SMA Solar Aktie

Sunny, welcome, everyone. We very much appreciate that you are taking the time for this investor and analyst call on our first half year 2026 results. This conference call is scheduled for up to 60 minutes and will be recorded. After the management presentation, we will be happy to answer your questions. Today's presentation is available on our Investor Relations website. The replay will also be available there shortly.

I'm glad to welcome our CEO, Jurgen Reinert, to this call. He joins me today to provide you with the H1 update. First, I will walk you through our first half figures. And then Juergen will provide you with an update on our transformation program as well as updates on our business, including new solutions to our portfolio, current regulatory developments and how we strengthen customer value with our large-scale solutions.

Finally, we will wrap up with the updated guidance for the 2026 financial year and take time for your questions. I expect the presentation part to last about 30 minutes. Let's start. I refer to our disclaimer on Page 2. Let's move to Page 4, financial highlights for the first half 2026. Well, before we deep dive into the various financial KPIs, let me first say that we are very happy with the results of H1. It clearly shows that SMA is gaining momentum again and that many efforts taken by the whole team are actually paying off.

In addition, all key figures are affected by the tariff refunds we could collect from the U.S. Treasury. Without going into too many details, we can say that we use the mirror accounting principle to book the impact. It means minus EUR 22 million is shown as a sales reduction from reversing the revenues we had in the past from passing on tariffs to large-scale customers and EUR 41 million of costs have been reversed in our COGS. As such, the net impact was around EUR 19 million of EBIT improvement and cash improved by EUR 42 million as we also received interest on the refunds.

We do not consider the tariff refund effects as true one-off effects since we also did not and do not report the tariff costs as one-offs. We are being consistent here, but the tariff refund obviously did have a meaningful impact on the Q2 figures. We do provide transparency on the related effects, just not in terms of adjusting our operating figures. Also, we have collected the vast majority of the IEPA refunds and do not expect any material impact going forward.

Group sales with EUR 687 million were on last year's level of EUR 685 million. This shows that we could keep the high level of H1 last year. Please note that this is impacted by the U.S. tariff refunds, which reduced sales as refunds of tariffs previously passed on to customers are recognized as a reduction of sales. If we would exclude this effect, our sales were approximately 4% above H1 last year. This is also the main reason for the sales development in the Large Scale & Project Solutions division, which decreased by 5% to EUR 542 million after EUR 569 million the year before.

Sales in the Home and Business Solutions division increased by about 25% to EUR 145 million due to elevated demand in Q2. Operating group EBITDA before one-off earning effects increased to EUR 66 million after EUR 50 million in the first half 2025. This includes the mentioned EUR 90 million U.S. tariff refunds recognized in earnings. Taking into account the total positive one-off earnings effect of EUR 22 million in Home & Business Solutions, group EBITDA increased to EUR 88 million in the reporting period versus EUR 9 million last year.

I will provide more insights on this and the individual divisions in a moment. Free cash flow increased to EUR 72 million in the first half of 2026 compared with EUR 66 million in the prior year period. Total order backlog benefited from a record order intake of EUR 567 million for our large-scale business in Q2 and increased to EUR 1.75 billion at the end of June compared to EUR 1.16 billion at the end of June 2025. Main markets in Q2 this year were the U.S. and Germany.

Now let's go to Page 5, sales by region and by division. On the left-hand side, we can see that Americas revenue share increased slightly to 35% with consistently strong large-scale sales in the U.S. and good uptake of our Home and Business Solutions revenues compared to H1 last year. EMEA revenue share was slightly down to 47% after 49% in the first half 2025 as large-scale sales slightly declined as a result of timing of key projects in the region, for which we actually expect a stronger H2 this year. This more than offset a solid sales growth in the Home and Business Solutions division in EMEA.

The APAC region share decreased to 18% after 19% in H1 2025 as large-scale revenues in Australia were below the extraordinary high level of H1 last year. The main markets for the SMA Group in H1 2026 were Germany, the United States, United Kingdom and Australia.

Now let me walk you through the sales performance by division, as shown on the right side of the slide. Given the pickup of demand compared to previous year, sales in the Home and Business division increased by 25% to EUR 145 million after EUR 116 million in H1 2025. The division's share of total sales has increased to 21% compared to 17% in H1 last year. Within our transformation program, EMEA continues to be the key focus region for Home & Business Solutions. So as expected, EMEA remained the division's largest division region in the first 6 months.

Obviously, this growth is partly driven by the rising energy prices as a result of the military conflict in the Middle East. Large scale showed a revenue decrease of about 5% in the first 6 months, reaching EUR 542 million after EUR 569 million last year. The main reason for this was the previously mentioned U.S. tariff refunds, which reduced revenue as refund of tariffs previously passed on to customers are recognized as a reduction of revenue.

