Enphase Energy, Inc.ENPH
Enphase Energy, Inc. Fair Value Disclosure
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 assets and liabilities measured at fair value on a recurring basis using the above input categories:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Cash equivalents, restricted cash and marketable securities: | |||||||||||||||||||||||||||||||||||
| Money market funds | $ | 186,677 | $ | — | $ | — | $ | 191,410 | $ | — | $ | — | |||||||||||||||||||||||
| Certificates of deposit | — | — | — | 95,000 | — | — | |||||||||||||||||||||||||||||
| Commercial paper | — | 14,985 | — | — | — | — | |||||||||||||||||||||||||||||
| U.S. Treasuries | — | 29,885 | — | — | — | — | |||||||||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||||||||||||||
| Certificates of deposit | — | 14,515 | — | — | 30,092 | — | |||||||||||||||||||||||||||||
| Commercial paper | — | 12,908 | — | — | 30,713 | — | |||||||||||||||||||||||||||||
| Corporate notes and bonds | — | 373,383 | — | — | 449,570 | — | |||||||||||||||||||||||||||||
| U.S. Treasuries | — | 63,754 | — | — | 111,612 | — | |||||||||||||||||||||||||||||
| U.S. Government agency securities | — | 573,976 | — | — | 631,493 | — | |||||||||||||||||||||||||||||
| Other assets: | |||||||||||||||||||||||||||||||||||
| Investments in debt securities | — | 6,300 | 55,046 | — | — | 64,834 | |||||||||||||||||||||||||||||
| Investment in equity instruments | — | — | 5,000 | — | — | — | |||||||||||||||||||||||||||||
| Investment in tax equity fund | — | — | 754 | — | — | — | |||||||||||||||||||||||||||||
| Total assets measured at fair value | $ | 186,677 | $ | 1,089,706 | $ | 60,800 | $ | 286,410 | $ | 1,253,480 | $ | 64,834 | |||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||
| Warranty obligations: | |||||||||||||||||||||||||||||||||||
| Current | $ | — | $ | — | $ | 23,259 | $ | — | $ | — | $ | 27,173 | |||||||||||||||||||||||
| Non-current | — | — | 169,963 | — | — | 143,743 | |||||||||||||||||||||||||||||
| Total warranty obligations measured at fair value | — | — | 193,222 | — | — | 170,916 | |||||||||||||||||||||||||||||
| Total liabilities measured at fair value | $ | — | $ | — | $ | 193,222 | $ | — | $ | — | $ | 170,916 | |||||||||||||||||||||||
Notes due 2028 and Notes due 2026
The Company carries the Notes due 2028 (as defined in Note 12, “Debt”) and Notes due 2026 (as defined in Note 12, “Debt”) at face value less unamortized debt issuance costs on its consolidated balance sheets. As of December 31, 2025, the fair value of the Notes due 2028 and Notes due 2026 was $500.5 million and $619.4 million, respectively. The fair value as of December 31, 2025 was determined based on the closing trading price per $100 principal amount as of the last day of trading for the period. The Company considers the fair value of the Notes due 2028 and Notes due 2026 to be a Level 2 measurement as they are not actively traded.
Equity investments without readily determinable fair value
The Company had previously invested $6.0 million in a privately-held company without a readily determinable fair value. During the year ended December 31, 2024, the Company determined that the carrying value of the investment was not recoverable. Accordingly, the Company recorded an impairment charge of $6.0 million within “Other income, net” on the consolidated statements of operations for the year ended December 31, 2024.
In October 2025, the Company invested $5.0 million to acquire 19.99% of the outstanding membership interests of a privately-held company without a readily determinable fair value. The Company elected the fair value option for this investment. Accordingly, this investment is measured at fair value on a recurring basis, with changes in fair value recognized in “Other expense, net” in the Company’s consolidated statements of operations. Further, the Company has concluded that this investment is considered to be a Level 3 measurement due to the use of significant unobservable inputs in the valuation model. The fair value of this investment approximated the purchase price as of December 31, 2025. This investment is included in “Other assets” on the consolidated balance sheet.
