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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
Form 10-Q
 
 
 
 
(Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 001-35480
 
 
 
https://cdn.kscope.io/20c8297921e7527276a47b47268e8a43-enph.jpg
Enphase Energy, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
20-4645388
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
47281 Bayside Parkway
Fremont, CA
 
94538
(Address of principal executive offices)
 
(Zip Code)
(707) 774-7000
(Registrant’s telephone number, including area code)
 
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x  No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an “emerging growth company.” See the definitions of “large accelerated filer,” “accelerated filer, ” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
¨
 
Accelerated filer
x
Non-accelerated filer
¨
 
Smaller reporting company
¨
Emerging growth company
¨
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨ No  x
As of April 23, 2019, there were 110,226,728 shares of the registrant’s common stock outstanding, $0.00001 par value per share.
 



ENPHASE ENERGY, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019
TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 



Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
 
March 31,
2019
 
December 31,
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
78,087

 
$
106,237

Accounts receivable, net
81,715

 
78,938

Inventory
12,971

 
16,267

Prepaid expenses and other assets
22,669

 
20,860

Total current assets
195,442

 
222,302

Property and equipment, net
20,178

 
20,998

Operating lease, right of use asset
7,963

 

Intangible assets, net
34,124

 
35,306

Goodwill
24,783

 
24,783

Other assets
36,762

 
36,548

Total assets
$
319,252

 
$
339,937

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
52,489

 
$
48,794

Accrued liabilities
32,431

 
29,010

Deferred revenues, current
32,916

 
33,119

Warranty obligations
7,925

 
8,083

Debt, current
2,985

 
28,155

Total current liabilities
128,746

 
147,161

Long-term liabilities:
 
 
 
Deferred revenues, noncurrent
78,393

 
76,911

Warranty obligations, noncurrent
23,117

 
23,211

Other liabilities
9,466

 
3,250

Debt, noncurrent
65,406

 
81,628

Total liabilities
305,128

 
332,161

Commitments and contingent liabilities (Note 9)


 


Stockholders’ equity:
 
 
 
Preferred stock, $0.00001 par value, 10,000 shares authorized; none issued and outstanding

 

Common stock, $0.00001 par value, 150,000 shares and 150,000 shares authorized; and 110,211 shares and 107,035 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
1

 
1

Additional paid-in capital
357,023

 
353,335

Accumulated deficit
(343,563
)
 
(346,302
)
Accumulated other comprehensive income
663

 
742

Total stockholders’ equity
14,124

 
7,776

Total liabilities and stockholders’ equity
$
319,252

 
$
339,937


See Notes to Condensed Consolidated Financial Statements.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 1

Table of Contents

ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
Three Months Ended
March 31,
 
2019
 
2018
Net revenues
$
100,150

 
$
69,972

Cost of revenues
66,811

 
51,657

Gross profit
33,339

 
18,315

Operating expenses:
 
 
 
Research and development
8,524

 
7,620

Sales and marketing
7,433

 
6,227

General and administrative
9,880

 
6,943

Restructuring charges
368

 

Total operating expenses
26,205

 
20,790

Income (loss) from operations
7,134

 
(2,475
)
Other expense, net
 
 
 
Interest expense
(3,540
)
 
(2,292
)
Other expense
(481
)
 
(126
)
Total other expense, net
(4,021
)
 
(2,418
)
Income (loss) before income taxes
3,113

 
(4,893
)
Provision for income taxes
(348
)
 
(235
)
Net income (loss)
$
2,765

 
$
(5,128
)
Net income (loss) per share:
 
 
 
Basic
$
0.03

 
$
(0.06
)
Diluted
$
0.02

 
$
(0.06
)
Shares used in per share calculation:
 
 
 
Basic
108,195

 
91,422

Diluted
115,863

 
91,422


See Notes to Condensed Consolidated Financial Statements.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 2

Table of Contents

ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
Three Months Ended
March 31,
 
2019
 
2018
Net income (loss)
$
2,765

 
$
(5,128
)
Other comprehensive (loss) income:
 
 
 
Foreign currency translation adjustments
(79
)
 
288

Comprehensive income (loss)
$
2,686

 
$
(4,840
)

See Notes to Condensed Consolidated Financial Statements.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 3

Table of Contents

ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY (DEFICIT)
(In thousands)
(Unaudited)
 
Three Months Ended
March 31,
 
2019
 
2018
Common stock and paid-in capital
 
 
 
Balance, beginning of period
$
353,336

 
$
287,257

Cumulative-effect adjustment to additional paid in capital (1)
26

 

Common stock issued under equity incentive and stock purchase plans, net
309

 
269

Issuance of common stock, net

 
19,923

Stock-based compensation expense and other
3,353

 
1,571

Balance, end of period
$
357,024

 
$
309,020

 
 
 
 
Retained earnings
 
 
 
Balance, beginning of period
$
(346,302
)
 
$
(295,727
)
Cumulative-effect adjustment to accumulated deficit (1)
(26
)
 
(38,948
)
Net income (loss)
2,765

 
(5,128
)
Balance, end of period
$
(343,563
)
 
$
(339,803
)
 
 
 
 
Accumulated other comprehensive income (loss)
 
 
 
Balance, beginning of period
$
742

 
$
(656
)
Foreign currency translation adjustments
(79
)
 
288

Balance, end of period
$
663

 
$
(368
)
Total stockholders’ equity, ending balance
$
14,124

 
$
(31,151
)
 
 
(1)
Includes the adoption of Accounting Standards Update (“ASU”) 2018-07, “Compensation - Stock Compensation: Improvements to Non-employee Share-Based Payment Accounting” on January 1, 2019 and the adoption of Accounting Standards Codification (“ASC”) No. 606, “Revenue Recognition” on January 1, 2018.