Regarding sales dynamics, we expect a higher level of project execution than in the first half, particularly in the EMEA region, supported by a stronger project pipeline. Americas was the strongest region with 41% followed by EMEA with 38% and APAC with 21%.

Now let me provide you with more information on profitability. EBITDA, excluding special items, which are primarily attributable to the Home & Business Solutions division amounted to EUR 66 million after EUR 50 million last year. Positive earnings effect of EUR 22 million resulted from the sale of previously written down inventories in Home and Business Solutions. Contrary to the original expectations, we were able to identify buyers for these inventories as part of the targeted sales initiatives.

In addition, EBITDA benefited from the release of personnel provisions of EUR 3 million related to the restructuring program. These positive effects were partly offset by EUR 3 million in expenses for external sales commissions incurred in connection with the successful sales initiative. Taking into account the positive earnings effect of EUR 22 million from the Home & Business Solutions, one-off EBITDA increased to EUR 88 million in the reporting period with an EBITDA margin of 13%.

Comparable EBITDA in 2025 was EUR 9 million with an EBITDA margin of 1%. Depreciation was slightly below last year with EUR 26 million. Looking at the results by division. EBIT for Home and Business Solutions improved significantly, reaching minus EUR 22 million compared to a minus EUR 129 million in H1 2025, driven by the restructuring and transformation measures as well as positive earnings effect of EUR 22 million resulted from the sale of previously impaired inventories.

EBIT in our Large Scale division reached EUR 78 million, which was below the level of H1 2025 with EUR 111 million. This was driven by 3 effects: first, higher scheduled depreciation and amortization on capitalized development projects after completion of the main product development phase of Sunny Central Flex; second, a less favorable U.S. dollar rate compared to H1 last year; and third, less capitalization of R&D costs. The overall reported EBIT margin for the SMA Group was solid with 9%.

Now I will move on to the balance sheet and net working capital on the next slide. Net working capital, which is shown on the top left of the page, decreased to EUR 178 million compared to the 2025 year-end figure of EUR 213 million. This leads to a net working capital ratio of 12%, which is slightly below the ratio at the end of last year.

Let me walk you through the net working capital positions. Inventories, including advanced payments to suppliers on inventories not yet received, were at EUR 370 million at the end of June compared to EUR 357 million at year-end 2025. Trade receivables at the end of June increased to EUR 192 million due to higher revenues at the end of the reporting period. These are expected to be converted to cash in Q3.

Trade payables increased by EUR 53 million, mainly related to timing of supplier payments. Advanced payments received from our customers slightly increased compared to end of 2025 and are expected to increase in Q3 based on the recently high level of order intake for the large-scale business. As a result, net cash increased by almost EUR 70 million, reaching EUR 245 million at the end of June, following the decrease of net working capital, the positive earnings and the tariff refunds received.

Now let's have a look at the group balance sheet on the right side of this page. And as I've already explained the changes in the net working capital position, I will focus on the major changes on the other balance sheet positions. Let's start with the changes in total cash and financial liabilities. As we have been able to bring our cash position to a very strong level again through our ongoing liquidity improvement measures, we fully repaid our revolving credit facility in the first quarter and have not needed to utilize the cash credit line since then.

You see the corresponding reduction of financial liabilities in our balance sheet on the right side of the page. Our total cash is EUR 245 million at the end of H1, which is a strong increase compared to the end of last year, driven by operational performance in both our results and net working capital management as well as the tariff refund. Regarding the other balance sheet items, noncurrent assets have increased since the end of 2025, driven by an increase of our deferred tax assets, which increased by over EUR 30 million as a result of moving the 3-year valuation basis forward to the end of H1 2029.

Other assets are higher than at the end of last year with EUR 70 million with the increase primarily from contract assets related to work done and investments into our EPC projects, which when ready will be sold. Shareholder equity increased by 21% to EUR 441 million per end of June, leading to an equity ratio of about 32%. The positive development is driven by the good H1 results and the positive effect from the updated valuation of our deferred tax assets as explained. Provisions slightly decreased to EUR 220 million at the end of June, mainly from the partial consumption of provisions for restructuring efforts in H1 as planned.

And other liabilities increased to EUR 580 million, mainly from increases in income tax and VAT liabilities. That concludes my explanation of the balance sheet. Let's have a look at our summary of cash flows on the next slide. Starting with our net income. And if we then add back the noncash P&L items such as depreciation and amortization and changes in provisions, you can see that we had a strong positive cash flow from our operating profitability in H1.

