Forward-Looking Statements



The following discussion and analysis of our financial condition and results of
operations should be read together with our condensed consolidated financial
statements and related notes appearing elsewhere in this Quarterly Report on
Form 10-Q. This discussion contains forward-looking statements reflecting our
current expectations and involves risks and uncertainties. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "expect," "plan," "anticipate," "believe," "estimate," "predict,"
"intend," "potential" or "continue" or the negative of these terms or other
comparable terminology. Such statements, include but are not limited to
statements regarding our expectations as to future financial performance;
expense levels; liquidity sources; the capabilities and performance of our
technology and products and planned changes; timing of new product releases; our
business strategies, including anticipated trends; growth and developments in
markets in which we target; the anticipated market adoption of our current and
future products; performance in operations, including component supply
management; product quality and customer service; risks related to supply chain
disruptions, the ongoing COVID-19 pandemic; geo-political events, such as the
conflict in Ukraine; new government regulations, such as the Inflation Reduction
Act of 2022 ("IRA"); and the anticipated benefits and risks relating to our
recent acquisitions. You should be aware that the forward-looking statements
contained in this report are based on our current views and assumptions, and are
subject to known and unknown risks, uncertainties and other factors that may
cause actual events or results to differ materially. For a discussion
identifying some of the important factors that could cause actual results to
vary materially from those anticipated in the forward-looking statements, see
below, those discussed in the section entitled "Risk Factors" herein and those
included in our Annual Report on Form 10-K for the year ended December 31, 2021
filed on February 11, 2022 (the "Form 10-K"). Unless the context requires
otherwise, references in this report to "Enphase," "we," "us" and "our" refer to
Enphase Energy, Inc. and its consolidated subsidiaries.

Business Overview



We are a global energy technology company. We deliver smart, easy-to-use
solutions that manage solar generation, storage and communication on one
platform. We revolutionized the solar industry with our microinverter technology
and we produce a fully integrated solar-plus-storage solution. As of
September 30, 2022, we have shipped more than 52 million microinverters, and
over 2.7 million Enphase residential and commercial systems have been deployed
in more than 145 countries.

The Enphase® Energy System™, powered by IQ® Microinverters and IQ™ Batteries,
our current generation integrated solar, storage and energy management offering,
enables self-consumption and delivers our core value proposition of yielding
more energy, simplifying design and installation, and improving system uptime
and reliability. The IQ family of microinverters, like all of our previous
microinverters, is fully compliant with NEC 2014 and 2017 rapid shutdown
requirements. Unlike string inverters, this capability is built-in, with no
additional equipment necessary.

The Enphase Energy System brings a high technology, networked approach to solar
generation plus energy storage, by leveraging our design expertise across power
electronics, semiconductors and cloud-based software technologies. Our
integrated approach to energy solutions maximizes a home's energy potential
while providing advanced monitoring and remote maintenance capabilities. The
Enphase Energy System with IQ uses a single technology platform for seamless
management of the whole solution, enabling rapid commissioning with the Enphase®
Installer App; consumption monitoring with IQ™ Gateway with IQ Combiner+™,
Enphase® App, a cloud-based energy management platform, and our IQ™ Battery.
System owners can use the Enphase App to monitor their home's solar generation,
energy storage and consumption from any web-enabled device. Unlike some of our
competitors, who utilize a traditional inverter, or offer separate components of
solutions, we have built-in system redundancy in both photovoltaic generation
and energy storage, eliminating the risk that comes with a single point of
failure. Further, the nature of our cloud-based, monitored system allows for
remote firmware and software updates, enabling cost-effective remote maintenance
and ongoing utility compliance.

In March 2022, we completed the acquisition of SolarLeadFactory, LLC.
("SolarLeadFactory"), a privately-held company. SolarLeadFactory provides high
quality leads to solar installers. As part of the purchase price, we paid
approximately $26.1 million in cash on March 14, 2022. In addition to the
purchase price paid, we are obligated to pay up to approximately $10.0 million
in shares of our common stock in the second quarter of 2023 subject to
achievement of certain operational and employment targets.

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Further details on the above acquisition may be found in   Note 4  , "Business
Combinations," in the notes to the condensed consolidated financial statements
included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

On October 10, 2022, we completed the acquisition of 100% of the voting interest
of GreenCom Networks AG, a privately-held company. GreenCom provides Internet of
Things software solutions for customers to connect and manage a wide range of
distributed energy devices within the home. As part of the consideration, we
paid approximately $34.9 million in cash. We are currently in the process of
completing the preliminary purchase price allocation, which will be included in
our Annual Report on Form 10-K for the year ended December 31, 2022.

Factors Affecting our Business and Operations



Supply Chain Constraints. Due to increased demand across a range of industries,
the global supply chain and the semiconductor industry have experienced
significant disruptions in recent periods. We have seen supply chain challenges
and logistics constraints increase, including component shortages, which have,
in certain cases, caused delays in critical components and inventory, longer
lead times, and have resulted in increased costs. We believe these supply chain
challenges will persist for the foreseeable future. In addition, the impact of
inflation on the price of components, raw materials and labor has increased,
although in the near term we have not seen our gross margin impacted by
inflation as we increased prices for our product offerings in the second half of
2021 and in 2022 as well.

