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.

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. Certain prior period amounts have been reclassified to conform to the current period presentation.

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, changes in stockholders’ equity, and cash flows for the interim periods indicated. The results of operations for the three and nine months ended September 30, 2026 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 benefit (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 rates 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 consolidated 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 year ended December 31, 2025, filed with the SEC on February 17, 2026 (the “Form 10‑K”).

Summary of Significant Accounting Policies

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.

Recently Issued Accounting Pronouncements

Not Yet Effective

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 of ASU 2024-03 on its condensed consolidated financial statements disclosures.

In September 2025, the FASB issued ASU 2025-06, “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 condensed consolidated financial statements.

In December 2025, the FASB issued ASU 2025-10, “Accounting for Government Grants Received by Business Entities” (“ASU 2025-10”), which establishes the accounting and presentation for government grants received by a business entity. ASU 2025-10 is effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. Early adoption is permitted. ASU 2025-10 permits an entity to apply the new guidance using a modified prospective basis, a modified retrospective basis, or a full retrospective basis. The Company has evaluated the impact of ASU 2025-10 and will adopt the standard using the modified retrospective transition method effective January 1, 2027. The Company does not expect the adoption of ASU 2025-10 to have a material impact on its condensed consolidated financial statements.

In December 2025, the FASB issued ASU 2025-12, “Codification Improvements” (“ASU 2025-12”), which addresses various improvements across a wide range of topics in the FASB Accounting Standards Codification (“ASC”) to correct, clarify and otherwise enhance the guidance. ASU 2025-12 is effective for fiscal years beginning after December 15, 2026, including interim reporting periods within those fiscal years. Early adoption is permitted, and the transition method may vary on an issue-by-issue basis. The Company is currently evaluating the impact from ASU 2025-12 on its condensed 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, 2026.

Significant changes in the balances of contract assets (prepaid expenses and other assets) in the nine months ended September 30, 2026 were as follows (in thousands):

Contract liabilities are recorded as deferred revenue on the 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.

As of September 30, 2026, contract liabilities included approximately $51.7 million of cash prepayments or billings under the Investment Tax Credit Five Percent Safe Harbor method for products to be delivered in the fourth quarter of 2026, and approximately $46.8 million of cash prepayments or billings under the Physical Work Test beginning-of-construction method for products to be delivered through the second quarter of 2031.

Significant changes in contract liabilities (deferred revenue) in the nine months ended September 30, 2026 were as follows (in thousands):

Remaining Performance Obligations

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

3. INVENTORY

Inventory consisted of the following:

4. GOODWILL AND INTANGIBLE ASSETS

The Company’s goodwill was as follows:

The Company’s purchased intangible assets were as follows:

During the three and nine months ended September 30, 2026, intangible assets increased by less than approximately $0.1 million due to the impact of foreign currency translation.

Amortization expense related to finite-lived intangible assets was 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 is presented below:

5. CASH EQUIVALENTS AND MARKETABLE SECURITIES

Cash equivalents and marketable securities consisted of the following:

The following table summarizes the contractual maturities of the Company’s cash equivalents and marketable securities as of September 30, 2026:

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

As of September 30, 2026, the Company also holds equity securities measured at fair value with changes in fair value recognized in Other income (expense), net. Refer to Note 18, “Related Party Transactions” for additional information.

6. OTHER FINANCIAL INFORMATION

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

Accrued Liabilities

Accrued liabilities consist of the following:

7. 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 United States enacted the Inflation Reduction Act of 2022 (“IRA”), which includes credits under the Advanced Manufacturing Production Tax Credit (“AMPTC”), to incentivize clean energy component sourcing and production, including for the production of microinverters in the United States. 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 credits under AMPTC as a reduction to cost of revenues in the condensed consolidated statements of operations for the microinverters manufactured in the United States and sold to customers. Such credit is also reflected as an increase to grant receivable or prepaid income tax on the Company’s condensed consolidated balance sheets within prepaid expenses and other current assets.

The following table presents the benefits recognized from AMPTC in the three and nine months ended September 30, 2026 and 2025.

(1) In March 2026, the Company entered into an agreement for the sale of approximately $235.0 million of AMPTC it generated during 2025 at 93% of face value, resulting in a discount of approximately $16.5 million. The Company also incurred approximately $2.5 million in transaction-related fees.

In June 2026, the Company entered into an agreement whereby the Company agreed to sell approximately $150.0 million of AMPTC generated during 2026 at 93% of face value. Associated with this agreement, the Company sold approximately $75.0 million of AMPTC generated in the first and second quarter of 2026 for approximately $69.8 million and incurred approximately $0.7 million in transaction-related fees. In October 2026, the Company sold $37.5 million of AMPTCs generated in the first and second quarter of 2026, for approximately $34.9 million.

8. WARRANTY OBLIGATIONS

The Company’s warranty obligation activities were as follows:

(1) Refer to Note 9, “Fair Value Measurements” for additional information about the monetary impact for changes in discount rate and changes in the profit element and risk premium.

Changes in Estimates

On a quarterly basis, the Company uses the best and most complete underlying information available, following a consistent, systematic and rational methodology to determine its warranty obligations. The Company considers all available evidence to assess the reasonableness of all key assumptions underlying its estimated warranty obligations for each generation of microinverter, battery and related accessories. The changes in estimates discussed below resulted from consideration of new or additional information becoming available and subsequent developments. Changes in estimates included in the table above were comprised of the following:

In the three months ended September 30, 2026, the Company recorded approximately $1.4 million in warranty benefit from changes in estimates, primarily due to approximately $1.4 million change in IQ Battery replacement costs. In the three months ended September 30, 2025, the Company recorded approximately $0.7 million in warranty expense from changes in estimates, of which approximately $7.6 million related to an increase in product replacement costs, primarily for estimated additional tariff costs, partially offset by approximately $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, 2026, the Company recorded approximately $9.1 million in warranty benefit from changes in estimates, primarily due to change in replacement costs from both lower tariff costs for majority of products and lower labor assumption for IQ Battery to be incurred.

In the nine months ended September 30, 2025, the Company recorded approximately $13.9 million in warranty expense from changes in estimates, of which approximately $15.3 million related to an increase in product replacement costs, primarily for estimated additional tariff costs and approximately $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 approximately $6.9 million related to continuing analysis of field performance data and diagnostic root-cause failure analysis for Enphase IQ Battery systems.