The non-P&L cash effects are mainly from payments related to our restructuring program, payments for prepaid assets such as annual IT license fees, which are realized as expenses throughout the full year as well as income taxes paid. Net working capital continued to be optimized. As explained, we successfully sold off some written down inventories in the Home and Business Solutions while increasing inventories for large-scale projects, which will be realized in the second half of this year.

For these inventories, we also have higher trade payables at the end of H1, resulting in an overall decrease of net working capital. Net CapEx amounted to EUR 10 million, which is well below the level of H1 2025 as we keep managing our cash position very closely, including reduced R&D capitalization. Considering our cash flows from operating and investing activities in total, our free cash flow was on a good level with plus EUR 72 million.

Comparing the free cash flows between 2025 and 2026, you can see a big difference. While in 2025, free cash flow was strongly supported by net working capital optimization, the 2026 free cash flow is heavily influenced by the significantly improved net income. Let's move to the next page, order backlog.

Looking at the left side of the slide, you see that our order backlog increased significantly to EUR 1.75 billion at the end of June compared to EUR 1.35 billion at the end of December 2025 and product order backlog increased to EUR 1.42 billion. On the right side of the page, you can see that our large-scale product order backlog remains strong with EUR 1.3 billion, and Home & Business Solutions more than doubled its product and order backlog to EUR 100 million compared to EUR 43 million at the end of December 2025, driven by the launch of our new product portfolio in June.

For the group in total, Q2 was a record order intake for large-scale showing EUR 567 million. Home & Business Solutions came in with EUR 137 million. Now let's turn to the next page, and I will hand over to Jurgen with an update on our business activities and our ongoing transformation program.

Thank you, Kaveh, and good day to everybody. Our key restructuring and transformation activities have been successfully implemented or are ongoing and are on track to achieve the saving targets. In cases where individual savings measures are behind plan, the teams are working on either achieving savings and other measures or introduce additional measures to compensate. From an organizational standpoint, our transformation efforts to establish the multi-shared service center in Poland and a global competence center in India have progressed especially well.

In India, more than 30 of the planned 50 FTEs have already been onboarded with hiring progressing on track. Together, these initiatives not only support our cost reduction targets, but also strengthen our global organization with additional capabilities and a more scalable operating model. Operationally, we continue to simplify our setup and optimize warehouse capacity across the group. This includes the closure of warehouse sites in Brazil and Singapore, reducing complexity and supporting a more efficient cost structure.

At the same time, our market performance is continuously improving. This is an important point because financial performance is not solely determined by cost measures. The combination of disciplined execution of the restructuring program and stronger commercial momentum is supporting our ability to achieve and in some cases, even exceed our financial plans. Looking ahead, our focus remains clear. We will complete the remaining measures, continue to improve operational efficiency and further advance the transformation of our Home and Business Solutions business.

As part of this transformation, we have streamlined the portfolio and addressed key customer needs with targeted solutions. A major milestone was the market launch of the Sunny Tripower Hybrid X, which enables us to address a broader range of customer applications. From a larger residential system with battery storage and a focus on energy independence to multifamily buildings and small commercial applications. At the same time, we will continue to optimize our development and supply chain setup, expand partnerships and sharpen our focus on the most attractive markets.

Overall, we are moving from restructuring towards a more competitive and scalable operating model. The remaining actions to achieve overall savings of EUR 250 million are clearly defined, Implementation is well underway, and we are confident that the program will provide a solid foundation for sustainable profitability beyond 2027.

In our Home and Business Solutions segment, we launched new integrated energy solutions, including the Sunny Tripower Hydroid X, SMA Storage M, the SMA backup solution and our next-generation energy management software, Energy Planner and Energy Maximizer. Together, these solutions enable customers to generate, store, intelligently optimize solar energy within one integrated system, reducing energy costs, increasing energy independence and providing reliable backup power.

At the same time, the integrated hardware and software ecosystem simplifies system planning, installation and commissioning for our partners. This marks an important strategic step for Home and Business Solutions, furthering evolving SMA from a product supplier to a provider of integrated customer solutions. The new portfolio received very positive customer feedback at Intersolar and was subsequently met with strong media coverage, confirming market interest in our integrated offering.

The rollout across Europe will begin in the second half of 2026 and further strengthening our competitive position in the home and business market. In largescale, we launched, as announced in one of our last analyst calls, a new stability enhanced deeply covered hybrid solution that combines PV, battery storage and grid forming capabilities in one fully integrated architecture. The solution addresses the growing demand for bankable hybrid power plants with high efficiency, improved grid stability and stronger project economics.

By integrating power conversion, plant control and engineering expertise, it further reinforces SNA's technology leadership in the utility scale market. The solution has been commercially available since Intersolar and has been very well received by our customers. Together, these launches underlie SMA's strategic development from a component supplier towards an integrated energy solution provider.

