability. Decreasing the discount rate by 100 basis points would result in a ~~$2.8~~$10.3 million increase to the liability.

~~9. DEBT~~

~~The following table provides information regarding the Company’s debt:~~

June 30,
2022 December 31,
2021
(In thousands)
Convertible notes
Notes due 2028 $ 575,000 $ 575,000
Less: unamortized debt discount — (143,636)
Less: unamortized debt issuance costs (7,359) (5,775)
Carrying amount of Notes due 2028 (1)
567,641 425,589
Notes due 2026 632,500 632,500
Less: unamortized debt discount — (104,755)
Less: unamortized debt issuance costs (7,312) (6,678)
Carrying amount of Notes due 2026 (1)
625,188 521,067
Notes due 2025 102,175 102,175
Less: unamortized debt discount (12,447) (14,584)
Less: unamortized debt issuance costs (1,299) (1,539)
Carrying amount of Notes due 2025 88,429 86,052
Notes due 2023 5,000 5,000
Less: unamortized issuance costs (43) (62)
Carrying amount of Notes due 2023 4,957 4,938
Total carrying amount of debt 1,286,215 1,037,646
Less: current portion of convertible notes (88,429) (86,052)
Debt, non-current $ 1,197,786 $ 951,594

(1) The net carrying amount was increased on January 1, 2022 as a result of the adoption of ASU 2020-06. Refer to Note 2, Summary of Significant Accounting Policies, in this Quarterly Report on Form 10-Q for further information.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 2017

Table of Contents

ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8. DEBT

The following table provides information regarding the Company’s debt:


	June 30, 2023		December 31, 2022

	(In thousands)
Convertible notes
Notes due 2028	$	575,000	$	575,000

Less: unamortized debt issuance costs	(6,062)		(6,705)
Carrying amount of Notes due 2028	568,938		568,295

Notes due 2026	632,500		632,500

Less: unamortized debt issuance costs	(5,320)		(6,307)
Carrying amount of Notes due 2026	627,180		626,193

Notes due 2025	102,175		102,175
Less: unamortized debt discount	(7,979)		(10,229)
Less: unamortized debt issuance costs	(813)		(1,054)
Carrying amount of Notes due 2025	93,383		90,892





Notes due 2023	5,000		5,000
Less: unamortized issuance costs	(4)		(23)
Carrying amount of Notes due 2023	4,996		4,977




Total carrying amount of debt	1,294,497		1,290,357

Less: debt, current	(93,383)		(90,892)
Debt, non-current	$	1,201,114	$	1,199,465

Enphase Energy, Inc. | 2023 Form 10-Q | 18

Table of Contents

ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the total amount of interest cost recognized in the condensed consolidated statement of operations relating to the Notes:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(In thousands)



Notes due 2028
Amortization of debt issuance costs	$	327	$	327	$	643	$	643
Total interest cost recognized	$	327	$	327	$	643	$	643

Notes due 2026
Amortization of debt issuance costs	$	502	$	502	$	987	$	987
Total interest cost recognized	$	502	$	502	$	987	$	987

Notes due 2025
Contractual interest expense	$	64	$	64	$	128	$	128
Amortization of debt discount	1,144		1,088		2,249		2,137
Amortization of debt issuance costs	123		123		241		241
Total interest cost recognized	$	1,331	$	1,275	$	2,618	$	2,506

Notes due 2023
Contractual interest expense	$	50	$	50	$	100	$	100
Amortization of debt issuance costs	10		10		20		20
Total interest costs recognized	$	60	$	60	$	120	$	120

Convertible Senior Notes due 2028

On March 1, 2021, the Company issued $575.0 million aggregate principal amount of ~~the Notes~~our 0.0% convertible senior notes due ~~2028.~~2028 (the “Notes due 2028”). The Notes due 2028 will not bear regular interest, and the principal amount of the Notes due 2028 will not accrete. The Notes due 2028 are general unsecured obligations and are governed by an indenture between the Company and U.S. Bank National Association, as trustee. The Notes due 2028 will mature on March 1, 2028, unless earlier repurchased by the Company or converted at the option of the holders. The Company received approximately $566.4 million in net proceeds, after deducting the initial purchasers’ discount, from the issuance of the Notes due 2028.

The initial conversion rate for the Notes due 2028 is 3.5104 shares of common stock per $1,000 principal amount of the Notes due 2028 (which represents an initial conversion price of approximately $284.87 per share). The conversion rate for the Notes due 2028 will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid special interest, if any. In addition, if a make-whole fundamental change or a redemption with respect to the Notes due 2028 occurs prior to the maturity date, under certain circumstances as specified in the relevant indenture, the Company will increase the conversion rate for the Notes due 2028 by a number of additional shares of the Company’s common stock for a holder that elects to convert its notes in connection with such make-whole fundamental change or redemption. Upon conversion, the Company will settle conversions of the Notes due 2028 through payment or delivery, as the case may be, of cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company may not redeem the Notes due 2028 prior to September 6, 2024. The Company may redeem for cash all or any portion of the Notes due 2028, at the Company’s election, on or after September 6, 2024, if the last reported sale price of the Company’s common stock has been greater than or equal to 130% of the conversion price then in effect for the Notes due 2028 ~~(i.e.~~(i.e. $370.33, which is 130% of the current conversion price for the Notes due 2028) for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will equal 100% of the principal amount of the Notes due 2028 to be redeemed, plus accrued and unpaid special interest, if any to, but excluding, the relevant redemption date. No sinking fund is provided for the Notes due 2028.

The Notes due 2028 may be converted on any day prior to the close of business on the business day immediately preceding September 1, 2027, in multiples of $1,000 principal amount, at the option of the holder only under any of the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the Notes due 2028 ~~(i.e.~~(i.e., $370.33 which is 130% of the current conversion price for the Notes due 2028) on each applicable trading day; (2) during the five business day period after any 5five consecutive trading day period (the “Measurement Period”) in which the “trading price” (as defined in the relevant indenture) per $1,000 principal amount of notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate for the Notes due 2028 on each such trading day; (3) if the Company calls any or all of the Notes due 2028 for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On and after September 1, 2027 until the close of business on the second scheduled trading day immediately preceding the maturity date of March 1, 2028, holders of the Notes due 2028 may convert their notes at any time, regardless of the foregoing circumstances. Upon the occurrence of a fundamental change (as defined in the relevant indenture), holders may require the Company to repurchase all or a portion of their Notes due 2028 for cash at a price equal to 100% of the principal amount of the notes to be repurchased plus any accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date.

In accounting for the issuance of the Notes due 2028 on March 1, 2021, the Company separated the Notes due 2028 into liability and equity components. The carrying amount of the liability component of approximately $415.0 million was calculated by using a discount rate of 4.77%, which was the Company’s borrowing rate on the date of the issuance of the Notes due 2028 for a similar debt instrument without the conversion feature. The carrying amount of the equity component of approximately $160.0 million, representing the

~~Enphase Energy, Inc. | 2022 Form 10-Q | 21~~

~~Table of Contents~~

~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

conversion option, was determined by deducting the fair value of the liability component from the par value of the Notes due 2028. The equity component of the Notes due 2028 was included in additional paid-in capital in the condensed consolidated balance sheet through December 31, 2021 and was not remeasured. The difference between the principal amount of the Notes due 2028 and the liability component (the “debt discount”) was amortized to interest expense using the effective interest method over the term of the Notes due 2028 through December 31, 2021.

Through December 31, 2021, the Company separated the Notes due 2028 into liability and equity components which resulted in a tax basis difference associated with the liability component that represents a temporary difference. The Company recognized the deferred taxes of $40.1 million for the tax effect of that temporary difference as an adjustment to the equity component included in additional paid-in capital in the condensed consolidated balance sheet.

Debt issuance costs for the issuance of the Notes due 2028 were approximately $9.1 million, consisting of initial purchasers' discount and other issuance costs. In accounting for the transaction costs, the Company allocated the total amount incurred to the liability and equity components using the same proportions as the proceeds from the Notes due 2028. Transaction costs attributable to the liability component were approximately $6.6 million, which were recorded as debt issuance cost (presented as contra debt in the condensed consolidated balance sheet) and are being amortized to interest expense over the term of the Notes due 2028. The transaction costs attributable to the equity component were approximately $2.5 million and were netted with the equity component in stockholders’ equity.

Enphase Energy, Inc. | 2023 Form 10-Q | 20

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Following the adoption of ASU 2020-06, “Debt - Debt with Conversion and Other Options (subtopic 470-20)” (“ASU 2020-06”) as of January 1, 2022, the Company no longer records the conversion feature of Notes due 2028 in equity. Instead, the Company combined the previously separated equity component with the liability component, which together is now classified as debt, thereby eliminating the subsequent amortization of the debt discount as interest expense. Similarly, the portion of issuance costs previously allocated to equity was reclassified to the carrying amount of Notes due 2028 and is amortized over the remaining term of the notes. Accordingly, the Company recorded a net decrease to additional paid-in capital by approximately $117.3 million, net of tax to remove the equity component separately recorded for the conversion features associated with the Notes due 2028 and equity component associated with the issuance costs, an increase of approximately $141.3 million in the carrying value of Notes due 2028 to reflect the full principal amount of the Notes due 2028, net of issuance costs, a decrease to deferred tax liability of approximately $36.0 million, and a decrease to accumulated deficit of approximately $12.0 million, net of tax in the Company’s consolidated balance sheet with no impact on the Company’s consolidated statements of operations. As of June 30, ~~2022,~~2023, the unamortized deferred issuance cost for the Notes due 2028 was ~~$7.4~~$6.1 million on the condensed consolidated balance sheet.

~~The following table presents the total amount of interest cost recognized in the statement of operations relating to the Notes due 2028:~~

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
(In thousands)
Amortization of debt discount $ — $ 4,872 $ — $ 6,483
Amortization of debt issuance costs 327 236 643 315
Total interest cost recognized $ 327 $ 5,108 $ 643 $ 6,798

Notes due 2028 Hedge and Warrant Transactions

In connection with the offering of the Notes due 2028, the Company entered into privately-negotiated convertible note hedge transactions (“Notes due 2028 Hedge”) pursuant to which the Company has the option to purchase a total of approximately 2.0 million shares of its common stock (subject to anti-dilution adjustments), which is the same number of shares initially issuable upon conversion of the Notes due 2028, at a price of $284.87 per share, which is the initial conversion price of the Notes due 2028. The total cost of the convertible note hedge transactions was approximately $161.6 million. The convertible note hedge transactions are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of the Notes due 2028 and/or offset

~~Enphase Energy, Inc. | 2022 Form 10-Q | 22~~

~~Table of Contents~~

~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be.

Additionally, the Company separately entered into privately-negotiated warrant transactions (the “2028 Warrants”) whereby the Company sold warrants to acquire approximately 2.0 million shares of the Company’s common stock (subject to anti-dilution adjustments) at an initial strike price of $397.91 per share. The Company received aggregate proceeds of approximately $123.4 million from the sale of the 2028 Warrants. If the market value per share of the Company’s common stock, as measured under the 2028 Warrants, exceeds the strike price of the 2028 Warrants, the 2028 Warrants will have a dilutive effect on the Company’s earnings per share, unless the Company elects, subject to certain conditions, to settle the 2028 Warrants in cash. Taken together, the purchase of the Notes due 2028 Hedge and the sale of the 2028 Warrants are intended to reduce potential dilution from the conversion of the Notes due 2028 and to effectively increase the overall conversion price from $284.87 to $397.91 per share. The 2028 Warrants are only exercisable on the applicable expiration dates in accordance with the Notes due 2028 Hedge. Subject to the other terms of the 2028 Warrants, the first expiration date applicable to the Notes due 2028 Hedge is June 1, 2028, and the final expiration date applicable to the Notes due 2028 Hedge is July 27, 2028.

Given that the transactions meet certain accounting criteria, the Notes due 2028 Hedge and the 2028 Warrants transactions are recorded in stockholders’ equity, and they are not accounted for as derivatives and are not remeasured each reporting period.

Convertible Senior Notes due 2026

On March 1, 2021, the Company issued $575.0 million aggregate principal amount of ~~the Notes~~0.0% convertible senior notes due ~~2026.~~2026 (the “Notes due 2026”). In addition, on March 12, 2021, the Company issued an additional $57.5 million aggregate principal amount of the Notes due 2026 pursuant to the initial purchasers’ full exercise of the over-allotment option for additional Notes due 2026. The Notes due 2026 will not bear regular interest, and the principal amount of the Notes due 2026 will not accrete. The Notes due 2026 are general unsecured obligations and are governed by an indenture between the Company and U.S. Bank National Association, as trustee. The Notes due 2026 will mature on March 1, 2026, unless repurchased earlier ~~repurchased~~ by the Company or converted at the option of

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

the holders. The Company received approximately $623.0 million in net proceeds, after deducting the initial purchasers’ discount, from the issuance of the Notes due 2026.

The initial conversion rate for the Notes due 2026 is 3.2523 shares of common stock per $1,000 principal amount of the Notes due 2026 (which represents an initial conversion price of approximately $307.47 per share). The conversion rate for the Notes due 2026 will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, if a make-whole fundamental change or a redemption with respect to the Notes due 2026 occurs prior to the maturity date, under certain circumstances as specified in the relevant indenture, the Company will increase the conversion rate for the Notes due 2026 by a number of additional shares of the Company’s common stock for a holder that elects to convert its notes in connection with such make-whole fundamental change or redemption. Upon conversion, the Company will settle conversions of Notes due 2026 through payment or delivery, as the case may be, of cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

The Company may not redeem the Notes due 2026 prior to the September 6, 2023. The Company may redeem for cash all or any portion of the Notes due 2026, at the Company’s election, on or after September 6, 2023, if the last reported sale price of the Company’s common stock has been greater than or equal to 130% of the conversion price then in effect for the Notes due 2026 ~~(i.e.~~(i.e., $399.71, which is 130% of the current conversion price for the Notes due 2026) for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will equal 100% of the principal amount of the Notes due 2026 to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the relevant redemption date for the Notes due 2026. The redemption price will be increased as described in the relevant indentures by a number of additional shares of the Company in connection with such optional redemption by the Company. No sinking fund is provided for the Notes due 2026.

The Notes due 2026 may be converted on any day prior to the close of business on the business day immediately preceding September 1, 2025, in multiples of $1,000 principal amount, at the option of the holder only

~~Enphase Energy, Inc. | 2022 Form 10-Q | 23~~

~~Table of Contents~~

~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

under any of the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the Notes due 2026 ~~(i.e.~~(i.e., $399.71, which is 130% of the current conversion price for the Notes due 2026) on each applicable trading day; (2) during the five business day period after any 5five consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in the relevant indenture) per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate for Notes due 2026 on each such trading day; (3) if the Company calls any or all of the Notes due 2026 for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On and after September 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date of March 1, 2026, holders of the Notes due 2026 may convert their notes at any time, regardless of the foregoing circumstances. Upon the occurrence of a fundamental change (as defined in the relevant indenture), holders may require the Company to repurchase all or a portion of their Notes due 2026 for cash at a price equal to 100% of the principal amount of the notes to be repurchased plus any accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date.

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In accounting for the issuance of the Notes due 2026 on March 1, 2021, the Company separated the Notes due 2026 into liability and equity components. The carrying amount of the liability component of approximately $509.0 million was calculated by using a discount rate of 4.44%, which was the Company’s borrowing rate on the date of the issuance of the Notes due 2026 for a similar debt instrument without the conversion feature. The carrying amount of the equity component of approximately $123.5 million, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the Notes due 2026. The equity component of the Notes due 2026 was included in additional paid-in capital in the condensed consolidated balance sheet through December 31, 2021 and was not remeasured. The difference between the principal amount of the Notes due 2026 and the liability component (the “debt discount”) was amortized to interest expense using the effective interest method over the term of the Notes due 2026 through December 31, 2021.

Through December 31, 2021, the Company separated the Notes due 2026 into liability and equity components which resulted in a tax basis difference associated with the liability component that represents a temporary difference. The Company recognized the deferred taxes of $31.0 million for the tax effect of that temporary difference as an adjustment to the equity component included in additional paid-in capital in the condensed consolidated balance sheet.

Debt issuance costs for the issuance of the Notes due 2026 were approximately $10.0 million, consisting of initial purchasers' discount and other issuance costs. In accounting for the transaction costs, the Company allocated the total amount incurred to the liability and equity components using the same proportions as the proceeds from the Notes due 2026. Transaction costs attributable to the liability component were approximately $8.0 million, which were recorded as debt issuance cost (presented as contra debt in the condensed consolidated balance sheet) and are being amortized to interest expense over the term of the Notes due 2026. The transaction costs attributable to the equity component were approximately $2.0 million and were netted with the equity component in stockholders’ equity.

