Enphase Energy, Inc.

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’s intelligent microinverters work with virtually every solar panel made, and when paired with the Company’s smart technology, results in one of the industry’s best-performing clean energy systems.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States (“U.S. 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 nine months ended September 30, 2025 are not necessarily indicative of the operating results for the full year.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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 credit losses, stock-based compensation, income tax provision, inventory valuation, government grants, accrued warranty obligations, fair value of debt securities, convertible notes, 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.

The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. 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, 2024 filed with the SEC on February 10, 2025 (the “Form 10‑K”).

Summary of Significant Accounting Policies

Except for the updated accounting policies related to the fair value of financial instruments specifically for loan receivables issued, 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.

Fair Value of Financial Instruments

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The financial instruments include the Company’s cash and cash equivalents, restricted cash, accounts receivable, loan receivables, accounts payable and accrued liabilities. The Company considers the carrying amount of short-term financial instruments to approximate the fair value because of the short maturity of those instruments. The Company’s long-term financial instruments are measured at amortized cost, no fair value option is elected. The Company evaluates the allowance for credit losses by assessing the risks and losses inherent to the financial instruments.

Recently Adopted Accounting Pronouncements

Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold, certain disclosures of state versus federal income tax expenses and taxes paid. ASU 2023-09 was effective for fiscal years beginning after December 15, 2024 and interim periods for fiscal years beginning after December 15, 2025. The Company plans to adopt ASU 2023-09 in its Annual Report on Form 10-K for the year ending December 31, 2025. As ASU 2023-09 affects only disclosures, the adoption of ASU 2023-09 is not expected to have a significant impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

Not Yet Effective

In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures” (“ASU 2024-03”), which requires additional disclosure of certain costs and expenses within the notes to the financial statements. ASU 2024-03 will be effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact from ASU 2024-03 on its consolidated financial statements disclosures.

In July 2025, the FASB issued ASU 2025-05, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets” (“ASU 2025-05”), which introduces a practical expedient for the application of the current expected credit loss model to current accounts receivable and contract assets. The practical expedient allows entities to assume that conditions as of the balance sheet date remain unchanged over the remaining life of these assets, thereby eliminating the need to incorporate macroeconomic forecasts. ASU 2025-05 is effective beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The guidance may be applied prospectively. The Company is currently evaluating the impact of ASU 2025-05 on its consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, “Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”), which simplifies the capitalization guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted. ASU 2025-06 permits an entity to apply the new guidance using a prospective, retrospective or modified transition approach. The Company is currently evaluating the impact from ASU 2025-06 on its consolidated financial statements.

2. REVENUE RECOGNITION

Disaggregated Revenue

The Company hasone 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 were as follows:

Contract Balances

Accounts receivable, and contract assets and contract liabilities from contracts with customers, were as follows:

The Company receives payments from customers based upon contractual payment terms. Accounts receivable are recorded in an amount that reflects the consideration that is expected to be received in exchange for those goods or services 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 hadno asset impairment charges related to contract assets for the nine months ended September 30, 2025.

Significant changes in the balances of contract assets (prepaid expenses and other assets) as of September 30, 2025 were as follows (in thousands):

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.

Significant changes in contract liabilities (deferred revenue) as of September 30, 2025 were as follows (in thousands):

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 were as follows:

3. OTHER FINANCIAL INFORMATION

Inventory

Inventory consists of the following:

Accrued Liabilities

Accrued liabilities consist of the following:

4. GOODWILL AND INTANGIBLE ASSETS

The Company’s goodwill as of September 30, 2025 and December 31, 2024 was as follows:

The Company’s purchased intangible assets as of September 30, 2025 and December 31, 2024 were as follows:

During the nine months ended September 30, 2025, intangible assets decreased by less than $0.1 million due to the impact of foreign currency translation.

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

Amortization of developed technology is recorded to cost of revenues, amortization of customer relationships and trade-names are recorded to sales and marketing expense, and amortization of certain customer relationships is recorded as a reduction to revenue.

The expected future amortization expense of intangible assets as of September 30, 2025 is presented below:

5. CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES

The cash equivalents, restricted cash and marketable securities consist of the following:

The following table summarizes the contractual maturities of the Company’s cash equivalents and marketable securities as of September 30, 2025:

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:

Changes in Estimates

In the three months ended September 30, 2025, the Company recorded $0.7 million in warranty expense from changes in estimates, of which $7.6 million related to an increase in product replacement costs primarily for estimated additional tariff costs, partially offset by $6.9 million related to continuing analysis of field performance data and diagnostic root-cause failure analysis for Enphase IQ® Battery systems. In the three months ended September 30, 2024, the Company recorded $4.6 million in warranty expense from changes in estimates, of which $8.4 million related to the Company proactively addressing certain component defects in a specific population of products that did not meet the Company’s high quality standards, $0.5 million related to increasing the warranty term to 20 years for microinverter units sold in Mexico, Colombia, Panama, Costa Rica andnine Caribbean countries, partially offset by $4.3 million related to a decrease in product replacement costs for Enphase IQ Battery systems and related accessories as the Company expanded its network of field service technicians in the United States to provide direct homeowner assistance.

