CEO Letter to Shareholders
2023
CEO Letter to Shareholders 2023 IQ Ba tt ery 5P IQ Ba tt ery 5P ENPHASE CEO LETTER TO SHAREHOLDERS 2023 1
Use of forward-looking statements This presentation contains forward-looking statements made pursuant to the Safe each of the non-GAAP nancial measures excludes one or more of the Harbor provisions of the Private Securities Litigation Reform Act of 1995, including but following items for purposes of calculating non-GAAP nancial measures not limited to statements concerning our future nancial performance; our business to facilitate an evaluation of our current operating performance and a strategies, including our operations and anticipated trends and developments in markets comparison to our past operating performance: in which we operate and in the markets in which we plan to expand; our expectations as to the impact and evolving current geopolitical issues and macroeconomic trends; • Stock-based compensation expense. We exclude stock-based the anticipated release, shipment, and market adoption of Enphase’s new products compensation expense from our non-GAAP measures primarily and technologies; the capabilities, performance and bene ts of our technology because they are non-cash in nature. Moreover, the impact of this and products, including future products, features and services, and the reduction of expense is signi cantly a ected by our stock price at the time of an commissioning times for installers; the ability to optimize and customize products, load award over which management has limited to no control. disaggregation, monitoring and management; our performance in operations, including CEO Letter to manufacturing, product capacity, training, and customer service; and statements • Acquisition related expenses and amortization. This item represents concerning manufacturing strategies and potential for market growth. These expenses incurred related to our business acquisitions, which are statements are based upon current expectations that involve risks and uncertainties. non-recurring in nature, and amortization of acquired intangible Any statements that are not of historical fact, may be forward-looking statements. assets, which is a non-cash expense. Acquisition related expenses Shareholders Words used such as “anticipates,” “believes,” “continues,” “designed,” “estimates,” and amortization of acquired intangible assets are not re ective of our “expects,” “goal,” “intends,” “likely,” “may,” “ongoing,” “plans,” “projects,” “pursuing,” ongoing nancial performance. “seeks,” “should,” “will,” “would” and similar expressions are intended to identify forward looking statements, although not all forward-looking statements contain • Restructuring and asset impairment charges. We exclude restructuring these words. All forward-looking statements are based on our current assumptions, and asset impairment charges due to the nature of the expenses 2023 expectations and beliefs, and involve substantial risks and uncertainties that may being unusual and arising outside the ordinary course of continuing cause results, performance or achievement to materially di er from those expressed operations. These costs primarily consist of fees paid for cash-based or implied by these forward-looking statements. Therefore, you should not place undue severance costs and asset write-downs of property and equipment reliance on our forward-looking statements. A detailed discussion of risk factors that and acquired intangible assets, and other contract termination costs a ect our business is included in the lings we make with the Securities and Exchange resulting from restructuring initiatives. Commission (SEC) from time to time, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading “Risk Factors.” Copies of these lings • Reserve for non-recurring legal matter. This item represents a charge are available on the Enphase website at http://investor.enphase.com/sec.cfm, or on taken for the potential settlement cost related to a dispute with a the SEC website at www.sec.gov. All forward-looking statements in this presentation are based on information currently available to us, and we assume no obligation to vendor. This item is excluded as it relates to a speci c matter and is not update these forward-looking statements in light of new information or future events. re ective of our ongoing nancial performance. Industry Information • Non-cash interest expense. This item consists primarily of amortization of debt issuance costs and accretion of debt discount because these expenses do not represent a cash out ow for us except in the period Information regarding market and industry statistics in this presentation is based on the nancing was secured and such amortization expense is not information available to us that we believe is accurate. It is generally based on publi- re ective of our ongoing nancial performance. cations that are not produced for purposes of economic analysis. • Non-GAAP income tax adjustment. This item represents the amount Non-GAAP Financial Metrics adjusted to our GAAP tax provision or bene t to present the non- GAAP tax amount based on cash tax expense and reserves for periods • We have presented certain non-GAAP nancial measures in this presentation. prior to 2023. E ective January 1, 2023, we updated our methodology Generally, a non-GAAP nancial measure is a numerical measure of a of computing the non-GAAP income tax adjustment from reporting company’s performance, nancial position, or cash ows that either exclude or cash tax expense and reserves to the projected non-GAAP annualized include amounts that are not normally excluded or included in the most directly e ective tax rate as we utilized most of our net operating loss and comparable measure calculated and presented in accordance with generally tax credit carryforwards in the year ended December 31, 2022, and accepted accounting principles in the United States (GAAP). Reconciliation became a signi cant cash taxpayer in the United States. Going forward, of each non-GAAP nancial measure to the most directly comparable GAAP we will exclude the income tax e ects of GAAP adjustments such as nancial measure can be found in the accompanying tables to this presentation. stock-based compensation, amortization of purchased intangibles, Non-GAAP nancial measures presented by us include non-GAAP gross pro t, and other non-recurring items that are not re ective of our ongoing gross margin, operating expenses, income from operations, net income, net nancial performance. income per share (basic and diluted) and free cash ow. • Non-GAAP net income per share, diluted. We exclude the dilutive • These non-GAAP nancial measures do not re ect a comprehensive system e ect of in-the-money portion of convertible senior notes as they are of accounting, di er from GAAP measures with the same captions and may covered by convertible note hedge transactions that reduce potential di er from non-GAAP nancial measures with the same or similar captions dilution to our common stock upon conversion of the Notes due 2025, that are used by other companies. In addition, these non-GAAP measures have Notes due 2026 and Notes due 2028, and includes the dilutive e ect of limitations in that they do not re ect all of the amounts associated with our employee’s stock-based awards and the dilutive e ect of warrants. We results of operations as determined in accordance with GAAP. As such, these believe these adjustments provide useful supplemental information to non-GAAP measures should be considered as a supplement to, and not as a the ongoing nancial performance. substitute for, or superior to, nancial measures calculated in accordance with GAAP. We use these non-GAAP nancial measures to analyze our operating • Net IRA bene t. This item represents the advanced manufacturing performance and future prospects, develop internal budgets and nancial production tax credit (“AMPTC”) from the IRA for manufacturing goals, and to facilitate period-to-period comparisons. We believe that these microinverters in the United States, partially o set by the incremental non-GAAP nancial measures re ect an additional way of viewing aspects manufacturing cost incurred in the United States relative to of our operations that, when viewed with our GAAP results, provide a more manufacturing in Mexico, India, and China. The AMPTC is accounted complete understanding of factors and trends a ecting our business. for by us as an income-based government grants that reduces cost of revenues in the consolidated statements of operations. • As presented in the “Reconciliation of Non-GAAP Financial Measures” page, • Free cash ow. This item represents net cash ows from operating activities less purchases of property and equipment. Copyright and Trademark Attribution ©2024 Enphase Energy, Inc. All rights reserved. Enphase, the e logo, IQ, and certain other marks listed at enphase.com/trademark are trademarks of Enphase Energy, Inc. in the United States and other countries. 2 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 3
Use of forward-looking statements This presentation contains forward-looking statements made pursuant to the Safe each of the non-GAAP nancial measures excludes one or more of the Harbor provisions of the Private Securities Litigation Reform Act of 1995, including but following items for purposes of calculating non-GAAP nancial measures not limited to statements concerning our future nancial performance; our business to facilitate an evaluation of our current operating performance and a strategies, including our operations and anticipated trends and developments in markets comparison to our past operating performance: in which we operate and in the markets in which we plan to expand; our expectations as to the impact and evolving current geopolitical issues and macroeconomic trends; • Stock-based compensation expense. We exclude stock-based the anticipated release, shipment, and market adoption of Enphase’s new products compensation expense from our non-GAAP measures primarily and technologies; the capabilities, performance and bene ts of our technology because they are non-cash in nature. Moreover, the impact of this and products, including future products, features and services, and the reduction of expense is signi cantly a ected by our stock price at the time of an commissioning times for installers; the ability to optimize and customize products, load award over which management has limited to no control. disaggregation, monitoring and management; our performance in operations, including CEO Letter to manufacturing, product capacity, training, and customer service; and statements • Acquisition related expenses and amortization. This item represents concerning manufacturing strategies and potential for market growth. These expenses incurred related to our business acquisitions, which are statements are based upon current expectations that involve risks and uncertainties. non-recurring in nature, and amortization of acquired intangible Any statements that are not of historical fact, may be forward-looking statements. assets, which is a non-cash expense. Acquisition related expenses Shareholders Words used such as “anticipates,” “believes,” “continues,” “designed,” “estimates,” and amortization of acquired intangible assets are not re ective of our “expects,” “goal,” “intends,” “likely,” “may,” “ongoing,” “plans,” “projects,” “pursuing,” ongoing nancial performance. “seeks,” “should,” “will,” “would” and similar expressions are intended to identify forward looking statements, although not all forward-looking statements contain • Restructuring and asset impairment charges. We exclude restructuring these words. All forward-looking statements are based on our current assumptions, and asset impairment charges due to the nature of the expenses 2023 expectations and beliefs, and involve substantial risks and uncertainties that may being unusual and arising outside the ordinary course of continuing cause results, performance or achievement to materially di er from those expressed operations. These costs primarily consist of fees paid for cash-based or implied by these forward-looking statements. Therefore, you should not place undue severance costs and asset write-downs of property and equipment reliance on our forward-looking statements. A detailed discussion of risk factors that and acquired intangible assets, and other contract termination costs a ect our business is included in the lings we make with the Securities and Exchange resulting from restructuring initiatives. Commission (SEC) from time to time, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading “Risk Factors.” Copies of these lings • Reserve for non-recurring legal matter. This item represents a charge are available on the Enphase website at http://investor.enphase.com/sec.cfm, or on taken for the potential settlement cost related to a dispute with a the SEC website at www.sec.gov. All forward-looking statements in this presentation are based on information currently available to us, and we assume no obligation to vendor. This item is excluded as it relates to a speci c matter and is not update these forward-looking statements in light of new information or future events. re ective of our ongoing nancial performance. Industry Information • Non-cash interest expense. This item consists primarily of amortization of debt issuance costs and accretion of debt discount because these expenses do not represent a cash out ow for us except in the period Information regarding market and industry statistics in this presentation is based on the nancing was secured and such amortization expense is not information available to us that we believe is accurate. It is generally based on publi- re ective of our ongoing nancial performance. cations that are not produced for purposes of economic analysis. • Non-GAAP income tax adjustment. This item represents the amount Non-GAAP Financial Metrics adjusted to our GAAP tax provision or bene t to present the non- GAAP tax amount based on cash tax expense and reserves for periods • We have presented certain non-GAAP nancial measures in this presentation. prior to 2023. E ective January 1, 2023, we updated our methodology Generally, a non-GAAP nancial measure is a numerical measure of a of computing the non-GAAP income tax adjustment from reporting company’s performance, nancial position, or cash ows that either exclude or cash tax expense and reserves to the projected non-GAAP annualized include amounts that are not normally excluded or included in the most directly e ective tax rate as we utilized most of our net operating loss and comparable measure calculated and presented in accordance with generally tax credit carryforwards in the year ended December 31, 2022, and accepted accounting principles in the United States (GAAP). Reconciliation became a signi cant cash taxpayer in the United States. Going forward, of each non-GAAP nancial measure to the most directly comparable GAAP we will exclude the income tax e ects of GAAP adjustments such as nancial measure can be found in the accompanying tables to this presentation. stock-based compensation, amortization of purchased intangibles, Non-GAAP nancial measures presented by us include non-GAAP gross pro t, and other non-recurring items that are not re ective of our ongoing gross margin, operating expenses, income from operations, net income, net nancial performance. income per share (basic and diluted) and free cash ow. • Non-GAAP net income per share, diluted. We exclude the dilutive • These non-GAAP nancial measures do not re ect a comprehensive system e ect of in-the-money portion of convertible senior notes as they are of accounting, di er from GAAP measures with the same captions and may covered by convertible note hedge transactions that reduce potential di er from non-GAAP nancial measures with the same or similar captions dilution to our common stock upon conversion of the Notes due 2025, that are used by other companies. In addition, these non-GAAP measures have Notes due 2026 and Notes due 2028, and includes the dilutive e ect of limitations in that they do not re ect all of the amounts associated with our employee’s stock-based awards and the dilutive e ect of warrants. We results of operations as determined in accordance with GAAP. As such, these believe these adjustments provide useful supplemental information to non-GAAP measures should be considered as a supplement to, and not as a the ongoing nancial performance. substitute for, or superior to, nancial measures calculated in accordance with GAAP. We use these non-GAAP nancial measures to analyze our operating • Net IRA bene t. This item represents the advanced manufacturing performance and future prospects, develop internal budgets and nancial production tax credit (“AMPTC”) from the IRA for manufacturing goals, and to facilitate period-to-period comparisons. We believe that these microinverters in the United States, partially o set by the incremental non-GAAP nancial measures re ect an additional way of viewing aspects manufacturing cost incurred in the United States relative to of our operations that, when viewed with our GAAP results, provide a more manufacturing in Mexico, India, and China. The AMPTC is accounted complete understanding of factors and trends a ecting our business. for by us as an income-based government grants that reduces cost of revenues in the consolidated statements of operations. • As presented in the “Reconciliation of Non-GAAP Financial Measures” page, • Free cash ow. This item represents net cash ows from operating activities less purchases of property and equipment. Copyright and Trademark Attribution ©2024 Enphase Energy, Inc. All rights reserved. Enphase, the e logo, IQ, and certain other marks listed at enphase.com/trademark are trademarks of Enphase Energy, Inc. in the United States and other countries. 2 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 3