They strengthen our differentiation in software and system solutions, increased value creation across customer segments and support our long-term growth and profitability potential. The regulatory environment is increasingly becoming a strategic factor for the energy industry. Across both Europe and the United States, we are seeing a growing focus on the resilience of critical energy infrastructure, cybersecurity and secure supply chains.

Energy infrastructure is no longer assessed solely by performance and cost, but increasingly also by its ability to withstand cyber threats, geopolitical risks and supply chain disruptions. In Europe, the implementation of the Net Zero Industry Act is now beginning to translate into concrete procurement activities. The first tenders in Italy, Spain and France, with Germany expected to follow, indicate that sustainability, supply chain transparency and resilience are gaining importance alongside traditional commercial criteria.

This development is broadly supportive of companies like SMA with an established European manufacturing base and transparent supply chains. A similar trend is emerging in the United States. At the end of July, U.S. Federal Communications Commission, FCC, expanded its covered list framework to include certain foreign produced power and hybrid inverters. Importantly, the vast majority of SMA products currently on the U.S. market already hold SEC authorization and are therefore not directly affected.

The new framework primarily affects future product approvals for the U.S. market. More broadly, the decision reflects the growing importance of trusted technologies, cybersecurity and resilient supply chains in critical energy infrastructure. While it is still too early to assess the commercial impact in detail, we believe this direction is strategically supportive for our Large Scale and Project Solutions business, where these capabilities are becoming increasingly important procurement criteria.

German Business Solutions, we currently expect a more limited impact. Overall, we see regulatory developments creating a supportive environment for trusted technology providers. This reinforces the long-term importance of resilience, cybersecurity and secure supply chains in the energy transition. The market for large-scale solutions is also evolving beyond individual components. Today, customers increasingly expect integrated solutions that improve project execution, strengthen resilience and reduce operational complexity.

A good example is the new U.S. integration facility in Arkansas, which we opened together with our long-standing partner, CEP. Local integration enables shorter delivery times, strengthen supply chain resilience and allows us to respond more effectively to customer requirements in one of our most important strategic markets. In addition, our partnership with Beta strengthens local transformer sourcing, further increasing supply chain resilience, reducing dependencies and supporting the growth -- the growing demand for domestically integrated solutions in the U.S. market.

Another area we are actively targeting is the growing data center market. Rising investment in AI and digital infrastructure is increasing demand for reliable, scalable and efficiently managed power supply. SMA can address these requirements by combining photovoltaics, battery storage and intelligent energy management in an integrated solution. This enables operators to manage peak loads, strengthen operational reliability and improve energy cost predictability.

We are gaining more and more traction and visibility in this attractive market segment and have built up capabilities of offerings accordingly. The first project in the United States is already underway. We are also advancing with the VDEFNN certification for the short-term overload capability of our central inverter. This capability is based on the SMA design reserve built into our products and allows the system to provide additional power for a limited period when required. We expect the first product certification by the end of August.

And once certified, it is expected to enable additional grid support functions, create opportunities for grid service revenues and reduce systems costs by lowering the need for oversizing. Overall, these examples illustrate how we translate technology leadership into tangible customer value and through faster project execution, more resilient energy infrastructure and greater operational flexibility.

I will now hand over back to Kaveh for the outlook and the guidance.

Thank you, Jurgen. On July 16, we raised our sales and earnings guidance for 2026. The updated guidance now forecast revenue of EUR 1.625 million to EUR 1.725 million and EBITDA of EUR 180 million to EUR 230 million. The guidance increase reflects both the reduction of the significant risk that existed at the beginning of the fiscal year and the improved market conditions currently observed across both divisions.

Drivers in the Large Scale & Project Solutions division are the stronger performance expected in the second half of the year and the current improved development of the U.S. dollar exchange rate. The original planning for the fiscal year 2026 was based on the assumption that the U.S. dollar would weaken against the euro. A further positive factor was while it was totally unclear what the Supreme Court ruling would mean, it turned out that refunds related to the IE EPA tariff were received almost in full in the second quarter.

For the Large Scale & Project Solutions division, we expect a stronger operating performance in the second half of the year. Full year sales will be above the high level of the previous year as a result of the existing high order backlog and sustained demand. In the Home & Business Solutions division, we also anticipate improved sales development in the second half of 2026, supported by the higher order intake recorded in the second quarter.

Group EBITDA will see a significant positive impact in 2026 due to reductions in costs and increases in efficiency as part of the restructuring and transformation program, the tariff refunds paid in Q2 and a strong operational performance on large-scale in the second half. Other expected positive drivers include stronger demand in Home and Business Solutions, continued favorable FX developments compared to our initial expectations and potential further reversal of inventory write-downs resulting from targeted sales measures in the second half of the year.