Following the adoption of ASU 2020-06 as of January 1, 2022, the Company no longer records the conversion feature of Notes due 2026 in equity. Instead, the Company combined the previously separated equity component with the liability component, which together is now classified as debt, thereby eliminating the subsequent amortization of the debt discount. Similarly, the portion of issuance costs previously allocated to equity was reclassified to the carrying amount debt and is amortized over the remaining term of the notes. Accordingly, the Company recorded a net decrease to additional paid-in capital by approximately $90.6 million, net of tax to remove the equity component separately recorded for the conversion features associated with the Notes due 2026 and equity component associated with the issuance costs, an increase of approximately $103.2 million in the carrying value of its Notes due 2026 to reflect the full principal amount of the Notes due 2026 outstanding net of issuance costs, a decrease to deferred tax liability of approximately $26.3 million, and a decrease to accumulated deficit of

~~Enphase Energy, Inc. | 2022 Form 10-Q | 24~~

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~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

approximately $13.7 million, net of tax in the Company’s consolidated balance sheet with no impact on the Company’s consolidated statements of operations. As of June 30, ~~2022,~~2023, the unamortized deferred issuance cost for the Notes due 2026 was ~~$7.3~~$5.3 million on the condensed consolidated balance sheet.

~~The following table presents the total amount of interest cost recognized in the statement of operations relating to the Notes due 2026:~~

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
(In thousands)
Amortization of debt discount $ — $ 5,587 $ — $ 7,373
Amortization of debt issuance costs 502 404 987 539
Total interest cost recognized $ 502 $ 5,991 $ 987 $ 7,912

Notes due 2026 Hedge and Warrant Transactions

In connection with the offering of the Notes due 2026 (including in connection with the issuance of additional Notes due 2026 upon the initial purchasers’ exercise of their over-allotment option), the Company entered into privately-negotiated convertible note hedge transactions (the “Notes due 2026 Hedge”) pursuant to which the Company has the option to purchase a total of approximately 2.1 million shares of its common stock (subject to anti-dilution adjustments), which is the same number of shares initially issuable upon conversion of the Notes due 2026, at a price of $307.47 per share, which is the initial conversion price of the Notes due 2026. The total cost of the Notes due 2026 Hedge was approximately $124.6 million. The Notes due 2026 Hedge are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of the Notes due 2026 and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be.

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Additionally, the Company separately entered into privately-negotiated warrant transactions, including in connection with the issuance of additional Notes due 2026 upon the initial purchasers’ exercise of their over-allotment option (the “2026 Warrants”), whereby the Company sold warrants to acquire approximately 2.1 million shares of the Company’s common stock (subject to anti-dilution adjustments) at an initial strike price of $397.91 per share. The Company received aggregate proceeds of approximately $97.4 million from the sale of the 2026 Warrants. If the market value per share of the Company’s common stock, as measured under the 2026 Warrants, exceeds the strike price of the 2026 Warrants, the 2026 Warrants will have a dilutive effect on the Company’s earnings per share, unless the Company elects, subject to certain conditions, to settle the 2026 Warrants in cash. Taken together, the purchase of the Notes due 2026 Hedge and the sale of the 2026 Warrants are intended to reduce potential dilution from the conversion of the Notes due 2026 and to effectively increase the overall conversion price from $307.47 to $397.91 per share. The 2026 Warrants are only exercisable on the applicable expiration dates in accordance with the 2026 Warrants. Subject to the other terms of the 2026 Warrants, the first expiration date applicable to the Warrants is June 1, 2026, and the final expiration date applicable to the 2026 Warrants is July 27, 2026.

Given that the transactions meet certain accounting criteria, the Notes due 2026 ~~hedge~~Hedge and the 2026 Warrants transactions are recorded in stockholders’ equity, and they are not accounted for as derivatives and are not remeasured each reporting period.

~~Enphase Energy, Inc. | 2022 Form 10-Q | 25~~

~~Table of Contents~~

~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Convertible Senior Notes due 2025

On March 9, 2020, the Company issued $320.0 million ~~Notes~~aggregate principal amount of our 0.25% convertible senior notes due ~~2025.~~2025 (the “Notes due 2025”). The Notes due 2025 are general unsecured obligations and bear interest at an annual rate of 0.25% per year, payable semi-annually on March 1 and September 1 of each year, beginning September 1, 2020. The Notes due 2025 are governed by an indenture between the Company and U.S. Bank National Association, as trustee. The Notes due 2025 will mature on March 1, 2025, unless earlier repurchased by the Company or converted at the option of the holders. The Company may not redeem the notes prior to the maturity date, and no sinking fund is provided for the notes. The Notes due 2025 may be converted, under certain circumstances as described below, based on an initial conversion rate of 12.2637 shares of common stock per $1,000 principal amount (which represents an initial conversion price of $81.54 per share). The conversion rate for the Notes due 2025 will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the relevant indenture), the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its notes in connection with such make-whole fundamental change. The Company received approximately $313.0 million in net proceeds, after deducting the initial purchasers’ discount, from the issuance of the Notes due 2025.

The Notes due 2025 may be converted prior to the close of business on the business day immediately preceding September 1, 2024, in multiples of $1,000 principal amount, at the option of the holder only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any 5five consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in the relevant indenture) per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On and after September 1, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date of March 1, 2025, holders may convert their notes at any time, regardless of the foregoing circumstances. Upon the occurrence of a fundamental change (as defined in the relevant indenture), holders may require the Company to repurchase all or a portion of their Notes due 2025 for cash at a price equal to 100% of the principal amount of the notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the sale price of the Company’s common stock was greater than or equal to $106.00 (130% of the notes conversion price) for at least 20 trading days (whether consecutive or not) during a period of 30 consecutive trading days preceding the quarter-ended June 30, ~~2022~~2023 and December 31, ~~2021.~~2022. As a result, ~~as of July 1, 2022,~~ the Notes due 2025 are convertible at the holders’ option through September 30, ~~2022.~~2023. Accordingly, the Company classified the net carrying amount of the Notes due 2025 of ~~$88.4~~$93.4 million and ~~$86.1~~$90.9 million as Debt, current on the condensed consolidated balance sheet as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. From July 1, ~~2022~~2023 through the date this Quarterly Report on Form 10-Q is available to be issued, the Company has not received any requests for conversion of the Notes due 2025.

For the period from March 9, 2020, the issuance date, through May 19, 2020, the number of authorized and unissued shares of the Company’s common stock that are not reserved for other purposes was less than the maximum number of underlying shares that would be required to settle the Notes due 2025 into equity. Accordingly, unless and until the Company had a number of authorized shares that were not issued or reserved for any other purpose that equaled or exceeded the maximum number of underlying shares (the “Share Reservation Condition”), the Company would have been required to pay to the converting holder in respect of each $1,000 principal amount of notes being converted solely in cash in an amount equal to the sum of the daily conversion values for each of the 20 consecutive trading days during the related observation period. However, following satisfaction of the Share Reservation Condition, the Company could settle conversions of notes through payment or delivery, as the case may be, of cash, shares of the Company’s common stock or a combination of cash and shares of its common stock, at the Company’s election. As further discussed below, the Company satisfied the Share Reservation Condition during May 2020.

~~Enphase Energy, Inc. | 2022 Form 10-Q | 26~~

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~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

In accounting for the issuance of the Notes due 2025, on March 9, 2020, the conversion option of the Notes due 2025 was deemed an embedded derivative requiring bifurcation from the Notes due 2025 (the “host contract”) and separate accounting as an embedded derivative liability, as a result of the Company not having the necessary number of authorized but unissued shares of its common stock available to settle the conversion option of the Notes due 2025 in shares. The proceeds from the Notes due 2025 were first allocated to the embedded derivative liability and the remaining proceeds were then allocated to the host contract. On March 9, 2020, the carrying amount of the embedded derivative liability of $68.7 million representing the conversion option was determined using the Binomial Lattice model and the remaining $251.3 million was allocated to the host contract. The difference between the principal amount of the Notes due 2025 and the fair value of the host contract (the “debt discount”) is amortized to interest expense using the effective interest method over the term of the Notes due 2025.

On May 20, 2020, at the Company’s annual meeting of stockholders, the stockholders approved an amendment to the Amended and Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock, par value $0.00001 per share, from 150,000,000 shares to 200,000,000 shares (the “Amendment”). The Amendment became effective upon filing with the Secretary of State of Delaware on May 20, 2020. As a result, the Company satisfied the Share Reservation Condition. The Company may now settle the Notes due 2025 and warrants issued in conjunction with the Notes due 2025 (the “2025 Warrants”) through payment or delivery, as the case may be, of cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election. Accordingly, on May 20, 2020, the embedded derivative liability was remeasured at a fair value of $116.3 million and was then reclassified to additional paid-in-capital in the condensed consolidated balance sheet in the second quarter of 2020 and is no longer remeasured as long as it continues to meet the conditions for equity classification. The Company recorded the change in the fair value of the embedded derivative in other expense, net in the condensed consolidated statement of operations during the year ended December 31, 2020.

The Company separated the Notes due 2025 into liability and equity components which resulted in a tax basis difference associated with the liability component that represents a temporary difference. The Company recognized the deferred taxes of $0.2 million for the tax effect of that temporary difference as an adjustment to the equity component included in additional paid-in capital in the condensed consolidated balance sheet.

Debt issuance costs for the issuance of the Notes due 2025 were approximately $7.6 million, consisting of initial purchasers' discount and other issuance costs. In accounting for the transaction costs, the Company allocated the total amount incurred to the Notes due 2025 host contract. Transaction costs were recorded as debt issuance cost (presented as contra debt in the condensed consolidated balance sheet) and are being amortized to interest expense over the term of the Notes due 2025.

Enphase Energy, Inc. | 2023 Form 10-Q | 25

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Partial repurchase of Notes due 2025

Concurrently with the offering of the Notes due 2026 and Notes due 2028, the Company entered into separately- and privately-negotiated transactions to repurchase approximately $217.7 million aggregate principal amount of the Notes due 2025. The Company paid $217.7 million in cash and issued approximately 1.67 million shares of its common stock to the holders of the repurchased notes with an aggregate fair value of $302.7 million, representing the conversion value in excess of the principal amount of the Notes due 2025, which were fully offset by shares received from the Company’s settlement of the associated note hedging arrangements discussed below. The total amount of $217.7 million paid to partially settle the repurchases of the Notes due 2025 was allocated between the liability and equity components of the amount extinguished by determining the fair value of the liability component immediately prior to the note repurchases and allocating that portion of the conversion price to the liability component in the amount of $184.5 million. The residual of the conversion price of $4.3 million of the repurchased Notes due 2025, net of inducement loss of $37.5 million for additional shares issued, was allocated to the equity component of the repurchased Notes due 2025 as an increase of additional paid-in capital. The fair value of the note settlement for such repurchases was calculated using a discount rate of 4.35%, representing an estimate of the Company's borrowing rate at the date of repurchase with a remaining expected life of approximately 4.1 years. As part of the settlement of the repurchase of the Notes due 2025, the Company wrote-off the $38.5 million unamortized debt discount and $4.1 million debt issuance cost apportioned to the principal amount of Notes due 2025 repurchased. The Company recorded a loss on partial settlement of the repurchased Notes due 2025 of $9.4 million in Other income (expense), net in the ~~six~~three months ended ~~June 30,~~March 31, 2021, representing the difference between the consideration attributed to the liability component and the sum of the net carrying amount of the liability

~~Enphase Energy, Inc. | 2022 Form 10-Q | 27~~

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~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

component and unamortized debt issuance costs. Further, the Company also recorded loss on inducement of $37.5 million in Other income (expense), net in the ~~six~~three months ended ~~June 30,~~March 31, 2021, representing the difference between the fair value of the shares that would have been issued under the original conversion terms with respect to the repurchased Notes due 2025.

During the second quarter of 2021, $0.1 million in aggregate principal amount of the Notes due 2025 were converted, and the principal amount of the converted Notes due 2025 was repaid in cash. In connection with such conversions during the second quarter of 2021, the Company also issued 485 shares of its common stock to the holders of the converted Notes due 2025, with an aggregate fair value of $0.1 million, representing the conversion value in excess of the principal amount of the Notes due 2025, which were fully offset by shares received from the settlements of the associated note hedging arrangements. Following the repurchase transactions summarized above, as of June 30, ~~2022,~~2023, $102.2 million aggregate principal amount of the Notes due 2025 remained outstanding.

~~The following table presents the total amount of interest cost recognized relating to the Notes due 2025:~~

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
(In thousands)
Contractual interest expense $ 64 $ 64 $ 128 $ 214
Amortization of debt discount 1,088 1,033 2,137 3,422
Amortization of debt issuance costs 123 122 241 416
Total interest cost recognized $ 1,275 $ 1,219 $ 2,506 $ 4,052

The derived effective interest rate on the Notes due 2025 host contract was determined to be 5.18%, which remains unchanged from the date of issuance. The remaining unamortized debt discount was ~~$12.4~~$8.0 million as of June 30, ~~2022,~~2023, and will be amortized over approximately ~~2.7~~1.7 years from June 30, ~~2022.~~2023.

Notes due 2025 Hedge and Warrant Transactions

In connection with the offering of the Notes due 2025, the Company entered into privately-negotiated convertible note hedge transactions (the “Notes due 2025 Hedge”) pursuant to which the Company has the option to purchase a total of approximately 3.9 million shares of its common stock (subject to anti-dilution adjustments), which is the same number of shares initially issuable upon conversion of the notes, at a price of $81.54 per share, which is the initial conversion price of the Notes due 2025. The total cost of the convertible note hedge transactions was approximately $89.1 million. The convertible note hedge transactions are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of the Notes due 2025 and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be.

Enphase Energy, Inc. | 2023 Form 10-Q | 26

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Additionally, the Company separately entered into privately-negotiated warrant transactions in connection with the offering of the Notes due 2025 whereby the Company sold the 2025 Warrants to acquire approximately 3.9 million shares of the Company’s common stock (subject to anti-dilution adjustments) at an initial strike price of $106.94 per share. The Company received aggregate proceeds of approximately $71.6 million from the sale of the 2025 Warrants. If the market value per share of the Company’s common stock, as measured under the 2025 Warrants, exceeds the strike price of the 2025 Warrants, the 2025 Warrants will have a dilutive effect on the Company’s earnings per share, unless the Company elects, subject to certain conditions, to settle the 2025 Warrants in cash. Taken together, the purchase of the convertible note hedges in connection with the Notes due 2025 Hedge and the sale of the 2025 Warrants are intended to reduce potential dilution from the conversion of the Notes due 2025 and to effectively increase the overall conversion price from $81.54 to $106.94 per share. The 2025 Warrants are only exercisable on the applicable expiration dates in accordance with the agreements relating to each of the 2025 Warrants. Subject to the other terms of the 2025 Warrants, the first expiration date applicable to the 2025 Warrants is June 1, 2025, and the final expiration date applicable to the 2025 Warrants is September 23, 2025.

~~Enphase Energy, Inc. | 2022 Form 10-Q | 28~~

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~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

During the first quarter of 2021, in connection with the repurchase of $217.7 million aggregate principal amount of the Notes due 2025 summarized above, the Company entered into partial unwind agreements with respect to certain of the Notes due 2025 Hedge and the 2025 Warrants. In connection with these unwind transactions, the Company received shares of the Company’s common stock as a termination payment for the portion of the Notes due 2025 Hedge that were unwound, and the Company issued shares of its common stock as a termination payment for the portion of the 2025 Warrants that were unwound. As a result of the unwind agreements for the Notes due 2025 Hedge and the 2025 Warrants, the Company received 1.9 million of the Company’s common stock from the Notes due 2025 Hedge settlement and issued 1.8 million of the Company’s common stock from the 2025 Warrants that were unwound. Following the unwind transactions summarized above, as of June 30, ~~2022,~~2023, options to purchase approximately 1.3 million shares of common stock remained outstanding under the Notes due 2025 Hedge, and 2025 Warrants exercisable to purchase approximately 1.3 million shares remained outstanding.