Dear fellow shareholders, 2023 was challenging. The solar industry su ered through a period of slowdown in overall demand. This was primarily because of high interest rates in the United States, the NEM 3.0 transition in California, and macroeconomic conditions in Europe. Our installer and distributor partners faced a tough time due to the reduced demand. Many of them were forced to reorganize their Badri Kothandaraman businesses and some unfortunately had to shut down. President and CEO Our revenue for 2023 was at compared to 2022. The second half of the year was more di cult than the rst half. We collaborated closely with our installer partners to assist them as much as possible. We made several improvements to our quality and service. We released many new products into Europe and other countries. We maintained pricing discipline, free cash ow, and pro tability. We undertook restructuring actions to reduce our spending. We developed business processes to better forecast our business and manage our channel. “Our employees around the world We remain unfazed in our e orts to advance a sustainable future for all. Our worked tirelessly to deliver strategy is unchanged. We are more determined than ever before to create innovative products and services solar and battery systems powering energy independence for consumers to our customers as we navigated that enable them to make, use, save, and sell their own power. We view the through the macroeconomic macroeconomic slowdown as no more than a minor blip and are con dent in conditions.” the solar industry’s resilience to return to sustained growth. Our employees around the world worked tirelessly to deliver innovative products and services to our customers as we navigated through the macroeconomic conditions. As a result of their collective e orts, we managed to maintain our operational excellence during 2023. Our culture playbook is a reminder of how we work together and achieve results. As is customary, this letter o ers insights into our past year’s performance, reinforces our strategic priorities, and outlines our key focus areas for 2024. The IQ8P microinverter is ideal for emerging residential markets with high-power panels 4 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 5
Dear fellow shareholders, 2023 was challenging. The solar industry su ered through a period of slowdown in overall demand. This was primarily because of high interest rates in the United States, the NEM 3.0 transition in California, and macroeconomic conditions in Europe. Our installer and distributor partners faced a tough time due to the reduced demand. Many of them were forced to reorganize their Badri Kothandaraman businesses and some unfortunately had to shut down. President and CEO Our revenue for 2023 was at compared to 2022. The second half of the year was more di cult than the rst half. We collaborated closely with our installer partners to assist them as much as possible. We made several improvements to our quality and service. We released many new products into Europe and other countries. We maintained pricing discipline, free cash ow, and pro tability. We undertook restructuring actions to reduce our spending. We developed business processes to better forecast our business and manage our channel. “Our employees around the world We remain unfazed in our e orts to advance a sustainable future for all. Our worked tirelessly to deliver strategy is unchanged. We are more determined than ever before to create innovative products and services solar and battery systems powering energy independence for consumers to our customers as we navigated that enable them to make, use, save, and sell their own power. We view the through the macroeconomic macroeconomic slowdown as no more than a minor blip and are con dent in conditions.”the solar industry’s resilience to return to sustained growth. Our employees around the world worked tirelessly to deliver innovative products and services to our customers as we navigated through the macroeconomic conditions. As a result of their collective e orts, we managed to maintain our operational excellence during 2023. Our culture playbook is a reminder of how we work together and achieve results. As is customary, this letter o ers insights into our past year’s performance, reinforces our strategic priorities, and outlines our key focus areas for 2024. The IQ8P microinverter is ideal for emerging residential markets with high-power panels 4 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 5
For the full year 2023, our revenue saw a modest sequential decline of 1.7% Our 2023 to $2.29 billion, compared to $2.33 billion in 2022. We shipped 15.5 million microinverters in 2023, compared to 15.4 million microinverters in 2022. 1 Notably, our non-GAAP gross margin expanded to 45.3%, excluding the 1 In ation Reduction Act (IRA) net bene t and surged to 47.1%, when factoring performance in the IRA net bene t - achieved through the domestic manufacturing of our microinverters in the United States. In addition, we generated positive free cash ow for all quarters in 2023 and exited the year with approximately $1.70 billion in cash, cash equivalents, and marketable securities, an increase of over $80 million from 2022. Despite the working capital constraints faced by our customers, our team excelled in collaborating with them, resulting in a healthy cash balance and positive free cash ow. “We shipped 15.5 million In July 2023, our Board of Directors approved a share repurchase program microinverters in 2023, compared with authorization to purchase up to $1.0 billion worth of shares of our common to 15.4 million microinverters in stock. In 2023, we repurchased 3,284,368 shares of our common stock, 2022.” representing 2.4% of our outstanding shares, at an average price of $124.83 per share for a total of $410.0 million. Our approach to stock repurchases is methodical, prioritizing the needs of our business while maintaining adequate reserves for potential acquisitions and strategic investments. Only then do we engage in opportunistic share repurchases if we believe that our share price is less than a conservatively calculated intrinsic value. Our global regional revenue was mixed, with Europe growing and the United States declining Our revenue distribution between the United States and international markets in 2023 stood at 64% and 36%, respectively. During 2023, we managed through a correction in the U.S. solar market after three years of phenomenal growth – a period in which the residential solar market had doubled, and Enphase sales had tripled. In 2023, our revenue in the United States decreased 17% from 2022. As I mentioned in my introduction, high interest rates and the NEM 3.0 transition in California were the main drivers for the decrease. Starting in the second quarter of 2023, we faced elevated inventory in the channel as a result of the slowdown. In response, we took prudent actions in the United States to curtail shipments and decrease channel inventory through the rest of 2023. California transitioned to NEM 3.0 in the second quarter of 2023. While solar installations in California su ered as a result in the second half of the year, the battery attach rate increased to greater than 80% for NEM 3.0 systems. 1 See Appendix for GAAP to non-GAAP reconciliation 6 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 7
For the full year 2023, our revenue saw a modest sequential decline of 1.7% Our 2023 to $2.29 billion, compared to $2.33 billion in 2022. We shipped 15.5 million microinverters in 2023, compared to 15.4 million microinverters in 2022. 1 Notably, our non-GAAP gross margin expanded to 45.3%, excluding the 1 In ation Reduction Act (IRA) net bene t and surged to 47.1%, when factoring performance in the IRA net bene t - achieved through the domestic manufacturing of our microinverters in the United States. In addition, we generated positive free cash ow for all quarters in 2023 and exited the year with approximately $1.70 billion in cash, cash equivalents, and marketable securities, an increase of over $80 million from 2022. Despite the working capital constraints faced by our customers, our team excelled in collaborating with them, resulting in a healthy cash balance and positive free cash ow. “We shipped 15.5 million In July 2023, our Board of Directors approved a share repurchase program microinverters in 2023, compared with authorization to purchase up to $1.0 billion worth of shares of our common to 15.4 million microinverters in stock. In 2023, we repurchased 3,284,368 shares of our common stock, 2022.” representing 2.4% of our outstanding shares, at an average price of $124.83 per share for a total of $410.0 million. Our approach to stock repurchases is methodical, prioritizing the needs of our business while maintaining adequate reserves for potential acquisitions and strategic investments. Only then do we engage in opportunistic share repurchases if we believe that our share price is less than a conservatively calculated intrinsic value. Our global regional revenue was mixed, with Europe growing and the United States declining Our revenue distribution between the United States and international markets in 2023 stood at 64% and 36%, respectively. During 2023, we managed through a correction in the U.S. solar market after three years of phenomenal growth – a period in which the residential solar market had doubled, and Enphase sales had tripled. In 2023, our revenue in the United States decreased 17% from 2022. As I mentioned in my introduction, high interest rates and the NEM 3.0 transition in California were the main drivers for the decrease. Starting in the second quarter of 2023, we faced elevated inventory in the channel as a result of the slowdown. In response, we took prudent actions in the United States to curtail shipments and decrease channel inventory through the rest of 2023. California transitioned to NEM 3.0 in the second quarter of 2023. While solar installations in California su ered as a result in the second half of the year, the battery attach rate increased to greater than 80% for NEM 3.0 systems. 1 See Appendix for GAAP to non-GAAP reconciliation 6 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 7
“As we think about our competitive ® Our European business was strong overall in 2023 with a 60% increase from We integrated the IQ Energy Router products from our GreenCom Networks 2022, despite plummeting demand in the second half of 2023, which required positioning in Europe, we see acquisition into our home energy management systems (HEMS) in Germany, us to make rapid inventory corrections in the channel. Our three largest complex power markets such as Austria, and Switzerland during 2023. These products have the ability to markets in Europe continued to be in the Netherlands, France, and Germany. dynamic tari s and home energy network third-party EV chargers and heat pumps with Enphase solar-plus- In the Netherlands, demand was impacted because consumers were fearing management needs play right into battery systems. The bene t to homeowners is reduced electricity bills due to our strengths.” ® an export penalty for solar, along with confusion around the ending of net increased self-consumption, and control via the Enphase App. As we think metering. We expect our business to improve as we o er a comprehensive about our competitive positioning in Europe, we see complex power markets solution with solar-plus-batteries and energy management software that we such as dynamic tari s and home energy management needs play right into our believe will help unlock the potential of the Dutch energy market. We also strengths. Our complete HEMS solutions can help homeowners navigate these believe other markets will have great possibilities. In France, we see potential complex tari s and manage EVs and heat pumps, all from their Enphase App. for the market to grow and evolve into a solar-plus-battery market as utility rates moved higher in 2023 and are expected to increase even more in 2024. Coming to the international regions, we introduced our IQ8™ family of In Germany, the residential solar market, the largest in Europe, is around 3 GW microinverters and third-generation batteries in Australia. We also started and storage attach rates are approximately 80%. We also introduced products shipping our 480 W IQ8P™ Microinverters to support the growing demand for into the United Kingdom, Italy, and several other countries in Europe. high-powered solar panels in Brazil, India, and Mexico. ENPHASE CLOUD IQ MICROINVERTERS IQ GATEWAY IQ BATTERY 10T IQ ENERGY ROUTER ENPHASE APP THIRD-PARTY EV CHARGER THIRD-PARTY HEAT PUMP A typical Home Energy Management System in Europe Enphase App showing solar, battery, EV, and heat pump 8 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 9