Despite higher sales, we expect EBIT for large-scale to remain broadly in line with the prior year level as a result of higher costs necessary for operations and less capitalization of R&D costs. A significant part of the cost increase reflects investments in expanding our service operations to strengthen the service organization within Large scale.

For Home & Business Solutions, the Management Board is once again expecting negative earnings in 2026, but with significant improvement over the previous year due to the ongoing transformation process and elevated demand. Looking ahead for the group, we anticipate further improvements in sales and operating EBITDA in the second half of the year compared with the first half. Based on our current planning, Q3 should improve sequentially versus Q2, followed by further acceleration in Q4, which is currently planned to be the strongest quarter of the year.

This development is primarily driven by higher revenue recognition and continuous improvements in operating performance. So in summary, we are optimistic despite the different headwinds as management currently sees also some tailwinds, including higher-than-expected demand in HPS and the positive FX development in large scale. However, any new trade restrictions, tariffs or FX movements may require adjustments to our assumptions. Last but not least, a note on our upcoming events. 9 months results will be published on November 12, combined with an analyst and investor call.

With this, I conclude the presentation, and we are happy to take your questions.

[Operator Instructions] The first question comes from Constantin Hesse from Jefferies.

On the numbers. I've got 2 questions. I would like to start with order momentum. And I'd like to break it down basically 2 parts. One, in large scale, clearly, a very, very strong quarter. What I want to understand here is what's driving this? Do you have any exposure to data centers here that you know of? And is this sustainable into the second half? That's the first part of the question.

Second part of the question is just on HBS. I'm assuming that the momentum we saw in Q2, and I think this is something that we discussed at Intersolar as well, we should expect a normalization of that in Q3.

Constantin, so on your first question and starting with large scale. So, we do have the situation that we see in the discussions with our utility customers that they tend to go over more and more to decentralized approaches using PV and, of course, storage instead of normal procurement of electricity over other suppliers, of course. And we do see a bigger trend towards PV. That's the one thing. So that's one part of the sustainable part that we see the whole time, and that is the same for U.S. and as from Europe.

But what we also see is that we have gained momentum when it comes to Altenso. The project developments are going well and continue to go well. And therefore, as you said, we really had a record high Q2, mainly coming, of course, from large-scale order intake. And -- we also see this to be sustainable. Probably we will not have the same momentum or the same amount as in Q2 as it was a record quarter, but it should not drop too much due to the fact that we do see these factors that I just mentioned as sustainable.

And in addition, as you also mentioned, the data centers are coming in. I did just say we also received the first order there, and we do expect further orders to come in there as we are very good positioned in the data center area with the grid forming capabilities with the technology we have and the reliability. So we do think this is sustainable both for large-scale and Athansa orders. When it comes to HPS, of course, we have had some tailwind when it comes to the crisis in the Middle East and the change in the feed-in tariff in Germany.

But we also see the fact that the destocking has been completed now, and we are in a situation where the distributors fill up their stock again, and they are moving up to us because we do have also new products, which excite them. This is really visible from the Intersolar discussions we've had and the installer discussions we've had.

We are in a good position to take some market share from others and that they come back to us on those hybrid products that we did not have in those power classes and because that we have addressed this also with the availability of storage and energy management and the energy planner and maximizer. So I think we have a good momentum there to pick up even beyond what the market is doing itself.

This is great. Second question is just on the U.S. Now I think it's -- I think we understood that it's clearly supportive towards SMA. -- as it seems to be something that banning rather Chinese products instead. What I want to understand is if we could have a bit more details on maybe what your customers are saying, what the dialogue has been?

What kind of feedback have you been getting? As a result of that, are you potentially planning to expand capacity in the U.S. even further? I think Power Electronics was talking about doubling capacity in the U.S. So any color you could give us here for the U.S. going forward, that would be very helpful.

Yes. I would say this is rather a little bit too early. We would see something like more than a few months or a quarter or maybe even 2 that we see potential tangible differences there. What we do know, of course, as you also know, the Spanish or this is about all foreign produced inverters, but not, of course, those that already have an SEC certification. So we are good right now anyway.

And we also do think, as you were suggesting, that we are quite well positioned for the future due to the fact that we can show that we have a resilient supply chain that we have a governance which is clearly identifiable and clear to our customers that we are in a situation that we can prove that our supply chain is not only resilient, but also mainly from European manufacturers or manufacturers outside China. And all of this will help us in getting the future certifications as well.

