Table of Contents ENPHASE ENERGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 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 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 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 consolidated balance sheet as of December 31, 2023 and December 31, 2022. The changes in the balance in investments in debt securities during the period were as follows: Years Ended December 31, 2023 2022 (In thousands) Balance at beginning of period $ 56,777 $ 41,042 Investment 15,000 15,000 8,078 735 Fair value adjustments included in other income (expense), net Balance at end of period $ 79,855 $ 56,777 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-K | 98