“As we think about our competitive ® Our European business was strong overall in 2023 with a 60% increase from We integrated the IQ Energy Router products from our GreenCom Networks 2022, despite plummeting demand in the second half of 2023, which required positioning in Europe, we see acquisition into our home energy management systems (HEMS) in Germany, us to make rapid inventory corrections in the channel. Our three largest complex power markets such as Austria, and Switzerland during 2023. These products have the ability to markets in Europe continued to be in the Netherlands, France, and Germany. dynamic tari s and home energy network third-party EV chargers and heat pumps with Enphase solar-plus- In the Netherlands, demand was impacted because consumers were fearing management needs play right into battery systems. The bene t to homeowners is reduced electricity bills due to our strengths.” ® an export penalty for solar, along with confusion around the ending of net increased self-consumption, and control via the Enphase App. As we think metering. We expect our business to improve as we o er a comprehensive about our competitive positioning in Europe, we see complex power markets solution with solar-plus-batteries and energy management software that we such as dynamic tari s and home energy management needs play right into our believe will help unlock the potential of the Dutch energy market. We also strengths. Our complete HEMS solutions can help homeowners navigate these believe other markets will have great possibilities. In France, we see potential complex tari s and manage EVs and heat pumps, all from their Enphase App. for the market to grow and evolve into a solar-plus-battery market as utility rates moved higher in 2023 and are expected to increase even more in 2024. Coming to the international regions, we introduced our IQ8™ family of In Germany, the residential solar market, the largest in Europe, is around 3 GW microinverters and third-generation batteries in Australia. We also started and storage attach rates are approximately 80%. We also introduced products shipping our 480 W IQ8P™ Microinverters to support the growing demand for into the United Kingdom, Italy, and several other countries in Europe.high-powered solar panels in Brazil, India, and Mexico. ENPHASE CLOUD IQ MICROINVERTERS IQ GATEWAY IQ BATTERY 10TIQ ENERGY ROUTERENPHASE APP THIRD-PARTY EV CHARGER THIRD-PARTY HEAT PUMP A typical Home Energy Management System in Europe Enphase App showing solar, battery, EV, and heat pump 8 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 9
A presidential Our operations team did an outstanding job in enabling microinverter shipments from our contract groundbreaking manufacturing facilities in the United States The microinverter supply landscape remained stable throughout 2023. As for Enphase IQ® Batteries, we have two cell pack suppliers, both in China, which have ample manufacturing capacity to support our ramp in 2024. In addition, we will have the capability to manufacture IQ Batteries in the United States in the second half of 2024 at the Salcomp, Texas facility. “The IRA legislation enabled Enphase On August 12, 2022, President Biden signed the IRA into law, marking the most to begin manufacturing in the signi cant action the U.S. Congress has taken on clean energy and climate United States, bring back high- change in the nation’s history. The IRA legislation enabled Enphase to begin technology jobs, and advance the manufacturing in the United States, bring back high-technology jobs, and country’s clean energy economy.” advance the country’s clean energy economy. Starting in the second quarter of 2023, we began shipments from our contract manufacturing partners in the United States. We are pleased that U.S. President Biden was able to visit the Flex South Carolina facility on July 6, 2023 and inaugurate the function. Our other contract manufacturer in the United States, Salcomp, commenced microinverter shipments from its Texas facility in August 2023. In line with our e orts to streamline manufacturing, we ceased operations at our contract manufacturing site in Romania. We now have ve contract manufacturing locations for microinverters – Flex China, Flex Mexico, Flex South Carolina, Salcomp India, and Salcomp Texas. Collectively, once fully ramped these facilities will have a global capacity of approximately 7.25 million microinverter units per quarter, of which 5 million units will be in the United States. President Joe Biden, Congressman James Clyburn of South Carolina, and Enphase’s Co-founder Raghu Belur, President Joe Biden at the Flex manufacturing facility event in Columbia, South Carolina at the Flex manufacturing facility event in Columbia, South Carolina 10 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 11
A presidential Our operations team did an outstanding job in enabling microinverter shipments from our contract groundbreaking manufacturing facilities in the United States The microinverter supply landscape remained stable throughout 2023. As for Enphase IQ® Batteries, we have two cell pack suppliers, both in China, which have ample manufacturing capacity to support our ramp in 2024. In addition, we will have the capability to manufacture IQ Batteries in the United States in the second half of 2024 at the Salcomp, Texas facility. “The IRA legislation enabled Enphase On August 12, 2022, President Biden signed the IRA into law, marking the most to begin manufacturing in the signi cant action the U.S. Congress has taken on clean energy and climate United States, bring back high- change in the nation’s history. The IRA legislation enabled Enphase to begin technology jobs, and advance the manufacturing in the United States, bring back high-technology jobs, and country’s clean energy economy.” advance the country’s clean energy economy. Starting in the second quarter of 2023, we began shipments from our contract manufacturing partners in the United States. We are pleased that U.S. President Biden was able to visit the Flex South Carolina facility on July 6, 2023 and inaugurate the function. Our other contract manufacturer in the United States, Salcomp, commenced microinverter shipments from its Texas facility in August 2023. In line with our e orts to streamline manufacturing, we ceased operations at our contract manufacturing site in Romania. We now have ve contract manufacturing locations for microinverters – Flex China, Flex Mexico, Flex South Carolina, Salcomp India, and Salcomp Texas. Collectively, once fully ramped these facilities will have a global capacity of approximately 7.25 million microinverter units per quarter, of which 5 million units will be in the United States. President Joe Biden, Congressman James Clyburn of South Carolina, and Enphase’s Co-founder Raghu Belur, President Joe Biden at the Flex manufacturing facility event in Columbia, South Carolina at the Flex manufacturing facility event in Columbia, South Carolina 10 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 11
Our smartest We ramped up shipments of IQ8 Microinverters worldwide and introduced a new high-power variant microinverters yet for emerging residential markets Throughout 2023, we signi cantly expanded the distribution of our IQ8 Microinverters, reaching 21 countries worldwide. In 2024, we plan to introduce IQ8 Microinverters into several additional countries across Europe and Asia. In 2023, we introduced the IQ8P Microinverter, boasting a peak output AC power of 480 W tailored for residential segments in emerging markets. Designed to support panels of up to 650 W DC, we launched IQ8P in Brazil, Mexico, India, and Vietnam, with plans for further expansion in 2024. “We believe our commitment to high Another variant of the IQ8P Microinverter, featuring a new 3-phase cabling quality, rapid shutdown capability, system, caters to small commercial 208 V solar installations ranging from 20 and microgrid-forming capability to 200 KW and is currently shipping to customers in North America. With the positions us well to serve the small global small commercial market estimated at over 11 GW, we are con dent in commercial market.” the value our microinverter systems bring to business owners and installers. We believe our commitment to high quality, rapid shutdown capability, and microgrid-forming capability positions us well to serve the small commercial market. We started shipping our IQ Smart EV Chargers in the United States and Canada We launched our IQ® Smart EV chargers in the United States and Canada in the fourth quarter of 2023. The Wi-Fi enabled charger is now integrated ® into the Enphase Energy System. This enables use cases such as self- consumption and green charging and allows homeowners visibility into their systems through their Enphase App. Looking ahead, we are developing IQ Smart EV chargers for Europe. In addition, we are diligently working on our bi-directional EV charger that we expect to introduce in 2025. IQ8 family of microinverters deliver up to 480 W peak AC power 12 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 13
Our smartest We ramped up shipments of IQ8 Microinverters worldwide and introduced a new high-power variant microinverters yet for emerging residential markets Throughout 2023, we signi cantly expanded the distribution of our IQ8 Microinverters, reaching 21 countries worldwide. In 2024, we plan to introduce IQ8 Microinverters into several additional countries across Europe and Asia. In 2023, we introduced the IQ8P Microinverter, boasting a peak output AC power of 480 W tailored for residential segments in emerging markets. Designed to support panels of up to 650 W DC, we launched IQ8P in Brazil, Mexico, India, and Vietnam, with plans for further expansion in 2024. “We believe our commitment to high Another variant of the IQ8P Microinverter, featuring a new 3-phase cabling quality, rapid shutdown capability, system, caters to small commercial 208 V solar installations ranging from 20 and microgrid-forming capability to 200 KW and is currently shipping to customers in North America. With the positions us well to serve the small global small commercial market estimated at over 11 GW, we are con dent in commercial market.” the value our microinverter systems bring to business owners and installers. We believe our commitment to high quality, rapid shutdown capability, and microgrid-forming capability positions us well to serve the small commercial market. We started shipping our IQ Smart EV Chargers in the United States and Canada We launched our IQ® Smart EV chargers in the United States and Canada in the fourth quarter of 2023. The Wi-Fi enabled charger is now integrated ® into the Enphase Energy System. This enables use cases such as self- consumption and green charging and allows homeowners visibility into their systems through their Enphase App. Looking ahead, we are developing IQ Smart EV chargers for Europe. In addition, we are diligently working on our bi-directional EV charger that we expect to introduce in 2025. IQ8 family of microinverters deliver up to 480 W peak AC power 12 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 13
® We shipped 351.6 megawatt hours of IQ Batteries “The IQ Battery 5P has a modularity In May 2023, we introduced our third-generation IQ Battery 5P, which has during the year of 5 kWh and delivers the best been well-received by installers. The IQ Battery 5P has a modularity of 5 kWh power specs and commissioning and delivers the best power specs and commissioning times of any Enphase Enphase IQ Batteries are microinverter-based storage systems built on our times of any Enphase battery to battery to date, at an industry-leading 15-year warranty. By the end of 2023, Ensemble™ energy management technology. At the close of 2023, we were date, at an industry-leading 15-year we were shipping the IQ Battery 5P to customers in the United States, Puerto shipping our IQ Batteries to customers across North America, Belgium, warranty.” Rico, Australia, and the United Kingdom. We also launched this battery into Germany, Austria, France, the Netherlands, Switzerland, Spain, Portugal, Italy during the fourth quarter of 2023 and expect to start shipping to more Sweden, Denmark, Greece, the United Kingdom, and Australia. countries in 2024. Battery adoption rates are on the rise globally, and we believe we are well-positioned to grow our battery sales in 2024. “At the close of 2023, we were Our IQ Batteries are AC-coupled and feature safe Lithium Iron Phosphate We continued to partner with aggregators and utilities to enable grid services shipping our IQ Batteries to (LFP) chemistry, low voltage DC operation, modularity in 3.3 kWh or 5 during 2023. Grid services help utility companies avoid using electricity from customers across North America, kWh units, and air cooling. The microinverter architecture of the batteries expensive, polluting power plants when electricity demand is high. In return, Belgium, Germany, Austria, France, improves serviceability and redundancy. The AC architecture enhances homeowners in certain locations can receive hundreds to thousands of dollars the Netherlands, Switzerland, self-consumption by allowing solar and storage to collectively power home from the utilities towards the purchase of IQ Batteries or as annual incentive Spain, Portugal, Sweden, Denmark, loads. The IQ® Load Controller gives homeowners the ability to choose which Greece, the United Kingdom, and appliances to power during a grid outage, with the ability to shed up to four payments. Australia.” loads. Storage battery Low-voltage DC Enphase IQ Batteries have lithium iron phosphate (LFP) chemistry for maximum safety Grid services events can be managed by homeowners from the Enphase App 14 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 15
® We shipped 351.6 megawatt hours of IQ Batteries “The IQ Battery 5P has a modularity In May 2023, we introduced our third-generation IQ Battery 5P, which has during the year of 5 kWh and delivers the best been well-received by installers. The IQ Battery 5P has a modularity of 5 kWh power specs and commissioning and delivers the best power specs and commissioning times of any Enphase Enphase IQ Batteries are microinverter-based storage systems built on our times of any Enphase battery to battery to date, at an industry-leading 15-year warranty. By the end of 2023, Ensemble™ energy management technology. At the close of 2023, we were date, at an industry-leading 15-year we were shipping the IQ Battery 5P to customers in the United States, Puerto shipping our IQ Batteries to customers across North America, Belgium, warranty.”Rico, Australia, and the United Kingdom. We also launched this battery into Germany, Austria, France, the Netherlands, Switzerland, Spain, Portugal, Italy during the fourth quarter of 2023 and expect to start shipping to more Sweden, Denmark, Greece, the United Kingdom, and Australia.countries in 2024. Battery adoption rates are on the rise globally, and we believe we are well-positioned to grow our battery sales in 2024. “At the close of 2023, we were Our IQ Batteries are AC-coupled and feature safe Lithium Iron Phosphate We continued to partner with aggregators and utilities to enable grid services shipping our IQ Batteries to (LFP) chemistry, low voltage DC operation, modularity in 3.3 kWh or 5 during 2023. Grid services help utility companies avoid using electricity from customers across North America, kWh units, and air cooling. The microinverter architecture of the batteries expensive, polluting power plants when electricity demand is high. In return, Belgium, Germany, Austria, France, improves serviceability and redundancy. The AC architecture enhances homeowners in certain locations can receive hundreds to thousands of dollars the Netherlands, Switzerland, self-consumption by allowing solar and storage to collectively power home from the utilities towards the purchase of IQ Batteries or as annual incentive Spain, Portugal, Sweden, Denmark, loads. The IQ® Load Controller gives homeowners the ability to choose which Greece, the United Kingdom, and appliances to power during a grid outage, with the ability to shed up to four payments. Australia.”loads. Storage battery Low-voltage DC Enphase IQ Batteries have lithium iron phosphate (LFP) chemistry for maximum safetyGrid services events can be managed by homeowners from the Enphase App 14 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 15