So we are positively looking into that. And coming to your question regarding customers, they see it the same way. So we will have to wait how this exactly evolves, but we are quite positive that this should be helping us. When it comes to the manufacturing, as you know, we already have the transformers and the integration there. So that's roughly half of the sales price and half of the cost of the product. And we do currently not intend to build up any manufacturing for the inverters there, but that we can handle that very well even under FCC law in the way in the setup we have right now. That's for the time being.

Okay. This is great. And lastly, just on the innovation point. I think during the Intersolar conference, we -- there, I think, one absolutely key component that everyone was talking about was solid-state transformers. I mean, clearly, we're still a few years away from it, but we have been seeing quite a few announcements already of product launches, prototypes being put in place.

And I think during Intersolar, you basically said that this is a market that you looked at in the past and then you stopped looking at it and now you're basically retaking some actions in there. What's the plan here in order to make sure that SMA doesn't stay behind?

Yes. I would like to start with the last sentence. I think we have shown over the last years that we have really been able to be very innovative. If you look at our market share against competition in large scale that you talk about, My, when it comes to SSD, for example, we did take market share, especially based on revenues over the last 3 years, and we even would see this year the same tendency.

And that is because we have really performed very well in making our solutions very good when it comes to grid stability, grid forming and all that goes into that apart from, of course, quality and features we already always had and are known for. So I think this is something where we have always anticipated it very well. When it comes to SST in specific, I think the market is actually still split because of the fact that -- on the one hand, of course, there's obvious reasons for SSD, especially in data center applications.

On the other hand, there's also arguments against it because you need to have a very, very high reliability of 99.5 x 9% and 5%. And normally, a transformer itself is always the most reliable part compared to transformer and price power electronics. And the other part would also be the cost, which is probably also rather comparable. So we have been looking into that, as you said, we are looking into that, but we will only make a clear statement to the outside once we have decided to do it or not. And right now, we are investigating into that.

And as you know, we are good in power electronics, probably much better than some of the competitors that many do small powers, and we have an own manufacturing of transformers with a very high knowledge even on high-frequency transformers. So we are well positioned for that. We are looking into that, and we will then, in due time, come back whether we see this as a real game changer or not.

That's great. If I can just throw in just the last one, just on the regulatory environment in Europe. I think if we think about it historically over the last few years, Europe has famously been more of a barking than biting. And I mean, clearly, we've seen about 1.5 months ago, a couple of months ago, the announcement of a funding ban from the European Investment Bank.

But what do you actually see on the ground in the market? Like are things really moving in the direction that we will probably see a potential ban on anything that's grid connected? Or is that something that you think is rather not really realistic?

I think it's very difficult to say. As you said, Europe tends to be a little bit more conservative, if I put it like that, towards U.S. or even Japan or Australia as we see it right now. And the move towards banning the -- some countries on inverters for publicly funded projects was already a big step for the EU. And we would not typically probably expect very concise and hard measures in the coming years. But of course, we would be surprised if that happened and would look at that. But we would not expect that to happen rather quickly.

On the other hand, what has happened already with the ban of inverters for publicly funded inverters out of some countries, we do see a lot of discussion around it with our customers. So customers are asking us of how we can replace, how we could -- how they could move over to our technology, et cetera. It's also too early to put that into figures, but we are definitely in discussions, especially also in solar and after that. And this is what I can say for the time being, I would not expect Europe to become too bold, but what is happening is actually in our direction.

[Operator Instructions] The next question comes from Guido Hoymann from Metzler.

I have actually 4 questions, 3 on HPS and on large scale. I think we can do it one by one. So the first one would be, how are the margins on your order intake in HPS at the moment? Are they better than precrisis? And if so, I hope so. Is that due to the optimized cost structure? Or is it about less interest -- customer interest for Chinese products as we have just discussed. So is there a stronger interest in, say, European or your products? That's the first one, margins.

Yes. Let me take this one. I think we have to distinguish a little bit when it comes to order intake, whether we look at the PV-only products, the existing product base or if you look at the new solutions that we're offering in the month. I think what is fair to say is that the new product line has much better margins and the order intake for that is really good.

So I think that's a good trend. What we've seen, obviously, for the older products, and that's mainly the products that we had written off in the inventory that we benefit now from the write-downs, but those would not have good margins if we hadn't written them down yet. So I think that's a twofold question. Going forward, obviously, the old base will dry out and then the new base will kick in and then the margin level definitely...

Okay. The second one would be, I think you indicated that the breakeven cost base in HPS would be EUR 300 million to EUR 400 million -- sorry, the sales you need to breakeven EUR 300 million to EUR 400 million in HPS. Given the scope of the order intake in Q2 and I think the short -- relatively short lead times here, can we expect HPS to breakeven in Q3 or in Q4?