For the period from March 9, 2020, the issuance date of the Notes due 2025 Hedge and 2025 Warrants, through May 19, 2020, the number of authorized and unissued shares of the Company’s common stock that are not reserved for other purposes was less than the maximum number of underlying shares that will be required to settle the Notes due 2025 through the delivery of shares of the Company’s common stock. Accordingly, the Notes due 2025 Hedge and 2025 Warrants could only be settled on net cash settlement basis. As a result, the Notes due 2025 Hedge and 2025 Warrants were classified as a ~~Convertible~~convertible notes hedge asset and 2025 Warrants liability, respectively, in the condensed consolidated balance sheet and the change in fair value of derivatives was included in other expense, net in the condensed consolidated statement of operations.

On May 20, 2020, at the Company’s annual meeting of stockholders, the stockholders approved the Amendment and satisfied the Share Reservation Condition (as discussed above), and as a result, the ~~Convertible~~convertible notes hedge asset and the 2025 Warrants liabilities were remeasured at a fair value of $117.1 million and $96.4 million, respectively, and were then reclassified to additional paid-in-capital in the condensed consolidated balance sheet in the second quarter of 2020 and is no longer remeasured as long as they continue to meet the conditions for equity classification. The change in the fair value of the ~~Convertible~~convertible notes hedge asset and the 2025 Warrants liability were recorded in other expense, net in the condensed consolidated statements of operations during the three and six months ended June 30, ~~2021.~~2020.

Convertible Senior Notes due 2023

In August 2018, the Company sold $65.0 million aggregate principal amount of 4.0% convertible senior notes due 2023 (the “Notes due 2023”) in a private placement. On May 30, 2019, the Company entered into separately and privately-negotiated transactions with certain holders of the Notes due 2023 resulting in the repurchase and exchange, as of June 5, 2019, of $60.0 million aggregate principal amount of the notes in consideration for the issuance of 10,801,080 shares of common stock and separate cash payments totaling $6.0 million. As of both June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, $5.0 million aggregate principal amount of the Notes due 2023 remained outstanding.

The remaining outstanding Notes due 2023 are general unsecured obligations and bear interest at a rate of 4.0% per year, payable semi-annually on February 1 and August 1 of each year. The Notes due 2023 are governed

Enphase Energy, Inc. | 2023 Form 10-Q | 27

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

by an indenture between the Company and U.S. Bank National Association, as trustee. The remaining outstanding Notes due 2023 will mature on August 1, 2023, unless earlier repurchased by the Company or converted at the option of the holders. The Company may not redeem the remaining Notes due 2023 prior to the maturity date, and no sinking fund is provided for such notes. The remaining Notes due 2023 are convertible, at a holder’s election, in multiples of $1,000 principal amount, into shares of the Company’s common stock based on the applicable conversion rate. The initial conversion rate for such notes is 180.018 shares of common stock per $1,000 principal amount of notes (which is equivalent to an initial conversion price of approximately $5.56 per share). The conversion rate and the corresponding conversion price are subject to adjustment upon the occurrence of certain events but will not be adjusted for any accrued and unpaid interest. Holders of the remaining Notes due 2023 who convert their notes in connection with a make-whole fundamental change (as defined in the applicable indenture) are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change, holders of the remaining Notes due 2023 may require the Company to repurchase all or a portion of their notes at a price equal to 100% of the principal amount of notes, plus any accrued and unpaid interest, including any additional interest to, but excluding, the repurchase date. Holders may convert all or any

~~Enphase Energy, Inc. | 2022 Form 10-Q | 29~~

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~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

portion of their Notes due 2023 at their option at any time prior to the close of business on the business day immediately preceding the maturity date, in multiples of $1,000 principal amount.

~~The following table presents the amount of interest cost recognized relating to the contractual interest coupon and the amortization of debt issuance costs of the Notes due 2023:~~

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
(In thousands)
Contractual interest expense $ 50 $ 50 $ 100 $ 100
Amortization of debt issuance costs 10 10 20 20
Total interest costs recognized $ 60 $ 60 $ 120 $ 120

~~10.~~9. COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases office facilities under ~~noncancelable~~noncancellable operating leases that expire on various dates through 2032, some of which may include options to extend the leases for up to 12 years.

The components of lease expense are presented as follows:

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
(In thousands)
Operating lease costs $ 2,052 $ 1,815 $ 3,989 $ 3,446


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(In thousands)
Operating lease costs	$	2,416	$	2,052	$	5,008	$	3,989

The components of lease liabilities are presented as follows:

June 30,
2022 December 31,
2021
(In thousands except years and percentage data)
Operating lease liabilities, current (Accrued liabilities)
$ 3,804 $ 3,830
Operating lease liabilities, non-current (Other liabilities) 16,181 11,920
Total operating lease liabilities $ 19,985 $ 15,750
Supplemental lease information:
Weighted average remaining lease term 5.8 years 5.9 years
Weighted average discount rate 6.3% 7.4%

~~Supplemental cash flow and other information related to operating leases, are as follows:~~

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 1,325 $ 1,425 $ 2,843 $ 2,786
Non-cash investing activities:
Lease liabilities arising from obtaining right-of-use assets $ — $ — $ 6,742 $ —


	June 30, 2023		December 31, 2022

	(In thousands except years and percentage data)
Operating lease liabilities, current (Accrued liabilities)	$	5,773	$	5,371
Operating lease liabilities, non-current (Other liabilities)	20,311		19,077
Total operating lease liabilities	$	26,084	$	24,448

Supplemental lease information:
Weighted average remaining lease term	5.6 years		5.3 years
Weighted average discount rate	6.7%		6.5%

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 3028

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Supplemental cash flow and other information related to operating leases, were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,788	$	1,325	$	3,490	$	2,843

Non-cash investing activities:
Lease liabilities arising from obtaining right-of-use assets	$	2,852	$	—	$	4,368	$	6,742

Undiscounted cash flows of operating lease liabilities as of June 30, ~~2022 are~~2023 were as follows:


		Lease Amounts			Lease Amounts
		(In thousands)			(In thousands)
Year:	Year:			Year:
2022 (remaining six months)		$	2,417
2023		5,141
2023 (remaining six months)				2023 (remaining six months)	$	3,752
2024	2024	4,281		2024	6,691
2025	2025	3,577		2025	5,940
2026	2026	2,618		2026	4,252
2027				2027	2,882
Thereafter	Thereafter	5,825		Thereafter	7,857
Total lease payments	Total lease payments	23,859		Total lease payments	31,374
Less: imputed lease interest	Less: imputed lease interest	(3,874)		Less: imputed lease interest	(5,290)
Total lease liabilities	Total lease liabilities	$	19,985	Total lease liabilities	$	26,084

Purchase Obligations

The Company has contractual obligations related to component inventory that its contract manufacturers procure on its behalf in accordance with its production forecast as well as other inventory related purchase commitments. As of June 30, ~~2022,~~2023, these purchase obligations totaled approximately ~~$439.4~~$633.4 million.

Litigation

From time-to-time, the Company may be involved in litigation relating to claims arising out of its operations, the ultimate disposition of which could have a material adverse effect on its operations, financial condition or cash flows. The Company is not currently involved in any material legal proceedings; however, the Company may be involved in material legal proceedings in the future. Such matters are subject to uncertainty and there can be no assurance that such legal proceedings will not have a material effect on its business, results of operations, financial position or cash flows.

10. STOCKHOLDERS' EQUITY

In May 2021, the board of directors authorized a share repurchase program (the “2021 Repurchase Program”) pursuant to which the Company was authorized to repurchase up to $500.0 million of the Company’s common stock, from time to time in the open market or through structured repurchase agreements with third parties, $200.0 million of which was remaining as of March 31, 2023.

During the three and six months ended June 30, 2023, the Company repurchased and subsequently retired 1,254,474 shares of common stock from the open market at an average cost of $159.43 per share for a total of $200.0 million. Of the 1,254,474 shares repurchased, 833,517 shares were retired as of June 30, 2023 and recorded as “Repurchase of common stock” in the accompanying condensed consolidated statements of changes in stockholders’ equity. The remaining 420,957 shares repurchased were retired in July 2023 and recorded as “Treasury stock, at cost” in the accompanying consolidated statements of changes in stockholders’ equity. The full

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 3129

Table of Contents

ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

$500.0 million of the Company’s common stock authorized under the 2021 Repurchase Program has been repurchased as of June 30, 2023.

11. STOCK-BASED COMPENSATION

Stock-based Compensation Expense

Stock-based compensation expense for all stock-based awards, which includes ~~stock options,~~shares purchased under the Company’s 2011 Employee Stock Purchase Plan (“ESPP”), restricted stock units (“RSUs”) and ~~performance-based~~performance stock units (“PSUs”), expected to vest is measured at fair value on the date of grant and recognized ratably over the requisite service period.

In addition, as part of certain business acquisitions, the Company is obligated to issue shares of common stock of the Company as payment subject to achievement of certain targets. For such payments, the Company records stock-based compensation classified as post-combination expense recognized ratably over the measurement period presuming the targets will be met.

The following table summarizes the components of total stock-based compensation expense included in the condensed consolidated statements of operations for the periods presented:


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022

		(In thousands)								(In thousands)
Cost of revenues	Cost of revenues	$	3,131	$	1,060	$	5,638	$	2,042		Cost of revenues	$	3,398	$	3,131	$	7,067	$	5,638
Research and development	Research and development	16,266		5,467		29,995		11,216			Research and development	23,765		16,266		45,243		29,995
Sales and marketing	Sales and marketing	22,176		5,335		35,233		8,872			Sales and marketing	14,515		22,176		35,934		35,233
General and administrative	General and administrative	11,491		3,450		29,995		8,026			General and administrative	12,488		11,491		25,577		29,995

Total	Total	$	53,064	$	15,312	$	100,861	$	30,156		Total	$	54,166	$	53,064	$	113,821	$	100,861

The following table summarizes the various types of stock-based compensation expense for the periods presented:


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022

		(In thousands)								(In thousands)
Stock options, RSUs and PSUs	Stock options, RSUs and PSUs	$	47,228	$	14,361	$	91,340	$	28,201		Stock options, RSUs and PSUs	$	51,852	$	47,228	$	108,809	$	91,340
Employee stock purchase plan	Employee stock purchase plan	1,014		951		2,396		1,955			Employee stock purchase plan	1,803		1,014		3,843		2,396
Post combination expense accrual (Accrued liabilities)	Post combination expense accrual (Accrued liabilities)	4,822		—		7,125		—			Post combination expense accrual (Accrued liabilities)	511		4,822		1,169		7,125
Total	Total	$	53,064	$	15,312	$	100,861	$	30,156		Total	$	54,166	$	53,064	$	113,821	$	100,861

As of June 30, ~~2022,~~2023, there was approximately ~~$319.8~~$407.6 million of total unrecognized stock-based compensation expense related to unvested equity awards, which are expected to be recognized over a weighted-average period of ~~2.3~~2.8 years.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 3230

Table of Contents

ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Equity Awards Activity

Stock Options

The following table summarizes stock option activity:

Number of
Shares
Outstanding Weighted-
Average
Exercise Price
per Share Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value (1)
(In thousands) (Years) (In thousands)
Outstanding at December 31, 2021 2,264 $ 1.90 0
Granted — —
Exercised (360) 1.74 $ 65,153
Canceled (1) 8.82
Outstanding at June 30, 2022 1,903 $ 1.93 2.4 $ 367,918
Vested and expected to vest at June 30, 2022 1,903 $ 1.93 2.4 $ 367,918
Exercisable at June 30, 2022 1,903 $ 1.93 2.4 $ 367,918


	Number of Shares Outstanding	Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value (1)
	(In thousands)			(Years)	(In thousands)








Outstanding at December 31, 2022	1,464	$	1.83
Granted	—	—
Exercised	(92)	1.64			$	15,375
Canceled	—	—
Outstanding at June 30, 2023	1,372	$	1.85	1.5	$	227,200
Vested and expected to vest at June 30, 2023	1,372	$	1.85	1.5	$	227,200
Exercisable at June 30, 2023	1,372	$	1.85	1.5	$	227,200

(1) The intrinsic value of options exercised is based upon the value of the Company’s stock at exercise. The intrinsic value of options outstanding, vested and expected to vest, and exercisable as of June 30, ~~2022~~2023 is based on the closing price of the last trading day during the period ended June 30, ~~2022.~~2023. The Company’s stock fair value used in this computation was ~~$195.24~~$167.48 per share.

The following table summarizes information about stock options outstanding at June 30, ~~2022:~~2023:

Options Outstanding Options Exercisable
Range of Exercise Prices Number of
Shares Weighted-
Average
Remaining
Life Weighted-
Average
Exercise
Price Number of
Shares Weighted-
Average
Exercise
Price
(In thousands) (Years) (In thousands)
$0.70 —– $1.11 479 2.8 $ 0.80 479 $ 0.80
$1.29 —– $1.29 1,000 2.2 1.29 1,000 1.29
$1.31 —– $5.53 380 2.0 2.15 380 2.15
$14.58 —– $14.58 33 3.8 14.58 33 14.58
$64.17 —– $64.17 11 4.8 64.17 11 64.17
Total 1,903 2.4 $ 1.93 1,903 $ 1.93


	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Remaining Life	Weighted- Average Exercise Price		Number of Shares	Weighted- Average Exercise Price
	(In thousands)	(Years)			(In thousands)
$0.70 —– $1.11	422	2.0	$	0.89	422	$	0.89
$1.29 —– $1.29	858	1.2	1.29		858	1.29
$1.31 —– $5.53	65	1.7	4.43		65	4.43
$14.58 —– $14.58	20	2.8	14.58		20	14.58
$64.17 —– $64.17	7	3.8	64.17		7	64.17
Total	1,372	1.5	$	1.85	1,372	$	1.85

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 3331

Table of Contents

ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restricted Stock Units

The following table summarizes RSU activity:


		Number of Shares Outstanding	Weighted- Average Fair Value per Share at Grant Date		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value (1)			Number of Shares Outstanding	Weighted- Average Fair Value per Share at Grant Date		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value (1)
		(In thousands)			(Years)	(In thousands)			(In thousands)			(Years)	(In thousands)

Outstanding at December 31, 2021		2,786	$	100.73		0
Outstanding at December 31, 2022								Outstanding at December 31, 2022	2,253	$	181.01
Granted	Granted	561	175.97					Granted	423	214.80
Vested	Vested	(916)	67.21			$	151,219	Vested	(691)	142.41			$	140,740
Canceled	Canceled	(113)	139.67					Canceled	(147)	176.87
Outstanding at June 30, 2022		2,318	130.32		1.2	$	452,664
Expected to vest at June 30, 2022		2,318	$	130.32	1.2	$	452,556
Outstanding at June 30, 2023								Outstanding at June 30, 2023	1,838	$	203.65	1.3	$	307,877
Expected to vest at June 30, 2023								Expected to vest at June 30, 2023	1,838	$	203.65	1.3	$	307,865

(1) The intrinsic value of RSUs vested is based upon the value of the Company’s stock when vested. The intrinsic value of RSUs outstanding and expected to vest as of June 30, ~~2022~~2023 is based on the closing price of the last trading day during the period ended June 30, ~~2022.~~2023. The Company’s stock fair value used in this computation was ~~$195.24~~$167.48 per share.

Performance Stock Units

The following summarizes PSU activity:


		Number of Shares Outstanding	Weighted- Average Fair Value per Share at Grant Date		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value (1)			Number of Shares Outstanding	Weighted- Average Fair Value per Share at Grant Date		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value (1)
		(In thousands)			(Years)	(In thousands)			(In thousands)			(Years)	(In thousands)

Outstanding at December 31, 2021		445	$	169.82		0
Outstanding at December 31, 2022								Outstanding at December 31, 2022	376	$	197.82
Granted	Granted	392	192.72					Granted	383	240.72
Vested	Vested	(303)	168.88			$	51,393	Vested	(375)	195.81			$	79,438
Canceled	Canceled	(176)	170.96					Canceled	(19)	227.35
Outstanding at June 30, 2022		358	$	195.14	0.7	$	69,900
Expected to vest at June 30, 2022		358	$	195.14	0.7	$	69,900
Outstanding at June 30, 2023								Outstanding at June 30, 2023	365	$	243.30	1.7	$	61,087
Expected to vest at June 30, 2023								Expected to vest at June 30, 2023	365	$	243.30	1.7	$	61,087

(1) The intrinsic value of PSUs vested is based upon the value of the Company’s stock when vested. The intrinsic value of PSUs outstanding and expected to vest as of June 30, ~~2022~~2023 is based on the closing price of the last trading day during the period ended June 30, ~~2022.~~2023. The Company’s stock fair value used in this computation was ~~$195.24~~$167.48 per share.

12. INCOME TAXES

For the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the Company’s income tax provision ~~of $15.2~~totaled $27.4 million and ~~$7.0~~$15.2 million, respectively, on a net income before income taxes of $184.6 million and $92.2 million, ~~and $46.3 million, respectively, and for~~respectively. For the six months ended June 30, 2023 and 2022, the Company’s income tax provision oftotaled $59.5 million and $20.8 million, respectively, on a net income before income taxes of $363.6 million and $149.6 million, respectively. For both the three and six months ended June 30, 2023 and 2022, the income tax provision was calculated using the annualized effective tax rate method and was primarily due to projected tax expense in the U.S. and foreign jurisdictions that are profitable, partially offset by a tax deduction from employee stock compensation reported as a discrete event.

For the six months ended June 30, 2021, the Company’s income tax benefit of $26.4 million, on a net income before income taxes of $44.7 million calculated using the annualized effective tax rate method, was primarily due to tax deduction in the first quarter of 2021 from employee stock compensation reported as a discrete event, partially offset by projected tax expense in the U.S. and foreign jurisdictions that are profitable.

~~For the~~ three and six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, in accordance with FASB guidance for interim reporting of income tax, the Company has computed its ~~benefit (provision)~~provision for income taxes based on a projected annual effective tax rate while excluding loss jurisdictions which cannot be benefited.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 3432

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In August 2022, the U.S. enacted the IRA, which included revisions to the Internal Revenue Code of 1986, as amended. The IRA introduced a 15% corporate alternative minimum income tax (“CAMT”) for corporations whose average adjusted financial income for any consecutive three-year period ending after December 31, 2021, exceeds $1.0 billion. Further, the IRA also extended the investment tax credits for clean energy and expanded the incentives to clean energy manufacturing. The Company is not subject to the CAMT based on the current operating results and interpretations of the latest IRA guidance.

13. NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed in a similar manner, but it also includes the effect of potential common shares outstanding during the period, when dilutive. Potential common shares include stock options, RSUs, PSUs, shares to be purchased under the Company’s ~~2011 Employee Stock Purchase Plan (the “ESPP”),~~ESPP, the Notes due 2023, ~~1.0% convertible senior notes due 2024 (the “Notes due 2024”),~~ Notes due 2025, Notes due 2026, Notes due 2028, and ~~warrant transactions in connection with~~ the ~~offering of the Notes due 2024 (the “2024 Warrants”),~~ 2025 ~~Warrants, 2026 Warrants and the 2028~~ Warrants. ~~See~~Refer to Note 98,. “Debt,” for additional information about the Company’s outstanding ~~notes.~~debt.

The following table presents the computation of basic and diluted net income per share for the periods presented:


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022

		(In thousands, except per share data)								(In thousands, except per share data)
Numerator:	Numerator:										Numerator:
Net income	Net income	$	76,976	$	39,351	$	128,797	$	71,049		Net income	$	157,191	$	76,976	$	304,064	$	128,797

Convertible Senior Notes interest and financing costs, net		662		45		1,304		89
Convertible senior notes interest and financing costs, net											Convertible senior notes interest and financing costs, net	1,651		662		3,255		1,304
Adjusted net income	Adjusted net income	$	77,638	$	39,396	$	130,101	$	71,138		Adjusted net income	$	158,842	$	77,638	$	307,319	$	130,101

Denominator:	Denominator:										Denominator:
Shares used in basic per share amounts:	Shares used in basic per share amounts:										Shares used in basic per share amounts:
Weighted average common shares outstanding	Weighted average common shares outstanding	135,196		135,094		134,768		133,209			Weighted average common shares outstanding	136,607		135,196		136,650		134,768

Shares used in diluted per share amounts:	Shares used in diluted per share amounts:										Shares used in diluted per share amounts:
Weighted average common shares outstanding		135,196		135,094		134,768		133,209
Weighted average common shares outstanding used for basic calculation											Weighted average common shares outstanding used for basic calculation	136,607		135,196		136,650		134,768
Effect of dilutive securities:	Effect of dilutive securities:										Effect of dilutive securities:
Employee stock-based awards	Employee stock-based awards	3,042		4,554		3,399		5,177			Employee stock-based awards	1,760		3,042		2,155		3,399
Notes due 2023	Notes due 2023	900		900		900		900			Notes due 2023	900		900		900		900
Notes due 2024		—		45		—		1,506
2024 Warrants		—		43		—		1,268

Notes due 2025	Notes due 2025	—		557		—		1,137			Notes due 2025	1,253		—		1,253		—
2025 Warrants	2025 Warrants	512		340		460		825			2025 Warrants	503		512		575		460
Notes due 2026	Notes due 2026	2,057		—		2,057		—			Notes due 2026	2,057		2,057		2,057		2,057

Notes due 2028	Notes due 2028	2,018		—		2,018		—			Notes due 2028	2,018		2,018		2,018		2,018

Weighted average common shares outstanding for diluted calculation	Weighted average common shares outstanding for diluted calculation	143,725		141,533		143,602		144,022			Weighted average common shares outstanding for diluted calculation	145,098		143,725		145,608		143,602

Basic and diluted net income per share	Basic and diluted net income per share										Basic and diluted net income per share
Net income per share, basic	Net income per share, basic	$	0.57	$	0.29	$	0.96	$	0.53		Net income per share, basic	$	1.15	$	0.57	$	2.23	$	0.96
Net income per share, diluted	Net income per share, diluted	$	0.54	$	0.28	$	0.91	$	0.49		Net income per share, diluted	$	1.09	$	0.54	$	2.11	$	0.91

~~For~~

Enphase Energy, Inc. | 2023 Form 10-Q | 33

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ENPHASE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Diluted earnings per share for the three and six months ended June 30, 2023 and 2022 includes the dilutive effect of potentially dilutive common shares ~~is reflected in diluted earnings per share~~ by application of the treasury stock method for stock options, RSUs, PSUs, ESPP, the 2025 Warrants, the 2026 Warrants, ~~and~~ the 2028 ~~Warrants.~~Warrants and includes potentially dilutive common shares by application of the if-converted method for the Notes due 2025, Notes due 2026 and Notes due 2028. To the extent these potential common shares are antidilutive, they are excluded from the calculation of diluted net income per share.

~~Enphase Energy, Inc. | 2022 Form 10-Q | 35~~

~~Table of Contents~~

~~ENPHASE ENERGY, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

For the three and six months ended June 30, 2022, due to adoption of ASU 2020-06 on January 1, 2022, the Company is no longer utilizing the treasury stock method for earnings per share impact for the Notes due 2025, Notes due 2026 and Notes due 2028. Instead, the Company is applying the if-converted method when reporting the number of potentially dilutive shares of common stock as the Company may at its election, settle its Convertible Senior Notes through payment or delivery, as the case may be, in cash, shares of its common stock or a combination of cash and shares of its common stock. Under this method, diluted earnings per share is determined by assuming that all of the Convertible Senior Notes were converted into shares of the Company’s common stock at the beginning of the reporting period.

Further, the Company under the relevant sections of the indentures, irrevocably may elect to settle principal in cash and any excess in cash or shares of the Company’s common stock for its Notes due 2025, Notes due 2026 and Notes due 2028. If and when the Company makes such election, there will be no adjustment to the net income and the Company will use the average share price for the period to determine the potential number of shares to be issued based upon assumed conversion to be included in the diluted share count.

Diluted earnings per share for the three and six months ended June 30, 2021 includes the dilutive effect of stock options, RSUs, PSUs, shares to be purchased under the ESPP, the Notes due 2023, the Notes due 2024, the 2024 Warrants, the Notes due 2025 and the 2025 Warrants. Certain common stock issuable under stock options, RSUs, PSUs, the Notes due 2026, the 2026 Warrants, the Notes due 2028 and the 2028 Warrants have been omitted from the diluted net income per share calculation because including such shares would have been antidilutive.

The following outstanding shares of common stock equivalents were excluded from the calculation of the diluted net income per share attributable to common stockholders because their effect would have been antidilutive:


		Three Months Ended June 30,		Six Months Ended June 30,		Three Months Ended June 30,			Six Months Ended June 30,
		2022	2021	2022	2021			2023	2022	2023	2022

		(In thousands)				(In thousands)

Employee stock-based awards	Employee stock-based awards	572	178	598	88		Employee stock-based awards	1,226	572	1,006	598
Notes due 2028		—	1,902	—	1,234

2028 Warrants	2028 Warrants	2,425	3,457	2,735	2,264		2028 Warrants	2,477	2,425	2,046	2,735
Notes due 2026		—	2,255	—	1,468

2026 Warrants	2026 Warrants	2,471	3,457	2,788	2,264		2026 Warrants	2,524	2,471	2,085	2,788
Notes due 2025	Notes due 2025	1,253	—	1,253	—		Notes due 2025	—	1,253	—	1,253

Total	Total	6,721	11,249	7,374	7,318		Total	6,227	6,721	5,137	7,374

14. RELATED PARTY

In 2018, a member of the Company’s board of directors and one of its principal stockholders, Thurman John Rodgers, purchased $5.0 million aggregate principal amount of the Notes due 2023 in a concurrent private placement. As of both June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, $5.0 million aggregate principal amount of the Notes due 2023 were outstanding. ~~For additional information related~~Refer to ~~this purchase, see~~ Note 98,. “Debt,” for additional information related to this purchase.

15. SUBSEQUENT EVENTS

Investment in a privately-held company

In July 2023, the Company invested $15.0 million in cash in a privately-held company. The investment does not require consolidation into the Company’s financial statements because the privately-held company is not a variable interest entity and the Company does not hold a majority voting interest.

Share repurchase program

In July 2023, the Company’s Board of Directors authorized the repurchase of up to $1.0 billion of the Company’s common stock. The Company may repurchase shares of common stock from time to time through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b5-1 plan. The timing, price and volume of repurchases will be based on market conditions, relevant securities laws, and other considerations. The share repurchase program may be discontinued or amended at any time by the Company’s Board of Directors and expires on July 26, 2026.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 3634

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements reflecting our current expectations and involves risks and uncertainties. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential” or “continue” or the negative of these terms or other comparable terminology. Such statements, include but are not limited to statements ~~regarding~~regarding: our expectations as to future financial ~~performance; expense levels;~~performance, including expenses, liquidity ~~sources;~~sources and cash requirements; the capabilities, performance and ~~performance~~competitive advantage of our technology and products and planned changes; timing of new product ~~releases; our business strategies, including anticipated trends; growth~~releases, and ~~developments in markets in which we target;~~ the anticipated market adoption of our current and future products; our expectations regarding, demand for our products; our business strategies, including anticipated trends and operating conditions; our expectations regarding our internal reorganization; growth of and development in markets we target, and our expansion into new and existing markets; our performance in operations, including component supply management; our product quality and customer service; ~~risks related to the ongoing COVID-19 pandemic; geo-political events,~~our expectations regarding geopolitical developments, such as the conflict in ~~Ukraine;~~Ukraine and inflationary pressures and their impact on our business operations, financial performance and the markets in which we, our suppliers, manufacturers and installers operate; and the importance of and anticipated benefits from government incentives for solar products, including through changes in the tax laws, rules and ~~risks relating to our recent acquisitions.~~ regulations. You should be aware that the forward-looking statements contained in this report are based on our current views and assumptions, and are subject to known and unknown risks, uncertainties and other factors that may cause actual events or results to differ materially. For a discussion identifying some of the important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see below, those discussed in the section entitled “Risk Factors” herein and those included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed on February ~~11, 2022~~13, 2023 (the “Form 10-K”). Unless the context requires otherwise, references in this report to “Enphase,” “we,” “us” and “our” refer to Enphase Energy, Inc. and its consolidated subsidiaries.

Business Overview

We are a global energy technology company. We deliver smart, easy-to-use solutions that manage solar generation, storage and communication on one platform. We revolutionized the solar industry with our microinverter technology and we produce a fully integrated solar-plus-storage solution. As of June 30, ~~2022,~~2023, we have shipped ~~more than 48~~approximately 68 million microinverters, and ~~approximately 2.5~~more than 3.5 million Enphase residential and commercial systems have been deployed in ~~more than 140~~over 145 countries.

The Enphase® Energy System™, powered by IQ® Microinverters and IQ™ Batteries, our current generation integrated solar, storage and energy management offering, enables self-consumption and delivers our core value proposition of yielding more energy, simplifying design and installation and improving system uptime and reliability. The IQ family of microinverters, like all of our previous microinverters, is fully compliant with NEC 2014 and 2017 rapid shutdown requirements. Unlike string inverters, this capability is built-in, with no additional equipment necessary.

The Enphase Energy System brings a high technology, networked approach to solar generation plus energy storage, by leveraging our design expertise across power electronics, semiconductors and cloud-based software technologies. Our integrated approach to energy solutions maximizes a home’s energy potential while providing advanced monitoring and remote maintenance capabilities. The Enphase Energy System with IQ uses a single technology platform for seamless management of the whole solution, enabling rapid commissioning with the Enphase® Installer ~~App;~~App and consumption monitoring with IQ™ Gateway with IQIQ™ Combiner+™, Enphase®App, a cloud-based energy management platform, and our ~~IQ™~~IQ Battery. System owners can use the Enphase App to monitor their home’s solar generation, energy storage and consumption from any web-enabled device. Unlike some of our competitors, who utilize a traditional inverter, or offer separate components of solutions, we have built-in system redundancy in both photovoltaic generation and energy storage, eliminating the risk that comes with a single point of failure. Further, the nature of our cloud-based, monitored system allows for remote firmware and software updates, enabling cost-effective remote maintenance and ongoing utility compliance.

~~In March 2022, we completed the acquisition~~

Enphase Energy, Inc. | 2023 Form 10-Q | 35

Table of ~~SolarLeadFactory, LLC. (“SolarLeadFactory”), a privately-held company. SolarLeadFactory provides high quality leads~~Contents

We sell primarily to solar distributors who combine our products with others, including solar modules products and racking systems, and resell to installers in each target region. In addition to our solar distributors, we sell directly to select large installers, original equipment manufacturers (“OEMs”) and strategic partners. Our OEMs customers include solar module manufacturers who integrate our microinverters with their solar module products and resell to both distributors and installers. ~~As part~~Strategic partners include providers of solar financing solutions. We also sell certain products and services to homeowners primarily in support of our warranty services and legacy product upgrade programs via our online store.

Inflation Reduction Act of 2022. In August 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted, which includes extension of the investment tax credit (“ITC”) as well as a new advanced manufacturing production tax credit (“AMPTC”) to incentivize clean energy component sourcing and production, including for the production of microinverters. The IRA provides an AMPTC on microinverters of 11 cents per alternating current watt. The AMPTC for microinverters decreases by 25% each year beginning in 2030 and ending after 2032. Under the IRA, the ITC was extended until 2032 to allow a qualifying homeowner to deduct 30% of the cost of installing residential solar systems from their U.S. federal income taxes, thereby returning a material portion of the purchase price of the residential solar system to homeowners. Under the terms of the current extension, the ITC will remain at 30% through the end of 2032, reduce to 26% for 2033, reduce to 22% for 2034, and further reduce to 0% after the end of 2034 for residential solar systems, unless it is extended before that time. We believe the enactment of the IRA is favorable to our overall business worldwide; however, we ~~paid approximately $26.1 million in cash on March 14, 2022. In addition~~are continuing to evaluate the overall impact and applicability of the IRA to our results of operations going forward, including the revisions to the ~~purchase price paid, we are obligated to pay up to approximately $10.0 million~~U.S. Internal Revenue Code, which include a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in ~~shares of our common stock in~~tax years beginning after December 31, 2022.

During the second quarter of 2023, we began our first shipments of microinverters from our contract manufacturer partners in the United States. We expect to add a total capacity of approximately 4.5 million microinverters per quarter with three different manufacturing partners in the U.S. as we exit 2023, which would bring our overall global capacity to approximately 10 million microinverters per quarter. This allows us to take advantage of the benefits of the IRA, and along with the manufacturing capacity in Romania, could help us better serve our customers by cutting down delivery times and diversifying our supply chain.