Investments in debt securities
In January 2021, the Company invested approximately $25.0 million in a privately-held company. The Company concluded the investment qualifies as an investment in a debt security, as it accrues interest and principal plus accrued interest becomes payable back to the Company at certain dates unless it is converted to equity at a pre-determined price. As the investment includes a conversion option, the Company has elected to account for this investment under the fair value option and any change in fair value of the investment is recognized in “Other income (expense), net” in the Company’s consolidated statements of operations for that period. Further, the Company has concluded that the Company’s investment in a debt security is considered to be a Level 3 measurement due to the use of significant unobservable inputs in the valuation model. The fair value of $29.6 million and $34.4 million as of December 31, 2025 and 2024, respectively, was determined using discounted cash flow methodology and assumptions include implied yield and change in estimated term of investment being held-to-maturity.
In September 2021, the Company invested approximately $13.0 million in secured convertible promissory notes issued by the stockholders of a privately-held company. The investment qualifies as an investment in a debt security and will accrete interest and principal plus accrued interest that becomes payable at certain dates unless it is converted to equity at a pre-determined price. As the investment includes a conversion option, the Company has elected to account for this investment under the fair value option and any change in fair value of the investment is recognized in “Other income (expense), net” in the Company’s consolidated statements of operations for that period. Further, the Company has concluded that the Company’s investment in a debt security is considered to be a Level 3 measurement due to the use of significant unobservable inputs in the valuation model. The fair value of $11.0 million and $13.9 million as of December 31, 2025 and 2024, respectively, was determined using discounted cash flow methodology and assumptions include implied yield and change in estimated term of investment being held-to-maturity.
In December 2022, the Company took a non-voting participating interest of approximately $15.0 million in a loan held by a privately-held company. As of December 31, 2024, the Company accreted interest of approximately $2.0 million in “Other income (expense), net” in the consolidated statements of operations. The Company determined that the carrying value of the investment was not recoverable as the privately-held company filed for Chapter 11 bankruptcy during the year ended December 31, 2024. Accordingly, the Company recorded an impairment charge of $17.0 million within “Other income, net” on the consolidated statements of operations for the year ended December 31, 2024.
In July 2023, the Company invested approximately $15.0 million in a secured convertible promissory note issued by the stockholders of a privately-held company. The investment qualified as an investment in a debt security
and will accrete interest. The principal plus accrued interest is payable upon maturity unless it is converted to equity at a pre-determined price. As the investment includes a conversion option, the Company has elected to account for this investment under the fair value option and any changes in fair value of the investment is recognized in “Other income (expense), net” in the Company’s consolidated statements of operations for that period. Further, the Company has concluded that the Company’s investment in a debt security is considered to be a Level 3 measurement due to the use of significant unobservable inputs in the valuation model. The fair value of $14.5 million and $16.6 million as of December 31, 2025 and 2024, respectively, was determined using discounted cash flow methodology and assumptions include implied yield and change in estimated term of investment being held-to-maturity.
In September 2025, the Company invested $6.3 million in cash to purchase convertible notes with an aggregate principal amount of $7.0 million issued by SunPower Inc. (“SunPower”) (formerly named “Complete Solaria, Inc.”). The Company elected the fair value option for this investment. Accordingly, the convertible notes are measured at fair value on a recurring basis, with changes in fair value recognized in “Other expense, net” in the Company’s consolidated statements of operations. The fair value of the notes approximated the purchase price. Subsequent changes in fair value, including those attributable to changes in credit risk and the embedded conversion feature, will be reflected in the Company’s consolidated statements of operations. Interest income is accrued and recognized based on the stated coupon rate.
Investments in debt securities is recorded in “Other assets” on the accompanying consolidated balance sheets as of December 31, 2025 and December 31, 2024. The changes in the balance in investments in debt securities during the period were as follows:
| Years Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (In thousands) | ||||||||||||||
| Balance at beginning of period | $ | 64,834 | $ | 79,855 | ||||||||||
| Investments | 6,300 | — | ||||||||||||
| Fair value adjustments included in other income (expense), net | (9,788) | 1,967 | ||||||||||||
| Impairment | — | (16,988) | ||||||||||||
| Balance at end of period | $ | 61,346 | $ | 64,834 | ||||||||||
Investment in tax equity fund
In the year ended December 31, 2025, the Company made an investment in a tax equity fund contributing $9.8 million. The Company has elected to report its investment at fair value, which is equal to the present value of the remaining future cash flows expected to be received from the investment. The investment is included in “Other assets” on the accompanying consolidated balance sheet as of December 31, 2025.