We remained unwavering in our dedication to Our installer training programs continued to expand in 2023. We o ered more enhancing customer experience, forti ed our training than 45 di erent certi cation and quali cation courses on our products, and they are available in 18 native languages across the United States, initiatives globally, and broadened the reach of our Latin America, Europe, South Africa, Australia, and Brazil. We expanded our installer network installer training programs for our batteries in 2023 and have certi ed more than 4,700 installers worldwide for our IQ Batteries. We have more than Our worldwide customer service Net Promoter Score (NPS) surged to 77 in 12 regional training centers spread across the United States, and use vans 2023, compared to 69 in 2022. We worked on root cause xes to eliminate equipped with our products to bring training to installers in remote locations problems, trained our customer service personnel, expanded our eld service across the United States and Puerto Rico. We also have dedicated training teams globally, and improved our business processes. In addition, we made events in the United Kingdom, the Netherlands, Belgium, France, Spain, Italy, good progress on solving customer problems by using the data streaming Austria, Germany, Poland, Sweden, Denmark, South Africa, Australia, the from our systems to the cloud, identifying problem patterns and rolling out Philippines, Thailand, India, and Brazil, with more planned in 2024. Training is software xes to the eet. Our data science team works proactively to identify also available on demand via our YouTube channels spanning the globe, where eet problems and x them before customers call us. we currently have more than 6,000 subscribers. “Quality is at the forefront in Quality and reliability remained integral to Enphase in 2023. Our goal is “We expanded our installer training In addition, by the end of 2023, we expanded our Enphase Installer Network every step of our design and to provide the most reliable and resilient energy systems. Quality is at the programs for our batteries in 2023 (EIN) in the United States, Australia, the Netherlands, Belgium, France, the manufacturing process, and we forefront in every step of our design and manufacturing process, and we and have certi ed more than 4,700 United Kingdom, Mexico, Puerto Rico, and India. Our EIN has been a highly have established some of the have established some of the industry’s most rigorous quality standards. For installers worldwide for our successful initiative as we continue to add trusted installers who act as our industry’s most rigorous quality microinverters, our target is less than 500 defective parts per million (DPPM), IQ Batteries.” product evangelists and are expected to provide exceptional experiences to standards.” which translates to a failure rate of less than 0.05%, shipped on an annualized homeowners across the globe. By the end of 2023, we had approximately 1,750 basis. In practice, we operate close to the target. Our target is similar for installers in our EIN worldwide through a highly selective process focused on IQ Batteries. installation quality and homeowner experience. Manufacturing line at our Flex contract manufacturing facility in Columbia, South Carolina Installer training in the Sacramento, California regional training center 16 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 17
We remained unwavering in our dedication to Our installer training programs continued to expand in 2023. We o ered more enhancing customer experience, forti ed our training than 45 di erent certi cation and quali cation courses on our products, and they are available in 18 native languages across the United States, initiatives globally, and broadened the reach of our Latin America, Europe, South Africa, Australia, and Brazil. We expanded our installer network installer training programs for our batteries in 2023 and have certi ed more than 4,700 installers worldwide for our IQ Batteries. We have more than Our worldwide customer service Net Promoter Score (NPS) surged to 77 in 12 regional training centers spread across the United States, and use vans 2023, compared to 69 in 2022. We worked on root cause xes to eliminate equipped with our products to bring training to installers in remote locations problems, trained our customer service personnel, expanded our eld service across the United States and Puerto Rico. We also have dedicated training teams globally, and improved our business processes. In addition, we made events in the United Kingdom, the Netherlands, Belgium, France, Spain, Italy, good progress on solving customer problems by using the data streaming Austria, Germany, Poland, Sweden, Denmark, South Africa, Australia, the from our systems to the cloud, identifying problem patterns and rolling out Philippines, Thailand, India, and Brazil, with more planned in 2024. Training is software xes to the eet. Our data science team works proactively to identify also available on demand via our YouTube channels spanning the globe, where eet problems and x them before customers call us. we currently have more than 6,000 subscribers. “Quality is at the forefront in Quality and reliability remained integral to Enphase in 2023. Our goal is “We expanded our installer training In addition, by the end of 2023, we expanded our Enphase Installer Network every step of our design and to provide the most reliable and resilient energy systems. Quality is at the programs for our batteries in 2023 (EIN) in the United States, Australia, the Netherlands, Belgium, France, the manufacturing process, and we forefront in every step of our design and manufacturing process, and we and have certi ed more than 4,700 United Kingdom, Mexico, Puerto Rico, and India. Our EIN has been a highly have established some of the have established some of the industry’s most rigorous quality standards. For installers worldwide for our successful initiative as we continue to add trusted installers who act as our industry’s most rigorous quality microinverters, our target is less than 500 defective parts per million (DPPM), IQ Batteries.”product evangelists and are expected to provide exceptional experiences to standards.”which translates to a failure rate of less than 0.05%, shipped on an annualized homeowners across the globe. By the end of 2023, we had approximately 1,750 basis. In practice, we operate close to the target. Our target is similar for installers in our EIN worldwide through a highly selective process focused on IQ Batteries. installation quality and homeowner experience. Manufacturing line at our Flex contract manufacturing facility in Columbia, South CarolinaInstaller training in the Sacramento, California regional training center 16 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 17
Your all-in-one design We continued to enhance our digital platform for installers In 2019, Enphase embarked on a mission to develop a comprehensive digital and proposal tool platform for installers, encompassing tools for designing, permitting, installing, monitoring, and maintaining solar and battery systems. Over the course of four years, we meticulously crafted a robust suite of tools and services on our digital platform, with the overarching goal of streamlining the sales process, reducing soft costs, and delivering an unparalleled experience to installers worldwide. “Over the course of four years, ® We rolled out numerous enhancements to the Solargraf software platform for we have meticulously crafted a design, proposal, and permits throughout 2023. These updates included smart robust suite of tools and services panel placement, battery design, document management, electrical design, on our digital platform, with the and single line diagram features, alongside continued support for NEM 3.0 overarching goal of streamlining functionality in California. NEM 3.0 incentivizes homeowners to embrace solar the sales process, reducing and battery systems to avoid energy imports during peak-rate periods while soft costs, and delivering an compensating for energy export during the times when the grid is stressed. The unparalleled experience to Solargraf software simpli es NEM 3.0 proposals for installers by making solar installers worldwide.” and battery design easy, optimizing electricity bill o sets and payback. Solargraf is currently accessible to installers in the United States, Canada, Germany, Austria, and Brazil, with plans for expansion into additional markets including the Netherlands, France, Australia, and several other countries in 2024. Solargraf - Design, proposal and permitting software 18 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 19
Your all-in-one design We continued to enhance our digital platform for installers In 2019, Enphase embarked on a mission to develop a comprehensive digital and proposal tool platform for installers, encompassing tools for designing, permitting, installing, monitoring, and maintaining solar and battery systems. Over the course of four years, we meticulously crafted a robust suite of tools and services on our digital platform, with the overarching goal of streamlining the sales process, reducing soft costs, and delivering an unparalleled experience to installers worldwide. “Over the course of four years, ® We rolled out numerous enhancements to the Solargraf software platform for we have meticulously crafted a design, proposal, and permits throughout 2023. These updates included smart robust suite of tools and services panel placement, battery design, document management, electrical design, on our digital platform, with the and single line diagram features, alongside continued support for NEM 3.0 overarching goal of streamlining functionality in California. NEM 3.0 incentivizes homeowners to embrace solar the sales process, reducing and battery systems to avoid energy imports during peak-rate periods while soft costs, and delivering an compensating for energy export during the times when the grid is stressed. The unparalleled experience to Solargraf software simpli es NEM 3.0 proposals for installers by making solar installers worldwide.” and battery design easy, optimizing electricity bill o sets and payback. Solargraf is currently accessible to installers in the United States, Canada, Germany, Austria, and Brazil, with plans for expansion into additional markets including the Netherlands, France, Australia, and several other countries in 2024. Solargraf - Design, proposal and permitting software 18 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 19
We upheld strong nancial discipline despite navigating We executed on most of the priorities I highlighted in through di cult times my letter a year ago In 2023, we achieved a 47% gross margin, 17% operating expense, and 30% “As of December 31, 2023, we had In summary, we made signi cant progress on our priorities, albeit falling operating income, all calculated as a percentage of revenue on a non-GAAP 3,157 employees, and I am proud of short on revenue growth. We enhanced product quality and ensured 1 their hard work and execution.” around-the clock customer support, and achieved a global NPS score of 77. basis, including the net IRA bene t. Our improved gross margin is primarily due to pricing discipline and cost management along with executing the We introduced our third-generation IQ Battery 5P with higher power and IQ8 transition globally. Our GAAP net income for 2023 amounted to $438.9 reduced commissioning times, while the introduction of IQ8 Microinverters million, resulting in diluted earnings per share of $3.08. Our non-GAAP net and IQ Batteries expanded our reach across multiple countries. In addition, income totalled $613.2 million, resulting in diluted earnings per share of $4.41. we successfully launched our small commercial product and IQ Smart EV chargers in the United States. By maintaining a lean approach, we invested in Below is a summary of our nancial performance for 2023 compared to innovation while remaining pro table and generating free cash ow. There is 2022, with 2018 nancials provided for a comprehensive ve-year overview. room for improvement in channel management and avoiding manufacturing All dollar amounts are presented in thousands, except for per share data and closures; we are actively addressing these areas for future growth. As of percentages: December 31, 2023, we had 3,157 employees, and I am proud of their hard work and execution. GAAP 2023 2022 2018 Revenue $ 2,290,786 $ 2,330,853 $ 316,159 Gross Margin 46.2 % 41.8 % 29.9 % Operating Expense 26.7 % 22.6 % 29.4 % Operating Income $ 445,741 $ 448,261 $ 1,596 Net Income (loss) $ 438,936 $ 397,362 $ (11,627) Basic EPS $ 3.22 $ 2.94 $ (0.12) Diluted EPS $ 3.08 $ 2.77 $ (0.12) Cash, cash equivalents and $ 1,695,034 $ 1,612,843 $ 106,237 marketable securities Net cash provided by $ 696,780 $ 744,817 $ 16,132 operating activities Non-GAAP 2023 2022 2018 Revenue $ 2,290,786 $ 2,330,853 $ 316,159 Gross Margin 47.1 % 42.6 % 30.2 % Operating Expense 16.7 % 13.0 % 23.7 % Operating Income $ 697,210 $ 690,292 $ 20,535 Net Income $ 613,241 $ 647,424 $ 10,013 Basic EPS $ 4.50 $ 4.78 $ 0.10 Diluted EPS $ 4.41 $ 4.62 $ 0.10 Cash, cash equivalents and $ 1,695,034 $ 1,612,843 $ 106,237 marketable securities Enphase employees at an industry tradeshow in Sinsheim, Germany Free Cash Flow $ 586,379 $ 698,374 $ 11,981 1See Appendix for GAAP to non-GAAP reconciliation 20 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 21
We upheld strong nancial discipline despite navigating We executed on most of the priorities I highlighted in through di cult times my letter a year ago In 2023, we achieved a 47% gross margin, 17% operating expense, and 30% “As of December 31, 2023, we had In summary, we made signi cant progress on our priorities, albeit falling operating income, all calculated as a percentage of revenue on a non-GAAP 3,157 employees, and I am proud of short on revenue growth. We enhanced product quality and ensured 1 their hard work and execution.” around-the clock customer support, and achieved a global NPS score of 77. basis, including the net IRA bene t. Our improved gross margin is primarily due to pricing discipline and cost management along with executing the We introduced our third-generation IQ Battery 5P with higher power and IQ8 transition globally. Our GAAP net income for 2023 amounted to $438.9 reduced commissioning times, while the introduction of IQ8 Microinverters million, resulting in diluted earnings per share of $3.08. Our non-GAAP net and IQ Batteries expanded our reach across multiple countries. In addition, income totalled $613.2 million, resulting in diluted earnings per share of $4.41.we successfully launched our small commercial product and IQ Smart EV chargers in the United States. By maintaining a lean approach, we invested in Below is a summary of our nancial performance for 2023 compared to innovation while remaining pro table and generating free cash ow. There is 2022, with 2018 nancials provided for a comprehensive ve-year overview. room for improvement in channel management and avoiding manufacturing All dollar amounts are presented in thousands, except for per share data and closures; we are actively addressing these areas for future growth. As of percentages: December 31, 2023, we had 3,157 employees, and I am proud of their hard work and execution. GAAP 202320222018 Revenue$ 2,290,786 $ 2,330,853 $ 316,159 Gross Margin46.2 %41.8 %29.9 % Operating Expense26.7 %22.6 %29.4 % Operating Income$ 445,741 $ 448,261 $ 1,596 Net Income (loss)$ 438,936 $ 397,362 $ (11,627) Basic EPS$3.22 $2.94 $(0.12) Diluted EPS$3.08 $2.77 $(0.12) Cash, cash equivalents and $ 1,695,034 $ 1,612,843 $ 106,237 marketable securities Net cash provided by $ 696,780 $ 744,817 $ 16,132 operating activities Non-GAAP 202320222018 Revenue$ 2,290,786 $ 2,330,853 $ 316,159 Gross Margin47.1 %42.6 %30.2 % Operating Expense16.7 %13.0 %23.7 % Operating Income$ 697,210 $ 690,292 $ 20,535 Net Income$ 613,241 $ 647,424 $ 10,013 Basic EPS$4.50 $4.78 $0.10 Diluted EPS$4.41 $4.62 $0.10 Cash, cash equivalents and $ 1,695,034 $ 1,612,843 $ 106,237 marketable securities Enphase employees at an industry tradeshow in Sinsheim, Germany Free Cash Flow$ 586,379 $ 698,374 $ 11,981 1See Appendix for GAAP to non-GAAP reconciliation 20 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 21