See Notes to Condensed Consolidated Financial Statements.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 4

Table of Contents

ENPHASE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Three Months Ended
March 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income (loss)
$
2,765

 
$
(5,128
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
3,572

 
2,276

Provision for doubtful accounts

 
600

Amortization of debt issuance costs
1,490

 
537

Financing fees on extinguishment of debt
2,152

 

Stock-based compensation
3,290

 
1,571

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(3,266
)
 
9,125

Inventory
3,296

 
7,457

Prepaid expenses and other assets
(2,413
)
 
(1,039
)
Accounts payable, accrued and other liabilities
4,851

 
(11,667
)
Warranty obligations
(252
)
 
809

Deferred revenues
1,578

 
(1,180
)
Net cash provided by operating activities
17,063

 
3,361

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(658
)
 
(1,043
)
Net cash used in investing activities
(658
)
 
(1,043
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock, net of issuance costs

 
19,923

Proceeds from debt, net of issuance costs

 
2,309

Principal payments and financing fees on debt
(44,731
)
 
(771
)
Proceeds from issuance of common stock under employee stock plans, net
309

 
269

Net cash provided by (used in) financing activities
(44,422
)
 
21,730

Effect of exchange rate changes on cash
(133
)
 
63

Net increase (decrease) in cash and cash equivalents
(28,150
)
 
24,111

Cash and cash equivalents—Beginning of period
106,237

 
29,144

Cash and cash equivalents—End of period
$
78,087

 
$
53,255

Supplemental disclosures of non-cash investing and financing activities:
 
 
 
Purchases of fixed assets included in accounts payable
$
458

 
$
117

Operating lease, right of use asset
$
8,392

 
$


See Notes to Condensed Consolidated Financial Statements.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 5

Table of Contents

ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
Enphase Energy, Inc. (the “Company”) is a global energy technology company. The Company delivers smart, easy-to-use solutions that connect solar generation, storage and management on one intelligent platform. The Company revolutionized solar with its microinverter technology and produces a fully-integrated solar plus storage solution.
Basis of Presentation and Consolidation
The accompanying condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States (“U.S”), or GAAP. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the U.S. The Company filed audited consolidated financial statements, which included all information and notes necessary for such a complete presentation in conjunction with its 2018 Annual Report on Form 10-K.
Unaudited Interim Financial Information
These accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring items, considered necessary to present fairly the Company’s financial condition, results of operations, comprehensive income (loss) and cash flows for the interim periods indicated. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the operating results for the full year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Significant estimates and assumptions reflected in the financial statements include revenue recognition, inventory valuation and accrued warranty obligations. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ materially from management’s estimates using different assumptions or under different conditions.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 6

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842).” ASU 2016-02 requires an entity to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. The guidance requires lessees to recognize all leases, with certain exceptions, on their balance sheets, whether operating or financing, while continuing to recognize the expenses on their income statements in a manner similar to current practice. The guidance states that a lessee must recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. On January 1, 2019, the Company adopted ASU 2016-02 using the modified retrospective transition option of applying the new standard at the adoption date for all leases with terms greater than 12 months. The Company elected certain practical expedients upon adoption and as such did not reassess the following: 1) whether any expired or existing contracts are or contain leases; 2) lease classification for any expired or existing leases; 3) initial direct costs for any expired or existing leases; 4) whether existing or expired land easements are or contain leases; and 5) regarding the lease term, from a hindsight perspective, whether or not the Company is reasonably certain to exercise the lease options. However, the Company will evaluate new or modified land easements under the new guidance after the commencement date. The Company also elected the practical expedient to not separate lease and non-lease components. The adoption of ASU 2016-02 on January 1, 2019 resulted in an increase in operating leases, right of use asset of $8.4 million, an increase in other liabilities of $6.8 million, an increase in accrued liabilities and other of $1.5 million and a decrease in other assets of $0.1 million on the Company’s consolidated balance sheets with no impact on the Company’s consolidated statements of operations.
In June 2018, the FASB issued ASU 2018-07, “Compensation - Stock Compensation: Improvements to Non-employee Share-Based Payment Accounting.” ASU 2018-07 was issued to provide to provide guidance on share-based payments granted to non-employees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance in ASC 505-50, “Equity-Based Payments to Non-Employees.” ASU 2018-07 aligns much of the guidance on measuring and classifying non-employee awards with that of awards to employees. The Company adopted ASU 2018-07 on January 1, 2019 a modified retrospective basis. The adopted standard did not have a material impact on the consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Effective
In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” to reduce diversity in practice in accounting for the costs of implementing cloud computing arrangements that are service contracts. ASU 2018-15 allows entities to apply the guidance in the ASC 350-40, “Intangibles–Goodwill and Other–Internal-Use Software,” to determine which implementation costs are eligible to be capitalized as assets in a cloud computing arrangement that is considered a service contract. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively and are required to make certain disclosures in the interim and annual period of adoption. The Company is currently evaluating the impact this update will have on its consolidated financial statements.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 7

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


2.
REVENUE RECOGNITION
Disaggregated Revenue
The Company has one business activity, which is the design, manufacture and sale of solutions for the solar photovoltaic (“PV”) industry. The following table provides information about disaggregated revenue by primary geographical market and timing of revenue recognition for the Company’s single product line:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
Primary geographical markets:
 
 
 
United States
$
77,686

 
$
43,130

International
22,464

 
26,842

Total
$
100,150

 
$
69,972

 
 
 
 
Timing of revenue recognition:
 
 
 
Products delivered at a point in time
$
90,400

 
$
59,371

Products and services delivered over time
9,750

 
10,601

Total
$
100,150

 
$
69,972


Contract Balances
Receivables, and contract assets and contract liabilities from contracts with customers are as follows:
 
March 31,
2019
 
December 31,
2018
 
(In thousands)
Receivables
$
81,715

 
$
78,938

Short-term contract assets (Prepaid expenses and other assets)
13,595

 
13,516

Long-term contract assets (Other assets)
34,683

 
34,148

Short-term contract liabilities (Deferred revenues)
32,916

 
33,119

Long-term contract liabilities (Deferred revenues)
78,393

 
76,911


The Company receives payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets include deferred product costs and commissions associated with the deferred revenue and will be amortized along with the associated revenue. The Company had no asset impairment charges related to contract assets in the three months ended March 31, 2019. Contract liabilities are recorded as deferred revenue on the accompanying condensed consolidated balance sheets and include payments received in advance of performance obligations under the contract and are realized when the associated revenue is recognized under the contract.
Significant changes in the balances of contract assets (prepaid expenses and other assets) and contract liabilities (deferred revenues) during the period are as follows (in thousands):
Contract Assets
 
Balance on December 31, 2018
$
47,664

Amount recognized
(3,594
)
Increase
4,208

Balance as of March 31, 2019
$
48,278


 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 8

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Contract Liabilities
 
Balance on December 31, 2018
$
110,030

Revenue recognized
(9,750
)
Increase due to billings
11,029

Balance as of March 31, 2019
$
111,309


Remaining Performance Obligations
The following table includes estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.
 