Factors Affecting our Business and Operations

As we have a growing global footprint, we are subject to ~~achievement of certain operational~~risk and ~~employment targets.~~

~~Further details on~~exposure from the ~~above acquisition may be found in~~ ~~Note 4, “Business Combinations,” in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.~~

~~Enphase Energy, Inc. | 2022 Form 10-Q | 37~~

~~Impact of the COVID-19 Pandemic~~

~~We continue to monitor, evaluate and respond to developments relating to the COVID-19 pandemic, which has resulted in, and is expected to continue to result in~~ manufacturing or supply chain problems, disruptions in local and global economies, volatility in the global financial markets, overall reductions in demand, delays in payment, restrictions on the shipment of our products, or other ramifications. We have reopened some of our offices, but a majority of our employees continue to work remotely. We continue to take meaningful precautions in accordance with relevant guidelines to protect the health and safety of our employees. The extent of the continuing impact of COVID-19 on our operational and financial performance will depend on various developments, including the duration and spread of the virus and its variants, impact on our end-customers’ spending, volume of sales, impact on our partners, suppliers and employees, and actions that may be taken by governmental authorities,evolving macroeconomic environment, including the effects of ~~recent government-mandated lockdowns~~increased global inflationary pressures and interest rates, fluctuations in ~~several cities in China.~~ Ifforeign currency exchange rates, potential economic slowdowns or recessions, the COVID-19 pandemic ~~or its adverse effects become more severe or prevalent or are prolonged~~and geopolitical pressures, including the unknown impacts of current and future trade regulations and the Russia-Ukraine armed conflict. We continuously monitor the direct and indirect impacts of these circumstances on our business and financial results.

Demand for Products.The demand environment for our products in the ~~locations where we,~~United States has experienced a broad-based slowdown, primarily due to high interest rates. During the second quarter of 2023, this resulted in elevated inventory with distributors and installers. We expect to sell less microinverters to distributors and installers during the third quarter of 2023 as they respond to this slower demand environment. We expect these trends to have an adverse effect on our ~~customers, suppliers or manufacturers conduct business, or we experience more pronounced~~revenue in the second half of 2023.

Unfavorable Macroeconomic and Market Conditions. The global macroeconomic and market uncertainty, including higher interest rates and inflation, have caused disruptions in ~~our business or operations, or in economic activity~~financial markets and ~~demand for~~may continue to have an adverse effect on the U.S. and world economies. As a result, customers may decide to delay purchasing our products and services ~~generally,~~or not purchase at all. A tighter credit market for consumer and business spending could, in turn, adversely affect spending levels of installers and end users and lead to increased price competition for our products. Reductions in customer spending in response to unfavorable or uncertain macroeconomic and market conditions, globally or in a particular region where we operate, would adversely affect our business, ~~and~~ results of operations ~~in future periods could be materially adversely affected.~~ and financial condition. Further information relating to the risks and uncertainties related to ~~the ongoing COVID-19 pandemic~~unfavorable macroeconomic and market conditions may be found in Part I, Item 1A, “Risk Factors” of the Form 10-K.

~~Supply Chain Constraints~~

Enphase Energy, Inc. | 2023 Form 10-Q | 36

Table of Contents

Products

The Enphase Energy System, powered by IQ Microinverters, IQ Batteries and other products and services, is an integrated solar, storage and energy management offering that enables self-consumption and delivers our core value proposition of yielding more energy, simplifying design and installation and improving system uptime and reliability.

~~Due~~IQ Microinverters. We recently began shipping our new IQ8 microinverters with peak output AC power of 384W in France, the Netherlands, Spain, Portugal, Poland, and Germany to support newer high-powered solar modules. The new IQ8 Microinverters are designed to maximize energy production and can manage a continuous DC current of 14 amperes, supporting higher powered solar modules through increased demand across a range of industries, the global supply chain and the semiconductor industry have experienced significant disruptions in recent periods. We have seen supply chain challenges and logistics constraints increase, including component shortages, which have, in certain cases, caused delays in critical components and inventory, longer lead times, and have resulted in increased costs. We believe these supply chain challenges will persist for the foreseeable future. ~~In addition, the impact of inflation on the price of components, raw materials and labor has increased.~~energy harvesting.

AC Module (“ACM”) products are integrated systems that allow installers to be more competitive through improved logistics, reduced installation times, faster inspection and training. We continue to ~~work to mitigate the effects from supply chain constraints. Given the dynamic nature of these circumstances on~~make steady progress with our ~~ongoing business, results of operations~~ACM partners, including SunPower Corporation and ~~overall financial performance, the full impact of COVID-19 and other macroeconomic factors, including the conflict in Ukraine, cannot be reasonably estimated at this time.~~ In the event we are unable to mitigate the impact of delays and/or price increases in raw materials, electronic components and freight, it could delay the manufacturing and installation of our products, which would adversely impact our cash flows and results of operations, including revenue and gross margin.

~~Products~~Maxeon Solar Technologies, Ltd.

IQ Batteries.Our Enphase IQ Battery storage systems, with usable and scalable capacity of 10.1 kWh and 3.4 Kilowatt-hour (“kWh”) for the United States, and 10.5 kWh and 3.5 kWh for Europe and other international countries, are based on our Ensemble OS™ energy ~~management technology,~~system, which powers the world’s first grid-independent microinverter-based storage system to customers in North America, have been shipping since the second quarter of 2020. The Enphase IQ Battery storage systems feature our embedded grid-forming microinverters that enable the Always-On capability that keeps homes powered when the grid goes down, and the ability to save money when the grid is up. These systems are now compatible with both new and existing Enphase IQ solar systems with M-series™, IQ6™ and IQ7™ microinverters. In January 2021, we announced expanded compatibility of the Enphase® Energy System™ with our M-series microinverters and string inverters. The expanded compatibility provides approximately 300,000 additional Enphase system owners with the possibility of achieving grid-agnostic energy resilience through the Enphase Upgrade Program. The program provides solar installers the opportunity to renew engagements with the installed base of Enphase system owners through microinverter, solar, and energy storage upgrades, and reflects our continued commitment to reliability, service, and long-term customer relationships.systems. We currently ship our Enphase IQ Battery storage systems to customers in North America, Belgium, Germany, Austria, France, the Netherlands and ~~Belgium.~~Switzerland, Spain and Portugal. Enphase IQ Batteries in ~~Germany and Belgium~~Europe can be installed with both single-phase and three-phase third-party solar energy inverters, enabling homeowners to upgrade their existing home solar systems with a residential battery storage solution that reduces costs while providing increased self-reliance. ~~We plan~~

In May 2023, we introduced our most powerful Enphase Energy System to-date, featuring the new IQ™ Battery 5P and IQ8 Microinverters, for customers in Australia. The IQ Battery 5P is modular with 5 kWh capacity; the IQ8 Microinverters provide a peak output power of 384 W. The IQ Battery 5P is also available for customers in the United States and Puerto Rico. The IQ Battery 5P is modular by design and can deliver 3.84 kW continuous power and 7.68 kW peak power, enabling homeowners to ~~introduce Enphase IQ Batteries in other European countries throughout 2022.~~start heavy loads like air conditioners easily during power outages.

~~During the second quarter of 2021, we introduced~~Our IQ™ Load Controller for our Enphase IQ Battery storage ~~systems. Load control allows~~systems allow homeowners to decide what gets power in their home in the event of a grid outage, with the ability to choose up to four loads. These loads will be on when the grid is present and shed automatically in the event of a grid failure. ~~We began shipping our IQ Load Controller, which includes updated features, in December 2021.~~

~~Enphase Energy, Inc. | 2022 Form 10-Q | 38~~

This product makes installation simpler and saves time for installers.

~~Our Enphase Energy System integrates~~Electric Vehicle (“EV”) Chargers. The increasing penetration of EVs has implications for home energy management, as households not only consume significantly more power with ~~most leading models of home standby AC generators, providing enhanced performance and~~an EV, but also have a ~~glitch-free transition~~large battery that can be used for homeowners during power outages. Homeowners can also monitor real-time power flow, start and stop their generator remotely, set quiet hours to prevent their generator from operating until their batteries fall below a designated threshold, and control it all with the Enphase® ~~App. The new feature functions without a generator automatic transfer switch and is designed to eliminate the power glitches that reset home electronic appliances when switching to generator power.~~

We began shipping our Enphase Energy System with IQ8™ microinverters in the fourth quarter of 2021 to customers in North America. Our investment in custom application specific integrated circuit chips has resulted in a software-defined microinverter smart enough to form a microgrid. Many homeowners often assume that their solar systems will function if the sun is shining, even during a power outage. This has unfortunately not been true until the introduction of IQ8. Now, with IQ8 homeowners can realize the true promise of solar — to make and use their own power. IQ8 solar microinverters can provide Sunlight Backup™ during an outage, even without a battery.

~~In the second quarter of 2022 the Enphase IQ8 Microinverter-based system was certified by UL, a global safety science leader, for the new North American safety~~both backup and grid ~~interconnection standards for connecting solar inverters, energy storage systems, and distributed energy resources to the grid.~~

We participate in the ConnectedSolutions program, which is an incentive program implemented by two utilities in the Northeast region of the United States to reduce electrical demand during high-use periods. Enphase Storage customers in Connecticut, Massachusetts and Rhode Island can sign-up, monitor, track money earned, and control participation in the program using the Enphase App. We announced during the third quarter of 2021 our participation in Hawaiian Electric’s Battery Bonus grid services program. This program offers a new incentive for homeowners on the island of Oahu to install a new home battery. During the fourth quarter of 2021, we announced our participation in the Arizona Public Service (“APS”) residential battery services program. The APS program offers homeowners who install Enphase IQ Batteries in its service territory the chance to participate and earn money through one-time, upfront incentives.service. In ~~addition, we announced during~~ the first quarter of ~~2022 that~~2023, we began production shipments of Enphase branded EV chargers at our existing contract manufacturing facility in Mexico. We expect this move could help to meet the ~~Vermont-based utility Green Mountain Power (“GMP”) will offer Enphase Energy Systems~~rapidly growing demand for reliable and affordable EV charging solutions by providing a greater supply of product and more predictable lead times. Our EV chargers are compatible with most EVs sold in North America. Customers are able to ~~its customers in~~purchase Enphase-branded EV chargers with a cutting-edge battery lease grid services pilot program. Homeowners can also enroll in GMP’s “Bring Your Own Device” grid services program, which enables customers with their own Enphase Energy Systems to participatecharging power range between 32 amperes and ~~earn an up-front incentive. These grid services programs enable utilities~~64 amperes.

In January 2023, we demonstrated our bidirectional EV charger technology enabling vehicle-to-home and vehicle-to-grid functionality. This new bidirectional EV charger is designed to leverage the power of grid forming IQ8 Microinverters and Ensemble OS™ energy management technology to seamlessly integrate into Enphase home energy systems, and can be controlled from the Enphase App, empowering homeowners to make, use, save, and sell their own power.

In June 2023, we introduced the IQ™ Energy Router family of devices in Germany and Austria to enable the integration of select third-party EV chargers and heat pumps into Enphase solar and battery systems. The IQ ~~Battery instead of turning on polluting peaker plants,~~Energy Router integrates with EV chargers, while ~~generating an income stream for~~ the ~~IQ Battery owner. Facilitating grid services participation for our customers intended to reduce the lifetime cost of IQ Batteries~~IQ™ Energy Router+ works with both EV chargers and ~~help drive increased demand.~~heat pumps.

Results of Operations

Net Revenues

Three Months Ended
June 30, Change in Six Months Ended
June 30, Change in
2022 2021 $ % 2022 2021 $ %
(In thousands, except percentages)
Net revenues $ 530,196 $ 316,057 $ 214,139 68 % $ 971,488 $ 617,811 $ 353,677 57 %

Enphase Energy, Inc. | 2023 Form 10-Q | 37

Table of Contents


	Three Months Ended June 30,				Change in				Six Months Ended June 30,				Change in
	2023		2022		$		%		2023		2022		$		%

	(In thousands, except percentages)
Net revenues	$	711,118	$	530,196	$	180,922	34	%	$	1,437,134	$	971,488	$	465,646	48	%

Three months ended June 30, ~~2022~~2023 and ~~2021~~2022

Net revenues increased by ~~68%,~~$180.9 million, or ~~$214.1 million,~~34%, in the three months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021,~~2022, driven primarily by a ~~42%~~55% increase in microinverter units volume shipped, ~~and a 205% increase~~as we sold approximately 5.2 million microinverter units in ~~Enphase IQ Battery Megawatt-hour (“MWh”) shipped. In~~ the three months ended June 30, ~~2022, consumer demand increased and component supply improved as we sold approximately 3.3 million microinverter units,~~2023, as compared to approximately ~~2.4~~3.3 million units in the three months ended June 30, 2021. In the three months ended June 30, 2022, we also increased shipments of our Enphase IQ Batteries to customers in the United States and Europe to 132.4 MWh as compared to 43.4 MWh shipped in the same period in 2021.2022. The average selling price of our microinverter products increased by ~~18%~~3% in the three months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021,~~2022, which contributed to an approximately $13.6 million increase in revenue, primarily driven by a favorable product mix as we sold more IQ8 ~~and IQ7+™~~ microinverters relative to IQ7 microinverters in the three months ended June 30, ~~2022 and increased prices for our product offerings~~2023. The increase in total net revenues was partially offset by a decrease in shipments of IQ Batteries from 132.4 Megawatt-hour (“MWh”) shipped in the ~~second half of 2021~~three months ended June 30, 2022 to ~~partially offset~~82.3 MWh shipped in the ~~impact of higher logistics costs and component costs from global supply chain pricing pressures.~~

~~Enphase Energy, Inc. | 2022 Form 10-Q | 39~~

three months ended June 30, 2023.

Six months ended June 30, ~~2022~~2023 and ~~2021~~2022

Net revenues increased by ~~57%~~$465.6 million, or 48%, ~~or $353.7 million, in~~for the six months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021,~~2022, driven primarily by a ~~28%~~62% increase in microinverter units volume shipped ~~and a 196% increase in Enphase IQ Battery MWh shipped. In the six months ended June 30, 2022, consumer demand increased and component supply improved,~~ as we sold approximately ~~6.2~~10.0 million microinverter ~~units, as compared to approximately 4.8 million~~ units in the six months ended June 30, ~~2021. In~~2023, as compared to approximately 6.2 million units for the six months ended June 30, ~~2022, we also increased shipments of our Enphase IQ Batteries to customers in the United States and Europe to 252.8 MWh, as compared to 85.4 MWh shipped in the same period in 2021.~~2022. The average selling price of our microinverter products increased by ~~16%~~4% in the six months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021,~~2022, which contributed to an approximately $39.7 million increase in revenue, primarily driven by a favorable product mix as we sold more IQ8 ~~and IQ7+~~ microinverters relative to IQ7 microinverters in the six months ended June 30, ~~2022 and increased prices for our product offerings~~2023. The increase in total net revenues was partially offset by a decrease in shipments of IQ Batteries from 252.8 MWh shipped in the ~~second half of 2021~~six months ended June 30, 2022 to ~~partially offset~~184.7 MWh shipped in the ~~impact of higher logistics costs and component costs from global supply chain pricing pressures.~~six months ended June 30, 2023.

Cost of Revenues and Gross Margin


		Three Months Ended June 30,						Change in				Six Months Ended June 30,						Change in					Three Months Ended June 30,		Change in						Six Months Ended June 30,				Change in
		2022			2021			$		%		2022			2021			$		%					2023			2022			$		%		2023			2022			$		%

		(In thousands, except percentages)																				(In thousands, except percentages)
Cost of revenues	Cost of revenues	$	311,191		$	188,256		$	122,935	65	%	$	575,510		$	367,061		$	208,449	57	%			Cost of revenues	$	387,776		$	311,191		$	76,585	25	%	$	787,421		$	575,510		$	211,911	37	%
Gross profit	Gross profit	$	219,005		$	127,801		$	91,204	71	%	$	395,978		$	250,750		$	145,228	58	%			Gross profit	323,342			219,005			104,337		48	%	649,713			395,978			253,735		64	%
Gross margin	Gross margin	41.3		%	40.4		%			0.9	%	40.8		%	40.6		%			0.2	%			Gross margin	45.5		%	41.3		%					45.2		%	40.8		%

Three months ended June 30, ~~2022~~2023 and ~~2021~~2022

Cost of revenues increased by ~~65%,~~$76.6 million, or ~~$122.9 million,~~25%, in the three months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021,~~2022, primarily due to higher volume of microinverter units sold ~~higher Enphase IQ Battery MWh shipped, higher shipping costs~~and monetary impact for change in discount rate input to the fair value of our ~~products due~~warranty obligations. These costs were partially offset by a decrease in shipments of IQ Batteries, and recognition of credits under the AMPTC, for microinverters manufactured and shipped to ~~supply chain disruptions and constraints globally. The increase was also due to $1.4 million higher amortization of developed technology and $2.1 million higher stock-based compensation.~~customers in the United States during the three months ended June 30, 2023.