I think it's too early to say. I think we see a good development in order intake, also profitability improves, as you can read in the numbers. But we don't -- we have too little actuals to say that. So I would not commit to a very early breakeven in Q3 or Q4. I think our plan is to be breakeven next year. That's what we're targeting.

And we will definitely have 1 or 2 months maybe this year where we will be breakeven, but then depending on the sales amplitude, so to say, especially in the outer months of the year when it's winter time, we'll probably be not that positive again. So this would be a little bit of fluctuation. But I think that the trend is definitely there that we improve month-over-month. But if you're already breakeven in Q3 or Q4, I wouldn't commit to it now.

And given these 2 trends, you cut down your costs and maybe also capacities in a way, at the same time, a strong increase in demand. So do you actually have sufficient capacities now to handle all that, assuming that the demand stays high? In other words, do you have already -- or do you recognize already longer lead times? Is there already, say, some sort of excess demand? Or in short, can -- do you have sufficient capacities actually to handle a stronger demand in the future?

Yes, let me take that. I think the capacity when it comes to production site lines and people is not a problem at all on both divisions, so both HPS and large scale. When it comes to large scale, which is, as you know, roughly 80% of the revenues, then I would also say we do not have any problems. Why? Because normally, of course, we have 6 to 10 months in lead time between order and then delivery. And thereby, we can much more anticipate that with the supply chain.

And also, if you would look at processes, for example, so chips with intelligence integrated, then we would have only one or a few in a whole central inverters and the same for one small inverter. So of course, we would prioritize the big inverters. So there, we would also not have a problem.

Where it could be and where we do see the tendency that you mentioned is longer lead times and even price increases, for example, on copper, aluminum and steel, but also on naked PC boards, and that is the same in the whole industry or even other industries, where we do see some trends, and they would then, in this case, come in mainly on HPS and only if the demand really is much different to what we anticipate anyway.

So there is a tendency towards higher lead times and higher prices on those that I mentioned and a few other components, which we are trying to adapt, of course, to in the best possible way. But to put that into perspective, once again, it's not on the production side. It's not on large scale, it's mainly on HPS and then only a portion of that and especially if it would change volumes quite considerably, then we would be in a situation where we need to have longer lead times. But all in all, it's still a comfortable situation.

Okay. And the last one is on large scale. If we adjust the Q2 EBIT for the tariff refunds, I understand that you consider that to be operational. But anyway, then the margin would be -- would have been, I think, some 8% or 9% only. So I would say, rather weak also compared to previous quarters. So what is the reason for that actually?

Yes, I can take that one. I think it's fair to say that the revenue level is a bit lower as well. So of course, you have this effect of the fixed cost that you have to carry. So when I do the math, I come to around 10%, which is lower, so I give you that. So that's one point. The other point is if you compare it to last year, for example, of course, the FX development has been negative. We improved versus our guidance because we expected it to be worse.

But if you compare it to last year, the FX effect also has a big impact. And the third thing, obviously, is we also mentioned is we don't capitalize R&D expenses in the same amount, right? So this is putting the margin lower compared to last year, while we still have the same cash flow. So I think those would be the 3 main effects.

The next question comes from Jeff Osborne from TD Cowen.

Just a couple of quick ones on my side. I was curious on the German market, if you're seeing ahead of any EEG changes, changes in distributor behavior in terms of wanting to build inventory, what you're hearing on the ground in terms of potential pull-in in demand?

Jeff, Jurgen here. No, I think the distributors and also installers are rather careful after the experience of the last year. So I would not expect or we have also had a discussion, K the other day. We would not expect anybody to really building buffer and they would be rather reluctant and careful there. So we do see, of course, that there is changes coming in the EEG in Germany, for example, even if it's still under discussion, but they will not do too much actually. They are small enough not to make a big disturbance.

And as you said, we would not expect distributors or installers to really buffer. So we do see an upward trend due to the fact that destocking has taken place due to the fact that people see here also in Germany, the trend towards -- and then rest of Europe towards all-electric society, more electric vehicles are being sold also due to the other factors from the higher oil prices, et cetera.

And therefore, we do see a positive market momentum. And as I said earlier, also a little bit of extra tailwind for us due to the new products and solutions. But we do not see an extraordinary trend coming out of the fact that EG is adapted in the timing nuances that it is adapted.

Makes sense. Just 2 other quick ones. One on the utility inverter side. I'm just curious, could you share with us how much of the unit volume is just related to battery-only solutions? It seems like you've gained quite a bit of traction there.

Yes, it's an interesting trend. So in Q1, I think because we get this question very often, in Q1, the trend was more of batteries, less of PV, right? -- in Q2, actually on the order intake side of things, it's the other way around. So we had more PV and less batteries. Overall, batteries is still growing as order intake is growing. But it's always, let's say, interesting with the big projects that we're supplying into.