During the three months ended September 30, 2022, overall reliability of supply
improved and the majority of our suppliers were able to deliver components by
their promised, though in many cases, extended, lead times. We continue to work
to mitigate the effects from supply chain constraints and the impacts of
inflation. In the event we are unable to mitigate the impact of delays and/or
price increases in raw materials, electronic components and freight, it could
delay the manufacturing and installation of our products, which would adversely
impact our cash flows and results of operations, including revenue and gross
margin.

COVID-19 Pandemic. The impact of the COVID-19 pandemic and countermeasures taken
to contain its spread remain dynamic. We continue to monitor the situation and
actively assess further implications for our business, supply chain, fulfillment
operations and overall demand. We continue to take meaningful precautions in
accordance with relevant guidelines to protect the health and safety of our
employees. The extent of the continuing impact of COVID-19 on our operational
and financial performance will depend on various developments, including the
duration and spread of the virus and its variants, impact on our end-customers'
spending, volume of sales, impact on our partners, suppliers and employees, and
actions that may be taken by governmental authorities, including the effects of
government-mandated lockdowns in several cities in China during 2022. If the
COVID-19 pandemic or its adverse effects become more severe or prevalent or are
prolonged in the locations where we, our customers, suppliers or manufacturers
conduct business, or we experience more pronounced disruptions in our business
or operations, or in economic activity and demand for our products and services
generally, our business and results of operations in future periods could be
materially adversely affected. Further information relating to the risks and
uncertainties related to the ongoing COVID-19 pandemic may be found in Part I,
Item 1A "Risk Factors" of the Form 10-K.

Inflation Reduction Act of 2022. In August 2022, the IRA was enacted, which
includes extension of the investment tax credit ("ITC") and production tax
credit ("PTC") for solar as well as a new advanced manufacturing PTC to
incentivize clean energy component sourcing and production, including for the
production of solar related components, battery cells and battery packs. The IRA
provides for an advanced manufacturing PTC on microinverters of 11 cents per
alternating current watt basis. The manufacturing PTC for each component
including on microinverters decreases by 25% each year beginning in 2030 and
ending after 2032. Under the IRA, the ITC was extended until 2032 to allow a
qualifying homeowner to deduct 30% of the cost of installing residential solar
systems from their U.S. federal income taxes, thereby returning a material
portion of the purchase price of the residential solar system to homeowners.
Under the terms of the current extension, the ITC will remain at 30% through the
end of 2032, reduce to 26% for 2033, reduce to 22% for 2034, and further reduce
to 0.0% after the end of 2034 for residential solar systems, unless it is
extended before that time. We believe the enactment of the IRA is favorable to
our overall business worldwide; however, we are continuing to evaluate the
overall impact and applicability of the IRA to our results of operations going
forward, including the revisions to the U.S. Internal Revenue Code, which
includes a 15% corporate minimum income tax and a 1% excise tax on corporate
stock repurchases in tax years beginning after December 31, 2022.

Russia and Ukraine Conflict. In February 2022, armed conflict escalated between
Russia and Ukraine. The United States and certain other countries have imposed
sanctions on Russia and could impose further sanctions, which could damage or
disrupt international commerce and the global economy. While we do not have
sales or

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operations in Russia or Ukraine, it is possible that the conflict or actions
taken in response, could adversely affect some of our markets and suppliers, the
broader economic and financial markets, or costs and availability of components
and materials, or cause further supply chain disruptions.

Products



Our Enphase IQ Battery storage systems, with usable and scalable capacity of
10.1 kWh and 3.4 kWh, are based on our Ensemble OS™ energy management
technology, which powers the world's first grid-independent microinverter-based
storage system to customers in North America, and has been shipping since the
second quarter of 2020. The Enphase IQ Battery storage systems feature our
embedded grid-forming microinverters that enable the Always-On capability that
keeps homes powered when the grid goes down, and the ability to save money when
the grid is up. These systems are now compatible with both new and existing
Enphase IQ solar systems with M-series™, IQ6™ and IQ7™ microinverters. In
January 2021, we announced expanded compatibility of the Enphase® Energy System™
with our M-series microinverters and string inverters. The expanded
compatibility provides approximately 300,000 additional Enphase system owners
with the possibility of achieving grid-agnostic energy resilience through the
Enphase Upgrade Program. The program provides solar installers the opportunity
to renew engagements with the installed base of Enphase system owners through
microinverter, solar, and energy storage upgrades, and reflects our continued
commitment to reliability, service, and long-term customer relationships. We
currently ship our Enphase IQ Battery storage systems to customers in North
America, Belgium and Germany. Enphase IQ Batteries in Belgium and Germany can be
installed with both single-phase and three-phase third-party solar energy
inverters, enabling homeowners to upgrade their existing home solar systems with
a residential battery storage solution that reduces costs while providing
increased self-reliance.

During the second quarter of 2021, we introduced IQ™ Load Controller for our
Enphase IQ Battery storage systems. Load control allows homeowners to decide
what gets power in their home in the event of a grid outage, with the ability to
choose up to four loads. These loads will be on when the grid is present and
shed automatically in the event of a grid failure. We began shipping our IQ Load
Controller, which includes updated features, in December 2021.

Our Enphase Energy System integrates with most leading models of home standby AC
generators, providing enhanced performance and a glitch-free transition for
homeowners during power outages. Homeowners can also monitor real-time power
flow, start and stop their generator remotely, set quiet hours to prevent their
generator from operating until their batteries fall below a designated
threshold, and control it all with the Enphase® App. The new feature functions
without a generator automatic transfer switch and is designed to eliminate the
power glitches that reset home electronic appliances when switching to generator
power.

We began shipping our Enphase Energy System with IQ8™ microinverters in the
fourth quarter of 2021 to customers in North America. Our investment in custom
application specific integrated circuit chips has resulted in a software-defined
microinverter smart enough to form a microgrid. Many homeowners often assume
that their solar systems will function if the sun is shining, even during a
power outage. This has unfortunately not been true until the introduction of
IQ8. Now, with IQ8 homeowners can realize the true promise of solar - to make
and use their own power. IQ8 solar microinverters can provide Sunlight Backup™
during an outage, even without a battery.

In the second quarter of 2022 the Enphase IQ8 Microinverter-based system was
certified by UL, a global safety science leader, for the new North American
safety and grid interconnection standards for connecting solar inverters, energy
storage systems, and distributed energy resources to the grid.

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We participate in the ConnectedSolutions program, which is an incentive program
implemented by two utilities in the Northeast region of the United States to
reduce electrical demand during high-use periods. Enphase Storage customers in
Connecticut, Massachusetts and Rhode Island can sign-up, monitor, track money
earned, and control participation in the program using the Enphase App. We
announced during the third quarter of 2021 our participation in Hawaiian
Electric's Battery Bonus grid services program. This program offers a new
incentive for homeowners on the island of Oahu to install a new home battery.
During the fourth quarter of 2021, we announced our participation in the Arizona
Public Service ("APS") residential battery services program. The APS program
offers homeowners who install Enphase IQ Batteries in its service territory the
chance to participate and earn money through one-time, upfront incentives. In
addition, we announced during the first quarter of 2022 that the Vermont-based
utility Green Mountain Power ("GMP") will offer Enphase Energy Systems to its
customers in a cutting-edge battery lease grid services pilot program.
Homeowners can also enroll in GMP's "Bring Your Own Device" grid services
program, which enables customers with their own Enphase Energy Systems to
participate and earn an up-front incentive. These grid services programs enable
utilities to leverage the IQ Battery instead of turning on polluting peaker
plants, while generating an income stream for the IQ Battery owner. While these
programs do not currently drive material revenues, we believe that facilitating
grid services participation for our customers can reduce the lifetime cost of IQ
Batteries and help drive increased demand for our Enphase Energy Systems.

Results of Operations



Net Revenues

                          Three Months Ended                                                          Nine Months Ended
                             September 30,                          Change in                           September 30,                           Change in
                        2022               2021                $                 %                 2022                2021                $                 %

                                                                          (In thousands, except percentages)
Net revenues        $ 634,713          $ 351,519          $ 283,194              81   %       $ 1,606,201          $ 969,330          $ 636,871              66   %

Three months ended September 30, 2022 and 2021



Net revenues increased by 81%, or $283.2 million, in the three months ended
September 30, 2022, as compared to the same period in 2021, driven primarily by
a 67% increase in microinverter units volume shipped and a 104% increase in
Enphase IQ Battery Megawatt-hour ("MWh") shipped. In the three months ended
September 30, 2022, consumer demand increased and component supply improved as
we sold approximately 4.3 million microinverter units, as compared to
approximately 2.6 million units in the three months ended September 30, 2021. In
the three months ended September 30, 2022, we also increased shipments of our
Enphase IQ Batteries to customers in the United States and Europe to 133.6 MWh
as compared to 65.4 MWh shipped in the same period in 2021. The average selling
price of our microinverter products increased by 9% in the three months ended
September 30, 2022, as compared to the same period in 2021, primarily driven by
a favorable product mix as we sold more IQ8 microinverters relative to IQ7
microinverters in the three months ended September 30, 2022 and increased prices
for our product offerings in the second half of 2021 and in 2022 to partially
offset the impact of higher logistics costs and component costs from global
supply chain pricing pressures.

Nine months ended September 30, 2022 and 2021



Net revenues increased by 66%, or $636.9 million, in the nine months ended
September 30, 2022, as compared to the same period in 2021, driven primarily by
a 42% increase in microinverter units volume shipped and a 156% increase in
Enphase IQ Battery MWh shipped. In the nine months ended September 30, 2022,
consumer demand increased and component supply improved, as we sold
approximately 10.5 million microinverter units, as compared to approximately 7.4
million units in the nine months ended September 30, 2021. In the nine months
ended September 30, 2022, we also increased shipments of our Enphase IQ
Batteries to customers in the United States and Europe to 386.4 MWh, as compared
to 150.8 MWh shipped in the same period in 2021. The average selling price of
our microinverter products increased by 14% in the nine months ended September
30, 2022, as compared to the same period in 2021, primarily driven by a
favorable product mix, as we sold more IQ8 microinverters relative to IQ7
microinverters in the nine months ended September 30, 2022 and increased prices
for our product offerings in the second half of 2021 and in 2022 to partially
offset the impact of higher logistics costs and component costs from global
supply chain pricing pressures.

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Cost of Revenues and Gross Margin



                                  Three Months Ended                                                               Nine Months Ended
                                    September 30,                               Change in                            September 30,                           Change in
                               2022                  2021                   $                  %                2022                2021                 $                 %

                                                                                   (In thousands, except percentages)

Cost of revenues        $      366,797           $     211,161       $       155,636           74  %       $      942,307       $     578,222       $ 364,085              63  %
Gross profit            $      267,916           $     140,358       $       127,558           91  %       $      663,894       $     391,108       $ 272,786              70  %
Gross margin                      42.2   %           39.9    %                                2.3  %              41.3  %           40.3    %                             1.0  %

Three months ended September 30, 2022 and 2021



Cost of revenues increased by 74%, or $155.6 million, in the three months ended
September 30, 2022, as compared to the same period in 2021, primarily due to
higher volume of microinverter units sold, higher Enphase IQ Battery MWh
shipped, and higher shipping and warranty costs associated with the higher
volume of sales globally. The increase was also due to $1.4 million higher
amortization of developed technology and $0.4 million higher stock-based
compensation.

Gross margin increased by 2.3 percentage points in the three months ended
September 30, 2022, as compared to the same period in 2021. The increase was
primarily due to an increase in average selling prices driven by a favorable
product mix as we sold more IQ8 microinverters relative to IQ7 microinverters in
the three months ended September 30, 2022, and price increases to our products
in the second half of 2021 and in 2022, as well as cost management efforts. This
increase was partially offset by unfavorable impact of 2.1 percentage points
from currency fluctuations in the euro relative to the U.S. dollar when we
convert the current quarter euro denominated revenue into the U.S. dollar using
the comparable prior period's average currency exchange rate and 0.2 percentage
points from higher amortization of developed technology.

Nine months ended September 30, 2022 and 2021



Cost of revenues increased by 63%, or $364.1 million, in the nine months ended
September 30, 2022, as compared to the same period in 2021, primarily due to
higher volume of microinverter units sold, higher Enphase IQ Battery MWh
shipped, and higher shipping and warranty costs associated with the higher
volume of sales, as well as higher shipping costs of our products due to supply
chain disruptions and constraints globally. The increase was also due to $4.2
million higher amortization of developed technology and $4.2 million higher
stock-based compensation.

Gross margin increased by 1.0 percentage point in the nine months ended
September 30, 2022, as compared to the same period in 2021. The increase was
primarily due to an increase in average selling prices driven by a favorable
product mix, as we sold more IQ8 microinverters relative to IQ7 microinverters
in the nine months ended September 30, 2022, and price increases to our products
in the second half of 2021 and in 2022, as well as cost management efforts. The
increase was partially offset by unfavorable impact of 1.4 percentage points
from currency fluctuations in the euro relative to the U.S. dollar using the
comparable prior period's average currency exchange rate and 0.3 percentage
point from higher amortization of developed technology.

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Research and Development

                                      Three Months Ended                                                           Nine Months Ended
                                         September 30,                            Change in                          September 30,                          Change in
                                    2022                  2021                $                %                2022                2021                $                %

                                                                                    (In thousands, except percentages)
Research and development     $       44,188           $     29,411       $ 14,777              50  %       $      119,163       $     73,937       $ 45,226              61  %
Percentage of net revenues                7   %              8   %                                                   7  %              8   %

Three months ended September 30, 2022 and 2021



Research and development expense increased by 50%, or $14.8 million, in the
three months ended September 30, 2022, as compared to the same period in 2021.
The increase was primarily due to $12.3 million of higher personnel-related
expenses and $2.5 million of equipment expense associated with our investment in
the development, introduction and qualification of new product innovation. The
increase in personnel-related expenses was primarily due to hiring and retention
programs for employees in New Zealand, India and the United States, which
increased total compensation costs, including stock-based compensation. The
amount of research and development expenses may fluctuate from period to period
due to the differing levels and stages of development activity for our products.

Nine months ended September 30, 2022 and 2021



Research and development expense increased by 61%, or $45.2 million, in the nine
months ended September 30, 2022, as compared to the same period in 2021.
The increase was primarily due to $40.7 million of higher personnel-related
expenses and $4.5 million of equipment expense associated with our investment in
the development, introduction and qualification of new product innovation. The
increase in personnel-related expenses was primarily due to hiring and retention
programs for employees in New Zealand, India and the United States, which
increased total compensation costs, including stock-based compensation. The
amount of research and development expenses may fluctuate from period to period
due to the differing levels and stages of development activity for our products.

Sales and Marketing

                                 Three Months Ended                                                           Nine Months Ended
                                    September 30,                            Change in                          September 30,                          Change in
                               2022                  2021                $                %                2022                2021                $                %

                                                                               (In thousands, except percentages)
Sales and marketing     $       55,257           $     39,296       $ 15,961              41  %       $      150,189       $     84,504       $ 65,685              78  %
Percentage of net
revenues                             9   %             11   %                                                   9  %              9   %

Three months ended September 30, 2022 and 2021



Sales and marketing expense increased by 41%, or $16.0 million, in the three
months ended September 30, 2022, as compared to the same period in 2021. The
increase was primarily due to $14.8 million of higher personnel-related expenses
from increased headcount as a result of our efforts to improve customer
experience, to provide 24/7 support along with a field service desk for
installers and Enphase system owners globally, and to support our business
growth in the United States and international expansion in Europe. In addition,
annual retention programs for employees also resulted in the increase in total
compensation costs, including stock-based compensation. The increase in sales
and marketing expense in the three months ended September 30, 2022, as compared
to the same period in 2021, was also attributable to $2.3 million higher
amortization of intangible assets acquired through business combinations and
$2.5 million of higher professional services and facility costs to support our
business growth. This increase was partially offset by a decrease of $3.6
million in the advertising costs and marketing expenses.

Nine months ended September 30, 2022 and 2021



Sales and marketing expense increased by 78%, or $65.7 million, in the nine
months ended September 30, 2022, as compared to the same period in 2021. The
increase was primarily due to $57.7 million of higher personnel-related expenses
from increased headcount as a result of our efforts to improve customer
experience, to provide

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24/7 support along with a field service desk for installers and Enphase system
owners globally, and to support our business growth in the United States and
international expansion in Europe. In addition, annual retention programs for
employees also resulted in the increase in total compensation costs, including
stock-based compensation. The increase in sales and marketing expense in the
nine months ended September 30, 2022, as compared to the same period in 2021,
was also attributable to $6.7 million higher amortization of intangible assets
acquired through business combinations and $5.3 million of higher professional
services and facility costs to support our business growth. This increase was
partially offset by a decrease of $4.1 million in the advertising costs and
marketing expenses.

General and Administrative

                                       Three Months Ended                                                           Nine Months Ended
                                          September 30,                            Change in                          September 30,                          Change in
                                     2022                  2021                $                %                2022                2021                $                %

                                                                                     (In thousands, except percentages)
General and administrative    $       32,436           $     34,300       $ (1,864)             (5) %       $      102,647       $     74,530       $ 28,117              38  %
Percentage of net revenues                 5   %             10   %                                                   6  %              8   %

Three months ended September 30, 2022 and 2021



General and administrative expense decreased by 5%, or $1.9 million, in the
three months ended September 30, 2022, as compared to the same period in 2021.
The decrease was primarily due to $5.9 million of lower stock-based compensation
expense related to timing of the grant of annual retention awards in 2021,
offset by a $3.1 million increase in investments in technological infrastructure
and other operational and facilities costs to support scalability of our
business growth, and $1.0 million of higher legal and professional services.

Nine months ended September 30, 2022 and 2021



General and administrative expense increased by 38%, or $28.1 million, in the
nine months ended September 30, 2022, as compared to the same period in 2021.
The increase was primarily due to $19.1 million of higher personnel-related
expenses as a result of an increase in headcount increasing total compensation
costs, including stock-based compensation and post business combination
employment-related expense, $5.8 million of investments in technological
infrastructure and other operational and facilities costs to support scalability
of our business growth, and $3.1 million of higher legal and professional
services.

Restructuring Charges

                                    Three Months Ended                                                        Nine Months Ended
                                       September 30,                          Change in                         September 30,                          Change in
                                   2022               2021                $                 %               2022               2021                $                 %

                                                                                   (In thousands, except percentages)
Restructuring charges         $      594           $     -          $      594                 **       $     594           $     -          $      594                 **
Percentage of net revenues             0   %             0  %                                                   0   %             0  %




**  Not meaningful

Three and nine months ended September 30, 2022 and 2021



In the three and nine months ended September 30, 2022, we began implementing
restructuring actions to reorganize our global workforce, consolidate facilities
and eliminate non-core projects. We expect to complete our restructuring
activities in 2023. Restructuring charges for the three and nine months ended
September 30, 2022 primarily included $0.6 million of one-time termination
benefits and other employee-related expenses and impairment of property and
equipment, net. We had no restructuring charges in the three months and nine
months ended September 30, 2021.

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Other Income (Expense), Net



                         Three Months Ended                                                       Nine Months Ended
                            September 30,                         Change in                         September 30,                         Change in
                       2022               2021                $                %               2022               2021                $                %

                                                                       (In thousands, except percentages)
Interest income    $   3,680          $     110          $  3,570            3,245  %       $  4,936          $     281          $  4,655            1,657  %
Interest expense      (2,255)           (12,628)           10,373              (82) %         (7,159)           (32,463)           25,304              (78) %
Other (expense)
income, net           (2,611)               874            (3,485)            (399) %         (5,208)               814            (6,022)            (740) %
Loss on partial
settlement of
convertible notes          -                  -                 -                 **%              -            (56,382)           56,382             (100) %

Total other
expense, net       $  (1,186)         $ (11,644)         $ 10,458
   (90) %       $ (7,431)         $ (87,750)         $ 80,319              (92) %




**  Not meaningful

Three months ended September 30, 2022 and 2021



Interest income of $3.7 million in the three months ended September 30, 2022
increased, as compared to $0.1 million for the three months ended September 30,
2021, primarily due to an increase in interest rates earned and a higher average
cash, cash equivalents and marketable securities balance in the three months
ended September 30, 2022, as compared to the same period in 2021.

Cash interest expense



Cash interest expense for each of the three months ended September 30, 2022 and
2021 totaled $0.2 million. Cash interest expense in the three months ended
September 30, 2022 primarily includes $0.2 million interest incurred with the
Notes due 2025 and Notes due 2023. Cash interest expense in the three months
ended September 30, 2021 primarily includes approximately $0.1 million coupon
interest incurred with our Notes due 2025, Notes due 2024 and Notes due 2023 and
less than approximately $0.1 million accretion of interest expense on contingent
consideration.

Non-cash interest expense

Non-cash interest expense of $2.1 million in the three months ended
September 30, 2022 primarily related to $2.1 million for the debt discount
amortization with our Notes due 2025 and amortization of debt issuance costs
with our Notes due 2023, Notes due 2025, Notes due 2026 and Notes due 2028.
Non-cash interest expense of $12.4 million in the three months ended September
30, 2021 primarily related to $12.4 million for the debt discount and
amortization of debt issuance costs with our Notes due 2024, Notes due 2025,
Notes due 2026 and Notes due 2028.

Other expense, net of $2.6 million expense in the three months ended
September 30, 2022 relates to a $3.1 million net loss due to foreign currency
denominated monetary assets and liabilities, partially offset by $0.5 million
non-cash net gain related to change in the fair value of debt securities. Other
income, net of $0.9 million in the three months ended September 30, 2021 relates
to a $0.8 million non-cash gain for the change in the fair value of debt
securities and $0.1 million net loss related to foreign currency exchange and
remeasurement.

Nine months ended September 30, 2022 and 2021



Interest income of $4.9 million in the nine months ended September 30, 2022
increased, as compared to $0.3 million for the nine months ended September 30,
2021, primarily due to an increase in interest rates earned and a higher average
cash, cash equivalents and marketable securities balance in the nine months
ended September 30, 2022, as compared to the same period in 2021.

Cash interest expense



Cash interest expense in the nine months ended September 30, 2022 and 2021
totaled $1.1 million and $0.6 million, respectively. Cash interest expense in
the nine months ended September 30, 2022 primarily includes $0.9 million
interest incurred with the Notes due 2025 and Notes due 2023, $0.1 million bank
charges and $0.1 million accretion of interest expense on contingent
consideration for an acquisition. Cash interest expense in the nine months ended
September 30, 2021 primarily included $0.4 million coupon interest incurred with
our Notes due

                   Enphase Energy, Inc. | 2022 Form 10-Q | 45

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2025, Notes due 2024 and Notes due 2023 and $0.2 million accretion of interest expense on contingent consideration.

Non-cash interest expense



Non-cash interest expense of $6.1 million in the nine months ended September 30,
2022 primarily related to $6.1 million for the debt discount amortization with
our Notes due 2025 and amortization of debt issuance costs with our Notes due
2023, Notes due 2025, Notes due 2026 and Notes due 2028. Non-cash interest
expense of $31.9 million in the nine months ended September 30, 2021 primarily
related to $31.8 million for the debt discount and amortization of debt issuance
costs with our Notes due 2024, Notes due 2025, Notes due 2026 and Notes due 2028
and less than $0.1 million relates to the amortization of debt issuance costs
associated with Notes due 2023.

Other expense, net of $5.2 million in the nine months ended September 30, 2022
relates to $5.4 million net loss due to foreign currency denominated monetary
assets and liabilities and $0.3 million impairment of a note receivable,
partially offset by $0.4 million non-cash net gain related to change in the fair
value of debt securities and $0.2 million interest income. Other income, net of
$0.8 million in the nine months ended September 30, 2021 relates to a $3.2
million non-cash gain for the change in the fair value of debt securities,
partially offset by a $2.4 million net loss related to foreign currency exchange
and remeasurement.

Loss on partial settlement of convertible notes recorded in the nine months
ended September 30, 2021 primarily related to the $9.5 million non-cash loss on
partial settlement of $87.1 million aggregate principal amount of the Notes due
2024, $9.5 million non-cash loss on partial settlement of $217.8 million
aggregate principal amount of the Notes due 2025 and $37.5 million non-cash
inducement loss incurred on the repurchase of Notes due 2025. We did not have
any such loss in the nine months ended September 30, 2022.

Income Tax (Provision) Benefit



                           Three Months Ended                                                          Nine Months Ended
                              September 30,                         Change in                            September 30,                            Change in
                         2022               2021                $                 %               2022                 2021                  $                 %

                                                                            (In thousands, except percentages)
Income tax
(provision) benefit  $  (19,443)         $ (3,898)         $ (15,545)            399  %       $  (40,261)         $        22,471       $ (62,732)            (279) %

Three months ended September 30, 2022 and 2021



The income tax provision of $19.4 million in the three months ended
September 30, 2022 increased, as compared to the income tax provision of $3.9
million in the same period in 2021, both calculated using the annualized
effective tax rate method, primarily due to higher projected tax expense in U.S.
and foreign jurisdictions that are more profitable in 2022 compared to 2021,
partially offset by tax deduction from employee stock-based compensation.

Nine months ended September 30, 2022 and 2021



The income tax provision of $40.3 million in the nine months ended September 30,
2022 was calculated using the annualized effective tax rate method, primarily
related to higher projected tax expense in U.S. and foreign jurisdictions that
are more profitable in 2022, partially offset by tax deduction from employee
stock-based compensation.

The income tax benefit of $22.5 million for the nine months ended September 30,
2021 was calculated using the annualized effective tax rate method, primarily
related to higher tax deduction from employee stock-based compensation,
partially offset by higher projected tax expense in foreign jurisdictions that
are profitable in 2021.

Liquidity and Capital Resources

Sources of Liquidity



As of September 30, 2022, we had $1.4 billion in net working capital, including
cash, cash equivalents and marketable securities of $1.4 billion, of which
approximately $1.4 billion were held in the United States. Our cash, cash
equivalents and marketable securities primarily consist of U.S. treasuries,
money market mutual funds, corporate notes and bonds and both interest-bearing
and non-interest-bearing deposits, with the remainder held in various foreign
subsidiaries. We consider amounts held outside the United States to be
accessible and have provided for the estimated U.S. income tax liability
associated with our foreign earnings.

                   Enphase Energy, Inc. | 2022 Form 10-Q | 46

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                                                          As of September 30,                        Change in
                                                                                             2022                  2021                 $                  %

                                                                                                           (In thousands, except percentages)
Cash, cash equivalents and marketable
securities                                                                             $   1,417,296          $ 1,394,123          $  23,173                  2  %
Total Debt                                                                             $   1,288,281          $ 1,026,283          $ 261,998                 26  %


Our cash, cash equivalents and marketable securities increased by $23.2 million
in the nine months ended September 30, 2022, compared to the same period in
2021, primarily due to cash generated from operations, partially offset by cash
used to fund acquisitions, make investments in private companies, repurchase our
outstanding common stock and make payments of withholding taxes related to net
share settlement of equity awards.

Total carrying amount of debt increased by $262.0 million in the nine months
ended September 30, 2022, as compared to the same period in 2021, primarily due
to adoption of ASU 2020-06 as of January 1, 2022, partially offset by repayment
of the Notes due 2024 and partial repayment of the Notes due 2025. Refer to Note
1, "Description of Business and Basis of Presentation - Recently Adopted
Accounting Pronouncements" in this Quarterly Report on Form 10-Q for further
information on adoption of ASU 2020-06.

We had net operating loss carryforwards for federal and California income tax
purposes of approximately $153.9 million and $92.8 million, respectively, as
well as federal and state research credit carryforwards of approximately $17.3
million and $9.8 million, respectively, as of December 31, 2021. When we utilize
all of our net operating loss and research credit carryforwards, which we expect
to occur for the taxable year of 2022, our cash paid for taxes in the United
States will substantially increase.

We plan to fund any cash requirements from our existing cash, cash equivalents
and marketable securities on hand, and cash generated from operations. We
anticipate that access to the debt market will be more limited compared to prior
years as interest rates have increased and are expected to continue to rise. Our
ability to obtain debt or any other additional financing that we may choose to,
or need to, obtain will depend on, among other things, our development efforts,
business plans, operating performance and the condition of the capital markets
at the time we seek financing.

Cash from operations could be affected by various risks and uncertainties,
including, but not limited to, the continued effects of COVID-19, the ongoing
conflict in Ukraine, new regulations and other risk factors discussed in the
section entitled "Risk Factors" herein and those included in the Form 10-K. We
believe that our cash flow from operations with existing cash, cash equivalents
and marketable securities will be sufficient to meet our anticipated cash needs
for working capital and capital expenditures for at least the next twelve months
and thereafter for the foreseeable future, including our ability to make
payments on our outstanding debt.

Our future capital requirements will depend on many factors including our growth
rate, the timing and extent of spending to support development efforts, the
expansion of sales and marketing activities, the introduction of new and
enhanced products, the costs to acquire or invest in complementary businesses
and technologies, the costs to ensure access to adequate manufacturing capacity,
the continuing market acceptance of our products and macroeconomic events, such
as the impacts from the COVID-19 pandemic, inflation, increase in interest
rates, and the ongoing conflict in Ukraine. We may also choose to seek
additional equity or debt financing. In the event that additional financing is
required from outside sources, we may not be able to raise it on terms
acceptable to us or at all. If we are unable to raise additional capital when
desired, our business, operating results and financial condition may be
adversely affected.

Repurchase of Common Stock. In May 2021, our board of directors authorized a
share repurchase program (the "2021 Repurchase Program") pursuant to which we
may repurchase up to an additional $500.0 million of our common stock. The
repurchases may be executed from time to time, subject to general business and
market conditions and other investment opportunities, through open market
purchases or privately negotiated transactions, including through Rule 10b5-1
plans. Such purchases are expected to continue through May 2024 unless otherwise
extended or shortened by our board of directors. As of September 30, 2022, we
have approximately $200.0 million remaining for repurchase of shares under the
2021 Repurchase Program.

                   Enphase Energy, Inc. | 2022 Form 10-Q | 47

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Cash Flows. The following table summarizes our cash flows for the periods
presented:

                                                          Nine Months Ended
                                                            September 30,
                                                         2022           2021

                                                            (In thousands)
Net cash provided by operating activities             $ 491,103      $ 

254,855


Net cash used in investing activities                  (253,775)      

(663,029)

Net cash provided by (used in) financing activities (14,116) 615,643 Effect of exchange rate changes on cash

                  (4,945)        

(1,302)


Net increase in cash and cash equivalents             $ 218,267      $ 

206,167

Cash Flows from Operating Activities



Cash flows from operating activities consist of our net income adjusted for
certain non-cash reconciling items, such as stock-based compensation expense,
non-cash interest expense, change in the fair value of debt securities, deferred
income taxes, depreciation and amortization, asset impairment, and changes in
our operating assets and liabilities. Net cash provided by operating activities
increased by $236.2 million in the nine months ended September 30, 2022, as
compared to the same period in 2021, primarily due to an increase in our gross
profit as a result of increased revenues, partially offset by higher operating
expenses as we continue to invest in the long-term growth of our business.

Cash Flows from Investing Activities



For the nine months ended September 30, 2022, net cash used in investing
activities of $253.8 million was primarily from $572.2 million purchase of
marketable securities, $27.7 million net cash used to acquire SolarLeadFactory
and Clipper Creek, Inc., $30.0 million used in purchases of test and assembly
equipment to expand our supply capacity, related facility improvements and
information technology enhancements including capitalized costs related to
internal-use software and $1.0 million used to invest in a private company,
partially offset by $377.2 million maturities of marketable securities.

For the nine months ended September 30, 2021, net cash used in investing
activities of $663.0 million was primarily from approximately $545.5 million
used in purchases of marketable securities, $58.0 million from the investment in
a debt security, $55.3 million net cash used to acquire Sofdesk Inc. and DIN
Engineer Service LLP's solar design services business, and $39.1 million used in
purchases of test and assembly equipment to expand our supply capacity, related
facility improvements and information technology enhancements including
capitalized costs related to internal-use software, partially offset by
approximately $35.0 million maturities of marketable securities.

Cash Flows from Financing Activities



For the nine months ended September 30, 2022, net cash used by financing
activities of approximately $14.1 million was primarily due to $19.4 million
payment of employee withholding taxes related to net share settlement of equity
awards, partially offset by $5.3 million net proceeds from employee stock option
exercises and purchases under our employee stock purchase plan.

For the nine months ended September 30, 2021, net cash provided by financing
activities of approximately $615.6 million was primarily from $1,188.4 million
net proceeds from the issuance of our Notes due 2028 and Notes due 2026, $220.8
million from sale of warrants related to our Notes due 2028 and Notes due 2026
and approximately $3.7 million net proceeds from employee stock option
exercises, partially offset by $286.2 million purchase of convertible note hedge
related to our Notes due 2028 and Notes due 2026, $289.3 million cash paid to
settle both $87.1 million in aggregate principal amount of the Notes due 2024
and $217.8 million in aggregate principal amount of the Notes due 2025, $200.0
million paid to repurchase shares of our common stock, $20.3 million payment of
employee withholding taxes related to net share settlement of equity awards, and
$1.4 million of repayment on sale of long-term financing receivables.

                   Enphase Energy, Inc. | 2022 Form 10-Q | 48

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Contractual Obligations



Our contractual obligations primarily consist of our Notes due 2028, Notes due
2026, Notes due 2025, Notes due 2023, obligations under operating leases and
inventory component purchase. As of September 30, 2022, there have been no
material changes from our disclosure in the Form 10-K. For more information on
our future minimum operating leases and inventory component purchase obligations
as of September 30, 2022, see   Note 10  , "Commitments and Contingencies -
Purchase Obligations" and for more information on our notes and other related
debt, see   Note 9  , "Debt" of the notes to condensed consolidated financial
statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Critical Accounting Policies



Our condensed consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the U.S. ("GAAP"). In connection
with the preparation of our condensed consolidated financial statements, we are
required to make assumptions and estimates about future events and apply
judgments that affect the reported amounts of assets, liabilities, revenue,
expenses and related disclosures. We base our assumptions, estimates and
judgments on historical experience, current trends and other factors that
management believes to be relevant at the time our condensed consolidated
financial statements are prepared. On a regular basis, we review the accounting
policies, assumptions, estimates and judgments to ensure that our condensed
consolidated financial statements are presented fairly and in accordance with
GAAP. However, because future events and their effects cannot be determined with
certainty, actual results could differ from our assumptions and estimates. To
the extent that there are material differences between these estimates and
actual results, our future financial statement presentation, financial
condition, results of operations and cash flows will be affected.

We consider an accounting policy to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain
at the time the estimate is made, and if different estimates that reasonably
could have been used, or changes in the accounting estimates that are reasonably
likely to occur periodically, could materially impact the condensed consolidated
financial statements.

Adoption of New and Recently Issued Accounting Pronouncements

Refer to Note 1 , "Description of Business and Basis of Presentation - Summary of Significant Accounting Policies" of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of adoption of new and recently issued accounting pronouncements.

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