Our world is dependent on energy for almost every human activity. We are Our strategic in a historic transition from consumptive, fossil-fuel-based energy generation towards clean, renewable energy generation with zero environmental impact. We believe that in most geographies, this transition involves local generation of electrical power at every home and business. Consumers will evolve to focus become prosumers who produce, store, and consume their own clean energy. “We are in a historic transition from Our strategy is simple. We focus on making best-in-class home energy systems consumptive, fossil-fuel-based that enable homeowners to make, use, save, and sell their own power. We rely energy generation towards clean, on great distribution partners who have a wide reach and can service installers renewable energy generation with with inventory and working capital. Installers are our lifeblood, and we rely on zero environmental impact.” them to sell our products to homeowners. We recognize the problems that installers face such as soft costs, disparate sales and design tools, and manual processes. We are committed to building an end-to-end installer platform to help streamline and make the entire sales and design process more e cient. Raghu Belur and Martin Fornage founded Enphase in 2006 based on their deep-rooted belief that an AC-coupled distributed architecture wins in the long run, based on cost, performance, and reliability. To build products based on this architecture, we developed core competencies in semiconductor- based power conversion, software-de ned Internet of Things (IoT) systems, and energy management. We build our own application-speci c integrated circuits (ASICs) that allow our solar and battery products to convert power e ciently, reliably, and intelligently. Our products are compatible with utility grid and microgrid conditions in virtually every place in the world. Our Ensemble technology can manage energy ows within a home and between homes. Ensemble technology coordinates distributed energy resources (DERs) such as solar microinverters, batteries, and EVs to deliver di erent use cases for the homeowner such as bill savings, resilience, or self-consumption. Solar Battery Home Loads Grid EV Heat Pump Generator Ensemble AC-coupled distributed architecture Our third-generation IQ Battery 5P in wall mount and pedestal mount con gurations 22 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 23
Our world is dependent on energy for almost every human activity. We are Our strategic in a historic transition from consumptive, fossil-fuel-based energy generation towards clean, renewable energy generation with zero environmental impact. We believe that in most geographies, this transition involves local generation of electrical power at every home and business. Consumers will evolve to focus become prosumers who produce, store, and consume their own clean energy. “We are in a historic transition from Our strategy is simple. We focus on making best-in-class home energy systems consumptive, fossil-fuel-based that enable homeowners to make, use, save, and sell their own power. We rely energy generation towards clean, on great distribution partners who have a wide reach and can service installers renewable energy generation with with inventory and working capital. Installers are our lifeblood, and we rely on zero environmental impact.” them to sell our products to homeowners. We recognize the problems that installers face such as soft costs, disparate sales and design tools, and manual processes. We are committed to building an end-to-end installer platform to help streamline and make the entire sales and design process more e cient. Raghu Belur and Martin Fornage founded Enphase in 2006 based on their deep-rooted belief that an AC-coupled distributed architecture wins in the long run, based on cost, performance, and reliability. To build products based on this architecture, we developed core competencies in semiconductor- based power conversion, software-de ned Internet of Things (IoT) systems, and energy management. We build our own application-speci c integrated circuits (ASICs) that allow our solar and battery products to convert power e ciently, reliably, and intelligently. Our products are compatible with utility grid and microgrid conditions in virtually every place in the world. Our Ensemble technology can manage energy ows within a home and between homes. Ensemble technology coordinates distributed energy resources (DERs) such as solar microinverters, batteries, and EVs to deliver di erent use cases for the homeowner such as bill savings, resilience, or self-consumption. Solar Battery Home Loads Grid EV Heat Pump Generator Ensemble AC-coupled distributed architecture Our third-generation IQ Battery 5P in wall mount and pedestal mount con gurations 22 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 23
IQ8 Microinverters, our latest product family, are inherently bi-directional and Enphase’s AC coupled distributed architecture is bene cial for small grid-forming, power-conversion devices. IQ8 Microinverters are completely photovolataic (PV) systems, such as those in social housing and plug-in software-de ned, using a new ASIC that is approximately 1,000x faster than balcony solar. There are approximately 2.4 million homes in the social housing the previous ASIC used in IQ7™ Microinverters. This allows them to respond segment in the Netherlands; each home could potentially install a PV system instantly to changing conditions and eliminates all sizing constraints between with six to nine panels. To improve installation cost, we developed a pre- ® batteries and solar inverters. The grid-forming capability of IQ8 also enables wired solution for social housing which integrates the IQ Gateway, IQ Relay, Sunlight Jumpstart and Sunlight Backup, allowing solar systems to function and cellular modem. We are also working on balcony solar solutions, where when the utility grid has an outage, even when no batteries or EVs are present homeowners install one to two panels on their balconies, patios or gardens or have depleted batteries. and connect the output, currently limited by regulation to 800 W, to a regular home AC socket. Our solution will also enable PV panel output, even when the “IQ8 Microinverters pair seamlessly The IQ8 product family includes microinverters with peak output AC power grid is down, to support small loads during the day. We expect to introduce with solar panels up to 650 W of ranging from 245 W to 480 W. IQ8 Microinverters pair seamlessly with solar variants of this product for di erent geographic regions in 2025. DC power and up to 14 amperes of panels up to 650 W of DC power and up to 14 amperes of DC current. The DC current.” IQ8P Microinverter supports up to 480 W AC output power and solar panels rated up to 650 W DC, allowing us to address markets where larger format panels are popular, e.g. in Latin America and other emerging markets such as India. The IQ8P Microinverter, along with a new 3-phase cabling system ® Gateway, is also available for U.S. small commercial solar installations and IQ ranging from 20 to 200 kW, which is ideal for gas stations, schools, hospitals, churches, small businesses, and other similar facilities. TM The IQ8P-3P Microinverter supports up to 480 AC output power Solar panels on a social housing residence in the Netherlands 24 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 25
IQ8 Microinverters, our latest product family, are inherently bi-directional and Enphase’s AC coupled distributed architecture is bene cial for small grid-forming, power-conversion devices. IQ8 Microinverters are completely photovolataic (PV) systems, such as those in social housing and plug-in software-de ned, using a new ASIC that is approximately 1,000x faster than balcony solar. There are approximately 2.4 million homes in the social housing the previous ASIC used in IQ7™ Microinverters. This allows them to respond segment in the Netherlands; each home could potentially install a PV system instantly to changing conditions and eliminates all sizing constraints between with six to nine panels. To improve installation cost, we developed a pre- ® batteries and solar inverters. The grid-forming capability of IQ8 also enables wired solution for social housing which integrates the IQ Gateway, IQ Relay, Sunlight Jumpstart and Sunlight Backup, allowing solar systems to function and cellular modem. We are also working on balcony solar solutions, where when the utility grid has an outage, even when no batteries or EVs are present homeowners install one to two panels on their balconies, patios or gardens or have depleted batteries. and connect the output, currently limited by regulation to 800 W, to a regular home AC socket. Our solution will also enable PV panel output, even when the “IQ8 Microinverters pair seamlessly The IQ8 product family includes microinverters with peak output AC power grid is down, to support small loads during the day. We expect to introduce with solar panels up to 650 W of ranging from 245 W to 480 W. IQ8 Microinverters pair seamlessly with solar variants of this product for di erent geographic regions in 2025. DC power and up to 14 amperes of panels up to 650 W of DC power and up to 14 amperes of DC current. The DC current.”IQ8P Microinverter supports up to 480 W AC output power and solar panels rated up to 650 W DC, allowing us to address markets where larger format panels are popular, e.g. in Latin America and other emerging markets such as India. The IQ8P Microinverter, along with a new 3-phase cabling system ® Gateway, is also available for U.S. small commercial solar installations and IQ ranging from 20 to 200 kW, which is ideal for gas stations, schools, hospitals, churches, small businesses, and other similar facilities. TM The IQ8P-3P Microinverter supports up to 480 AC output power Solar panels on a social housing residence in the Netherlands 24 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 25
Beyond the IQ8 family of microinverters, we are working on the IQ9™ Microinverter family, which we expect to introduce to the market in 2025. 46.4" The IQ9 family will support even higher DC input currents up to 18 amperes, as well as higher AC grid voltages including 480 V for the small commercial market. The IQ9 microinverters will use Gallium Nitride (GaN) high-voltage transistors to enable higher output power and lower cost. We are working closely with our GaN suppliers to maximize the bene ts of this wide bandgap (WBG) technology for our application. We will also use a proprietary novel " isolated driver technology and multiple innovations in magnetics, mechanical, 6 . 8 and thermal design to deliver higher power at a lower cost. 3 After IQ9, we plan to introduce the IQ10™ family of microinverters that will be built around a new ASIC chipset we believe will raise the bar for functional safety and security in the solar industry, including many features found today in automotive products. This new ASIC utilizes an advanced 22 nm CMOS process that enables a higher level of integration and performance without 2 x IQ Battery 5P adding cost or power loss. IQ10 Microinverters will further reduce the cost and size by operating at 4x the switching frequency of IQ9 Microinverters, allowing Third-generation IQ Battery us to maximize the bene ts of GaN and use novel magnetics technologies. IQ10 is designed to support native 3-phase generation as well as neutral- 10 kWh of storage | 12.4 sq. ft. of wall space forming. IQ10 technology will be used to power our next generation of solar 7.4 in. deep | 7.6 cu. ft. inverters, batteries, and bi-directional EV chargers. Max lifting weight is 146 lbs. (for 5 kWh unit) “In 2025, we plan to introduce our We started shipping batteries to North America in 2020. Since then, we fourth-generation battery, which have received a lot of feedback from our installers asking for higher power is designed to increase energy and robust communication. In 2023, we introduced IQ Battery 5P, our third- 27.8" density by 40%, reduce wall space generation battery, which delivers higher continuous power and peak power area by 60%, and reduce cost.” at the same cost. This means homeowners are now able to start heavy loads such as air conditioners and pool pumps with ease. The higher charging and discharging rate of the third-generation battery is also uniquely bene cial " 5 to NEM 3.0 systems in California through its ability to generate revenue . 4 2 by exporting into the grid at the appropriate time. The battery uses a wired Controller Area Network (CAN) for increased robustness. In 2025, we plan to introduce our fourth-generation battery, which is designed to increase energy density by 40%, reduce wall space area by 60%, and Fourth-generation IQ Battery reduce cost. This is achieved primarily by optimizing the electronics inside the battery, utilizing our new 1.68 kW AC microinverter variant with integrated 10 kWh of storage | 4.7 sq. ft. of wall space battery management and neutral-forming capability. We are also working 14.3 in. deep | 5.6 cu. ft. closely with our battery cell suppliers to advance our battery design life up Max lifting weight is 126 lbs. (for 5 kWh unit) to 20 years, and to further improve battery safety and reliability. Starting in 2024, our batteries will include microinverters manufactured in our contract manufacturing facilities in the United States, leveraging the IRA. 26 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 27