In the nine months ended September 30, 2025, the Company recorded $13.9 million in warranty expense from changes in estimates, of which $15.3 million related to an increase in product replacement costs primarily for estimated additional tariff costs and $5.5 million related to continuing analysis of field performance data and diagnostic root-cause failure analysis primarily for prior generation products, partially offset by $6.9 million related to continuing analysis of field performance data and diagnostic root-cause failure analysis for Enphase IQ Battery systems. In the nine months ended September 30, 2024, the Company recorded $8.1 million in warranty benefit from changes in estimates, of which $15.5 million related to a decrease in product replacement costs primarily associated with Enphase IQ Battery systems and related accessories as the Company expanded its network of field service technicians in the United States, Europe and Australia to provide direct homeowner assistance, and $4.4 million related to continuing analysis of field performance data and diagnostic root-cause failure analysis for early generations of IQ Battery. This benefit was partially offset by $10.2 million related to the Company proactively addressing certain component defects in a specific population of products that did not meet the Company’s high quality standards, $1.1 million for continuing analysis of field performance data and diagnostic root-cause failure analysis for all other products, as well as $0.5 million related to increasing the warranty term to 20 years for microinverter units sold in Mexico, Colombia, Panama, Costa Rica andnine Caribbean countries.

7. 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.

•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:

Notes due 2028 and Notes due 2026

The Company carries the Notes due 2028 (as defined in Note 9, “Debt”) and Notes due 2026 (as defined in Note 9, “Debt”) at face value less unamortized debt issuance costs on its condensed consolidated balance sheets. As of September 30, 2025, the fair value of the Notes due 2028 and Notes due 2026 was $494.5 million and $617.8 million, respectively. The fair value as of September 30, 2025 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 and Notes due 2026 to be a Level 2 measurement as they are not actively traded.

Investments in debt securities

In September 2025, the Company invested $6.3 million in cash to purchase convertible notes with an aggregate principal amount of $7.0 million issued by Complete Solaria, Inc. (“Complete Solaria”). The Company elected the fair value option for this investment. Accordingly, the convertible notes are measured at fair value on a recurring basis, with changes in fair value recognized in “Other expense, net” in the Company’s consolidated statement of operations. At initial recognition, the fair value of the notes approximated the purchase price. Subsequent changes in fair value, including those attributable to changes in credit risk and the embedded conversion feature, will be reflected in the Company’s condensed consolidated statements of operations. Interest income is accrued and recognized based on the stated coupon rate.

Investments in debt securities is recorded in “Other assets” on the accompanying condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024. The changes in the balance in investments in debt securities during the period were as follows:

Investment in tax equity fund

In January 2025, June 2025 and September 2025, the Company made an investment in a tax equity fund contributing $6.9 million, $1.4 million and $1.4 million, respectively. The Company has elected to report its investment at fair value, which is equal to the present value of the remaining future cash flows expected to be received from the investment. The investment is included in “Other assets” on the accompanying condensed consolidated balance sheet as of September 30, 2025.

As of September 30, 2025, the fair value of the Company’s investment in tax equity fund was $3.1 million, representing its proportionate share of the tax equity fund’s net assets. As of September 30, 2025, the Company recognized a deferred tax asset of $6.2 million related to the difference between the initial investment amounts and its fair value. Additionally, the Company recognized an expense of $0.5 million for both thethree and nine months ended September 30, 2025, respectively, included in “Other expense, net” in the condensed consolidated statements of operations.

Issuance of Loan Receivables

The loan receivables represent financing arrangements provided to certain direct and indirect customers. These loan receivables have contractual maturities ranging fromone tothree years and are recorded on amortized cost basis. Interest income is accrued and recognized based on the stated coupon rate, included in “Other expense, net” in the condensed consolidated statements of operations. The Company’s short-term and long-term loan receivables were as follows:

There wasno activity in allowance for credit losses during the three and nine months ended September 30, 2025.

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 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 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:

Quantitative and Qualitative Information about Level 3 Fair Value Measurements

As of September 30, 2025 and December 31, 2024, the significant unobservable inputs used in the fair value measurement of the Company’s liabilities designated as Level 3 were as follows:

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 discount rate is determined by reference to the Company’s own credit standing at the fair value measurement date, which increased in the nine months ended September 30, 2025 due to the increase in the risk free rate and market spreads, contributing to the $5.7 million change in warranty benefit 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 $1.4 million increase to the liability. Decreasing the profit element and risk premium by 100 basis points would result in a $1.4 million reduction to the liability. Increasing the discount rate by 100 basis points would result in a $12.6 million decrease to the liability. Decreasing the discount rate by 100 basis points would result in a $14.2 million increase to the liability.

8. RESTRUCTURING AND ASSET IMPAIRMENT CHARGES

2024 Restructuring Plan

In the fourth quarter of 2024, the Company implemented a restructuring plan (the “2024 Restructuring Plan”) designed to better align its workforce and cost structure with the Company’s business needs, strategic priorities and ongoing commitment to profitable growth, while increasing operational efficiencies and reducing operating cost. The Company plans to complete its restructuring activities under the 2024 Restructuring Plan in the fourth quarter of 2025.

The following table presents the details of the Company’s restructuring and asset impairment charges under the 2024 Restructuring Plan for the three and nine months ended September 30, 2025:

The following table provides information regarding changes in the Company’s accrued restructuring balances under the 2024 Restructuring Plan for the periods indicated:

2023 Restructuring Plan

In the fourth quarter of 2023, the Company implemented a restructuring plan (the “2023 Restructuring Plan”) designed to increase operational efficiencies and execution, reduce operating costs, and better align the Company’s workforce and cost structure with current market conditions, and the Company’s business needs, strategic priorities and ongoing commitment to profitable growth. The Company completed its restructuring activities under the 2023 Restructuring Plan in the fourth quarter of 2024 and substantially all of the remaining liabilities as of December 31, 2024, were settled during the nine months ended September 30, 2025.