 
March 31,
2019
 
 
(In thousands)
Fiscal year:
 
 
2019 (remaining nine months)
 
$
26,092

2020
 
27,797

2021
 
21,626

2022
 
16,594

2023
 
10,801

Thereafter
 
8,399

Total
 
$
111,309



 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 9

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


3.
OTHER FINANCIAL INFORMATION
Accounts Receivable, Net
Accounts receivable, net consist of the following:
 
March 31,
2019
 
December 31,
2018
 
(In thousands)
Accounts receivable
$
83,855

 
$
81,076

Allowance for doubtful accounts
(2,140
)
 
(2,138
)
Accounts receivable, net
$
81,715

 
$
78,938


Inventory
Inventory consist of the following:
 
March 31,
2019
 
December 31,
2018
 
(In thousands)
Raw materials
$
950

 
$
970

Finished goods
12,021

 
15,297

Total inventory
$
12,971

 
$
16,267


Accrued Liabilities
Accrued liabilities consist of the following:
 
March 31,
2019
 
December 31,
2018
 
(In thousands)
Salaries, commissions, incentive compensation and benefits
$
6,442

 
$
4,107

Customer rebates and sales incentives
8,769

 
8,527

Freight
7,599

 
7,286

Other
9,621

 
9,090

Total accrued liabilities
$
32,431

 
$
29,010



 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 10

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


4.
GOODWILL AND INTANGIBLE ASSETS
The following table presents the details of the Company’s goodwill and purchased intangible assets:
 
March 31, 2019
 
December 31, 2018
 
Gross
 
Accumulated Amortization
 
Net
 
Gross
 
Additions
 
Accumulated Amortization
 
Net
 
(In thousands)
Goodwill
$
24,783

 
$

 
$
24,783

 
$
3,664

 
$
21,119

 
$

 
$
24,783

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Other indefinite-lived intangibles
$
286

 
$

 
$
286

 
$
286

 
$

 
$

 
$
286

Intangible assets with finite lives:
 
 
 
 
 
 
 
 
 
 
 
 
 
Patents and licensed technology
1,665

 
(1,665
)
 

 
1,665

 

 
(1,665
)
 

Developed technology
13,100

 
(1,455
)
 
11,645

 

 
13,100

 
(909
)
 
12,191

Customer relationships
23,100

 
(907
)
 
22,193

 

 
23,100

 
(271
)
 
22,829

Total purchased intangible assets
$
38,151

 
$
(4,027
)
 
$
34,124

 
$
1,951

 
$
36,200

 
$
(2,845
)
 
$
35,306


In August 2018, the Company acquired certain finite-lived intangible assets in its acquisition of SunPower Corporation’s (“SunPower”) microinverter business pursuant to an Asset Purchase Agreement (“APA”), primarily developed technology and customer relationships. See Note 20. “Acquisition,” of the notes to consolidated financial statements included in Item 8 of the Company’s 2018 Form 10‑K filed with the SEC on March 15, 2019 for additional information related to this acquisition.
Amortization expense related to finite-lived intangible assets are as follows:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
Developed technology, and patents and licensed technology
$
546

 
$
76

Customer relationships
636

 

Total amortization expense
$
1,182

 
$
76


Amortization of developed technology, patents and licensed technology is primarily recorded to sales and marketing expense. The developed technology acquired from the Company’s acquisition of SunPower’s microinverter business is embedded in the microinverters that SunPower sells to its customers. The Company does not actively use the developed technology acquired from SunPower and holds the developed technology to prevent others from using it. Accordingly, the Company accounts for the developed technology as a defensive intangible asset and amortizes the associated value over a period of six years from the date of acquisition.
The master service agreement (“MSA”) negotiated with SunPower in August 2018 provides the Company with the exclusive right to supply SunPower with module level power electronics for a period of five years, with options for renewals. The exclusivity arrangement extends throughout the term of the MSA, which comprises all of the expected cash flows from the customer relationship intangible asset, and was a condition to, and was an essential part of the acquisition of the SunPower’s microinverter business by the Company. As the fair value ascribed to the customer relationship intangible asset represents payments to a customer, the Company amortizes the value of the customer relationship intangible asset as a reduction to revenue using a pattern of economic benefit method over a useful life of nine years.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 11

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


5.
WARRANTY OBLIGATIONS
The Company’s warranty activities were as follows:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
Warranty obligations, beginning of period
$
31,294

 
$
29,816

Accruals for warranties issued during period
858

 
758

Changes in estimates
804

 
1,450

Settlements
(2,296
)
 
(1,676
)
Increase due to accretion expense
551

 
419

Other
(169
)
 
(142
)
Warranty obligations, end of period
31,042

 
30,625

Less current portion
(7,925
)
 
(7,699
)
Noncurrent
$
23,117

 
$
22,926


6.
FAIR VALUE MEASUREMENTS
The accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of such assets or liabilities do not entail a significant degree of judgment.
Level 2—Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The following table presents the Company’s liabilities that were measured at fair value on a recurring basis and its categorization within the fair value hierarchy:
 
Fair Value
Hierarchy
 
March 31,
2019
 
December 31,
2018
 
 
 
(In thousands)
Warranty obligations
 
 
 
 
 
Current
 
 
$
4,237

 
$
4,288

Non-current
 
 
7,828

 
7,469

Total warranty obligations
Level 3
 
$
12,065

 
$
11,757



 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 12

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Fair Value Option for Warranty Obligations Related to Microinverters Sold Since January 1, 2014
The Company estimates the fair value of warranty obligations by calculating the warranty obligations in the same manner as for sales prior to January 1, 2014 and applying an expected present value technique to that result. The expected present value technique, an income approach, converts future amounts into a single current discounted amount. In addition to the key estimates of failure rates, claim rates and replacement costs, the Company used certain Level 3 inputs which are unobservable and significant to the overall fair value measurement. Such additional assumptions included a discount rate based on the Company’s credit-adjusted risk-free rate and compensation comprised of a profit element and risk premium required of a market participant to assume the obligation.
The following table provides information regarding changes in nonfinancial liabilities related to the Company’s warranty obligations measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the periods indicated:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
Balance at beginning of period
$
11,757

 
$
9,791

Accruals for warranties issued during period
858

 
758

Changes in estimates
341

 
1,785

Settlements
(1,272
)
 
(891
)
Increase due to accretion expense
551

 
419

Other
(170
)
 
(142
)
Balance at end of period
$
12,065

 
$
11,720


Quantitative and Qualitative Information about Level 3 Fair Value Measurements
As of March 31, 2019 and December 31, 2018, the significant unobservable inputs used in the fair value measurement of the Company’s liabilities designated as Level 3 are as follows:
 
 
 
 
 
 
Percent Used
(Weighted Average)
Item Measured at Fair Value
 
Valuation Technique
 
Description of Significant Unobservable Input
 
March 31,
2019
 
December 31,
2018
Warranty obligations for microinverters sold since January 1, 2014
 