Beyond the IQ8 family of microinverters, we are working on the IQ9™ Microinverter family, which we expect to introduce to the market in 2025. 46.4" The IQ9 family will support even higher DC input currents up to 18 amperes, as well as higher AC grid voltages including 480 V for the small commercial market. The IQ9 microinverters will use Gallium Nitride (GaN) high-voltage transistors to enable higher output power and lower cost. We are working closely with our GaN suppliers to maximize the bene ts of this wide bandgap (WBG) technology for our application. We will also use a proprietary novel " isolated driver technology and multiple innovations in magnetics, mechanical, 6 . 8 and thermal design to deliver higher power at a lower cost. 3 After IQ9, we plan to introduce the IQ10™ family of microinverters that will be built around a new ASIC chipset we believe will raise the bar for functional safety and security in the solar industry, including many features found today in automotive products. This new ASIC utilizes an advanced 22 nm CMOS process that enables a higher level of integration and performance without 2 x IQ Battery 5P adding cost or power loss. IQ10 Microinverters will further reduce the cost and size by operating at 4x the switching frequency of IQ9 Microinverters, allowing Third-generation IQ Battery us to maximize the bene ts of GaN and use novel magnetics technologies. IQ10 is designed to support native 3-phase generation as well as neutral-10 kWh of storage | 12.4 sq. ft. of wall space forming. IQ10 technology will be used to power our next generation of solar 7.4 in. deep | 7.6 cu. ft. inverters, batteries, and bi-directional EV chargers. Max lifting weight is 146 lbs. (for 5 kWh unit) “In 2025, we plan to introduce our We started shipping batteries to North America in 2020. Since then, we fourth-generation battery, which have received a lot of feedback from our installers asking for higher power is designed to increase energy and robust communication. In 2023, we introduced IQ Battery 5P, our third-27.8" density by 40%, reduce wall space generation battery, which delivers higher continuous power and peak power area by 60%, and reduce cost.”at the same cost. This means homeowners are now able to start heavy loads such as air conditioners and pool pumps with ease. The higher charging and discharging rate of the third-generation battery is also uniquely bene cial " 5 to NEM 3.0 systems in California through its ability to generate revenue . 4 2 by exporting into the grid at the appropriate time. The battery uses a wired Controller Area Network (CAN) for increased robustness. In 2025, we plan to introduce our fourth-generation battery, which is designed to increase energy density by 40%, reduce wall space area by 60%, and Fourth-generation IQ Battery reduce cost. This is achieved primarily by optimizing the electronics inside the battery, utilizing our new 1.68 kW AC microinverter variant with integrated 10 kWh of storage | 4.7 sq. ft. of wall space battery management and neutral-forming capability. We are also working 14.3 in. deep | 5.6 cu. ft. closely with our battery cell suppliers to advance our battery design life up Max lifting weight is 126 lbs. (for 5 kWh unit) to 20 years, and to further improve battery safety and reliability. Starting in 2024, our batteries will include microinverters manufactured in our contract manufacturing facilities in the United States, leveraging the IRA. 26 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 27
The adoption of EVs is growing rapidly worldwide, especially in Europe and the We have also demonstrated bi-directional EV charging and its integration United States. EV adoption will nearly double the electricity consumption of into our Ensemble technology. Using the same proven bi-directional inverter a typical home, since 80% of charging takes place at home. The charging of technology for solar and batteries, we created an IQ Smart EV charger that EVs will require more solar and storage because in many geographies, the grid can both charge and discharge an EV based on CHArge de MOve (CHAdeMO) does not have the capacity to serve the increased demand this presents; we and the Combined Charging Standard (CCS) protocol. We demonstrated estimate that each EV requires an additional 10-15 kWh of stationary storage the vehicle-to-home (V2H) use case, where the vehicle is providing power and around 2-3 kWp of solar. to a home while the utility grid is down, and the vehicle-to-grid (V2G) use case where the vehicle is discharging and providing power back to the home “EV adoption will nearly double We acquired ClipperCreek in 2021 and entered the EV charging market with a for self-consumption or exporting to the utility grid to earn incentives. We the electricity consumption of brand that stands for quality and service. In 2023, we introduced the IQ Smart continue to collaborate with car makers to ensure interoperability and plan a typical home, since 80% of EV charger into the United States and Canada, with plans to follow in Europe to make the product available to the market in 2025 when more vehicles charging takes place at home.” during 2024. This charger features internet connectivity and is integrated with bi-directional capability are released. seamlessly into the Enphase home energy system, enabling use cases such as green charging, which means charging the EV only using clean energy. This charger also allows homeowners to view EV charging, solar, and batteries all in the Enphase App. The IQ Smart EV charger provides cost savings for homeowners, avoiding taking energy from the grid when utility tari rates are high, such as NEM 3.0 in California. The IQ Smart EV charger integrates seamlessly into the Enphase home energy system Enphase bi-directional EV chargers enables EVs to provide power to a home during an outage 28 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 29
The adoption of EVs is growing rapidly worldwide, especially in Europe and the We have also demonstrated bi-directional EV charging and its integration United States. EV adoption will nearly double the electricity consumption of into our Ensemble technology. Using the same proven bi-directional inverter a typical home, since 80% of charging takes place at home. The charging of technology for solar and batteries, we created an IQ Smart EV charger that EVs will require more solar and storage because in many geographies, the grid can both charge and discharge an EV based on CHArge de MOve (CHAdeMO) does not have the capacity to serve the increased demand this presents; we and the Combined Charging Standard (CCS) protocol. We demonstrated estimate that each EV requires an additional 10-15 kWh of stationary storage the vehicle-to-home (V2H) use case, where the vehicle is providing power and around 2-3 kWp of solar. to a home while the utility grid is down, and the vehicle-to-grid (V2G) use case where the vehicle is discharging and providing power back to the home “EV adoption will nearly double We acquired ClipperCreek in 2021 and entered the EV charging market with a for self-consumption or exporting to the utility grid to earn incentives. We the electricity consumption of brand that stands for quality and service. In 2023, we introduced the IQ Smart continue to collaborate with car makers to ensure interoperability and plan a typical home, since 80% of EV charger into the United States and Canada, with plans to follow in Europe to make the product available to the market in 2025 when more vehicles charging takes place at home.”during 2024. This charger features internet connectivity and is integrated with bi-directional capability are released. seamlessly into the Enphase home energy system, enabling use cases such as green charging, which means charging the EV only using clean energy. This charger also allows homeowners to view EV charging, solar, and batteries all in the Enphase App. The IQ Smart EV charger provides cost savings for homeowners, avoiding taking energy from the grid when utility tari rates are high, such as NEM 3.0 in California. The IQ Smart EV charger integrates seamlessly into the Enphase home energy systemEnphase bi-directional EV chargers enables EVs to provide power to a home during an outage 28 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 29
We are partnering with aggregators and utilities to enable grid services in “The introduction of HEMS software based forecasting and optimization logic of our HEMS solution to other geographies where such programs are o ered. Grid services programs enable not only allows us to optimally product areas. We believe this AI-based logic will fuel all of our future product homeowners with IQ Batteries to participate by discharging their batteries, control equipment in the home, but releases and will signi cantly di erentiate us in the market. This optimization thereby reducing their demand on the grid, and receive compensation also further extends the capability engine will be applied as well to support dynamic tari s in di erent European in the form of incentives or rebates. As a result, utilities can reduce their of our systems to participate in grid markets as well as NEM 3.0 in California. dependency on expensive, polluting power plants that traditionally address services programs.” peak power demand. In Europe, Australia, and other regions, we are seeing The introduction of HEMS software not only allows us to optimally control more opportunities to tap into additional value pools in the di erent energy equipment in the home, but also further extends the capability of our systems markets like imbalance or ancillary services. Extending our grid services to to participate in grid services programs. Where most grid services programs generate additional bene ts for homeowners and partners will be important today only allow utilities to leverage speci c resources in the home, HEMS for us in 2024 and beyond. software can provide a coordinated response to utility requests, creating a larger and more reliable participation for the utility and more incentive “We leverage our extensive Our Ensemble technology supports the use of generators. These devices ful ll value with less disruption for the homeowner. We are laying the foundation knowledge of our large eet’s long- a need when solar energy is insu cient, especially during the winter and in for becoming the intelligent site management behind the meter and being term performance and apply the places such as the Northeast region of the United States. During extended the technical aggregator across portfolios of sites. We will utilize our core latest data science and machine outages in the winter season, battery storage may not last, and generators strengths of having a deep understanding of the assets behind the meter and learning (ML) algorithms to it.” become invaluable. When combined with an Ensemble system, generators are our AI-based forecasting and optimization engine. used infrequently, which makes them a good option to enhance resilience in clean energy systems. We made our storage system able to accept generator We have discussed our strategy for all the AC-coupled elements of an Enphase inputs without the need for an external automatic transfer switch (ATS). home energy management system: microinverters, batteries, EV chargers, A generator appears in the Enphase App and o ers a seamless customer generators, HEMS software, and grid services. experience. The combination of full home electri cation, EVs, increasing energy prices, and complex tari structures makes it essential that all DERs and major loads in the home are managed optimally. This means coordinating the charging and discharging of residential batteries, the charging and discharging of EVs and major home loads such as heat pumps, air conditioners, pool pumps, and domestic hot water heaters to ensure that the cost of electricity imported from the grid is minimized and the value of electricity exported to the grid is maximized. Optimizing energy ows in the home requires accurate forecasting of energy production, home energy consumption, and tari s. We leverage our extensive knowledge of our large eet’s long-term performance and apply the latest data science and machine learning (ML) algorithms to it. In geographies where there is a large di erence in tari s between importing and exporting electricity, the di erence between basic and optimal energy management can amount to $1,000 annually per home or more. Ensemble technology a ords us ultimate exibility in managing DERs and major loads in the home. Our solar and battery systems can work together to maximize savings, carbon o set, and resilience. Our acquisition of GreenCom Networks supports our e orts to provide a premier HEMS solution, bringing extensive experience integrating a diverse set of devices such as solar inverters, battery systems, EV chargers, and heat pumps. In 2023, GreenCom’s software was integrated seamlessly in Ensemble to manage these devices intelligently. In addition, we started extending the Arti cial Intelligence (AI)- Enphase’s HEMS software integrates with third-party devices and uses AI to enhance savings 30 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 31
We are partnering with aggregators and utilities to enable grid services in “The introduction of HEMS software based forecasting and optimization logic of our HEMS solution to other geographies where such programs are o ered. Grid services programs enable not only allows us to optimally product areas. We believe this AI-based logic will fuel all of our future product homeowners with IQ Batteries to participate by discharging their batteries, control equipment in the home, but releases and will signi cantly di erentiate us in the market. This optimization thereby reducing their demand on the grid, and receive compensation also further extends the capability engine will be applied as well to support dynamic tari s in di erent European in the form of incentives or rebates. As a result, utilities can reduce their of our systems to participate in grid markets as well as NEM 3.0 in California. dependency on expensive, polluting power plants that traditionally address services programs.” peak power demand. In Europe, Australia, and other regions, we are seeing The introduction of HEMS software not only allows us to optimally control more opportunities to tap into additional value pools in the di erent energy equipment in the home, but also further extends the capability of our systems markets like imbalance or ancillary services. Extending our grid services to to participate in grid services programs. Where most grid services programs generate additional bene ts for homeowners and partners will be important today only allow utilities to leverage speci c resources in the home, HEMS for us in 2024 and beyond. software can provide a coordinated response to utility requests, creating a larger and more reliable participation for the utility and more incentive “We leverage our extensive Our Ensemble technology supports the use of generators. These devices ful ll value with less disruption for the homeowner. We are laying the foundation knowledge of our large eet’s long-a need when solar energy is insu cient, especially during the winter and in for becoming the intelligent site management behind the meter and being term performance and apply theplaces such as the Northeast region of the United States. During extended the technical aggregator across portfolios of sites. We will utilize our core latest data science and machine outages in the winter season, battery storage may not last, and generators strengths of having a deep understanding of the assets behind the meter and learning (ML) algorithms to it.”become invaluable. When combined with an Ensemble system, generators are our AI-based forecasting and optimization engine. used infrequently, which makes them a good option to enhance resilience in clean energy systems. We made our storage system able to accept generator We have discussed our strategy for all the AC-coupled elements of an Enphase inputs without the need for an external automatic transfer switch (ATS). home energy management system: microinverters, batteries, EV chargers, A generator appears in the Enphase App and o ers a seamless customer generators, HEMS software, and grid services. experience. The combination of full home electri cation, EVs, increasing energy prices, and complex tari structures makes it essential that all DERs and major loads in the home are managed optimally. This means coordinating the charging and discharging of residential batteries, the charging and discharging of EVs and major home loads such as heat pumps, air conditioners, pool pumps, and domestic hot water heaters to ensure that the cost of electricity imported from the grid is minimized and the value of electricity exported to the grid is maximized. Optimizing energy ows in the home requires accurate forecasting of energy production, home energy consumption, and tari s. We leverage our extensive knowledge of our large eet’s long-term performance and apply the latest data science and machine learning (ML) algorithms to it. In geographies where there is a large di erence in tari s between importing and exporting electricity, the di erence between basic and optimal energy management can amount to $1,000 annually per home or more. Ensemble technology a ords us ultimate exibility in managing DERs and major loads in the home. Our solar and battery systems can work together to maximize savings, carbon o set, and resilience. Our acquisition of GreenCom Networks supports our e orts to provide a premier HEMS solution, bringing extensive experience integrating a diverse set of devices such as solar inverters, battery systems, EV chargers, and heat pumps. In 2023, GreenCom’s software was integrated seamlessly in Ensemble to manage these devices intelligently. In addition, we started extending the Arti cial Intelligence (AI)-Enphase’s HEMS software integrates with third-party devices and uses AI to enhance savings 30 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 31
