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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 September 30, 2023
or
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
enpha15.jpg
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)
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.00001 par value per shareENPHNasdaq 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 October 20, 2023, there were 136,551,216 shares of the registrant’s common stock outstanding, $0.00001 par value per share.

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


ENPHASE ENERGY, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
Page

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

PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements (Unaudited)
ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
As of
September 30,
2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents$290,075 $473,244 
Marketable securities1,493,809 1,139,599 
Accounts receivable, net of allowances of $1,947 and $979 at September 30, 2023 and December 31, 2022, respectively
560,286 440,896 
Inventory174,114 149,708 
Prepaid expenses and other assets80,346 60,824 
Total current assets2,598,630 2,264,271 
Property and equipment, net173,005 111,367 
Operating lease, right of use asset, net21,164 21,379 
Intangible assets, net79,147 99,541 
Goodwill213,193 213,559 
Other assets215,275 169,291 
Deferred tax assets, net253,528 204,872 
Total assets$3,553,942 $3,084,280 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$90,116 $125,085 
Accrued liabilities434,825 295,939 
Deferred revenues, current114,031 90,747 
Warranty obligations, current40,750 35,556 
Debt, current94,665 90,892 
Total current liabilities774,387 638,219 
Long-term liabilities:
Deferred revenues, non-current366,032 281,613 
Warranty obligations, non-current148,116 95,890 
Other liabilities53,762 43,520 
Debt, non-current1,196,947 1,199,465 
Total liabilities2,539,244 2,258,707 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.00001 par value, 300,000 shares authorized; and 136,512 shares and 136,441 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
1 1 
Additional paid-in capital899,107 819,119 
Accumulated earnings125,352 17,335 
Accumulated other comprehensive loss(9,762)(10,882)
Treasury stock, at cost  
Total stockholders’ equity1,014,698 825,573 
Total liabilities and stockholders’ equity$3,553,942 $3,084,280 

See Notes to Condensed Consolidated Financial Statements.
Enphase Energy, Inc. | 2023 Form 10-Q | 3

ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Net revenues$551,082 $634,713 $1,988,216 $1,606,201 
Cost of revenues289,069 366,797 1,076,490 942,307 
Gross profit262,013 267,916 911,726 663,894 
Operating expenses:
Research and development54,873 44,188 172,045 119,163 
Sales and marketing55,357 55,257 178,383 150,189 
General and administrative33,794 32,436 104,456 102,647 
Restructuring charges 594 870 594 
Total operating expenses144,024 132,475 455,754 372,593 
Income from operations117,989 135,441 455,972 291,301 
Other income (expense), net
Interest income19,669 3,680 49,235 4,936 
Interest expense(2,196)(2,255)(6,571)(7,159)
Other income (expense), net1,883 (2,611)2,276 (5,208)
Total other income (expense), net19,356 (1,186)44,940 (7,431)
Income before income taxes137,345 134,255 500,912 283,870 
Income tax provision(23,392)(19,443)(82,895)(40,261)
Net income$113,953 $114,812 $418,017 $243,609 
Net income per share:
Basic$0.84 $0.85 $3.06 $1.80 
Diluted$0.80 $0.80 $2.92 $1.70 
Shares used in per share calculation:
Basic136,165 135,633 136,491 135,056 
Diluted143,863 145,962 145,081 144,058 

See Notes to Condensed Consolidated Financial Statements.
Enphase Energy, Inc. | 2023 Form 10-Q | 4

ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Net income$113,953 $114,812 $418,017 $243,609 
Other comprehensive income (loss):
Foreign currency translation adjustments(3,742)(3,364)(2,234)(5,670)
Marketable securities
Change in net unrealized gain (loss), net of income tax provision (benefit) of $293 and $1,179 for the three and nine months ended September 30, 2023, respectively, and $(328) and $(2,759) for the three and nine months ended September 30, 2022, respectively.
832 (933)3,354 (7,852)
Comprehensive income$111,043 $110,515 $419,137 $230,087 
    

See Notes to Condensed Consolidated Financial Statements.
Enphase Energy, Inc. | 2023 Form 10-Q | 5

ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Common stock and paid-in capital
Balance, beginning of period$858,040 $713,474 $819,120 $837,925 
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 awards719 693 1,315 5,280 
Issuance of common stock related to 365 Pronto, Inc. post combination expense— — 10,307 — 
Payment of withholding taxes related to net share settlement of equity awards(8,465)(4,589)(93,100)(19,396)
Settlement of convertible notes due 20235,000  5,000  
Stock-based compensation expense43,814 52,435 156,466 146,171 
Balance, end of period$899,108 $762,013 $899,108 $762,013 
Treasury stock, at cost
Balance, beginning of period$(68,140)$ $ $ 
Purchases of treasury stock, at cost— — (68,140)— 
Treasury stock retired and reclassed to accumulated earnings68,140 — 68,140 — 
Balance, end of period$ $ $ $ 
Accumulated earnings (deficit)
Balance, beginning of period$189,539 $(251,230)$17,335 $(405,737)
Cumulative-effect adjustment to accumulated deficit related to the adoption of ASU 2020-06— — — 25,710 
Treasury stock retired and reclassed to accumulated earnings(68,140)— (68,140)— 
Repurchase of common stock(110,000)— (241,860)— 
Net income113,953 114,812 418,017 243,609 
Balance, end of period$125,352 $(136,418)$125,352 $(136,418)
Accumulated other comprehensive loss
Balance, beginning of period$(6,852)$(11,245)$(10,882)$(2,020)
Foreign currency translation adjustments(3,742)(3,364)(2,234)(5,670)
Change in net unrealized gain (loss) on marketable securities, net of tax832 (933)3,354 (7,852)
Balance, end of period$(9,762)$(15,542)$(9,762)$(15,542)
Total stockholders' equity, ending balance
$1,014,698 $610,053 $1,014,698 $610,053 

See Notes to Condensed Consolidated Financial Statements.
Enphase Energy, Inc. | 2023 Form 10-Q | 6

ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
20232022
Cash flows from operating activities:
Net income$418,017 $243,609 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization53,867 42,766 
Net amortization (accretion) of premium (discount) on marketable securities(12,611)2,091 
Provision for doubtful accounts1,282 52 
Asset impairment903 1,200 
Non-cash interest expense6,254 6,090 
Net gain from change in fair value of debt securities(5,408)(390)
Stock-based compensation157,635 153,157 
Deferred income taxes(38,295)15,732 
Changes in operating assets and liabilities:
Accounts receivable(118,249)(18,680)
Inventory(24,406)(72,051)
Prepaid expenses and other assets(57,376)(20,826)
Accounts payable, accrued and other liabilities117,128 42,288 
Warranty obligations57,420 32,207 
Deferred revenues105,169 63,858 
Net cash provided by operating activities661,330 491,103 
Cash flows from investing activities:
Purchases of property and equipment(90,326)(30,014)
Investments in private companies(15,000)(1,000)
Business acquisitions, net of cash acquired (27,680)
Purchases of marketable securities(1,743,674)(572,237)
Maturities and sale of marketable securities1,406,608 377,156 
Net cash used in investing activities(442,392)(253,775)
Cash flows from financing activities:
Proceeds from exercise of equity awards and employee stock purchase plan1,315 5,280 
Payment of withholding taxes related to net share settlement of equity awards(93,100)(19,396)
Repurchase of common stock(310,000) 
Net cash used in financing activities(401,785)(14,116)
Effect of exchange rate changes on cash and cash equivalents(322)(4,945)
Net increase (decrease) in cash and cash equivalents(183,169)218,267 
Cash and cash equivalents—Beginning of period473,244 119,316 
Cash and cash equivalents—End of period$290,075 $337,583 
Supplemental cash flow disclosure:
Supplemental disclosures of non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable$16,183 $5,366 
Purchases of property and equipment through tenant improvement allowance$ $748 

See Notes to Condensed Consolidated Financial Statements.
Enphase Energy, Inc. | 2023 Form 10-Q | 7

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 nine months ended September 30, 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.
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, 2022 filed with the SEC on February 13, 2023 (the “Form 10‑K”).
Summary of Significant Accounting Policies
Except for the accounting policy for treasury stock added as a result of the common stock repurchased but not retired, 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.
Treasury Stock, at Cost
The Company accounts for treasury stock at cost per Accounting Standards Codification (“ASC”) 505. This results in a reduction of stockholders’ equity on the Company’s condensed consolidated balance sheet and on the
Enphase Energy, Inc. | 2023 Form 10-Q | 8