Discounted cash flows
 
Profit element and risk premium
 
14%
 
16%
 
 
Credit-adjusted risk-free rate
 
18%
 
19%
Sensitivity of Level 3 Inputs - Warranty Obligations
Each of the significant unobservable inputs is independent of the other. The profit element and risk premium are estimated based on requirements of a third-party participant willing to assume the Company’s warranty obligations. The credit‑adjusted risk‑free rate (“discount rate”) is determined by reference to the Company’s own credit standing at the fair value measurement date. Increasing the profit element and risk premium input by 100 basis points would result in a $0.1 million increase to the liability. Decreasing the profit element and risk premium by 100 basis points would result in a $0.1 million reduction of the liability. Increasing the discount rate by 100 basis points would result in a $0.5 million reduction of the liability. Decreasing the discount rate by 100 basis points would result in a $0.5 million increase to the liability.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 13

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


7.
RESTRUCTURING
Restructuring expense consist of the following:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
Redundancy and employee severance and benefit arrangements
$
468

 
$

Lease loss reserves
(100
)
 

Total restructuring charges
$
368

 
$


2018 Plan
In the third quarter of 2018, the Company began implementing restructuring actions (the “2018 Plan”) to lower its operating expenses. The restructuring actions include reorganization of the Company’s global workforce, elimination of certain non-core projects and consolidation of facilities. The Company expects to complete this restructuring in 2019.
The following table provides information regarding changes in the Company’s 2018 Plan accrued restructuring balance for the periods indicated:
 
Redundancy and Employee Severance and Benefits
 
Lease Loss Reserves and Contractual Obligations
 
Total
 
(In thousands)
Balance as of December 31, 2018
$
904

 
$
288

 
$
1,192

Charges
468

 

 
468

Cash payments
(752
)
 

 
(752
)
Non-cash settlement and other
(55
)
 
(288
)
 
(343
)
Balance as of March 31, 2019
$
565

 
$

 
$
565


2016 Plan
In the third quarter of 2016, the Company began implementing restructuring actions (the “2016 Plan”) to lower its operating expenses. The restructuring actions have included reductions in the Company’s global workforce, the elimination of certain non-core projects, consolidation of office space at the Company’s corporate headquarters and the engagement of management consultants to assist the Company in making organizational and structural changes to improve operational efficiencies and reduce expenses. The Company substantially completed its restructuring activities under the 2016 Plan in 2017.
The following table provides information regarding changes in the Company’s 2016 Plan accrued restructuring balance for the periods indicated:
 
Lease Loss Reserves and Contractual Obligations
 
(In thousands)
Balance as of December 31, 2018
$
1,591

Other (1)
(1,591
)
Balance as of March 31, 2019
$

 
 
(1)
Adoption of ASU 2016-02.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 14

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


8.
DEBT
Long-term debt was comprised of the following:
 
March 31,
2019
 
December 31,
2018
 
(In thousands)
Convertible notes due 2023
$
65,000

 
$
65,000

Less unamortized issuance costs
(2,232
)
 
(2,361
)
Carrying amount of convertible notes due 2023
62,768

 
62,639

 
 
 
 
Term loan

 
41,524

Less unamortized discount and issuance costs

 
(1,059
)
Carrying amount of term loan

 
40,465

 
 
 
 
Sale of long-term financing receivable recorded as debt
5,623

 
6,679

Less value of future purchase option

 

Carrying amount of sale of long-term financing receivable recorded as debt
5,623

 
6,679

Total carrying amount of debt
68,391

 
109,783

Less current portion term loan

 
(25,417
)
Less current portion of long-term financing receivable recorded as debt
(2,985
)
 
(2,738
)
Long-term debt
$
65,406

 
$
81,628


Term Loan
In July 2016, the Company entered into a Loan and Security Agreement (the “Original Term Loan Agreement”) with lenders that are affiliates of Tennenbaum Capital Partners, LLC. In February 2017, the Company entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) that amended and restated the Original Term Loan Agreement. The Loan Agreement provided for a $25.0 million secured term loan to the Company (the “New Term Loan”), which is in addition to the $25.0 million secured term loan borrowed by the Company under the Original Term Loan Agreement (together with the “New Term Loan” the “Term Loans”).
On January 28, 2019, the Company repaid in full the remaining principal amount of the Term Loans of approximately $39.5 million plus accrued interest and fees.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 15

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


9.
COMMITMENTS AND CONTINGENT LIABILITIES
Operating Leases
The Company leases office facilities under noncancelable operating leases that expire on various dates through 2028, some of which may include options to extend the leases for up to 12 years.
The terms of the lease agreements generally provide for rental payments on a graduated basis, and certain leases require the Company to pay its portion of executory costs such as taxes, insurance, and operating expenses. The Company recognizes rent expense on a straight-line basis over the lease term.
The components of lease expense are presented as follows:
 
Three Months Ended
March 31, 2019
 
(In thousands)
Operating lease cost
$
499

The components of lease liabilities are presented as follows:
 
March 31,
2019
 
(In thousands)
Lease liabilities, current (Accrued liabilities)
$
2,181

Lease liabilities, non-current (Other liabilities)
7,837

Total lease liabilities
$
10,018


Supplemental lease information
 
Weighted average remaining lease term
4.4 years
Weighted average discount rate
9.2%
Other information related to operating leases, are as follows:
 
Three Months Ended
March 31, 2019
 
(In thousands)
Cash paid for amounts included in the measurement of lease liabilities
$
737


Maturities of lease liabilities as of March 31, 2019 are as follows:
 
Lease Amounts
 
(In thousands)
Year:
 
2019 (remaining nine months)
$
2,248

2020
3,071

2021
3,155

2022
1,717

2023
893

Thereafter
1,227

Total
12,311

Less imputed lease interest
(2,293
)
Total lease liabilities
$
10,018



 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 16

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Litigation
From time-to-time, the Company may be involved in litigation relating to claims arising out of its operations. The Company is not currently involved in any material legal proceedings; however, the Company may be involved in material legal proceedings in the future. Such matters are subject to uncertainty and there can be no assurance that such legal proceedings will not have a material effect on its business, results of operations, financial position or cash flows.
10.
STOCK-BASED COMPENSATION
Stock-based Compensation Expense
Stock-based compensation expense for all stock-based awards expected to vest is measured at fair value on the date of grant and recognized ratably over the requisite service period. The following table summarizes the components of total stock-based compensation expense included in the condensed consolidated statements of operations for the periods presented:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
Cost of revenues
$
231

 
$
198

Research and development
716

 
618

Sales and marketing
999

 
361

General and administrative
1,288

 
394

Restructuring
55

 

Total
$
3,289

 
$
1,571


The following table summarizes the various types of stock-based compensation expense for the periods presented:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
Stock options, RSUs, and PSUs
$
3,222

