Enphase Energy : 2023 CEO Letter

CEO Letter to Shareholders 2023

IQ Battery 5P

IQBattery5P

CEO Letter to Shareholders 2023

Use of forward-looking statements

This presentation contains forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements concerning our future financial performance; our business strategies,includingouroperationsandanticipatedtrendsanddevelopmentsinmarkets 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; the anticipated release, shipment, and market adoption of Enphase's new products and technologies; the capabilities, performance and benefits of our technology and products, including future products, features and services, and the reduction of commissioning times for installers; the ability to optimize and customize products, load disaggregation, monitoring and management; our performance in operations, including manufacturing, product capacity, training, and customer service; and statements concerning manufacturing strategies and potential for market growth. These statements are based upon current expectations that involve risks and uncertainties. Any statements that are not of historical fact, may be forward-looking statements. Words used such as "anticipates," "believes," "continues," "designed," "estimates," "expects," "goal," "intends," "likely," "may," "ongoing," "plans," "projects," "pursuing," "seeks," "should," "will," "would" and similar expressions are intended to identify forward looking statements, although not all forward-looking statements contain these words. All forward-looking statements are based on our current assumptions, expectations and beliefs, and involve substantial risks and uncertainties that may cause results, performance or achievement to materially differ from those expressed or implied by these forward-looking statements. Therefore, you should not place undue reliance on our forward-looking statements. A detailed discussion of risk factors that affect our business is included in the filings we make with the Securities and Exchange 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 filings are available on the Enphase website at http://investor.enphase.com/sec.cfm, or on 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 update these forward-looking statements in light of new information or future events.

Industry Information

Information regarding market and industry statistics in this presentation is based on information available to us that we believe is accurate. It is generally based on publications that are not produced for purposes of economic analysis.

Non-GAAP Financial Metrics

•	We have presented certain non-GAAP financial measures in this presentation.
	Generally, a non-GAAP financial	measure is a numerical measure of a
	company's performance, financial	position,	or cash flows that either exclude or
	include amounts that are not normally excluded or included in the most directly
	comparable measure calculated and presented in accordance with generally
	accepted accounting principles in the United States (GAAP). Reconciliation
	of each non-GAAP financial	measure to the most directly comparable GAAP
	financial measure can be found in the accompanying tables to this presentation.
	Non-GAAP financial	measures presented by us include non-GAAP gross profit,
	gross margin, operating expenses, income from operations, net income, net
	income per share (basic and diluted) and free cash flow.
•	These non-GAAP financial	measures do not reflect a comprehensive system
	of accounting, differ from GAAP measures with the same captions and may
	differ from non-GAAP financial measures with the same or similar captions
	that are used by other companies. In addition, these non-GAAP measures have
	limitations in that they do not reflect all of the amounts associated with our
	results of operations as determined in accordance with GAAP. As such, these
	non-GAAP measures should be considered as a supplement to, and not as a
	substitute for, or superior to, financial measures calculated in accordance with
	GAAP. We use these non-GAAP financial	measures to analyze our operating
	performance and future prospects, develop internal budgets and financial
	goals, and to facilitate period-to-period comparisons. We believe that these
	non-GAAP financial	measures reflect an additional way of viewing aspects
	of our operations that, when viewed with our GAAP results, provide a more
	complete understanding of factors and trends affecting our business.

• As presented in the "Reconciliation of Non-GAAP Financial Measures" page,

each of the non-GAAP financial measures excludes one or more of the following items for purposes of calculating non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance:

• Stock-basedcompensation expense. We exclude stock-based compensation expense from our non-GAAP measures primarily because they are non-cash in nature. Moreover, the impact of this expense is significantly affected by our stock price at the time of an award over which management has limited to no control.
• Acquisition related expenses and amortization. This item represents expenses incurred related to our business acquisitions, which are non-recurring in nature, and amortization of acquired intangible assets, which is a non-cash expense. Acquisition related expenses and amortization of acquired intangible assets are not reflective of our ongoing financial performance.
• Restructuring and asset impairment charges. We exclude restructuring and asset impairment charges due to the nature of the expenses being unusual and arising outside the ordinary course of continuing operations. These costs primarily consist of fees paid for cash-based severance costs and asset write-downs of property and equipment and acquired intangible assets, and other contract termination costs resulting from restructuring initiatives.
• Reserve for non-recurring legal matter. This item represents a charge

taken for the potential settlement cost related to a dispute with a vendor. This item is excluded as it relates to a specific matter and is not reflective of our ongoing financial performance.

• Non-cashinterest expense. This item consists primarily of amortization of debt issuance costs and accretion of debt discount because these expenses do not represent a cash outflow for us except in the period the financing was secured and such amortization expense is not reflective of our ongoing financial performance.
• Non-GAAPincome tax adjustment. This item represents the amount adjusted to our GAAP tax provision or benefit to present the non- GAAP tax amount based on cash tax expense and reserves for periods prior to 2023. Effective January 1, 2023, we updated our methodology of computing the non-GAAP income tax adjustment from reporting cash tax expense and reserves to the projected non-GAAP annualized effective tax rate as we utilized most of our net operating loss and tax credit carryforwards in the year ended December 31, 2022, and became a significant cash taxpayer in the United States. Going forward, we will exclude the income tax effects of GAAP adjustments such as stock-based compensation, amortization of purchased intangibles, and other non-recurring items that are not reflective of our ongoing financial performance.
• Non-GAAPnet income per share, diluted. We exclude the dilutive effect of in-the-money portion of convertible senior notes as they are covered by convertible note hedge transactions that reduce potential dilution to our common stock upon conversion of the Notes due 2025, Notes due 2026 and Notes due 2028, and includes the dilutive effect of employee's stock-based awards and the dilutive effect of warrants. We believe these adjustments provide useful supplemental information to the ongoing financial performance.
• Net IRA benefit. This item represents the advanced manufacturing production tax credit ("AMPTC") from the IRA for manufacturing microinverters in the United States, partially offset by the incremental manufacturing cost incurred in the United States relative to manufacturing in Mexico, India, and China. The AMPTC is accounted for by us as an income-based government grants that reduces cost of revenues in the consolidated statements of operations.
• Free cash flow. This item represents net cash flows 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/trademarkare trademarks of Enphase Energy, Inc. in the United States and other countries.

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ENPHASE CEO LETTER TO SHAREHOLDERS 2023

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Badri Kothandaraman

President and CEO

"Our employees around the world worked tirelessly to deliver innovative products and services to our customers as we navigated through the macroeconomic conditions."

Dear fellow shareholders,

2023 was challenging. The solar industry suffered 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 businesses and some unfortunately had to shut down.

Our revenue for 2023 was flat compared to 2022. The second half of the year was more difficult than the first 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 flow, and profitability. We undertook restructuring actions to reduce our spending. We developed business processes to better forecast our business and manage our channel.

We remain unfazed in our efforts to advance a sustainable future for all. Our strategy is unchanged. We are more determined than ever before to create solar and battery systems powering energy independence for consumers that enable them to make, use, save, and sell their own power. We view the macroeconomic slowdown as no more than a minor blip and are confident in 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 efforts, we managed to maintain our operational excellence during 2023. Our culture playbookis a reminder of how we work together and achieve results.

As is customary, this letter offers 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

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Our 2023 performance

"We shipped 15.5 million microinverters in 2023, compared to 15.4 million microinverters in 2022."

For the full year 2023, our revenue saw a modest sequential decline of 1.7% 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. Notably, our non-GAAP gross margin expanded to 45.3%,1 excluding the Inflation Reduction Act (IRA) net benefit and surged to 47.1%, when factoring in the IRA net benefit - achieved through the domestic manufacturing of our microinverters in the United States. In addition, we generated positive free cash flow 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 flow.

In July 2023, our Board of Directors approved a share repurchase program with authorization to purchase up to $1.0 billion worth of shares of our common stock. In 2023, we repurchased 3,284,368 shares of our common stock, 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 suffered 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

ENPHASE CEO LETTER TO SHAREHOLDERS 2023

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Our European business was strong overall in 2023 with a 60% increase from 2022, despite plummeting demand in the second half of 2023, which required us to make rapid inventory corrections in the channel. Our three largest markets in Europe continued to be in the Netherlands, France, and Germany. In the Netherlands, demand was impacted because consumers were fearing an export penalty for solar, along with confusion around the ending of net metering. We expect our business to improve as we offer a comprehensive solution with solar-plus-batteries and energy management software that we believe will help unlock the potential of the Dutch energy market. We also believe other markets will have great possibilities. In France, we see potential 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. In Germany, the residential solar market, the largest in Europe, is around 3 GW and storage attach rates are approximately 80%. We also introduced products into the United Kingdom, Italy, and several other countries in Europe.

ENPHASE CLOUD

IQ MICROINVERTERS

IQ GATEWAY

IQ BATTERY 10T

IQ ENERGY ROUTER

ENPHASE APP

THIRD-PARTY EV CHARGER

THIRD-PARTY HEAT PUMP

"As we think about our competitive positioning in Europe, we see complex power markets such as dynamic tariffs and home energy management needs play right into our strengths."

We integrated the IQ® Energy Router products from our GreenCom Networks acquisition into our home energy management systems (HEMS) in Germany, Austria, and Switzerland during 2023. These products have the ability to network third-party EV chargers and heat pumps with Enphase solar-plus- battery systems. The benefit to homeowners is reduced electricity bills due to increased self-consumption, and control via the Enphase® App. As we think about our competitive positioning in Europe, we see complex power markets such as dynamic tariffs and home energy management needs play right into our strengths. Our complete HEMS solutions can help homeowners navigate these complex tariffs and manage EVs and heat pumps, all from their Enphase App.

Coming to the international regions, we introduced our IQ8™ family of microinverters and third-generation batteries in Australia. We also started shipping our 480 W IQ8P™ Microinverters to support the growing demand for high-powered solar panels in Brazil, India, and Mexico.

A typical Home Energy Management System in Europe

Enphase App showing solar, battery, EV, and heat pump

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ENPHASE CEO LETTER TO SHAREHOLDERS 2023

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A presidential groundbreaking

"The IRA legislation enabled Enphase to begin manufacturing in the United States, bring back high- technology jobs, and advance the country's clean energy economy."

Our operations team did an outstanding job in enabling microinverter shipments from our contract 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.

On August 12, 2022, President Biden signed the IRA into law, marking the most significant action the U.S. Congress has taken on clean energy and climate change in the nation's history. The IRA legislation enabled Enphase to begin manufacturing in the United States, bring back high-technology jobs, and 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 efforts to streamline manufacturing, we ceased operations at our contract manufacturing site in Romania. We now have five 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, at the Flex manufacturing facility event in Columbia, South Carolina

President Joe Biden at the Flex manufacturing facility event in Columbia, South Carolina

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Our smartest microinverters yet

IQ8 family of microinverters deliver up to 480 W peak AC power

"We believe our commitment to high quality, rapid shutdown capability, and microgrid-forming capability positions us well to serve the small commercial market."

We ramped up shipments of IQ8 Microinverters worldwide and introduced a new high-power variant for emerging residential markets

Throughout 2023, we significantly 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.

Another variant of the IQ8P Microinverter, featuring a new 3-phase cabling system, caters to small commercial 208 V solar installations ranging from 20 to 200 KW and is currently shipping to customers in North America. With the global small commercial market estimated at over 11 GW, we are confident in 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.

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"At the close of 2023, we were shipping our IQ Batteries to customers across North America, Belgium, Germany, Austria, France, the Netherlands, Switzerland, Spain, Portugal, Sweden, Denmark, Greece, the United Kingdom, and Australia."

We shipped 351.6 megawatt hours of IQ Batteries during the year

Enphase IQ Batteries are microinverter-based storage systems built on our Ensemble™ energy management technology. At the close of 2023, we were shipping our IQ Batteries to customers across North America, Belgium, Germany, Austria, France, the Netherlands, Switzerland, Spain, Portugal, Sweden, Denmark, Greece, the United Kingdom, and Australia.

Our IQ Batteries are AC-coupled and feature safe Lithium Iron Phosphate (LFP) chemistry, low voltage DC operation, modularity in 3.3 kWh or 5 kWh units, and air cooling. The microinverter architecture of the batteries improves serviceability and redundancy. The AC architecture enhances self-consumption by allowing solar and storage to collectively power home loads. The IQ® Load Controller gives homeowners the ability to choose which appliances to power during a grid outage, with the ability to shed up to four loads.

"The IQ Battery 5P has a modularity of 5 kWh and delivers the best power specs and commissioning times of any Enphase battery to date, at an industry-leading15-year warranty."

In May 2023, we introduced our third-generation IQ® Battery 5P, which has been well-received by installers. The IQ Battery 5P has a modularity of 5 kWh and delivers the best power specs and commissioning times of any Enphase battery to date, at an industry-leading15-year warranty. By the end of 2023, we were shipping the IQ Battery 5P to customers in the United States, Puerto Rico, Australia, and the United Kingdom. We also launched this battery into Italy during the fourth quarter of 2023 and expect to start shipping to more 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.

We continued to partner with aggregators and utilities to enable grid services during 2023. Grid services help utility companies avoid using electricity from expensive, polluting power plants when electricity demand is high. In return, homeowners in certain locations can receive hundreds to thousands of dollars from the utilities towards the purchase of IQ Batteries or as annual incentive payments.

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

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ENPHASE CEO LETTER TO SHAREHOLDERS 2023

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"Quality is at the forefront in every step of our design and manufacturing process, and we have established some of the industry's most rigorous quality standards."

We remained unwavering in our dedication to enhancing customer experience, fortified our training initiatives globally, and broadened the reach of our installer network

Our worldwide customer service Net Promoter Score (NPS) surged to 77 in 2023, compared to 69 in 2022. We worked on root cause fixes to eliminate problems, trained our customer service personnel, expanded our field service teams globally, and improved our business processes. In addition, we made good progress on solving customer problems by using the data streaming from our systems to the cloud, identifying problem patterns and rolling out software fixes to the fleet. Our data science team works proactively to identify fleet problems and fix them before customers call us.

Quality and reliability remained integral to Enphase in 2023. Our goal is to provide the most reliable and resilient energy systems. Quality is at the forefront in every step of our design and manufacturing process, and we have established some of the industry's most rigorous quality standards. For microinverters, our target is less than 500 defective parts per million (DPPM), which translates to a failure rate of less than 0.05%, shipped on an annualized basis. In practice, we operate close to the target. Our target is similar for IQ Batteries.

"We expanded our installer training programs for our batteries in 2023 and have certified more than 4,700 installers worldwide for our

IQ Batteries."

Our installer training programs continued to expand in 2023. We offered more than 45 different certification and qualification courses on our products, and they are available in 18 native languages across the United States, Latin America, Europe, South Africa, Australia, and Brazil. We expanded our installer training programs for our batteries in 2023 and have certified more than 4,700 installers worldwide for our IQ Batteries. We have more than

12 regional training centers spread across the United States, and use vans equipped with our products to bring training to installers in remote locations across the United States and Puerto Rico. We also have dedicated training events in the United Kingdom, the Netherlands, Belgium, France, Spain, Italy, Austria, Germany, Poland, Sweden, Denmark, South Africa, Australia, the Philippines, Thailand, India, and Brazil, with more planned in 2024. Training is also available on demand via our YouTube channels spanning the globe, where we currently have more than 6,000 subscribers.

In addition, by the end of 2023, we expanded our Enphase Installer Network (EIN) in the United States, Australia, the Netherlands, Belgium, France, the United Kingdom, Mexico, Puerto Rico, and India. Our EIN has been a highly successful initiative as we continue to add trusted installers who act as our product evangelists and are expected to provide exceptional experiences to homeowners across the globe. By the end of 2023, we had approximately 1,750 installers in our EIN worldwide through a highly selective process focused on 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

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Your all-in-one design and proposal tool

Solargraf - Design, proposal and permitting software

"Over the course of four years, we have 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."

We continued to enhance our digital platform for installers

In 2019, Enphase embarked on a mission to develop a comprehensive digital 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.

We rolled out numerous enhancements to the Solargraf® software platform for design, proposal, and permits throughout 2023. These updates included smart panel placement, battery design, document management, electrical design, and single line diagram features, alongside continued support for NEM 3.0 functionality in California. NEM 3.0 incentivizes homeowners to embrace solar and battery systems to avoid energy imports during peak-rate periods while compensating for energy export during the times when the grid is stressed. The Solargraf software simplifies NEM 3.0 proposals for installers by making solar and battery design easy, optimizing electricity bill offsets 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.

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ENPHASE CEO LETTER TO SHAREHOLDERS 2023

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