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. During the three months ended September 30, 2023, the Company retired all of the outstanding treasury stock of 420,957 shares and as a result reclassed the value of such shares from treasury stock, at cost to accumulated earnings.
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 credits under 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 nine months ended September 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 October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“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 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 effective January 1, 2023. The adoption of ASU 2021-08 did not have an impact on the Company’s condensed consolidated financial statements.
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 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
September 30,
Nine Months Ended
September 30,
2023202220232022
(In thousands)
Primary geographical markets:
U.S.$350,447 $451,787 $1,240,990 $1,243,907 
International200,635 182,926 747,226 362,294 
Total$551,082 $634,713 $1,988,216 $1,606,201 
Timing of revenue recognition:
Products delivered at a point in time$522,419 $614,928 $1,908,193 $1,550,942 
Products and services delivered over time28,663 19,785 80,023 55,259 
Total$551,082 $634,713 $1,988,216 $1,606,201 
Enphase Energy, Inc. | 2023 Form 10-Q | 9

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:
September 30,
2023
December 31,
2022
(In thousands)
Receivables$560,286 $440,896 
Short-term contract assets (Prepaid expenses and other assets)39,518 32,130 
Long-term contract assets (Other assets)125,972 100,991 
Short-term contract liabilities (Deferred revenues, current)114,031 90,747 
Long-term contract liabilities (Deferred revenues, non-current)366,032 281,613 
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 for the nine months ended September 30, 2023.
Significant changes in the balances of contract assets (prepaid expenses and other assets) as of September 30, 2023 are as follows (in thousands):
Contract Assets
Contract Assets, beginning of period$133,121 
Amount recognized(27,564)
Increased due to shipments59,933 
Contract Assets, end of period$165,490 
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 the balances of contract liabilities (deferred revenues) as of September 30, 2023 are as follows (in thousands):
Contract Liabilities
Contract Liabilities, beginning of period$372,360 
Revenue recognized(80,023)
Increased due to billings187,726 
Contract Liabilities, end of period$480,063 
Enphase Energy, Inc. | 2023 Form 10-Q | 10

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:
September 30,
2023
(In thousands)
Fiscal year:
2023 (remaining three months)$29,240 
2024112,125 
2025103,985 
202688,345 
202768,755 
Thereafter77,613 
Total$480,063 
3.    OTHER FINANCIAL INFORMATION
Inventory
Inventory consists of the following:
September 30,
2023
December 31,
2022
(In thousands)
Raw materials$28,497 $34,978 
Finished goods145,617 114,730 
Total inventory$174,114 $149,708 

Accrued Liabilities
Accrued liabilities consist of the following:
September 30,
2023
December 31,
2022
(In thousands)
Customer rebates and sales incentives$211,257 $153,916 
Income tax payable91,837 16,146 
Liability due to supply agreements40,343 17,341 
VAT payable24,363 19,852 
Freight18,283 35,011 
Salaries, commissions, incentive compensation and benefits15,723 18,009 
Operating lease liabilities, current5,397 5,371 
Post combination expense accrual 9,138 
Liabilities related to restructuring activities 714 
Other27,622 20,441 
Total accrued liabilities$434,825 $295,939 
Enphase Energy, Inc. | 2023 Form 10-Q | 11

ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4.    GOODWILL AND INTANGIBLE ASSETS
The Company’s goodwill as of September 30, 2023 and December 31, 2022 were as follows:
GoodwillSeptember 30,
2023
December 31,
2022
(In thousands)
Goodwill, beginning of period$213,559 $181,254 
Goodwill acquired 33,354 
Currency translation adjustment(366)(1,049)
Goodwill, end of period$213,193 $213,559 
The Company’s purchased intangible assets as of September 30, 2023 and December 31, 2022 were as follows:
September 30, 2023December 31, 2022
GrossAdditionsAccumulated AmortizationNetGrossAdditionsAccumulated AmortizationNet
(In thousands)
Intangible assets:
Other indefinite-lived intangibles$286 $— $— $286 $286 $— $— $286 
Intangible assets with finite lives:
 Developed technology51,044  (24,632)26,412 38,650 12,394 (17,260)33,784 
 Customer relationships55,106  (27,069)28,037 41,021 14,085 (19,702)35,404 
 Trade names37,700  (13,288)24,412 37,700  (7,633)30,067 
 Order backlog600  (600) 600  (600) 
Total purchased intangible assets$144,736 $ $(65,589)$79,147 $118,257 $26,479 $(45,195)$99,541 
During the nine months ended September 30, 2023, intangible assets acquired 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:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(In thousands)
Developed technology$2,456 $2,012 $7,366 $5,888 
Customer relationships
2,456 2,066 7,364 5,891 
Trade names1,885 1,885 5,655 5,655 
Order backlog   600 
Total amortization expense
$6,797 $5,963 $20,385 $18,034 
Amortization of developed technology is recorded to cost of sales, 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.
Enphase Energy, Inc. | 2023 Form 10-Q | 12

ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The expected future amortization expense of intangible assets as of September 30, 2023 is presented below:
September 30,
2023
(In thousands)
Fiscal year:
2023 (remaining three months)$6,795 
202424,365 
202523,041 
202619,482 
20275,178 
Total$78,861 
5.    CASH EQUIVALENTS AND MARKETABLE SECURITIES
The cash equivalents and marketable securities consist of the following:
As of September 30, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueCash EquivalentsMarketable Securities
(In thousands)
Money market funds$112,659 $ $ $112,659 $112,659 $ 
Certificates of deposit53,415 14 (51)53,378  53,378 
Commercial paper90,886  (233)90,653  90,653 
Corporate notes and bonds360,042 43 (2,696)357,389  357,389 
U.S. Treasuries465,322 22 (501)464,843  464,843 
U.S. Government agency securities530,140 209 (2,803)527,546  527,546 
Total$1,612,464 $288 $(6,284)$1,606,468 $112,659 $1,493,809 
As of December 31, 2022
Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueCash EquivalentsMarketable Securities
(In thousands)
Money market funds$165,407 $ $ $165,407 $165,407 $ 
Certificates of deposit31,874 13 (130)31,757  31,757 
Commercial paper148,832 10 (171)148,671 50,764 97,907 
Corporate notes and bonds168,887 2 (3,313)165,576  165,576 
U.S. Treasuries301,349 8 (132)301,225 4,094 297,131 
U.S. Government agency securities554,035  (6,807)547,228  547,228 
Total$1,370,384 $33 $(10,553)$1,359,864 $220,265 $1,139,599 
Enphase Energy, Inc. | 2023 Form 10-Q | 13

ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table summarizes the contractual maturities of the Company’s cash equivalents and marketable securities as of September 30, 2023:
Amortized CostFair Value
(In thousands)
Due within one year$1,266,174 $1,262,017 
Due within one to three years346,290 344,451 
Total$1,612,464 $1,606,468 
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
September 30,
Nine Months Ended
September 30,
2023202220232022
(In thousands)
Warranty obligations, beginning of period$180,715 $96,551 $131,446 $73,377 
Accruals for warranties issued during period12,477 13,370 44,992 33,591 
Changes in estimates(1,983)927 (8,618)22,902 
Settlements(6,283)(6,539)(20,269)(19,010)
Increase due to accretion expense3,157 2,952 10,609 6,295 
Change in discount rate(1)
2,811  34,608 (9,609)
Other(2,028)(1,381)(3,902)(1,666)
Warranty obligations, end of period188,866 105,880 188,866 105,880 
Less: warranty obligations, current(40,750)(32,350)(40,750)(32,350)
Warranty obligations, non-current$148,116 $73,530 $148,116 $73,530 
(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 September 30, 2023, the Company recorded a $2.0 million decrease in warranty expense from change in estimates, of which $9.2 million related to decrease in product replacement costs for Enphase IQTM Battery storage systems and related accessories, partially offset for continuing analysis of field performance data and diagnostic root-cause failure analysis totaling $6.0 million for IQTM System Controller and $0.7 million of prior generation products, as well as $0.5 million related to increase in product replacement costs for all other products. During the three months ended September 30, 2022, the Company recorded $0.9 million in warranty expense from change in estimates related to continuing analysis of field performance data and diagnostic root-cause failure analysis primarily for Enphase IQ Battery storage systems.
Enphase Energy, Inc. | 2023 Form 10-Q | 14

ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
During the nine months ended September 30, 2023, the Company recorded a $8.6 million decrease in warranty expense from change in estimates, of which $29.7 million related to a decrease in product replacement costs related to Enphase IQ Battery storage systems and accessories and $1.6 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 $16.6 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 nine months ended September 30, 2022, the Company recorded $22.9 million in warranty expense from change in estimates, of which $14.0 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, $4.9 million is related to an increase in expedited freight costs and replacement costs and $4.0 million due to an increase in labor reimbursement rates.
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.
Enphase Energy, Inc. | 2023 Form 10-Q | 15

ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents assets and liabilities measured at fair value on a recurring basis using the above input categories:
September 30, 2023December 31, 2022
(In thousands)
Level 1Level 2Level 3Level 1Level 2Level 3
Assets:
Cash and cash equivalents:
Money market funds$112,659 $ $ $165,407 $ $ 
Commercial paper    50,764  
U.S. Treasuries    4,094  
Marketable securities:
Certificates of deposit 53,378   31,757  
Commercial paper 90,653   97,907  
Corporate notes and bonds 357,389   165,576  
U.S. Treasuries 464,843   297,131  
U.S. Government agency securities 527,546   547,228  
Other assets
Investments in debt securities  77,185   56,777 
Total assets measured at fair value$112,659 $1,493,809 $77,185 $165,407 $1,194,457 $56,777 
Liabilities:
Warranty obligations
Current$ $ $31,693 $ $ $30,740 
Non-current  127,197   75,749 
Total warranty obligations measured at fair value  158,890   106,489 
Total liabilities measured at fair value$ $ $158,890 $ $ $106,489 
Notes due 2028, Notes due 2026 and Notes due 2025
The Company carries the Notes due 2028 (as defined in Note 8, “Debt”) and Notes due 2026 (as defined in Note 8, “Debt”) at face value less unamortized debt issuance costs on its condensed consolidated balance sheets. The Company carries the Notes due 2025 (as defined in Note 8, “Debt”) at face value less unamortized debt discount and issuance costs on its condensed consolidated balance sheets. As of September 30, 2023, the fair value of the Notes due 2028, Notes due 2026 and Notes due 2025 was $480.8 million, $545.2 million and $218.1 million, respectively. The fair value as of September 30, 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 determined using discounted cash flow methodology and assumptions include implied yield and change in estimated term of investment being held-to-maturity.
Enphase Energy, Inc. | 2023 Form 10-Q | 16

ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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. Principal plus accrued interest receivable of the investment approximates the fair value.
In December 2022, the Company 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 raised, or as long as certain applicable payment conditions are satisfied. The accreted interest is recognized in “Other income (expense), net” in the Company’s condensed consolidated statement of operations for that period. Principal plus unpaid accrued interest receivable of the investment approximates the fair value.
In July 2023, the Company invested approximately $15.0 million in a secured convertible promissory note issued by the stockholders of a privately-held company. The investment qualified as an investment in a debt security and will accrete interest. The principal plus accrued interest is payable upon maturity 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 changes 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. Principal plus accrued interest receivable of the investment approximates the fair value.
Investment in debt securities is recorded in “Other assets” on the accompanying condensed consolidated balance sheet as of September 30, 2023 and December 31, 2022. The changes in the balance in investments in debt securities during the period were as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(In thousands)
Balance at beginning of period$60,275 $40,913 $56,777 $41,042 
Investment15,000  15,000  
Fair value adjustments included in other income (expense), net1,910 519 5,408 390 
Balance at end of period$77,185 $41,432 $77,185 $41,432 
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.
Enphase Energy, Inc. | 2023 Form 10-Q | 17

ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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
September 30,
Nine Months Ended
September 30,
2023202220232022
(In thousands)
Balance at beginning of period$150,540 $73,923 $106,489 $51,007 
Accruals for warranties issued during period12,485 12,472 44,854 32,362 
Changes in estimates(2,561)1,141 (14,241)19,732 
Settlements(5,514)(5,548)(19,527)(14,272)
Increase due to accretion expense3,157 2,952 10,609 6,295 
Change in discount rate 2,811  34,608 (9,609)
Other(2,028)(1,385)(3,902)(1,961)
Balance at end of period$158,890 $83,554 $158,890 $83,554 
Quantitative and Qualitative Information about Level 3 Fair Value Measurements
As of September 30, 2023 and December 31, 2022, the significant unobservable inputs used in the fair value measurement of the Company’s liabilities designated as Level 3 were as follows, of which the monetary impact for change in discount rate is captured in “Change in discount rate” in the table above: