Enphase Energy, Inc.

9. 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

The Company carries the Notes due 2028 (as defined in Note 11, “Debt”) at face value less unamortized debt issuance costs on its condensed consolidated balance sheets. As of March 31, 2026, the fair value of the Notes due 2028 was $510.3 million. The fair value as of March 31, 2026 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 to be a Level 2 measurement as they are not actively traded.

Investments in debt securities

Investments in debt securities are recorded in “Other assets” on the condensed consolidated balance sheets. The changes in the balance of investments in debt securities were as follows:

In September 2021, the Company invested approximately $13.0 million in secured convertible promissory notes issued by the stockholders of a privately-held company. In February 2026, the notes were amended to extend the maturity date and modify certain other contractual terms. The notes are classified as debt securities, and the Company has elected the fair value option, with changes in fair value recognized in “Other income (expense), net” in the condensed consolidated statements of operations. The notes are categorized as Level 3 within the fair value hierarchy, as the valuation incorporates significant unobservable inputs. The fair value of $11.0 million as of both March 31, 2026 and December 31, 2025 was estimated using a discounted cash flow methodology, which included assumptions related to implied yield and estimated duration.

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 an amortized cost basis. Interest income is accrued and recognized based on the stated coupon rate, included in “Other income (expense), net” on the condensed consolidated statements of operations. The principal outstanding under the loan receivables were as follows:

There wasno activity in the allowance for credit losses related to loan receivables during the three months ended March 31, 2026.

Warranty 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 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 non-financial 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 March 31, 2026 and December 31, 2025, 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, which decreased 2.6% during the three months ended March 31, 2026, contributing to a $3.5 million change in warranty benefit captured in “Change in profit element and risk premium” in the table above. The discount rate is determined by reference to the Company’s own credit standing at the fair value measurement date. 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 $12.5 million decrease to the liability. Decreasing the discount rate by 100 basis points would result in a $14.1 million increase to the liability.

10. RESTRUCTURING AND ASSET IMPAIRMENT CHARGES

2026 Restructuring Plan

In January 2026, the Company implemented a restructuring plan (the “2026 Restructuring Plan”) designed to better align its workforce and cost structure with its business needs, strategic priorities and ongoing commitment to profitable growth.

The following table presents the details of the Company’s restructuring charges under the 2026 Restructuring Plan:

The following table provides information regarding changes in the Company’s accrued restructuring balances under the 2026 Restructuring Plan for the periods indicated:

11. DEBT

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

The following table presents the total amount of interest cost recognized in the condensed consolidated statement of operations relating to the Company’s notes:

Convertible Senior Notes due 2028

On March 1, 2021, the Company issued $575.0 million aggregate principal amount of its 0.0% convertible senior notes due 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). 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.

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., $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 on each applicable trading day; (2) during thefive business day period after anyfive 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.

As of March 31, 2026, the sales price of the Company’s common stock was not greater than or equal to $370.33 (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 March 31, 2026. As a result, the Notes due 2028 are not convertible at the holders’ option. Accordingly, the Company classified the net carrying amount of the Notes due 2028 of $572.5 million as Debt, non-current on the condensed consolidated balance sheet as of March 31, 2026. As of March 31, 2026, the unamortized deferred issuance cost for the Notes due 2028 was $2.5 million on the condensed consolidated balance sheet.

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. 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 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 were recorded in stockholders’ equity, and they were not accounted for as derivatives and are not remeasured each reporting period.

Convertible Senior Notes due 2026

On March 2, 2026, the Company settled all of its outstanding 0.0% convertible senior notes due 2026 (the “Notes due 2026”) for cash consideration of $632.5 million, representing payment of the full principal amount. No shares of the Company’s common stock were issued in connection with the settlement, as the conversion value of the Notes due 2026 was less than the principal amount outstanding. As a result of the settlement, there wereno Notes due 2026 outstanding as of March 31, 2026.

Notes due 2026 Hedge and Warrant Transactions

In connection with the issuance of the Notes due 2026, the Company entered into privately negotiated convertible note hedge transactions (the “Notes due 2026 Hedge”). The Notes due 2026 Hedge was intended to reduce potential dilution to the Company’s common stock upon any conversion of the Notes due 2026 and/or to offset any cash payments the Company would have been required to make in excess of the principal amount upon conversion. The Notes due 2026 Hedge expired on March 2, 2026 in connection with the settlement of the Notes due 2026. No value was realized from the Notes due 2026 Hedge at expiration, as the applicable strike price exceeded the market price of the Company’s common stock.

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. 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. 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 and the 2026 Warrants transactions were recorded in stockholders’ equity, and they were not accounted for as derivatives and are not remeasured each reporting period.

12. COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases office facilities under noncancellable operating leases that expire on various dates through 2034, some of which may include options to extend the leases for up to 12 years.

The components of lease expense were as follows:

The components of right of use assets and lease liabilities were as follows:

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

Undiscounted cash flows of operating lease liabilities as of March 31, 2026 were as follows:

Purchase Obligations

The Company has contractual obligations related to component inventory that it and its contract manufacturers procure on its behalf in accordance with its production forecast as well as other inventory related purchase commitments. As of March 31, 2026, these purchase obligations totaled approximately $275.0 million.

Litigation

The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and that have not been fully resolved. An accrual for a loss contingency is recognized when it is probable and the amount of loss or recovery can be reasonably estimated. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management’s expectations, the Company’s business, results of operations, financial position and cash flows for that reporting period could be materially adversely affected. As of March 31, 2026, in the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss greater than a recorded accrual, concerning loss contingencies for asserted legal and other claims.

Tariff Contingencies

On February 20, 2026, the United States Supreme Court issued a ruling in Learning Resources, Inc. v. Trump invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”). Following this ruling, the U.S. Court of International Trade issued an order directing U.S. Customs and Border Protection (“CBP”) to establish a process for the submission and review of refund claims related to affected IEEPA tariffs.

On April 20, 2026, CBP launched an online portal through which companies may submit IEEPA tariff refund requests. Submitted claims are subject to review and validation by CBP, and the approval, timing, and amount of any refunds remain subject to CBP determination.

Based on the Company’s submitted refund requests related to tariffs paid during fiscal 2025 and the first quarter of fiscal 2026, the Company may be eligible to receive tariff refunds. However, because the approval and timing of such refunds remain uncertain and are contingent upon CBP’s review and validation process, the Company has not recognized a receivable as of March 31, 2026 and will not recognize such amounts until they are realized or realizable. The ultimate impact of any approved refunds, if any, could be material.

13. STOCKHOLDERS' EQUITY

In July 2023, the board of directors authorized a share repurchase program (the “2023 Repurchase Program”) pursuant to which the Company was authorized to repurchase 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.

During the three months ended March 31, 2026, there wereno repurchases of common stock. During the three months ended March 31, 2025, the Company repurchased and subsequently retired 1,594,105 shares of common stock from the open market at an average cost of $62.71 per share for a total of $100.0 million.

As of March 31, 2026, $268.7 million remains available for repurchasing shares under the 2023 Repurchase Program.

14. STOCK-BASED COMPENSATION

Stock-based Compensation Expense

Stock-based compensation expense for all stock-based awards, which includes shares purchased under the Company’s employee stock purchase plan (“ESPP”), restricted stock units (“RSUs”) and 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.

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

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

As of March 31, 2026, there was $303.1 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 years.

Equity Awards Activity

Stock Options

No stock options were granted during the three months ended March 31, 2026 and 2025. Stock option activity during the period, as well as stock options outstanding as of March 31, 2026, were immaterial.

Restricted Stock Units

The following table summarizes RSU activity:

(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 March 31, 2026 is based on the closing price of the last trading day during the period ended March 31, 2026. The Company’s stock fair value used in this computation was $37.81 per share.

Performance Stock Units

The following table summarizes PSU activity:

(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 March 31, 2026 is based on the closing price of the last trading day during the period ended March 31, 2026. The Company’s stock fair value used in this computation was $37.81 per share.

15. INCOME TAXES

For the three months ended March 31, 2026, the Company recognized an income tax benefit of $6.5 million, on a loss before income taxes of $13.9 million, compared to an income tax provision of $17.2 million, on income before income taxes of $46.9 million for the three months ended March 31, 2025.

The income tax benefit for the three months ended March 31, 2026 was calculated using the annualized effective tax rate method and primarily reflects tax benefits attributable to losses generated in the United States and the impact of AMPTC under Section 45X of the Internal Revenue Code of 1986, as amended, partially offset by income in profitable foreign jurisdictions and tax expense related to equity‑based compensation shortfalls. AMPTC is generated based on qualifying production and shipment activity and are therefore directly related to the Company’s pretax income; however, the AMPTC is treated as permanent items for income tax accounting purposes and is excluded from the calculation of the annualized effective tax rate.

The income tax provision for the three months ended March 31, 2025 primarily reflected tax expense in profitable U.S. and foreign jurisdictions, tax expense related to equity‑based compensation shortfalls, and discrete prior‑year return‑to‑provision adjustments.