Today, the IQ® System Controller brings it all together, as it performs the Beginning in 2025, we expect to move the MID into a meter collar to simplify functions of a microgrid interconnection device (MID) for safety, power backup installations in North America. This simpli es the installation cost aggregation, connectivity, and neutral-forming. It interfaces with the grid, particularly for meter-main combo panels in California, where the meter solar microinverters, batteries, EV, home loads, and provides local control, and the main load center are within the same structure. In addition, with the as well as receives instructions from the cloud and dispatches them to neutral-forming function present in the fourth-generation battery, an external the distributed energy resources onsite. The IQ Gateway uploads data to transformer, which was previously embedded in the IQ System Controller the Enphase cloud at a regular cadence and all this data is available at the is no longer needed. Once that is done, the IQ® Combiner can be used for homeowner’s ngertips through the Enphase App. The Enphase App provides “Beginning in 2025, we expect to connectivity and aggregating power obviating the need for an IQ System deep insight into the consumption and production of energy in the home and move the MID into a meter collar Controller in North America. In Europe and other international regions, we o ers unprecedented control to the homeowner, including disconnecting to simplify backup installations in have already eliminated the IQ Combiner and integrated everything into the the home from the utility grid on-demand, and controlling the operation of North America.” IQ System Controller including an MID, as the meter collar is not required. batteries, EV chargers, and home loads in the event of an outage and more. IQ8 PV IQ8 PV Next-generation Meter main with IQ Combiner IQ Meter Collar Utility grid IQ Meter Collarwith integrated consumption monitoring Fourth-generation IQ Battery Control cable IQ Smart EV charger The IQ System Controller 3 in Australia combines safety, power aggregation, and connectivity Our fourth-generation home energy system in North America, planned for 2025 32 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 33
Today, the IQ® System Controller brings it all together, as it performs the Beginning in 2025, we expect to move the MID into a meter collar to simplify functions of a microgrid interconnection device (MID) for safety, power backup installations in North America. This simpli es the installation cost aggregation, connectivity, and neutral-forming. It interfaces with the grid, particularly for meter-main combo panels in California, where the meter solar microinverters, batteries, EV, home loads, and provides local control, and the main load center are within the same structure. In addition, with the as well as receives instructions from the cloud and dispatches them to neutral-forming function present in the fourth-generation battery, an external the distributed energy resources onsite. The IQ Gateway uploads data to transformer, which was previously embedded in the IQ System Controller the Enphase cloud at a regular cadence and all this data is available at the is no longer needed. Once that is done, the IQ® Combiner can be used for homeowner’s ngertips through the Enphase App. The Enphase App provides “Beginning in 2025, we expect to connectivity and aggregating power obviating the need for an IQ System deep insight into the consumption and production of energy in the home and move the MID into a meter collar Controller in North America. In Europe and other international regions, we o ers unprecedented control to the homeowner, including disconnecting to simplify backup installations in have already eliminated the IQ Combiner and integrated everything into the the home from the utility grid on-demand, and controlling the operation of North America.”IQ System Controller including an MID, as the meter collar is not required. batteries, EV chargers, and home loads in the event of an outage and more. IQ8 PV IQ8 PV Next-generation Meter main with IQ Combiner IQ Meter Collar Utility grid IQ Meter Collarwith integrated consumption monitoring Fourth-generation IQ Battery Control cable IQ Smart EV charger The IQ System Controller 3 in Australia combines safety, power aggregation, and connectivityOur fourth-generation home energy system in North America, planned for 2025 32 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 33
® “The PES charges from the grid, or Finally, we plan to introduce the IQ Portable Energy System (PES) in 2024 “Although we rmly believe No strategy is complete without a discussion about the impact of AI on our a car or portable solar panels via for both energy security and energy-on-the-go. This product o ers 1.5 kW of in the value of direct human business. We see AI as an enabling technology in our industry that will help the back ports, while its front ports power, with 3.0 kW of surge power, from a 1.5 kWh LFP battery. We decided interaction in customer support, us to simultaneously scale and improve our products and services. Besides provide power to plugged-in loads.” to use LFP battery chemistry in our product to leverage the safety and battery we see many opportunities to improving how we develop new products and conduct business, we believe management knowledge we learned making our IQ Batteries. This product improve our homeowner and there are two speci c areas where AI will play an increasingly important role for can be thought of as Ensemble-in-a-Box; we have integrated our battery installer experience by using AI us. The rst area is energy management, which was mentioned earlier. We can management, power conversion, and control technologies into a single self- to recognize problems before the improve the quality and performance of our systems by better understanding contained product. The key di erentiating features are its ability to allow a user homeowner does and address the behaviors, needs, and patterns in the household, and AI is instrumental for to charge or discharge at high rates continuously even under warm conditions; them proactively.” that. The second area is customer and homeowner experience. Although we compliance with UL safety standards; and usability in outdoor conditions. The rmly believe in the value of direct human interaction in customer support, we PES has a connected user experience through Wi-Fi and cellular, providing see many opportunities to improve our homeowner and installer experience insight into its state of charge and power owing into and out of the product by using AI to recognize problems before the homeowner does and address through a mobile app, in addition to the touchscreen on the product. This them proactively. connectivity allows our users to have access to world class customer service 24x7 that provides remote troubleshooting and the latest software updates. The PES charges from the grid, or a car or portable solar panels via the back ports, while its front ports provide power to plugged-in loads. The PES o ers a plug-and-play solution, as it does not require any installation or wiring. The IQ Portable Energy System provides both energy security and energy-on-the-go 34 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 35
® “The PES charges from the grid, or Finally, we plan to introduce the IQ Portable Energy System (PES) in 2024 “Although we rmly believe No strategy is complete without a discussion about the impact of AI on our a car or portable solar panels via for both energy security and energy-on-the-go. This product o ers 1.5 kW of in the value of direct human business. We see AI as an enabling technology in our industry that will help the back ports, while its front ports power, with 3.0 kW of surge power, from a 1.5 kWh LFP battery. We decided interaction in customer support, us to simultaneously scale and improve our products and services. Besides provide power to plugged-in loads.” to use LFP battery chemistry in our product to leverage the safety and battery we see many opportunities to improving how we develop new products and conduct business, we believe management knowledge we learned making our IQ Batteries. This product improve our homeowner and there are two speci c areas where AI will play an increasingly important role for can be thought of as Ensemble-in-a-Box; we have integrated our battery installer experience by using AI us. The rst area is energy management, which was mentioned earlier. We can management, power conversion, and control technologies into a single self-to recognize problems before the improve the quality and performance of our systems by better understanding contained product. The key di erentiating features are its ability to allow a user homeowner does and address the behaviors, needs, and patterns in the household, and AI is instrumental for to charge or discharge at high rates continuously even under warm conditions; them proactively.”that. The second area is customer and homeowner experience. Although we compliance with UL safety standards; and usability in outdoor conditions. The rmly believe in the value of direct human interaction in customer support, we PES has a connected user experience through Wi-Fi and cellular, providing see many opportunities to improve our homeowner and installer experience insight into its state of charge and power owing into and out of the product by using AI to recognize problems before the homeowner does and address through a mobile app, in addition to the touchscreen on the product. This them proactively. connectivity allows our users to have access to world class customer service 24x7 that provides remote troubleshooting and the latest software updates. The PES charges from the grid, or a car or portable solar panels via the back ports, while its front ports provide power to plugged-in loads. The PES o ers a plug-and-play solution, as it does not require any installation or wiring. The IQ Portable Energy System provides both energy security and energy-on-the-go 34 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 35
As we progress in 2024, our primary focus revolves around three areas: customer Our 2024 experience, new products, and operational excellence. Transform the customer experience priorities “We plan to focus on key metrics At Enphase, we take pride in serving our customers. Our commitment to delivering which give us comprehensive an exceptional customer experience begins with shipping value-added products insight into the entire solar pipeline with the highest quality and helping our customers 24x7 with any issues they including proposals, permits, sell- encounter when using the products. We are striving to deliver world-class collateral through, and activations, improving to installers through a world-class website. We are aiming to provide a seamless our channel management.” installation and commissioning experience for our products. We also expect to improve the quality of our products by focusing relentlessly on the right metrics, identifying the root cause of returns, and implementing corrective actions. We are enabling better eet management by bolstering our cloud infrastructure. We plan to collect a great deal of data on the vitals of the product and stream them to our cloud platform. We are anticipating potential product problems by using our data warehouse to organize this data and applying ML/AI techniques to uncover key insights. We are making our products software-de ned so that such problems can be solved over-the-air most of the time. Develop best-in-class new products New products are our lifeblood. We are working on the next two generations of microinverters – IQ9 and IQ10 to improve the power, form factor, and e ciency of our microinverters to decrease the cost per watt for consumers. We are designing our fourth- and fth-generation of IQ Batteries to minimize the form- factor, increase the energy density, and reduce the cost for consumers. We are also working on streamlining the balance of system for our batteries, reducing the number of boxes on the wall, and ensuring we pay attention to both product and labor costs for installers. We are working on EV chargers – the IQ Smart EV chargers for Europe and IQ bi-directional EV chargers with V2G and V2H capability. Finally, we are developing AI-based software to manage NEM 3.0 tari s in California and dynamic tari s in Europe along with third-party EV chargers and heat pumps. Our IP Portfolio currently includes more than 405 issued patents, and many additional pending worldwide – a testament to our product innovation. Elevate operational excellence We expect to elevate our operational excellence in 2024. We plan to focus on key metrics which give us comprehensive insight into the entire solar pipeline including proposals, permits, sell-through, and activations, and improving our channel management. These metrics are instrumental in forecasting our business and strengthening our distributor and installer relationships. We are going to manage product costs, new product transitions, and inventory to best-in-class levels. We will maintain our pricing discipline and continue to price products based on value. While we plan to leverage the IRA by manufacturing in the United States, we will strike a balance with respect to worldwide manufacturing. Finally, embracing a lean and frugal mindset will help us remain as a high-performance organization. 3636 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 37
As we progress in 2024, our primary focus revolves around three areas: customer Our 2024 experience, new products, and operational excellence. Transform the customer experience priorities“We plan to focus on key metrics At Enphase, we take pride in serving our customers. Our commitment to delivering which give us comprehensive an exceptional customer experience begins with shipping value-added products insight into the entire solar pipeline with the highest quality and helping our customers 24x7 with any issues they including proposals, permits, sell- encounter when using the products. We are striving to deliver world-class collateral through, and activations, improving to installers through a world-class website. We are aiming to provide a seamless our channel management.” installation and commissioning experience for our products. We also expect to improve the quality of our products by focusing relentlessly on the right metrics, identifying the root cause of returns, and implementing corrective actions. We are enabling better eet management by bolstering our cloud infrastructure. We plan to collect a great deal of data on the vitals of the product and stream them to our cloud platform. We are anticipating potential product problems by using our data warehouse to organize this data and applying ML/AI techniques to uncover key insights. We are making our products software-de ned so that such problems can be solved over-the-air most of the time. Develop best-in-class new products New products are our lifeblood. We are working on the next two generations of microinverters – IQ9 and IQ10 to improve the power, form factor, and e ciency of our microinverters to decrease the cost per watt for consumers. We are designing our fourth- and fth-generation of IQ Batteries to minimize the form- factor, increase the energy density, and reduce the cost for consumers. We are also working on streamlining the balance of system for our batteries, reducing the number of boxes on the wall, and ensuring we pay attention to both product and labor costs for installers. We are working on EV chargers – the IQ Smart EV chargers for Europe and IQ bi-directional EV chargers with V2G and V2H capability. Finally, we are developing AI-based software to manage NEM 3.0 tari s in California and dynamic tari s in Europe along with third-party EV chargers and heat pumps. Our IP Portfolio currently includes more than 405 issued patents, and many additional pending worldwide – a testament to our product innovation. Elevate operational excellence We expect to elevate our operational excellence in 2024. We plan to focus on key metrics which give us comprehensive insight into the entire solar pipeline including proposals, permits, sell-through, and activations, and improving our channel management. These metrics are instrumental in forecasting our business and strengthening our distributor and installer relationships. We are going to manage product costs, new product transitions, and inventory to best-in-class levels. We will maintain our pricing discipline and continue to price products based on value. While we plan to leverage the IRA by manufacturing in the United States, we will strike a balance with respect to worldwide manufacturing. Finally, embracing a lean and frugal mindset will help us remain as a high-performance organization. 3636 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 37
Our most powerful, all-in-one home energy solution yet IQ Battery 5P Two IQ Battery 5P, totaling 10 kWh IQ System Controller capacity 3838 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 3939
Our most powerful, all-in-one home energy solution yet IQ Battery 5P Two IQ Battery 5P, totaling 10 kWh IQ System Controller capacity 3838 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 3939
The power of Final thoughts the sun at your In summary, 2023 was a challenging year for the solar industry given the macroeconomic conditions. Despite these challenges, we managed to hold our ground compared to our industry peers. We maintained our market share and focused on supporting our customers. Notably, we started manufacturing our microinverters in the United States. We ngertips were pro table in 2023, but the highlight of the year was our introduction of new products in many new countries – IQ8 Microinverters, IQ8P small commercial microinverters, IQ Batteries, and IQ Smart EV chargers. Make, use, save, and sell your own power We are optimistic about what 2024 will bring. We expect that our worldwide channel inventory will return to normal levels as we enter the second half of the year. We also foresee potential relief as the Federal Reserve Board begins lowering interest rates within the same timeframe, easing pressure on solar economics for consumers. We expect utility rates to be on the rise around the world. While EVs appear out of favor today, we strongly believe that full home electri cation is inevitable. Our strategy is to build best-in-class home energy systems to enable full home electri cation while positively impacting climate change. Our home energy systems, comprising of IQ Microinverters, IQ Batteries, IQ Smart EV chargers, and software, have seen remarkable adoption, with over 73 million solar microinverters and 1.2 GWh of IQ Batteries shipped at the end of 2023 since our company’s inception. Approximately 4.0 million Enphase-based systems have been deployed in 1 more than 150 countries, preventing 56 million metric tons of carbon dioxide equivalent. We are laser focused on innovation, quality, and customer experience to make our systems provide high value to consumers at lower cost. I extend my sincere gratitude to our employees for their dedication and hard work, and our customers, partners, and shareholders for their continued support. To be continued, Badri Kothandaraman President and CEO May 20, 2024 1 Estimate based on Enphase managed systems data as of December 31, 2023 grossed up for non-managed systems based on cumulative production records; CO₂e calculations based on U.S. Environmental Protection Agency (U.S. EPA) GHG calculator The Enphase App 40 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 41
The power of Final thoughts the sun at your In summary, 2023 was a challenging year for the solar industry given the macroeconomic conditions. Despite these challenges, we managed to hold our ground compared to our industry peers. We maintained our market share and focused on supporting our customers. Notably, we started manufacturing our microinverters in the United States. We ngertips were pro table in 2023, but the highlight of the year was our introduction of new products in many new countries – IQ8 Microinverters, IQ8P small commercial microinverters, IQ Batteries, and IQ Smart EV chargers. Make, use, save, and sell your own powerWe are optimistic about what 2024 will bring. We expect that our worldwide channel inventory will return to normal levels as we enter the second half of the year. We also foresee potential relief as the Federal Reserve Board begins lowering interest rates within the same timeframe, easing pressure on solar economics for consumers. We expect utility rates to be on the rise around the world. While EVs appear out of favor today, we strongly believe that full home electri cation is inevitable. Our strategy is to build best-in-class home energy systems to enable full home electri cation while positively impacting climate change. Our home energy systems, comprising of IQ Microinverters, IQ Batteries, IQ Smart EV chargers, and software, have seen remarkable adoption, with over 73 million solar microinverters and 1.2 GWh of IQ Batteries shipped at the end of 2023 since our company’s inception. Approximately 4.0 million Enphase-based systems have been deployed in 1 more than 150 countries, preventing 56 million metric tons of carbon dioxide equivalent. We are laser focused on innovation, quality, and customer experience to make our systems provide high value to consumers at lower cost. I extend my sincere gratitude to our employees for their dedication and hard work, and our customers, partners, and shareholders for their continued support. To be continued, Badri Kothandaraman President and CEO May 20, 2024 1 Estimate based on Enphase managed systems data as of December 31, 2023 grossed up for non-managed systems based on cumulative production records; CO₂e calculations based on U.S. Environmental Protection Agency (U.S. EPA) GHG calculator The Enphase App 40 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 41
Appendix Enphase Energy, Inc. reconciliation of GAAP nancial measures to non-GAAP nancial measures Enphase Energy, Inc. reconciliation of GAAP nancial measures to non-GAAP nancial measures (continued) In thousands, except per share data and percentages Year ended In thousands, except per share data and percentages Year ended 2023 2022 2018 2023 2022 2018 Gross pro t (GAAP) $ 1,058,388 $ 974,595 $ 94,445 Net income (loss) per share, basic (GAAP) $ 3.22 $ 2.94 $ (0.12) Stock-based compensation 13,357 13,097 1,071 Stock-based compensation 1.56 1.60 0.11 Acquisition related amortization 7,580 6,324 - Acquisition related expenses and amortization 0.17 0.17 0.02 Gross pro t (Non-GAAP) $ 1,079,325 $ 994,016 $ 95,516 Restructuring and asset impairment charges 0.12 0.02 0.04 Reserve for non-recurring legal matter - - 0.02 Gross margin (GAAP) 46.2 % 41.8 % 29.9 % Non-cash interest expense 0.06 0.06 0.03 Stock-based compensation 0.6 % 0.5 % 0.3 % Non-GAAP income tax adjustment (0.63) (0.01) - Acquisition related amortization 0.3 % 0.3 % - % Net income per share, basic (Non-GAAP) $ 4.50 $ 4.78 $ 0.10 Gross margin (Non-GAAP) 47.1 % 42.6 % 30.2 % Shares used in per share calculation, basic and 136,376 135,349 99,619 Operating expenses (GAAP) $ 612,647 $ 526,334 $ 92,849 diluted (GAAP and Non-GAAP) Stock-based compensation (199,500) (203,705) (10,361) Net income (loss) per share, diluted (GAAP) $ 3.08 $ 2.77 $ (0.12) Acquisition related expenses and amortization (15,317) (16,521) (1,614) Stock-based compensation 1.57 1.55 0.11 Restructuring and asset impairment charges (15,715) (2,384) (4,128) Acquisition related expenses and amortization 0.16 0.16 0.02 Reserve for non-recurring legal matter - - (1,765) Restructuring, asset impairment and other charges 0.11 0.02 0.04 Operating expenses (Non-GAAP) $ 382,115 $ 303,724 $ 74,981 Reserve for non-recurring legal matter - - 0.02 Operating expense % of revenue 16.7 % 13.0 % 23.7 % Non-cash interest expense 0.06 0.06 0.03 Income from operations (GAAP) $ 445,741 $ 448,261 $ 1,596 Non-GAAP income tax adjustment (0.57) 0.06 - 1 $ 4.41 $ 4.62 $ 0.10 Stock-based compensation 212,857 216,802 11,432 Net income per share, diluted (Non-GAAP) Acquisition related expenses and amortization 22,897 22,845 1,614 Shares used in per share calculation (GAAP) 143,290 144,390 99,619 Restructuring and asset impairment charges 15,715 2,384 4,128 Shares used in per share calculation (Non-GAAP) 139,214 140,315 111,696 Reserve for non-recurring legal matter - - 1,765 Income from operations (Non-GAAP) $ 697,210 $ 690,292 $ 20,535 Income-based government grants (GAAP) $ 53,470 $ - $ - Net income (loss) (GAAP) $ 438,936 $ 397,362 $ (11,627) Incremental cost for manufacturing in U.S. (11,603) - - Stock-based compensation 212,857 216,802 11,432 Net IRA bene t (Non-GAAP) $ 41,867 $ - $ - Acquisition related expenses and amortization 22,897 22,845 1,614 Net cash provided by operating activities (GAAP) $ 696,780 $ 744,817 $ 16,132 Restructuring and asset impairment charges 15,715 2,384 4,128 Purchases of property and equipment (110,401) (46,443) (4,151) Reserve for non-recurring legal matter - - 1,765 Free cash ow (Non-GAAP) $ 586,379 $ 698,374 $ 11,981 Non-cash interest expense 8,380 8,169 2,701 Non-GAAP income tax adjustment (85,544) (138) - Net income (Non-GAAP) $ 613,241 $ 647,424 $ 10,013 1 Calculation of non-GAAP diluted net income per share for the year ended December 31, 2023, 2022, and 2018, excludes convertible notes due 2023 expense, net of tax of approximately $0.1 million, $0.1 million, and $0.7 million, respectively, from non-GAAP net income. 42 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 43
Appendix Enphase Energy, Inc. reconciliation of GAAP nancial measures to non-GAAP nancial measuresEnphase Energy, Inc. reconciliation of GAAP nancial measures to non-GAAP nancial measures (continued) In thousands, except per share data and percentagesYear endedIn thousands, except per share data and percentages Year ended 202320222018 2023 2022 2018 Gross pro t (GAAP)$ 1,058,388 $ 974,595 $ 94,445 Net income (loss) per share, basic (GAAP) $ 3.22 $ 2.94 $ (0.12) Stock-based compensation 13,357 13,097 1,071 Stock-based compensation 1.56 1.60 0.11 Acquisition related amortization 7,580 6,324 - Acquisition related expenses and amortization 0.17 0.17 0.02 Gross pro t (Non-GAAP)$ 1,079,325 $ 994,016 $ 95,516 Restructuring and asset impairment charges 0.12 0.02 0.04 Reserve for non-recurring legal matter - - 0.02 Gross margin (GAAP)46.2 %41.8 %29.9 % Non-cash interest expense 0.06 0.06 0.03 Stock-based compensation0.6 %0.5 %0.3 % Non-GAAP income tax adjustment (0.63) (0.01) - Acquisition related amortization0.3 %0.3 %- % Net income per share, basic (Non-GAAP) $ 4.50 $ 4.78 $ 0.10 Gross margin (Non-GAAP)47.1 %42.6 %30.2 % Shares used in per share calculation, basic and 136,376 135,349 99,619 Operating expenses (GAAP)$ 612,647 $ 526,334 $ 92,849 diluted (GAAP and Non-GAAP) Stock-based compensation (199,500) (203,705) (10,361) Net income (loss) per share, diluted (GAAP) $ 3.08 $ 2.77 $ (0.12) Acquisition related expenses and amortization (15,317) (16,521) (1,614) Stock-based compensation 1.57 1.55 0.11 Restructuring and asset impairment charges (15,715) (2,384) (4,128) Acquisition related expenses and amortization 0.16 0.16 0.02 Reserve for non-recurring legal matter-- (1,765) Restructuring, asset impairment and other charges 0.11 0.02 0.04 Operating expenses (Non-GAAP)$ 382,115 $ 303,724 $ 74,981 Reserve for non-recurring legal matter - - 0.02 Operating expense % of revenue16.7 %13.0 %23.7 % Non-cash interest expense 0.06 0.06 0.03 Income from operations (GAAP)$ 445,741 $ 448,261 $ 1,596 Non-GAAP income tax adjustment (0.57) 0.06 - 1 $ 4.41 $ 4.62 $ 0.10 Stock-based compensation212,857216,80211,432 Net income per share, diluted (Non-GAAP) Acquisition related expenses and amortization22,89722,8451,614 Shares used in per share calculation (GAAP) 143,290 144,390 99,619 Restructuring and asset impairment charges15,7152,384 4,128 Shares used in per share calculation (Non-GAAP) 139,214 140,315 111,696 Reserve for non-recurring legal matter-- 1,765 Income from operations (Non-GAAP)$ 697,210 $ 690,292 $ 20,535 Income-based government grants (GAAP) $ 53,470 $ - $ - Net income (loss) (GAAP)$ 438,936 $ 397,362 $ (11,627) Incremental cost for manufacturing in U.S. (11,603) - - Stock-based compensation 212,857 216,802 11,432 Net IRA bene t (Non-GAAP) $ 41,867 $ - $ - Acquisition related expenses and amortization 22,897 22,845 1,614 Net cash provided by operating activities (GAAP) $ 696,780 $ 744,817 $ 16,132 Restructuring and asset impairment charges 15,715 2,384 4,128 Purchases of property and equipment (110,401) (46,443) (4,151) Reserve for non-recurring legal matter - - 1,765 Free cash ow (Non-GAAP) $ 586,379 $ 698,374 $ 11,981 Non-cash interest expense 8,380 8,169 2,701 Non-GAAP income tax adjustment (85,544) (138) - Net income (Non-GAAP)$ 613,241 $ 647,424 $ 10,013 1 Calculation of non-GAAP diluted net income per share for the year ended December 31, 2023, 2022, and 2018, excludes convertible notes due 2023 expense, net of tax of approximately $0.1 million, $0.1 million, and $0.7 million, respectively, from non-GAAP net income. 42 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 43
Enphase HCS commercial chargers are a popular choice for eet and workplace charging 44 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 45
Enphase HCS commercial chargers are a popular choice for eet and workplace charging 44 ENPHASE CEO LETTER TO SHAREHOLDERS 2023 45
Enphase Energy, Inc. Corporate headquarters 47281 Bayside Parkway Fremont, CA 94538 www.enphase.com 707-774-7000 Investor relations investor.enphase.com [email protected] Transfer agent and registrar Equiniti Trust Company, LLC 6201 15th Avenue Brooklyn, NY 11219 www.equiniti.com 800-468-9716 Independent registered public accounting 昀椀rm Deloitte & Touche LLP Stock exchange listing Enphase Energy, Inc. common stock trades on the NASDAQ Global Market under the symbol ENPH Financial and investor information is available on the company’s investor relations website at investor.enphase.com 46