 
$
1,317

Employee stock purchase plan
67

 
254

Total
$
3,289

 
$
1,571


As of March 31, 2019, there was approximately $30.3 million of total unrecognized stock-based compensation expense related to unvested equity awards expected to be recognized over a weighted-average period of 2.1 years.
No income tax benefit has been recognized relating to stock-based compensation expense and no tax benefits have been realized from exercised stock options for the three months ended March 31, 2019.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 17

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Valuation of Equity Awards
Stock Options
The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
Expected term—The expected term of the option awards represents the period of time between the grant date of the option awards and the date the option awards are either exercised, converted or canceled, including an estimate for those option awards still outstanding. The Company used the simplified method, as permitted by the SEC for companies with a limited history of stock option exercise activity, to determine the expected term for its option grants.
Expected volatility—The expected volatility was calculated based on the Company’s historical stock prices, supplemented as necessary with historical volatility of the common stock of several peer companies with characteristics similar to those of the Company.
Risk-free interest rate—The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant and with a maturity that approximated the Company’s expected term.
Dividend yield—The dividend yield was based on the Company’s dividend history and the anticipated dividend payout over its expected term.
The following table presents the weighted-average grant date fair value of options granted for the periods presented and the assumptions used to estimate those values using a Black-Scholes option pricing model:
 
Three Months Ended
March 31,
 
2019
 
2018
Weighted average grant date fair value
**
 
$
1.83

Expected term (in years)
**
 
4.2

Expected volatility
**
 
86.4
%
Annual risk-free rate of return
**
 
2.4
%
Dividend yield
**
 
%
 
 
**
No stock options were granted during the period.
Restricted Stock Units
The fair value of the Company’s restricted stock units (“RSU”) awards granted is based upon the closing price of the Company’s stock price on the date of grant.
Performance Stock Units
The fair value of the Company’s non-market performance stock units (“PSU”) awards granted was based upon the closing price of the Company’s stock price on the date of grant. The fair value of awards of the Company’s PSU awards containing market conditions was determined using a Monte Carlo simulation model based upon the terms of the conditions, the expected volatility of the underlying security, and other relevant factors.


 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 18

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Equity Awards Activity
Stock Options
The following is a summary of stock option activity:
 
Number of
Shares
Outstanding
 
Weighted-
Average
Exercise Price
per Share
 
Weighted-
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
(1)
 
(In thousands)
 
 
 
(Years)
 
(In thousands)
Outstanding at December 31, 2018
6,772

 
$
1.76

 
 
 
 
Granted

 

 
 
 
 
Exercised
(1,573
)
 
1.06

 
 
 
$
10,715

Canceled
(55
)
 
5.55

 
 
 
 
Outstanding at March 31, 2019
5,144

 
1.94

 
4.8
 
$
37,671

Vested and expected to vest at March 31, 2019
5,144

 
1.94

 
4.8
 
$
37,671

Exercisable at March 31, 2019
3,318

 
2.20

 
4.6
 
$
23,471

 
 
(1)
The intrinsic value of options exercised is based upon the value of the Company’s stock at exercise. The intrinsic value of options outstanding, vested and expected to vest, and exercisable as of March 31, 2019 is based on the closing price of the Company’s stock fair value on March 31, 2019 or the earlier of the last trading day prior to March 31, 2019, if March 31, 2019 is a non-trading day. The Company’s stock fair value used in this computation was $9.23 per share.
The following table summarizes information about stock options outstanding at March 31, 2019:
 
 
Options Outstanding
 
Options Exercisable
Range of Exercise Prices
 
Number of
Shares
 
Weighted-
Average
Remaining
Life
 
Weighted-
Average
Exercise
Price
 
Number of
Shares
 
Weighted-
Average
Exercise
Price
 
 
(In thousands)
 
(Years)
 
 
 
(In thousands)
 
 
$0.27 —– $1.14
 
1,061

 
5.6
 
$
0.83

 
703

 
$
0.79

$1.29 —– $1.29
 
1,000

 
5.5
 
1.29

 
375

 
1.29

$1.31 —– $1.31
 
1,752

 
5.0
 
1.31

 
1,230

 
1.31

$1.37 —– $6.98
 
1,034

 
3.9
 
2.90

 
713

 
3.03

$7.01 —– $12.57
 
297

 
2.2
 
8.40

 
297

 
8.40

Total
 
5,144

 
4.8
 
1.94

 
3,318

 
2.20



 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 19

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Restricted Stock Units
The following is a summary of RSU activity:
 
Number of
Shares
Outstanding
 
Weighted-
Average
Fair Value
per Share at
Grant Date
 
Weighted-
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
(1)
 
(In thousands)
 
 
 
(Years)
 
(In thousands)
Outstanding at December 31, 2018
4,352

 
$
3.52

 
 
 
 
Granted
1,114

 
8.12

 
 
 
 
Vested
(716
)
 
3.70

 
 
 
$
6,255

Canceled
(216
)
 
2.02

 
 
 
 
Outstanding at March 31, 2019
4,534

 
4.70

 
1.5
 
$
41,845

Expected to vest at March 31, 2019
4,532

 
4.70

 
1.5
 
$
41,835

 
 
(1)
The intrinsic value of RSUs vested is based upon the value of the Company’s stock when vested. The intrinsic value of RSUs outstanding and expected to vest as of March 31, 2019 is based on the closing price of the Company’s stock on March 31, 2019 or the earlier of the last trading day prior to March 31, 2019, if March 31, 2019 is a non-trading day. The Company’s stock fair value used in this computation was $9.23 per share.

Performance Stock Units
The following is a summary of PSU activity:
 
Number of
Shares
Outstanding
 
Weighted-
Average
Fair Value
per Share at
Grant Date
 
Weighted-
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
(1)
 
(In thousands)
 
 
 
(Years)
 
(In thousands)
Outstanding at December 31, 2018
1,330

 
$
4.66

 
 
 
 
Granted
1,046

 
9.40

 
 
 
 
Vested
(1,026
)
 
4.63

 
 
 
$
9,925

Canceled
(337
)
 
4.78

 
 
 
 
Outstanding at March 31, 2019
1,013

 
8.64

 
1.0
 
$
9,349

Expected to vest at March 31, 2019
1,013

 
8.64

 
1.0
 
$
9,349

 
 
(1)
The intrinsic value of PSUs vested is based upon the value of the Company’s stock when vested. The intrinsic value of PSUs outstanding and expected to vest as of March 31, 2019 is based on the closing price of the Company’s stock on March 31, 2019 or the earlier of the last trading day prior to March 31, 2019, if March 31, 2019 is a non-trading day. The Company’s stock fair value used in this computation was $9.23 per share.
11.
INCOME TAXES
The Company used the discrete tax approach in calculating the tax expense for the three months ended March 31, 2019 and 2018 due to the fact that a relatively small change in the Company’s projected pre-tax net income (loss) could result in a volatile effective tax rate. Under the discrete method, the Company determines its tax (expense) benefit based upon actual results as if the interim period was an annual period. The tax provision recorded was primarily related to income taxes attributable to its foreign operations.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 20

Table of Contents
ENPHASE ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


12.
NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed in a similar manner, but it also includes the effect of potential common shares outstanding during the period, when dilutive. Potential common shares include stock options, RSUs, PSUs, shares to be purchased under the Company’s employee stock purchase program (“ESPP”), and the convertible notes. The dilutive effect of potentially dilutive common shares is reflected in diluted earnings per share by application of the treasury stock method. To the extent these potential common shares are antidilutive, they are excluded from the calculation of diluted net income (loss) per share.
The following table presents the computation of basic and diluted net income (loss) per share for the periods presented:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands, except per share data)
Numerator:
 
 
 
Net income (loss)
$
2,765

 
$
(5,128
)
 
 
 
 
Denominator:
 
 
 
Weighted average common shares outstanding
108,195

 
91,422

Effect of dilutive securities
 
 
 
Employee stock-based awards
7,668

 

Weighted average common shares outstanding for diluted calculation
115,863

 
91,422

 
 
 
 
Net income (loss) per share, basic
$
0.03

 
$
(0.06
)
Net income (loss) per share, diluted
$
0.02

 
$
(0.06
)

As the Company incurred a net loss for the three months ended March 31, 2018, potential dilutive securities from employee stock options, RSUs, PSUs, and shares to be purchased under the Company’s ESPP have been excluded from the diluted net loss per share computation because the effect of including such shares would have been antidilutive.
The following outstanding shares of common stock equivalents were excluded from the calculation of the diluted net income (loss) per share attributable to common stockholders because their effect would have been antidilutive:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
Employee stock options
112

 
8,418

RSUs and PSUs
91

 
3,659

Convertible notes
11,701

 

Total
11,904

 
12,077


13.
RELATED PARTY
The Company sells products to SunPower, which as of March 31, 2019 held 7.5 million shares of the Company’s common stock, under the August 2018 MSA. Revenue recognized under the MSA for the three months ended March 31, 2019 was $4.5 million, net of amortization of the customer relationship intangible asset (see Note 4. “Goodwill and Intangible Assets”). At March 31, 2019 and December 31, 2018, the Company had accounts receivable of $5.2 million and $10.3 million, respectively, from SunPower.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 21

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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, and the anticipated benefits and risks relating to the transaction with SunPower Corporation. Our actual results and the timing of events may differ materially from those discussed in our forward-looking statements as a result of various factors, including those discussed below and those discussed in the section entitled “Risk Factors” included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2018.
Overview and Q1 2019 Highlights
We are a global energy technology company. We deliver smart, easy-to-use solutions that connect solar generation, storage and management on one intelligent platform. We revolutionized solar with our microinverter technology and produces a fully-integrated solar plus storage solution. We have shipped more than 20 million microinvertersand more than 895,000 Enphase residential and commercial systems have been deployed in over 125 countries.
We sell our solutions primarily to distributors who resell them to solar installers. We also sell directly to large installers, OEMs, strategic partners and homeowners.
On January 28, 2019, we repaid in full the remaining principal amount of the Term Loans of approximately $39.5 million plus accrued interest and fees owed to lenders affiliated with Tennenbaum Capital Partners, LLC.
Products
Enphase IQ Microinverter System
The Enphase IQ™ microinverter is a key component of the Enphase Home Energy Solution™, which can also include our Envoy™ Communications Gateway with IQ Combiner+, Enphase Enlighten™, a cloud-based energy management platform, and our Enphase AC Battery™. System owners can use Enphase Enlighten to monitor their home’s solar generation, energy storage and consumption from any web-enabled device.
Our IQ 7X™ product addresses 96-cell photovoltaic (“PV”) modules up to 400W direct current (“DC”) and with its 97.5 percent California Energy Commission (“CEC”) efficiency rating, is ideal for integration into high power modules. In the first quarter of 2019, we shipped limited quantities of our new product IQ 7A™ which addresses up to 450W DC modules. In addition, we recently started shipping our IQ 7AS™ microinverters to SunPower Corporation (“SunPower”), which is expected to integrate our IQ 7AS into its 66-cell Next Generation Technology (“NGT”) DC modules.
Our IQ 8™ system is based upon our grid-agnostic “always on” technology called Ensemble. This system has four components: 1) energy generation, which is accomplished with the grid-agnostic microinverter IQ8; 2) energy storage, which is achieved by the Encharge™ battery with capacities of 3.3 kWh, 10 kWh and 13.2 kWh; 3) communication and control, which consists of the automatic transfer switch called Enpower™, and the combiner box with the Envoy gateway; and 4) Enlighten, which is the internet of things, or IoT, cloud software. We anticipate introducing Ensemble in a phased manner starting in the fourth quarter of 2019.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 22

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Results of Operations
Net Revenues 
 
Three Months Ended
March 31,
 
Change in
 
2019
 
2018
 
$
 
%
 
(In thousands)
Net revenues
$
100,150

 
$
69,972

 
$
30,178

 
43
%
Three months ended March 31, 2019 and 2018
Net revenues increased by 43% for the three months ended March 31, 2019, as compared to the same period in 2018, primarily due to higher unit volume. We sold approximately 976,000 microinverter units in the three months ended March 31, 2019, as compared to approximately 611,000 units in the same period in 2018.
Cost of Revenues and Gross Profit 
 
Three Months Ended
March 31,
 
Change in
 
2019
 
2018
 
$
 
%
 
(In thousands)
Cost of revenues
$
66,811

 
$
51,657

 
$
15,154

 
29
%
Gross profit
33,339

 
18,315

 
15,024

 
82
%
Gross margin
33.3
%
 
26.2
%
 


 
 
Three months ended March 31, 2019 and 2018
Cost of revenues increased by 29% for the three months ended March 31, 2019, as compared to the same period in 2018, primarily due to higher volume of microinverter units sold and expedited freight costs, partially offset by a decrease in the cost of our products as a result of our cost reduction efforts. Gross margin increased by 7.1 percentage points for the three months ended March 31, 2019, as compared to the same period in 2018. The increase in gross margin was primarily attributable to higher product margins as a result our IQ 7 family of microinverters, which has a lower cost than previous microinverters, as well as our overall pricing management efforts. In the first quarter of 2019, IQ 7 sales represent 94% of our total microinverter sales, as compared to 8% of our total microinverter sales in the first quarter of 2018.
Research and Development
 