In accordance with ASC 740‑270, the Company computed its provision for income taxes based on a projected annual effective tax rate, excluding the effects of permanent items and losses generated in jurisdictions for which realization of the related tax benefits is not considered more likely than not. As a result, the Company’s effective tax rate may differ significantly from the U.S. federal statutory rate and may not be indicative of the Company’s annual effective tax rate.

In March 2026, the Company revoked its direct pay election and made a transfer election on its timely filed 2025 federal income tax return to sell $235.0 million of AMPTC generated during 2025 to a third party. The transfer election did not have a material impact on the income tax provision for the three months ended March 31, 2026.

16. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed in a similar manner, but it also includes the effect of potential common shares outstanding during the period, when dilutive.

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

Diluted earnings per share for the three months ended March 31, 2025 included the dilutive effect of potentially dilutive common shares by application of the treasury stock method for stock options, RSUs, PSUs, ESPP, Notes due 2025, and includes potentially dilutive common shares by application of the if-converted method for the Notes due 2026 and the Notes due 2028. To the extent potential common shares are antidilutive, they are excluded from the calculation of diluted net income per share.

The Company under the relevant sections of the indenture, irrevocably may elect to settle principal in cash and any excess conversion value in cash or shares of the Company’s common stock for the Notes due 2028. If and when the Company makes such election, there would be no adjustment to net income and the Company would use the average share price to determine the potential number of shares issuable upon an assumed conversion to be included in the diluted share count.

The Notes due 2026 were convertible at any time from September 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date of March 1, 2026. Upon any conversion, the Company had elected, on August 28, 2025, to settle the Notes due 2026 with a combination settlement method, whereby the principal amount would have been settled in cash and any excess conversion value would have been settled in shares of the Company's common stock. As a result, after the election date, there was no adjustment to net income and the Company used the average share price to determine the potential number of shares issuable upon an assumed conversion to be included in the diluted share count.

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

17. SEGMENT INFORMATION

The Company’s chief operating decision maker is the Chief Executive Officer (the “CEO”). The Company hasone business activity, which entails the design, development, manufacture and sale of solutions for the solar PV industry. There are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level. Accordingly, management has determined that the Company has a single operating and reportable segment. The primary measure of segment profit or loss is consolidated net income as presented below and is used by the CEO for the purpose of evaluating segment performance and allocation of budget to support business expansion, new product development and operational efficiencies.

(1) Represents consolidated cost of revenue excluding stock-based compensation, acquisition related amortization, fair value of AMPTC generated and loss from sale of AMPTC generated during 2025.

(2) Represents costs incurred in connection with acquisition-related activities, which are not indicative of normal, recurring operating expenses, and acquisition related amortization.

(3) Represents consolidated restructuring and asset impairment charges excluding stock-based compensation.

(4) Represents consolidated research and development excluding stock-based compensation.

(5) Represents consolidated sales and marketing excluding stock-based compensation and acquisition related amortization.

(6) Represents consolidated general and administrative excluding stock-based compensation and acquisition related expenses.

See Note 2, “Revenue Recognition”, for the table presenting net revenues (based on the destination of shipments).

18. RELATED PARTY TRANSACTIONS

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 SunPower Inc. (“SunPower”) (formerly named “Complete Solaria, Inc.”). The CEO of SunPower also serves as a member of the Company’s Board of Directors, and therefore this transaction constitutes a related party transaction. The notes bear an interest rate of 7% per annum and mature on July 1, 2029. The initial conversion rate is 467.8363 shares of SunPower common stock per $1,000 principal amount of notes (equivalent to a conversion price of approximately $2.14 per share). The terms of the transaction were reviewed and approved by the Company’s Audit Committee and were determined to be on an arm’s-length basis.

On March 1, 2026 and April 7, 2026, the Company, in its capacity as a holder of the SunPower notes, executed a consent that allows SunPower to issue up to $50.0 million of senior secured notes that can be secured by a first‑priority lien on SunPower’s assets and can rank senior to the Company’s unsecured convertible notes. The consent was provided pursuant to the provisions of the existing indenture, which was not modified or amended, and will terminate if the first closing does not occur on or before May 1, 2026. The Company’s Audit Committee reviewed and approved the consent, and the Company believes the consent was provided on terms consistent with those offered to other noteholders and continues to be on an arm’s‑length basis.

19. SUBSEQUENT EVENTS

On April 10, 2026, the Company entered into a $30.0 million secured revolving credit facility with a private-held company which the Company holds a non-controlling equity interest. The facility matures on the earlier of April 30, 2027 or an event of default and bears interest at 9% per annum. In April 2026, the Company funded an initial borrowing of approximately $6.1 million.