As of December 31, 2025, the fair value of the Company’s investment in tax equity fund was $0.8 million, representing its proportionate share of the tax equity fund’s net assets. As of December 31, 2025, the Company recognized a deferred tax asset of $8.8 million related to the difference between the initial investment amounts and its fair value. Additionally, the Company recognized an expense of $0.2 million for year ended December 31, 2025 included in “Other income (expense), net” in the consolidated statements of operations.
Issuance of Loan Receivables
The loan receivables represent financing arrangements provided to certain direct and indirect customers. These loan receivables have contractual maturities ranging from to three years and are recorded on amortized cost basis. Interest income is accrued and recognized based on the stated coupon rate, included in “Other income (expense), net” in the consolidated statements of operations. The principal outstanding under the Company’s loan receivables were as follows:
| December 31, 2025 | |||||
| (In thousands) | |||||
| Current | $ | 47,000 | |||
| Non-current | 1,500 | ||||
| Loan receivables | $ | 48,500 | |||
There was no activity in allowance for credit losses during the year ended December 31, 2025.
Warranty obligations
Fair Value Option for Warranty Obligations Related to Products Sold Since January 1, 2014
The Company estimates the fair value of warranty obligations by calculating the warranty obligations in the same manner as for sales prior to January 1, 2014 and applying an expected present value technique to that result. The expected present value technique, an income approach, converts future amounts into a single current discounted amount. In addition to the key estimates of return rates and replacement costs, the Company used certain Level 3 inputs, which are unobservable and significant to the overall fair value measurement. Such additional assumptions are based on the Company’s credit-adjusted risk-free rate (“discount rate”) and compensation comprised of a profit element and risk premium required of a market participant to assume the obligation.
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 designated as Level 3 for the periods indicated:
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Balance at beginning of period | $ | 170,916 | $ | 161,793 | |||||||
| Accruals for warranties issued during period | 29,069 | 27,500 | |||||||||
| Changes in estimates | 6,997 | 625 | |||||||||
| Settlements | (20,392) | (21,789) | |||||||||
| Increase due to accretion expense | 13,399 | 11,010 | |||||||||
| Change in discount rate | (203) | (459) | |||||||||
| Other | (6,564) | (7,764) | |||||||||
| Balance at end of period | $ | 193,222 | $ | 170,916 | |||||||
Quantitative and Qualitative Information about Level 3 Fair Value Measurements
As of December 31, 2025 and December 31, 2024, the significant unobservable inputs used in the fair value measurement of the Company’s liabilities designated as Level 3 were as follows:
Percent Used (Weighted Average) | ||||||||||||||||||||||||||
| Item Measured at Fair Value | Valuation Technique | Description of Significant Unobservable Input | December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| Warranty obligations for products sold since January 1, 2014 | Discounted cash flows | Profit element and risk premium | 17.5% | 16.8% | ||||||||||||||||||||||
| Credit-adjusted risk-free rate | 7.3% | 7.2% | ||||||||||||||||||||||||
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 the requirements of a third-party participant willing to assume the Company’s warranty obligations. The discount rate is determined by reference to the Company’s own credit standing at the fair value measurement date, which increased 0.1% in the year ended December 31, 2025 due to the increase in the risk free rate and market spreads, contributing to the $0.2 million change in warranty benefit captured in “Change in discount rate” in the table above. Under the expected present value technique, increasing the profit element and risk premium input by 100 basis points would result in a $1.4 million increase to the liability. Decreasing the profit element and risk premium by 100 basis points would result in a $1.4 million reduction to the liability. Increasing the discount rate by 100 basis points would result in a $13.3 million decrease to the liability. Decreasing the discount rate by 100 basis points would result in a $14.9 million increase to the liability.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 10, 2025 | |
| 2023 | Feb 9, 2024 | |
| 2022 | Feb 13, 2023 | |
| 2021 | Feb 11, 2022 | |
| 2020 | Feb 16, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Apr 2, 2018 | |
| 2016 | Mar 16, 2017 | |
| 2015 | Mar 1, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.