Three Months Ended
March 31,
 
Change in
 
2019
 
2018
 
$
 
%
 
(In thousands)
Research and development
$
8,524

 
$
7,620

 
$
904

 
12
%
Three months ended March 31, 2019 and 2018
Research and development expense increased by 12% for the three months ended March 31, 2019, as compared to the same period in 2018. The increase is due to higher expenses associated with the development of our products, personnel-related costs, equipment costs, and facility costs. The increase in personnel-related expenses included higher bonus and stock-based compensation expense, partially offset by lower compensation and benefit costs associated with moving certain functions to lower cost locations as part of restructuring actions taken in 2018.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 23

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Sales and Marketing
 
Three Months Ended
March 31,
 
Change in
 
2019
 
2018
 
$
 
%
 
(In thousands)
Sales and marketing
$
7,433

 
$
6,227

 
$
1,206

 
19
%
Three months ended March 31, 2019 and 2018
Sales and marketing expense increased by 19% for the three months ended March 31, 2019, as compared to the same period in 2018. The increase was due to an increase in personnel-related expenses and equipment costs, partially offset by lower bad debt expense and facilities costs. The increase in personnel-related expenses included higher stock-based compensation expense, sales bonus and commissions, and employee compensation.
General and Administrative
 
Three Months Ended
March 31,
 
Change in
 
2019
 
2018
 
$
 
%
 
(In thousands)
General and administrative
$
9,880

 
$
6,943

 
$
2,937

 
42
%
Three months ended March 31, 2019 and 2018
General and administrative expense increased 42% for the three months ended March 31, 2019, as compared to the same period in 2018. The increase is primarily due to an increase in personnel-related expenses and additional consulting and advisory fees due to our first year of being subject to SOX auditor attestation requirements, partially offset by lower facilities costs and $1.8 million paid to resolve a dispute with a supplier in 2018 that did not repeat in 2019. The increase in personnel-related expenses included higher stock-based compensation expense, employee compensation expense and benefit costs.
Restructuring Charges
 
Three Months Ended
March 31,
 
Change in
 
2019
 
2018
 
$
 
%
 
(In thousands)
Restructuring charges
$
368

 
$

 
$
368

 
**
 
 
**
Not meaningful
Three months ended March 31, 2019 and 2018
Restructuring expense for the three months ended March 31, 2019 primarily include a $0.5 million of one-time termination benefits and other employee-related expenses, partially offset by $0.1 million reduction in lease loss reserves.
In the first quarter of 2018, we incurred no restructuring expense.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 24

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Other Expense, Net
 
Three Months Ended
March 31,
 
Change in
 
2019
 
2018
 
$
 
%
 
(In thousands)
Other expense, net
$
(4,021
)
 
$
(2,418
)
 
$
(1,603
)
 
66%
Three months ended March 31, 2019 and 2018
Other expense, net for the three months ended March 31, 2019 includes $2.8 million of interest expense and financing fees related to our term loans which we repaid, $0.8 million of interest expense related to our convertible notes, and a $0.5 million charge related to foreign currency exchange and remeasurement. Other expense, net for the three months ended March 31, 2018 includes $2.3 million of interest expense related to our term loans and $0.4 million loss related to foreign currency exchange and remeasurement.
Liquidity and Capital Resources
Sources of Liquidity
As of March 31, 2019, we had $78.1 million in cash and cash equivalents and working capital of $66.7 million. Cash and cash equivalents held in the U.S. were $67.1 million and consisted primarily of U.S. Government money market mutual funds and non-interest-bearing checking deposits, with the remainder held in various foreign subsidiaries. We consider amounts held outside the U.S. to be accessible and have provided for the estimated U.S. income tax liability associated with our foreign earnings.
Term Loans. On January 28, 2019, we repaid in full the remaining principal amount of the Term Loans of approximately $39.5 million plus accrued interest and fees owed to lenders affiliated with Tennenbaum Capital Partners, LLC.
Convertible Notes. In August 2018, we sold $65.0 million aggregate principal amount of convertible senior notes due 2023 (the “Notes”) in a private placement. The Notes are senior, unsecured and bear interest at a rate of 4.0% per year, payable semi-annually on February 1 and August 1 of each year, beginning on February 1, 2019. The Notes will mature on August 1, 2023, unless earlier repurchased by the Company or converted at the option of the holders.
We believe that our existing cash and cash equivalents and cash flows from our operating activities will be sufficient to meet our anticipated cash needs for at least the next 12 months.
Cash Flows. The following table summarizes our cash flows for the periods presented:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
Net cash provided by operating activities
$
17,063

 
$
3,361

Net cash used in investing activities
(658
)
 
(1,043
)
Net cash provided by (used in) financing activities
(44,422
)
 
21,730

Cash Flows from Operating Activities
For the three months ended March 31, 2019, net cash provided by operating activities of $17.1 million was primarily attributable to net income of $2.8 million, non-cash charges of $8.4 million, cash from operating assets and liabilities of $3.8 million, and a one-time charge of $2.2 million related to settlement of our term loan. The primary driver of cash inflows from changes in operating assets and liabilities was a $4.9 million increase in accounts payable due to both successful re-negotiations of our vendor payment terms as well as the timing of vendor payments, a $3.3 million decrease in inventory due to higher demand and continued improvement in the management of our supply chain, and a $1.6 million increase in deferred revenues, which were partially offset by $3.3 million increase in accounts receivable due to higher sales.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 25

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For the three months ended March 31, 2018, net cash provided by operating activities of $3.4 million was primarily attributable to a net loss of $5.1 million offset by non-cash charges of $5.0 million and net cash inflows from changes in operating assets and liabilities of $3.5 million. Non-cash charges included $1.6 million of stock-based compensation, $2.3 million of depreciation and amortization, and $0.6 million provision for doubtful accounts. The primary driver of cash outflows from changes in operating assets and liabilities was a $9.1 million decrease in accounts receivable due to seasonally lower revenues and a $7.5 million decrease in inventory due to supply chain management efforts, which were partially offset by an $12.0 million decrease in accounts payable as a result of lower inventory levels and the timing of vendor payments.
Cash Flows from Investing Activities
For the three months ended March 31, 2019, net cash used in investing activities of $0.7 million primarily resulted from purchases of test and assembly equipment and capitalized costs related to internal-use software.
For the three months ended March 31, 2018, net cash used in investing activities of $1.0 million primarily resulted from purchases of test and assembly equipment and capitalized costs related to internal-use software.
Cash Flows from Financing Activities
For the three months ended March 31, 2019, net cash used in financing activities of $44.4 million consisted of $44.7 million of principal payments on debts and financing fees associated with repayment of our term loan, which was partially offset by $0.3 million in net proceeds from sales of common stock under our employee stock incentive program.
For the three months ended March 31, 2018, net cash provided by financing activities of $21.7 million consisted of $20.2 million in net proceeds from sales of common stock and $2.3 million in net proceeds from the sale of certain long-term financing receivables. These proceeds were partially offset by a $0.8 million principal payment on our term debt.
Contractual Obligations
Other than as described below, there were no material changes during the three months ended March 31, 2019 to our contractual commitments as presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2018 Form 10‑K filed with the SEC on March 15, 2019. See Note 9. “Commitments and Contingent Liabilities,” of the condensed consolidated financial statements.
On January 28, 2019, we repaid in full the remaining principal amount of the Term Loans of approximately $39.5 million plus accrued interest and fees owed to lenders affiliated with Tennenbaum Capital Partners, LLC.
Off-Balance Sheet Arrangements
As of March 31, 2019, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
Critical Accounting Policies
Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S., or 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 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.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 26

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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. “Summary of Significant Accounting Policiesof the notes to condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for a discussion of adoption of new and recently issued accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For quantitative and qualitative disclosures about market risk, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 2018 Form 10‑K filed with the SEC on March 15, 2019. Our exposures to market risk have not changed materially since December 31, 2018.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2019. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, includes, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of March 31, 2019, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in Internal Control
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 27

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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in litigation relating to claims arising out of our operations. We are not currently involved in any material legal proceedings, and our management believes there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our operations, financial condition, or cash flows. We may, however, be involved in material legal proceedings in the future. Such matters are subject to uncertainty and there can be no assurance that such legal proceedings will not have a material adverse effect on our business, results of operations, financial position or cash flows.
Item 1A. Risk Factors
There has been no material changes in our risk factors from those disclosed in Part I, Item 1A, in our 2018 Form 10‑K filed with the SEC on March 15, 2019.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other
None.


 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 28

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Item 6. Exhibits
A list of exhibits filed with this report or incorporated herein by reference is found in the Exhibit Index below.
 
 
 
 
 
 
Incorporation by Reference
Exhibit Number
 
Exhibit Description
 
Form
 
SEC File No.
 
Exhibit
 
Filing Date
 
Filed Herewith
10.1
 
 
8-K
 
001-35480
 
10.1
 
2/6/2019
 
 
10.2
 
 
 
 
 
 
 
 
 
 
X
31.1
 
 
 
 
 
 
 
 
 
 
X
31.2
 
 
 
 
 
 
 
 
 
 
X
32.1*
 
 
 
 
 
 
 
 
 
 
X
101.INS
 
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
 
 
 
 
 
 
 
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document.
 
 
 
 
 
 
 
 
 
X
101.CAL
 
 
 
 
 
 
 
 
 
 
X
101.DEF
 
 
 
 
 
 
 
 
 
 
X
101.LAB
 
 
 
 
 
 
 
 
 
 
X
101.PRE
 
 
 
 
 
 
 
 
 
 
X
 
 
*
The certifications attached as Exhibit 32.1 accompany this quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by Enphase Energy, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.


 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 29

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: April 30, 2019
 
ENPHASE ENERGY, INC.
 
 
 
 
 
 
By:
 
/s/ Eric Branderiz
 
 
 
 
Eric Branderiz
 
 
 
 
Vice President and Chief Financial Officer
 
 
 
 
(Duly Authorized Officer)
 

 
Enphase Energy, Inc. | Q1 2019 Form 10-Q | 30
a20190207amend2secpurch1
DocuSign Envelope ID: 025ECDCA-DD38-46E2-A8F7-337BB4A493EA23A8CFD8-1ED4-494B-8571-6B0BAD99D1C6559B9FB4-34B5-42DF-8C7E-70FBCE342C19 AMENDMENT NO. 2 TO SECURITIES PURCHASE AGREEMENT This Amendment No. 2 dated February 7, 2019 (this “Amendment No. 2”) amends the Securities Purchase Agreement (the “Agreement”) dated January 9, 2017, as amended, between Enphase Energy, Inc., a Delaware corporation (the “Company”), and each purchaser identified on Exhibit A thereto (each a “Purchaser” and collectively, the “Purchasers”). IN CONSIDERATION of the mutual covenants and agreements contained in this Amendment No. 2, the sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Defined Terms. Capitalized terms used but not defined in this Amendment No. 2 have the meanings ascribed to them in the Agreement. 2. Amendment to the Agreement. Section 6.5 of the Agreement is amended by deleting the second sentence and inserting the following sentence in its place: “In addition, the Board of Directors and Mr. Rodgers will agree on a solar industry expert to be added to the Board of Directors (the “New Director”), and the Board of Directors shall take all action necessary to appoint the New Director to the Board of Directors as a Class I director, within three years of the date of the Closing.” 3. No Other Amendments. Except as expressly set forth above, the Agreement remains in full force and effect. 4. Counterparts. This Amendment No. 2 may be executed in any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one instrument. ENPHASE ENERGY, INC. FORIS VENTURES, LLC By:_____________________________ By:____________________________ Badri Kothandaraman Barbara Hager Name: :_________________________ Name: :_________________________ President and CEO Title: :_________________________ Title: :_________________________Manager RODGERS MASSEY REVOCABLE LIVING TRUST dtd 4/4/11 By: ____________________________ Thurman John Rodgers (as Trustee)


 
Exhibit


Exhibit 31.1
CERTIFICATION
I, Badrinarayanan Kothandaraman, certify that:
1.
I have reviewed this Form 10-Q of Enphase Energy, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 30, 2019

 
/s/ BADRINARAYANAN KOTHANDARAMAN
 
Badrinarayanan Kothandaraman
 
President and Chief Executive Officer
(Principal Executive Officer)


Exhibit


Exhibit 31.2
CERTIFICATION
I, Eric Branderiz, certify that:
1.
I have reviewed this Form 10-Q of Enphase Energy, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 30, 2019

 
/s/ ERIC BRANDERIZ
 
Eric Branderiz
 
Vice President and Chief Financial Officer
(Principal Financial Officer)


Exhibit


Exhibit 32.1
CERTIFICATION
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Badrinarayanan Kothandaraman, President and Chief Executive Officer of Enphase Energy, Inc. (the “Company”), and Eric Branderiz, Vice President and Chief Financial Officer of the Company, each hereby certifies that, to the best of his or her knowledge:
1. The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2019, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
In Witness Whereof, the undersigned have set their hands hereto as of the 30th day of April, 2019.


/s/ BADRINARAYANAN KOTHANDARAMAN
 
/s/ ERIC BRANDERIZ
Badrinarayanan Kothandaraman
 
Eric Branderiz
President and Chief Executive Officer
 
Vice President and Chief Financial Officer
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Enphase Energy, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.