Gross margin increased by ~~0.9~~4.2 percentage points in the three months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~2022. The increase was primarily due to a higher average selling prices driven by a favorable product mix as we sold more IQ8 ~~and IQ7+™~~ microinverters relative to IQ7 microinverters in the three months ended June 30, ~~2022, an increase~~2023, and favorable impact from foreign currency exchange rate. Gross margin also increased in average selling prices driven by favorable product mix and price increases to our products, as well as cost management effort. This increase was partially offset by higher shipping costs of our products due to supply chain disruptions globally in combination with semiconductor supply constraints, $1.4 million higher amortization of developed technology and $2.1 million higher stock-based compensation.

~~Six~~the three months ended June 30, ~~2022 and 2021~~

~~Cost of revenues increased by 57%, or $208.4 million, in the six months ended June 30, 2022,~~2023, as compared to the same period in ~~2021,~~2022, due to cost management efforts, such as lower shipping costs and the benefit recognized from credits under AMPTC.

Six months ended June 30, 2023 and 2022

Enphase Energy, Inc. | 2023 Form 10-Q | 38

Table of Contents

Cost of revenues increased by $211.9 million, or 37%, for the six months ended June 30, 2023, as compared to the same period in 2022, primarily due to higher volume of microinverter units sold ~~higher Enphase IQ Battery MWh shipped~~ and ~~higher shipping costs~~monetary impact for change in discount rate input to the fair value of our ~~products due~~warranty obligations. These costs were partially offset by a decrease in shipments of IQ Batteries and the recognition of credit under the AMPTC for microinverters manufactured and shipped to ~~supply chain disruptions and constraints globally. The increase was also due to $2.7 million higher amortization of developed technology and $3.6 million higher stock-based compensation.~~

~~Gross margin increased by 0.2 percentage points~~customers in the United States during the six months ended June 30, ~~2022,~~2023.

Gross margin increased by 4.4 percentage points for the six months ended June 30, 2023, as compared to the same period in ~~2021.~~2022. The increase was primarily due to a higher average selling prices driven by a favorable product mix, as we sold more IQ8 ~~and IQ7+~~ microinverters relative to IQ7 microinverters, ~~in the six months ended June 30, 2022, an increase in average selling prices driven by favorable product mix and price increases to our products,~~ as well as cost management ~~effort. The increase was partially offset by higher~~efforts such as lower shipping costs ~~of our products due to supply chain disruptions globally in combination with semiconductor supply constraints, $2.7 million higher amortization of developed technology~~ and ~~$3.6 million higher stock-based compensation.~~the benefit recognized from credits under AMPTCs.

~~Enphase Energy, Inc. | 2022 Form 10-Q | 40~~

Research and Development

Three Months Ended
June 30, Change in Six Months Ended
June 30, Change in
2022 2021 $ % 2022 2021 $ %
(In thousands, except percentages)
Research and development $ 39,256 $ 22,708 $ 16,548 73 % $ 74,975 $ 44,526 $ 30,449 68 %
Percentage of net revenues 7 % 7 % 8 % 7 %


	Three Months Ended June 30,						Change in				Six Months Ended June 30,						Change in
	2023			2022			$		%		2023			2022			$		%

	(In thousands, except percentages)
Research and development	$	60,043		$	39,256		$	20,787	53	%	$	117,172		$	74,975		$	42,197	56	%
Percentage of net revenues	8		%	7		%					8		%	8		%

Three months ended June 30, ~~2022~~2023 and ~~2021~~2022

Research and development expense increased by ~~73%,~~$20.8 million, or ~~$16.5 million,~~53%, in the three months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~2022. The increase was primarily due to ~~$16.3~~$15.5 million of higher personnel-related expenses, ~~and $0.2~~$3.5 million of ~~outside consulting services and~~ equipment expense associated with our investment in the development, introduction and qualification of new ~~product innovation.~~products, and $2.4 million of professional services and corporate expenses to support our business growth, partially offset by a decrease of $0.6 million of facility costs from restructuring activities. The increase in personnel-related expenses was primarily due to hiring and retention programs for employees, ~~in New Zealand, India and the United States,~~ which increased total compensation costs, including stock-based compensation. The amount of research and development expenses may fluctuate from period to period due to the differing levels and stages of development ~~activity.~~activity for our products.

Six months ended June 30, ~~2022~~2023 and ~~2021~~2022

Research and development expense increased by ~~68%~~$42.2 million, or 56%, ~~or $30.4 million, in~~for the six months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~2022. The increase was primarily due to ~~$28.4~~$32.2 million of higher personnel-related expenses, ~~and $1.6~~$7.0 million of ~~outside consulting services and~~ equipment expense associated with our investment in the development, introduction and qualification of new ~~product innovation.~~products, and $3.9 million of professional services and corporate expenses to support our business growth, partially offset by a decrease of $0.9 million of facility costs from restructuring activities. The increase in personnel-related expenses was primarily due to a growth in headcount from hiring and retention programs for employees, ~~in New Zealand, India and the United States,~~ which increased total compensation costs, including stock-based compensation. The amount of research and development expenses may fluctuate from period to period due to the differing levels and stages of development ~~activity.~~activity for our products.

Sales and Marketing


		Three Months Ended June 30,						Change in				Six Months Ended June 30,						Change in					Three Months Ended June 30,		Change in						Six Months Ended June 30,				Change in
		2022			2021			$		%		2022			2021			$		%					2023			2022			$		%		2023			2022			$		%

		(In thousands, except percentages)																				(In thousands, except percentages)
Sales and marketing	Sales and marketing	$	53,588		$	25,586		$	28,002	109	%	$	94,932		$	45,208		$	49,724	110	%			Sales and marketing	$	58,405		$	53,588		$	4,817	9	%	$	123,026		$	94,932		$	28,094	30	%
Percentage of net revenues	Percentage of net revenues	10		%	8		%					10		%	7		%							Percentage of net revenues	8		%	10		%					9		%	10		%

Enphase Energy, Inc. | 2023 Form 10-Q | 39

Table of Contents

Three months ended June 30, ~~2022~~2023 and ~~2021~~2022

Sales and marketing expense increased by ~~109%,~~$4.8 million, or ~~$28.0 million,~~9%, in the three months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~2022. The increase was primarily due to ~~$25.4~~$2.1 million of higher personnel-related expenses from increased headcount as a result of our efforts to improve customer experience, to provide 24/7 support along with a field service desk for installers and Enphase system owners globally, and to support our business growth in the United States and international expansion in Europe. In addition, annual retention programs for employees also resulted in the increase in total compensation costs, including stock-based compensation.globally. The increase in sales and marketing expense in the three months ended June 30, ~~2022~~2023, as compared to the same period in ~~2021,~~2022, was also ~~attributable~~attributable to ~~$2.0 million higher amortization of intangible assets acquired through business combinations and $0.6~~$3.3 million of higher professional services and advertising costs to support our business growth. This increase was partially offset by a decrease of $0.6 million in equipment and facility costs ~~to enable business growth.~~from restructuring activities.

Six months ended June 30, ~~2022~~2023 and ~~2021~~2022

Sales and marketing expense increased by ~~110%~~$28.1 million, or 30%, ~~or $49.7 million, in~~for the six months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~2022. The increase was primarily due to ~~$42.9~~$22.4 million of higher personnel-related expenses from ~~increased~~a growth in headcount as a result of our efforts to improve customer experience, to provide 24/7 support along with a field service desk for installers and Enphase system owners globally, and to support our business growth ~~in the United States and international expansion in Europe. In addition, annual retention programs~~

~~Enphase Energy, Inc. | 2022 Form 10-Q | 41~~

~~for employees also resulted in the increase in total compensation costs, including stock-based compensation.~~globally. The increase in sales and marketing expense infor the six months ended June 30, ~~2022~~2023, as compared to the same period in ~~2021,~~2022, was also attributable to ~~$4.4 million higher amortization of intangible assets acquired through business combinations and $2.3~~$5.7 million of higher professional services, equipment and facility costs to ~~enable~~support our business ~~growth~~growth.

General and Administrative


		Three Months Ended June 30,						Change in				Six Months Ended June 30,						Change in					Three Months Ended June 30,		Change in						Six Months Ended June 30,				Change in
		2022			2021			$		%		2022			2021			$		%					2023			2022			$		%		2023			2022			$		%

		(In thousands, except percentages)																				(In thousands, except percentages)
General and administrative	General and administrative	$	32,125		$	20,107		$	12,018	60	%	$	70,211		$	40,230		$	29,981	75	%			General and administrative	$	34,397		$	32,125		$	2,272	7	%	$	70,662		$	70,211		$	451	1	%
Percentage of net revenues	Percentage of net revenues	6		%	6		%					7		%	7		%							Percentage of net revenues	5		%	6		%					5		%	7		%

Three months ended June 30, ~~2022~~2023 and ~~2021~~2022

General and administrative expense increased by ~~60%~~$2.3 million, or 7%, in the three months ended June 30, 2023, as compared to the same period in 2022. The increase was primarily due to $2.8 million of higher personnel-related expenses, including stock-based compensation, and $2.3 million of higher legal, professional services and technological infrastructure to support scalability of our business growth, offset by $2.8 million of lower facility costs from restructuring activities.

Six months ended June 30, 2023 and 2022

General and administrative expense increased by $0.5 million, or ~~$12.0~~1%, in the six months ended June 30, 2023, as compared to the same period in 2022. The increase was primarily due to $3.9 million of higher legal, professional services and other operational and facility costs to support scalability of our business growth, offset by a $3.4 million of lower personnel-related expenses primarily due to a decrease in stock based compensation from stock awards modification expense recorded in the six months ended June 30, 2022.

Enphase Energy, Inc. | 2023 Form 10-Q | 40

Table of Contents

Restructuring Charges


	Three Months Ended June 30,					Change in			Six Months Ended June 30,					Change in
	2023			2022		$		%	2023			2022		$		%

	(In thousands, except percentages)
Restructuring charges	$	177		$	—	$	177	**	$	870		$	—	$	870	**
Percentage of net revenues	0.1		%						0.1		%

** Not meaningful

Three months ended June 30, 2023 and 2022

During the second half of 2022, we began implementing restructuring actions to reorganize our global workforce, consolidate facilities and eliminate non-core projects. Restructuring charges for the three months ended June 30, 2023 primarily consisted of $0.2 million of one-time termination benefits and other employee-related expenses. We had no restructuring charges in the three months ended June 30, 2022. As of June 30, 2023, we have completed our restructuring activities.

Six months ended June 30, 2023 and 2022

Restructuring charges in the six months ended June 30, 2023 primarily consisted of $0.9 million of one-time termination benefits and other employee-related expenses. We had no restructuring charges in the six months ended June 30, 2022. As of June 30, 2023, we have completed our restructuring activities.

Other Income (Expense), Net


	Three Months Ended June 30,				Change in				Six Months Ended June 30,				Change in
	2023		2022		$		%		2023		2022		$		%

	(In thousands, except percentages)
Interest income	$	16,526	$	796	$	15,730	1,976	%	$	29,566	$	1,256	$	28,310	2,254	%
Interest expense	(2,219)		(2,168)		(51)		2	%	(4,375)		(4,904)		529		(11)	%
Other income (expense), net	(33)		(456)		423		(93)	%	393		(2,597)		2,990		(115)	%

Total other income (expense), net	$	14,274	$	(1,828)	$	16,102	881	%	$	25,584	$	(6,245)	$	31,829	(510)	%

Three months ended June 30, 2023 and 2022

Interest income was $16.5 million in the three months ended June 30, ~~2022,~~2023, as compared to ~~the same period in 2021. The increase was primarily due to $7.1~~ ~~million of higher personnel-related expenses from increased headcount increasing total compensation costs, including stock-based compensation and post business combination employment-related expense, $2.6~~ ~~million of investments in technological infrastructure and other operational and facilities costs to support scalability of our business growth,~~ ~~$1.5~~ ~~million of higher legal and professional services and $1.2 million of asset impairment, partially offset by a $0.5 million decrease in acquisition-related costs.~~

~~Six months ended June 30, 2022 and 2021~~

~~General and administrative expense increased by 75%, or $30.0 million, in the six months ended June 30, 2022, as compared to the same period in 2021. The increase was primarily due to $25.0~~ million of higher personnel-related expenses as a result of an increase in headcount increasing total compensation costs, including stock-based compensation and post business combination employment-related expense~~, $4.6~~ ~~million of investments in technological infrastructure and other operational and facilities costs to support scalability of our business growth,~~ ~~$2.1~~ ~~million of higher legal and professional services and $1.2 million of asset impairment, partially offset by a decrease of $3.1 million of acquisition-related costs.~~

~~Other Income (Expense), Net~~

Three Months Ended
June 30, Change in Six Months Ended
June 30, Change in
2022 2021 $ % 2022 2021 $ %
(In thousands, except percentages)
Interest income $ 796 $ 98 $ 698 712 % $ 1,256 $ 171 $ 1,085 635 %
Interest expense (2,168) (12,506) 10,338 (83) % (4,904) (19,835) 14,931 (75) %
Other expense, net (456) (633) 177 (28) % (2,597) (60) (2,537) 4,228 %
Loss on partial settlement of convertible notes — (13) 13 (100) % — (56,382) 56,382 (100) %
Total other expense, net $ (1,828) $ (13,054) $ 11,226 (86) % $ (6,245) $ (76,106) $ 69,861 (92) %

~~Three months ended June 30, 2022 and 2021~~

~~Interest income of~~ $0.8 ~~million in the three months ended June 30, 2022 increased, as compared to $0.1~~ million for the three months ended June 30, ~~2021, was~~2022, primarily due to an increase in interest rates ~~earned on~~and a higher average cash, cash equivalents and marketable securities balance in the three months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~2022.

Cash interest expense

Cash interest expense infor each of the three months ended June 30, ~~2022~~2023 and ~~2021~~2022 totaled $0.1 ~~million. Cash interest expense in the three months ended June 30, 2022~~million, which primarily ~~includes $0.1 million~~included interest incurred with the Notes due 2025 ~~and~~the Notes due 2023. ~~Cash interest expense in the three months ended June 30, 2021 primarily~~

~~Enphase Energy, Inc. | 2022 Form 10-Q | 42~~

includes approximately $0.1 million coupon interest incurred with our Notes due 2025, Notes due 2024 and Notes due 2023 and less than approximately $0.1 million accretion of interest expense on contingent consideration.

Non-cash interest expense

Non-cash interest expense of $2.1 million in each of the three months ended June 30, 2023 and 2022, primarily related to $2.1 million for the debt discount amortization with ~~our~~the Notes due 2025 and amortization of debt issuance costs with ~~our~~the Notes due 2023, Notes due 2025, Notes due 2026 and the Notes due 2028. ~~Non-cash interest~~

Other income (expense), net of less than $0.1 million expense ~~of $12.3 million~~ in the three months ended June 30, ~~2021 primarily relates~~2023 related to ~~$12.3~~a $2.1 million ~~for~~net loss due to foreign currency denominated monetary assets and liabilities, partially offset by a $2.1 million non-cash net gain related to change in the ~~debt discount and amortization~~fair value of debt ~~issuance costs with our Notes due 2024, Notes due 2025, Notes due 2026~~securities and ~~Notes due 2028 and less than approximately $0.1 million relates to the amortization~~interest income.

Enphase Energy, Inc. | 2023 Form 10-Q | 41

Table of ~~debt issuance costs associated with Notes due 2023.~~Contents

Other ~~expense,~~income (expense), net of $0.5 million expense in the three months ended June 30, 2022 ~~relates~~related to a $1.5 million net loss related to foreign currency denominated monetary assets and liabilities, partially offset by $1.0 million non-cash net gain related to change in the fair value of debt securities. Other (expense) income, net of $0.6 million expense in the three months ended June 30, 2021, relates to a $1.5 million net loss related to foreign currency exchange and remeasurement, partially offset by $0.9 million non-cash gain related to the change in the fair value of debt securities.

Six months ended June 30, ~~2022~~2023 and ~~2021~~2022

Interest income ~~of $1.3~~was $29.6 million in the six months ended June 30, ~~2022 increased,~~2023, as compared to ~~$0.2~~$1.3 million ~~for~~in the ~~six months ended June 30, 2021,~~same period in 2022, primarily due to an increase in interest rates ~~earned on~~and a higher average cash, cash equivalents and marketable securities balance in the six months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~2022.

Cash interest expense

Cash interest expense in the six months ended June 30, 2023 and 2022 ~~and 2021~~ totaled ~~$0.9~~$0.2 million and ~~$0.4~~$0.9 million, respectively. Cash interest expense in the six months ended June 30, 2023, primarily included $0.2 million in interest incurred with the Notes due 2025 and Notes due 2023. Cash interest expense for the six months ended June 30, 2022, primarily ~~includes~~included $0.8 million interest incurred with the Notes due 2025 and Notes due 2023, and $0.1 million accretion of interest expense on contingent consideration for an acquisition. ~~Cash~~

Non-cash interest expense

Non-cash interest expense of $4.1 million in the six months ended June 30, ~~2021~~2023, primarily ~~includes $0.3~~related to $4.1 million ~~coupon interest incurred~~for the debt discount amortization with ~~our~~the Notes due 2025 and amortization of debt issuance costs with the Notes due 2023, Notes due 2025, Notes due ~~2024~~2026 and Notes due ~~2023 and $0.1 million accretion of interest expense on contingent consideration.~~

~~Non-cash interest expense~~2028.

Non-cash interest expense of $4.0 million in the six months ended June 30, 2022, primarily related to $4.0 million for the debt discount amortization with ~~our~~the Notes due 2025 and amortization of debt issuance costs with ~~our~~the Notes due 2023, Notes due 2025, Notes due 2026 and Notes due 2028. ~~Non-cash interest expense~~

Other income (expense), net of ~~$19.5~~$0.4 million income in the six months ended June 30, ~~2021~~2023, primarily ~~relates~~related to ~~$19.4~~$3.4 million ~~for~~non-cash net gain related to a change in the ~~debt discount and amortization~~fair value of debt ~~issuance costs with our Notes~~securities and $0.5 million in interest income, partially offset by a $3.5 million net loss due ~~2024, Notes due 2025, Notes due 2026~~to foreign currency denominated monetary assets and ~~Notes due 2028 and less than $0.1 million relates to the amortization of debt issuance costs associated with Notes due 2023.~~liabilities.

Other ~~expense,~~income (expense), net of $2.6 million expense in the six months ended June 30, 2022, ~~relates~~primarily related to a $2.2 million net loss related to foreign currency denominated monetary assets and liabilities, $0.3 million impairment of note receivable and $0.1 million non-cash net loss related to change in the fair value of debt securities. Other (expense) income, net of less than $0.1 million expense in the six months ended June 30, 2021, related to a $2.4 million net loss related to foreign currency exchange and remeasurement, partially offset by $2.3 million non-cash gain related to change in the fair value of debt securities.

Loss on partial settlement of convertible notes recorded in the six months ended June 30, 2021 primarily related to the $9.5 million non-cash loss on partial settlement of $87.1 million aggregate principal amount of the Notes due 2024, $9.5 million non-cash loss on partial settlement of $217.8 million aggregate principal amount of the Notes due 2025 and $37.5 million non-cash inducement loss incurred on repurchase of Notes due 2025. We did not have any such loss in the six months ended June 30, 2022.

~~Enphase Energy, Inc. | 2022 Form 10-Q | 43~~

Income Tax ~~(Provision) Benefit~~Provision

Three Months Ended
June 30, Change in Six Months Ended
June 30, Change in
2022 2021 $ % 2022 2021 $ %
(In thousands, except percentages)
Income tax (provision) benefit $ (15,232) $ (6,995) $ (8,237) 118 % $ (20,818) $ 26,369 $ (47,187) (179) %


	Three Months Ended June 30,				Change in				Six Months Ended June 30,				Change in
	2023		2022		$		%		2023		2022		$		%

	(In thousands, except percentages)
Income tax provision	$	(27,403)	$	(15,232)	$	(12,171)	80	%	$	(59,503)	$	(20,818)	$	(38,685)	186	%

Three months ended June 30, ~~2022~~2023 and ~~2021~~2022

The income tax provision was $27.4 million in the three months ended June 30, 2023, as compared to the income tax provision of $15.2 million in the ~~three months ended June 30, 2022 increased, as compared to the income tax provision of $7.0 million in the~~ same period in ~~2021,~~2022, both calculated using the annualized effective tax rate method, primarily due to higher projected tax expense in U.S. and foreign jurisdictions that are more profitable in ~~2022~~2023 compared to ~~2021,~~2022, partially offset by tax deduction from employee stock-based compensation.

Six months ended June 30, ~~2022~~2023 and ~~2021~~2022

The income tax provision was $59.5 million in the six months ended June 30, 2023, as compared to the income tax provision of $20.8 million in the ~~six months ended June 30,~~same period in 2022, ~~was~~both calculated using the annualized effective tax rate method, primarily ~~relates~~due to higher projected tax expense in the U.S. and foreign jurisdictions that are more profitable in 2023, compared to 2022, partially offset by the tax deduction from employee stock-based compensation.

~~The income tax benefit~~

Enphase Energy, Inc. | 2023 Form 10-Q | 42

Table of $26.4 million for the six months ended June 30, 2021 was calculated using the annualized effective tax rate method, primarily relates to higher tax deduction from employee stock-based compensation, partially offset by higher projected tax expense in foreign jurisdictions that are profitable in 2021.Contents

Liquidity and Capital Resources

Sources of Liquidity

As of June 30, ~~2022,~~2023, we had ~~$1.3~~$1.8 billion in net working capital, including cash, cash equivalents and marketable securities of ~~$1.2~~$1.8 billion, of which approximately ~~$1.2~~$1.8 billion were held in the United States. Our cash, cash equivalents and marketable securities primarily consist of U.S. treasuries, money market mutual funds, corporate notes and bonds and both interest-bearing and non-interest-bearing deposits, with the remainder held in various foreign subsidiaries. We consider amounts held outside the United States to be accessible and have provided for the estimated ~~U.S.~~ income tax liability ~~associated with~~on the repatriation of our foreign earnings.


		Six Months Ended June 30,	Change in								Six Months Ended June 30,		Change in
			2022		2021		$		%					2023		2022		$		%

			(In thousands, except percentages)										(In thousands, except percentages)
Cash, cash equivalents and marketable securities	Cash, cash equivalents and marketable securities		$	1,247,801	$	1,312,261	$	(64,460)	(5)	%		Cash, cash equivalents and marketable securities		$	1,800,492	$	1,247,801	$	552,691	44	%
Total Debt	Total Debt		1,286,215		1,014,140		272,075		27	%		Total Debt		$	1,294,497	$	1,286,215	$	8,282	1	%

Our cash, cash equivalents and marketable securities ~~decreased~~increased by ~~$64.5~~$552.7 million infor the six months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021,~~2022, primarily due to ~~use of~~ cash generated from operations, partially offset by cash used to fund acquisitions, ~~repurchase shares of our common stock, make~~ investments in private companies, and ~~make~~ payments of withholding taxes related to net share settlement of equity ~~awards, partially offset by cash generated from operations.~~awards.

Total carrying amount of debt increased by ~~$272.1~~$8.3 million infor the six months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021,~~2022, primarily due to ~~adoption~~the accretion of ASU 2020-06 as of January 1, 2022, partially offset by repayment of the Notes due 2024 and partial repayment of the Notes due 2025. Refer to Note 1, “Description of Business and Basis of Presentation - Recently Adopted Accounting Pronouncements” in this Quarterly Report on Form 10-Q for further information on adoption of ASU 2020-06.debt discount.

We had net operating loss carryforwards for federal and California income tax purposes of approximately $153.9 million and $92.8 million, respectively, as well as federal and state research credit carryforwards of approximately $17.3 million and $9.8 million, respectively, as of December 31, 2021. When we utilize all ofexpect that our ~~net operating loss and research credit carryforwards, which we expect to occur within~~principal short-term (over the next ~~twelve months from June 30, 2022,~~12 months) and long-term cash needs related to our ~~cash paid~~operations will fund working capital, strategic investment, acquisitions, payment of withholding taxes for ~~taxes in the U.S. will substantially increase.~~

~~Enphase Energy, Inc. | 2022 Form 10-Q | 44~~

net share settlement of equity awards and purchase of property and equipment, such as production lines at our contract manufacturing partners. We plan to fund any cash requirements for the next 12 months from our existing cash, cash equivalents and marketable securities on hand, and cash generated from operations. We anticipate that access to the debt market will be more limited compared to prior years as interest rates have increased and are expected to continue to rise. Our ability to obtain debt or any other additional financing that we may choose to, or need to, obtain will depend on, among other things, our development efforts, business plans, operating performance and the condition of the capital markets at the time we seek financing.

Cash from operations could be affected by various risks and uncertainties, including, but not limited to, the continued effects of COVID-19, the ongoing conflict in Ukraine and other risk factors discussed in the section entitled “Risk Factors” herein and those included in the Form 10-K. We believe that our cash flow from operations with existing cash, cash equivalents and marketable securities will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months and thereafter for the foreseeable future, including our ability to make payment on our outstanding debt.

Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products, the costs to acquire or invest in complementary businesses and technologies, the costs to ensure access to adequate manufacturing capacity, the continuing market acceptance of our products and macroeconomic events, such as the impacts from the COVID-19 pandemic, inflation, and the ongoing conflict in Ukraine. We may also choose to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition may be adversely affected.

Repurchase of Common Stock. In May 2021, our board of directors authorized a share repurchase program (the “2021 Repurchase Program”) pursuant to which we ~~may~~were authorized to repurchase up to ~~an additional~~ $500.0 million of our common ~~stock.~~stock, $200.0 million of which was remaining as of March 31, 2023. The repurchases ~~may~~could be funded from available working capital and could be executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. ~~Such purchases are expected to continue through May 2024 unless otherwise extended or shortened~~During the three months ended June 30, 2023, we repurchased 1,254,474 shares for an aggregate amount of $200.00 million. Of the 1,254,474 shares repurchased, 833,517 shares were retired by ~~our board of directors.~~June 30, 2023 and the remaining 420,957 shares repurchased were retired in July 2023. As of June 30, ~~2022, we have approximately $200.0 million remaining for repurchase of shares under~~2023, the 2021 Repurchase ~~Program.~~Program has been completed.

Cash Flows. The following table summarizes our cash flows for the periods presented:

Six Months Ended
June 30,
2022 2021
(In thousands)
Net cash provided by operating activities $ 303,093 $ 141,501
Net cash provided by (used in) investing activities 84,226 (126,607)
Net cash provided by (used in) financing activities (10,220) 618,914
Effect of exchange rate changes on cash (942) (926)
Net increase in cash and cash equivalents $ 376,157 $ 632,882


	Six Months Ended June 30,
	2023		2022

	(In thousands)
Net cash provided by operating activities	$	515,475	$	303,093
Net cash provided by (used in) investing activities	(427,582)		84,226
Net cash used in financing activities	(284,039)		(10,220)
Effect of exchange rate changes on cash and cash equivalents	1,578		(942)
Net increase (decrease) in cash and cash equivalents	$	(194,568)	$	376,157

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Cash Flows from Operating Activities

Cash flows from operating activities ~~consist~~consisted of our net income adjusted for certain non-cash reconciling items, such as stock-based compensation expense, non-cash interest expense, change in the fair value of ~~investments,~~debt securities, deferred income taxes, depreciation and amortization, and changes in our operating assets and liabilities. Net cash provided by operating activities increased by ~~$161.6~~$212.4 million infor the six months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021,~~2022, primarily due to an increase in our gross profit as a result of increased revenue, partially offset by higher operating expenses as we continue to invest in the long-term growth of our business.

Cash Flows from Investing Activities

For the six months ended June 30, 2023, net cash used in investing activities of $427.6 million was primarily from the purchase of $1,272.9 million of marketable securities, $66.5 million used in purchases of test and assembly equipment to expand our supply capacity, related facility improvements and information technology enhancements, including capitalized costs related to internal-use software, partially offset by $911.8 million sale and maturities of marketable securities.

For the six months ended June 30, 2022, net cash ~~provided~~used from investing activities of $84.2 million was primarily ~~from~~ $193.0 million maturities of marketable securities, partially offset by $60.1 million purchase of marketable securities, $27.7 million net cash used to acquire SolarLeadFactory and Clipper Creek, Inc., and $21.1 million used in purchases of test and assembly equipment to expand our supply capacity, related facility improvements and information technology enhancements including capitalized costs related to internal-use software.

~~Enphase Energy, Inc. | 2022 Form 10-Q | 45~~

Cash Flows from Financing Activities

For the six months ended June 30, ~~2021,~~2023, net cash used in ~~investing~~financing activities of ~~$126.6~~approximately $284.0 million was primarily from ~~$55.3~~$200.0 million paid to repurchase our common stock under the 2021 Repurchase Program, and the payment of $84.6 million in employee withholding taxes related to net share settlement of equity awards, partially offset by $0.6 million net ~~cash used to acquire Sofdesk Inc.~~proceeds from employee stock option exercises and ~~DIN Engineer Service LLP’s solar design services business, $45.0 million from the investment in a debt security, and $26.4 million used in~~ purchases ~~of test and assembly equipment to expand~~under our ~~supply capacity, related facility improvements and information technology enhancements including capitalized costs related to internal-use software.~~

~~Cash Flows from Financing Activities~~employee stock purchase plan.

For the six months ended June 30, 2022, net cash used by financing activities of approximately $10.2 million was primarily ~~due to~~from the payment of $14.8 million ~~payment of~~in employee withholding taxes related to net share settlement of equity awards, partially offset by $4.6 million net proceeds from employee stock option exercises and purchases under our employee stock purchase plan.

For the six months ended June 30, 2021, net cash provided by financing activities of approximately $618.9 million was primarily from $1,188.4 million net proceeds from the issuance of our Notes due 2028 and Notes due 2026, $220.8 million from sale of warrants related to our Notes due 2028 and Notes due 2026 and $3.6 million net proceeds from employee stock option exercises, partially offset by $286.2 million purchase of convertible note hedge related to our Notes due 2028 and Notes due 2026, $289.3 million cash paid to settle both $87.1 million in aggregate principal amount of the Notes due 2024 and $217.8 million in aggregate principal amount of the Notes due 2025, $200.0 million paid to repurchase shares of our common stock, $17.0 million payment of employee withholding taxes related to net share settlement of equity awards, and $1.4 million of repayment on sale of long-term financing receivables.

Contractual Obligations

Our contractual obligations primarily consist of our Notes due 2028, Notes due 2026, Notes due 2025, Notes due 2023, obligations under operating leases and inventory component ~~purchase.~~purchases. As of June 30, ~~2022,~~2023, there have been no material changes from our disclosure in the Form 10-K. For more information on our future minimum operating leases and inventory component purchase obligations as of June 30, ~~2022, see~~2023, refer to Note 109, “Commitments and Contingencies - Purchase Obligations” and for more information on our notes and other related debt, ~~see~~refer to Note 98, “Debt” of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Critical Accounting Policies

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the ~~U.S.~~United States (“GAAP”). In connection with the preparation of our condensed consolidated financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our condensed consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our condensed consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

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We consider an accounting policy to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the condensed consolidated financial statements.

Adoption of New and Recently Issued Accounting Pronouncements

Refer to Note 1, “Description of Business and Basis of Presentation - Summary of Significant Accounting Policies” of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of adoption of new ~~and recently issued~~ accounting pronouncements.

~~Enphase Energy, Inc. | 2022 Form 10-Q | 46~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our market risk compared to the disclosures in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in the Form 10-K. Also see the section entitled “Risk Factors” in Part I, Item 1A in the Form 10-K.

~~Enphase Energy, Inc. | 2022 Form 10-Q | 47~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, ~~2022.~~2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) includes, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of June 30, ~~2022,~~2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that ~~has~~have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During the quarter ended June 30, 2022, we migrated to a new Enterprise Resource Planning (“ERP”) system designed to maintain our financial records used to report operating results. We have not experienced any material impact to our internal controls over financial reporting despite the new ERP system and the fact that most of our employees continue to work remotely due to the COVID-19 pandemic. We continue to monitor and assess the impact of the new ERP system and ongoing COVID-19 pandemic on our internal controls to minimize the impact on their design and operating effectiveness.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 4845

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising out of our operations, the ultimate disposition of which could have a material adverse effect on our operations, financial condition, or cash flows. We are not currently involved in any material legal proceedings, and our management believes there are currently no material claims or actions pending against us.

Item 1A. Risk Factors

~~The disclosure~~Investing in our securities involves a high degree of risk. Before investing in our securities, you should consider carefully the information contained in this quarterly report and in the Form 10-K, including the risk factors identified in Part I, Item 1A, “Risk Factors” thereof. This quarterly report contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements” in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” above. Our actual results could differ materially from those contained in the forward-looking statements. Any of the risks discussed in the Form 10-K, in other reports we file with the U.S. Securities and Exchange Commission (“SEC”), and other risks we have not anticipated or discussed, could have a material adverse impact on our business, financial condition or results of operations. Except as set forth below, ~~supplements~~there has been no material change to our risk factors from those disclosed in Part I, Item 1A, “Risk Factors” in the Form 10‑K. ~~These risks~~

The reduction, elimination or expiration of government subsidies and ~~uncertainties, along with those previously disclosed,~~economic incentives for on-grid solar electricity applications could ~~materially~~reduce demand for solar photovoltaic systems and harm our business.

The market for on-grid applications, where solar power is used to supplement a customer’s electricity purchased from the utility network or sold to a utility under tariff, depends in large part on the availability and size of government and economic incentives that vary by geographic market. Because our customers’ sales of solar power are typically into the on-grid market, the reduction, elimination or expiration of government subsidies and economic incentives for on-grid solar electricity may negatively affect the competitiveness of solar electricity relative to conventional and non-solar renewable sources of electricity and could harm or halt the growth of the solar electricity industry and our business.

National, state and local government bodies in many countries, including the United States, have provided incentives in the form of feed-in tariffs (“FiTs”), rebates, tax credits and other incentives to system owners, distributors, system integrators and manufacturers of solar photovoltaic (“PV”) systems to bolster the cost competitiveness of solar electricity in on-grid applications relative to the cost of utility power, and to reduce dependency on other forms of energy. Many of these government incentives expire, phase out over time, terminate upon the exhaustion of the allocated funding, require renewal by the applicable authority or are being changed by governments due to changing market circumstances or changes to national, state or local energy policy.

Electric utility companies or generators of electricity from other non-solar renewable sources of electricity may successfully lobby for changes in the relevant legislation in their markets that are harmful to the solar industry. Reductions in, or eliminations or expirations of, governmental incentives in regions where we focus our sales efforts could result in decreased demand for and lower revenue from solar PV systems there, which would adversely affect sales of our products. In addition, our ability to successfully penetrate new geographic markets may depend on new countries adopting and maintaining incentives to promote solar electricity, to the extent such incentives are not currently in place. Furthermore, electric utility companies may establish pricing structures or interconnection requirements that could adversely affect our sales and be harmful to the solar and distributed rooftop solar generation industry.

Among other government-established incentives, net metering and related policies have supported the growth of on-grid solar products, and changes to such policies may reduce demand for electricity from our solar service offerings. Net metering is a utility rate program that requires a consumer’s electric company to purchase the excess solar energy that the consumer’s solar panels produce and pay the retail rate for electricity exported to the grid, less certain non-bypassable fees paid by the consumer. For example, in 2016, the California Public Utilities Commission (CPUC) issued an order retaining retail rate-based net metering credits for residential customers of California's major utilities as part of NEM 2.0. Customers under NEM 2.0 were subject to interconnection charges and must take service under time‑of-use rates with different electricity prices during peak and off-peak hours. Existing customers who receive service under the prior net metering program, as well as new customers under the NEM 2.0 program,

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remain eligible for the NEM 2.0 program for a period of 20 years. However, on December 15, 2022, the CPUC adopted a “NEM 3.0” policy, also known as the Net Billing Tariff, that unbundles export compensation from retail rates and instead bases it on a tool called the Avoided Cost Calculator (“ACC”), which estimates the hourly utility costs that are avoided by exports from distributed generation. The CPUC did seek to ease the transition for the solar market by adopting export “adders” to the hourly ACC values for the first several years of the tariff. Nevertheless, these ACC-based export compensation values are significantly lower than retail rates for most hours of the year and may therefore increase payback periods, and thereby reduce demand, for solar-only systems. These types of modifications to net metering incentives could harm our business, both in California where we have derived a significant portion of historical revenues in the United States, and if pursued in other jurisdictions.

Our focus on a limited number of specific markets increases risks associated with the modification, elimination, or ~~financial results.~~expiration of governmental subsidies and economic incentives for on-grid solar electricity applications.

~~Challenges relating~~To date, we have generated most of our revenues from North America, and revenues generated from the U.S. market represented 76%, 80%, and 82% of our total revenue for the annual period ending on December 31, 2022, 2021, and 2020, respectively. We also expect to ~~current supply chain constraints, including with respect~~continue to ~~semiconductors~~generate a majority of our revenues from North America in the future.

There are several important incentives (including the ITC), AMPTC and ~~integrated circuits, could adversely~~other U.S. federal and state tax incentives, that impact our ~~revenues, gross margins~~business. Under the IRA, the ITC was extended until 2032 to allow a qualifying homeowner to deduct 30% of the cost of installing residential solar systems from their U.S. federal income taxes, thereby returning a material portion of the purchase price of the residential solar system to homeowners. Under the terms of the current extension, the ITC will remain at 30% through the end of 2032, reduce to 26% for 2033, reduce to 22% for 2034, and ~~results~~further reduce to 0% after the end of ~~operations.~~

~~Due~~2034 for residential solar systems, unless it is further extended before that time. The Internal Revenue Service has not provided guidance so there is still uncertainty on how the new tax rules will be applied. If the ITC, AMPTC, or other tax credits are reduced or eliminated as part of futures changes to ~~increased demand across~~the U.S. Internal Revenue Code, changes to state law or regulatory reform initiatives by subsequent legislative action or by a ~~range of industries, the global supply market for certain raw materials and components, including, in particular, semiconductor, integrated circuits and other electronic components used in some~~presidential administration, sales of our products ~~has experienced significant constraint~~in North America and ~~disruption~~other markets could be adversely affected. In addition, changes to the IRA could impact the benefits we currently expect to receive from our plans to increase our domestic manufacturing footprint in ~~recent periods. This constrained supply environment has adversely affected,~~the United States, in partnership with third-party contract manufacturers.

Several European countries, including Germany, Belgium, Italy and ~~could further affect, component availability, lead times~~the United Kingdom, have adopted reductions in or concluded their net energy metering or FiT programs. Certain countries have proposed or enacted taxes levied on renewable energy. These and ~~cost,~~related developments have significantly impacted the solar industry in Europe and could increase the likelihood of unexpected cancellations or delays of previously committed supply of key components. In an effort to mitigate these risks, we have incurred higher costs to secure available inventory, have extended our purchase commitments and placed non-cancellable, advanced orders with or through suppliers, particularly for long lead time components. Our efforts to expand our manufacturing capacity and multi-source and pre-order components may fail to reduce the impact of these adverse supply chain conditions on our business.

~~Despite our mitigation efforts, these constrained supply conditions~~ may adversely ~~impact our revenues and results of operations. At~~affect the same time, increased costs associated with supply premiums, labor, expediting fees and freight and logistics may adversely impact our gross margin, profitability and ability to reduce the cost to manufacture our productsfuture demand for solar energy solutions in a manner consistent with prior periods. The COVID-19 pandemic and conflict in Ukraine has also contributed to and exacerbated this strain, and there can be no assurance that the impacts of the pandemic and conflict in Ukraine on our supply chain will not continue, or worsen, in the future. The current supply chain challenges could also result in increased use of cash, engineering design changes and delays in new product introductions, each ofEurope, which ~~could adversely impact our business and financial results. In the event these supply chain challenges persist for the foreseeable future, these conditions~~ could adversely impact our results of operations.

We also sell our products in Australia. In 2012, Australia enacted a Renewable Energy Target that is intended to ensure that 33,000 Gigawatt-hours of Australia’s electricity comes from renewable sources by 2020. This policy supports both the installation of large-scale centralized renewable generation projects, along with small-scale systems of under 100kW each for residential and small business customers. This target was met in 2019; however, the scheme continues to require high-energy users to meet their obligations under the policy until 2030. During 2018, the state of Victoria introduced state-based incentive schemes, aimed at solar customers in the state of Victoria. Other Australian states and territories introduced similar programs in 2019. Any change in, or failure to implement, these programs may adversely affect the demand for solar energy solutions in Australia.

Reductions in incentives and uncertainty around future energy policy, including local content requirements, have negatively affected and may continue to negatively affect our business, financial condition and results of operations as we seek to increase our business domestically and abroad. Additionally, as we further expand to other countries, changes in incentive programs or electricity policies could negatively affect returns on our investments in those countries as well as our business, financial condition and results of operations.

Our business is subject to tax liabilities.

We are subject to income tax, indirect tax or other tax claims by tax agencies in jurisdictions in which we conduct business. Significant judgment is required in determining our worldwide provision for income taxes. Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. The IRA included significant changes to the U.S. federal income tax laws, the consequences of which could

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increase our future U.S. income tax expense. As additional guidance is issued by the applicable taxing authorities and as new accounting treatment is clarified, we may report additional adjustments in the period if new information becomes available. We have deferred tax assets related to net operating losses or tax credits that could be subject to limitations under IRS Code Sections 382 or 383, and State separate return limitation year rules. The limitations could reduce our ability to utilize our net operating losses or tax credits before the expiration of the tax attributes. Tax law changes or the limitations could be material and could materially affect our tax obligations and effective tax rate.

In the ordinary course of our business, there are many transactions and calculations where the ultimate income tax, indirect tax, or other tax determination is uncertain. Although we believe our tax estimates are reasonable, we cannot be certain that the final determination of our tax audits and litigation will not be materially different from that which is reflected in historical tax provisions and accruals. Should additional taxes be assessed as a result of an audit, assessment or litigation, there could be a material adverse effect on our cash, tax provisions and net income in the period or periods for which that determination is made.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On June 27, 2023, as additional earn out consideration for our acquisition of all the outstanding shares of 365 Pronto, Inc. (“365 Pronto”) in December 2021, we issued 23,366 shares of our common stock to the stockholder representative of the former holders of capital stock of 365 Pronto. The issuance of the shares was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving any public offering. The issuance of these shares was made without any general solicitation or advertising, and an appropriate legend was placed on the share certificate issued in the transaction to reflect the restricted nature of the shares.

Stock Repurchase Program

In May 2021, our board of directors authorized the 2021 Repurchase Program pursuant to which we may repurchase up to an aggregate of $500.0 million of our common stock. ~~As of June 30, 2022, we have~~We utilized approximately $200.0 million remaining for repurchase of shares ~~under~~during the three months ended June 30, 2023. As of June 30, 2023, the 2021 Repurchase Program. Purchases may be completed from time to time in the open market or through structured repurchase agreements with third parties. The program may be discontinued or amended at any time and expires on May 13, 2024. Such purchases are expected to continue through May 2024 unless otherwise extended or shortened by our board of directors.Program is completed.

~~Enphase Energy, Inc. | 2022 Form 10-Q | 49~~

The following table provides information about our purchases of our common stock during the three months ended June 30, ~~2022~~2023 (in thousands, except per share amounts):

~~Period Ended~~

~~Total Number of Shares Purchased~~

~~Average Price Paid per Share~~

~~Total Number of Shares Purchased as Part of Publicly Announced Programs~~

~~Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs~~

~~April 2022~~

—

~~200,000~~

~~May 2022~~

—

~~200,000~~

~~June 2022~~

—

~~200,000~~

~~Total~~

—


Period Ended	Total Number of Shares Purchased	Average Price Paid per Share(1)		Total Number of Shares Purchased as Part of Publicly Announced Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs(2)
April 2023	148,557	$	164.60	148,557	$	175,548
May 2023	684,960	$	156.81	684,960	$	68,140
June 2023	420,957	$	161.87	420,957	$	—

Total	1,254,474			1,254,474

(1) Average price paid per share includes brokerage commissions.

(2) During the three months ended June 30, 2023, we repurchased 1,254,474 shares of our common stock at a weighted average price of $159.43 per share for an aggregate amount of $200.0 million.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~Rule 10b5-1 Trading Plans

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 5048

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During the three months ended June 30, 2023, Mandy Yang, our Vice President and Chief Financial Officer, and an officer for purposes of Section 16 of the Exchange Act, terminated her equity trading plan put in place in accordance with Rule 10b5-1(c)(1) under the Exchange Act. Ms. Yang’s trading plan was terminated on May 2, 2023 during an open insider trading window. An equity trading plan is a written document that preestablishes the amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of our stock, including sales of shares acquired under our employee and director equity plans.

Item 6. Exhibits

A list of exhibits filed with this report or incorporated herein by reference is found in the Exhibit Index below.

Incorporation by Reference

Exhibit Number

Exhibit Description

Form

SEC File No.

Exhibit

Filing Date

Filed Herewith

3.1

Amended and Restated Certificate of Incorporation of Enphase Energy, Inc.

8-K

001-35480

3.1

4/6/2012

3.2

Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Enphase Energy, Inc.

10-Q

001-35480

3.1

8/9/2017

3.3

Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Enphase Energy, Inc.

10-Q

001-35480

2.1

8/6/2018

3.4

Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Enphase Energy, Inc.

8-K

001-35480

3.1

5/27/2020

3.5

Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Enphase Energy, Inc.

S-8

333-256290

4.5

5/19/2021

3.6

Amended and Restated Bylaws of Enphase Energy, Inc.

8-K

001-35480

3.1

4/8/2022

10.1#

Amendment No. 3 to Flextronics Manufacturing Services Agreement by and between Enphase Energy, Inc. and Flextronics Industrial, Ltd., dated as of June 22, 2023.

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).

32.1*

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101).

Incorporation by Reference
Exhibit Number Exhibit Description Form SEC File No. Exhibit Filing Date Filed Herewith
3.1
Amended and Restated Certificate of Incorporation of Enphase Energy, Inc.
8-K 001-35480 3.1 4/6/2012
3.2
Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Enphase Energy, Inc.
10-Q 001-35480 3.1 8/9/2017
3.3
Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Enphase Energy, Inc.
10-Q 001-35480 2.1 8/6/2018
3.4
Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Enphase Energy, Inc.
8-K 001-35480 3.1 5/27/2020
3.5
Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Enphase Energy, Inc.
S-8 333-256290 4.5 5/19/2021
3.6
Amended and Restated Bylaws of Enphase Energy, Inc.
8-K 001-35480 3.1 4/8/2022
10.1
Amendment No. 4 to Master Supply Agreement, dated January 4, 2021, by and between Enphase Energy, Inc. and SunPower Corporation.
X
10.2#
Amendment No. 5 to Master Supply Agreement, dated July 6, 2022, by and between Enphase Energy, Inc. and SunPower Corporation.
X
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
X
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
X
32.1*
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document. X
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. X
101.DEF XBRL Taxonomy Extension Definition Linkbase Document. X
101.LAB XBRL Taxonomy Extension Label Linkbase Document. X
101.PRE XBRL Taxonomy Extension Presentation Document. X
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). X

# Certain portions of this exhibit have been omitted pursuant to Item 601 of Regulation S-K,. as the Company has determined that (i) the omitted information is not material and (ii) the omitted information is of the type that the Company customarily treats as private or confidential.

* The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act, ~~of 2002,~~ and shall not be deemed “filed” by Enphase Energy, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as ~~amended.~~amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act, except as shall be expressly set forth by specific reference in such filing.

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 5149

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: July ~~26, 2022~~27, 2023

ENPHASE ENERGY, INC.

By:

/s/ Mandy Yang

Mandy Yang

Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)

(Duly Authorized Officer)

Enphase Energy, Inc. | ~~2022~~2023 Form 10-Q | 5250


	Preliminary Fair Value		Useful Life
	(In thousands)		(Years)
Developed technology	$	3,600	5
Customer relationships	7,600		5
Total identifiable intangible assets	$	11,200


	As of June 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash Equivalents		Marketable Securities

	(In thousands)
Money market funds	$	432,946	$	—	$	—	$	432,946	$	432,946	$	—
Certificates of Deposit	3,126		—		(24)		3,102		—		3,102
Commercial paper	121,294		—		(224)		121,070		—		121,070
Corporate notes and bonds	144,438		1		(3,189)		141,250		—		141,250
U.S. Treasuries	39,551		1		(8)		39,544		—		39,544
U.S. Government agency securities	456,128		—		(8,766)		447,362		—		447,362
Total	$	1,197,483	$	2	$	(12,211)	$	1,185,274	$	432,946	$	752,328


	As of December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash Equivalents		Marketable Securities

	(In thousands)
Money market funds	$	35,789	$	—	$	—	$	35,789	$	35,789	$	—
Certificates of Deposit	16,001		—		(2)		15,999		6,000		9,999
Commercial paper	215,964		—		(114)		215,850		26,997		188,853
Corporate notes and bonds	199,244		—		(872)		198,372		760		197,612
U.S. Treasuries	14,999		—		(1)		14,998		—		14,998
U.S. Government agency securities	487,743		—		(1,870)		485,873		—		485,873
Total	$	969,740	$	—	$	(2,859)	$	966,881	$	69,546	$	897,335