If you have 1 or 2 big projects in one area, they obviously change the proportion or the figure. So I think we are growing in both areas. So year-to-date, it is more or less 50-50, but there was a shift in Q1 and Q2. And I don't think that's a strategic move. It's, let's say, due to the randomness of project business and the size of the tickets more.

Perfect. And just very quickly, the last one I had is just as we approach the FIAC implementation in the U.S., are you seeing any observable trends in the commercial inverter market where you've historically had a large market share along with chips?

No, we don't see any huge change there. We are performing quite well in the commercial market. And as you said, we always had a good market share there. But we don't see a huge difference there actually coming over right now. But we also anticipate there that it would rather help us with the products that are also aligned with PO.

And -- but we haven't seen a huge difference compared to what we said earlier in Q1. So we are seeing an increase towards last year in commercial, which is good, but not anything specifically coming notably from PO, I would say.

The next question comes from Jean-Marc Mueller from JMS Invest.

You mentioned that the order intake momentum is continuing quite strongly, maybe not at the very high levels we've seen in Q2, but still at very high levels. At the same time, given your guidance, you expect some sales momentum in the second half. I mean just for us, from what you see today, should we expect a book-to-bill in the second half to be above 1?

I mean that is difficult to say a good question. But as we said, we do see a stronger second half than the first half when it comes to sales. And we did have a good order intake in the first half, mainly due to quarter 2. So out of that perspective, sales going up and order intake already on a very high note. It is difficult to say whether the one or the other is going to be higher.

But the essence of the question also, as I said earlier, of course, we do see sustainability in our order intake due to the fact also that we are positioned and also the data center part is coming along as well. So it's difficult to say right now whether the one or the other one will be higher, but both on a very good level, we think.

Okay. Cool. And then on HPS quickly. I mean, the way I look at it, I mean -- and it was referred to in the call, I mean, the breakeven level, I heard now EUR 300 million to EUR 400 million. The way I do the math, it's probably -- it has to be at least EUR 400 million. You mentioned that you would like to achieve a breakeven level in 2027. So I would have to expect sales level of around EUR 400 million for HPS in 2027. Is this correct?

I think the EUR 300 million is not possible. You're right. I think the last time we mentioned that it was EUR 350 million to EUR 400 million. So I think it should be in that range. And it really depends in the end of the day of the product mix and the margins that we can achieve in the end with the new portfolio, which is not only the inverters, but also the batteries also the proportion of energy management revenues we can generate. So all these come in line.

If we would have just one product, the answer would be more simple for me to calculate. But of course, the product mix will depend. So if you have a good product mix, we will be a bit lower. If the product mix is less in our favor, then we will go more towards the EUR 400 million. So I think that's from. Given that we have 1 month, the product solutions in the field, I think given that history, let's say, in data, I think to work with the EUR 350 million to EUR 400 million range is probably the best we can do right now.

I mean I was more wondering also regarding order intake in '26. You were referring to new product introduction, inventory being low. So obviously, these are 2 items that should help order intake in 2026. But still, it's kind of hard to see an order intake in HPS of EUR 400 million, which then would build enough order backlog for you to actually then have the EUR 350 million to EUR 400 million sales in 2027 to then again breakeven on an EBIT level?

Yes. I think the turnover rate is much higher in HPS, right? So usually, we have, depending on the product, something between 2 weeks and 2 months currently from order intake to delivery and sales. So we don't need to leave the year with EUR 400 million of order backlog we can generate EUR 500 million. That's more for the large-scale piece, right?

Of course, while for large scale, we have much better visibility and forecasting capabilities. For HPS is more tricky. So I'm okay with the order backlog we have now and the current planning. But of course, we need to see how the next months the previously mentioned solutions portfolio will kick in.

I was wondering what will be plan B for HPS? I mean if you see that breakeven levels are more towards EUR 400 million, et cetera, and it seems ambitious that you reach this level on a continuous basis. So what...

Yes, I think we -- good question. We also got in one of the last analyst calls. I mean, of course, you can imagine having gone through a very heavy time with HPS, we've looked at all possible actions and plan B and C. So we have been looking at that. We are quite happy for the time being with -- as we also said, of how the new products have been taken into the market, how the order intake is developing.

Still too early to say for sure because it's only 1.5 months. But we do see a good trend and therefore, also a good possibility to go into profitability into next year. So we will fully focus on that plan. But of course, as you can imagine, one always has to look at the alternatives should it not come in the way we anticipate. So -- and those options to us, I think they are also clear of what those could be.

Can you enlighten me again quickly? I mean is closing down selling? I mean...

Yes. I mean those are, of course, the obvious choices. But as I said, we currently are happy with the performance. We see the trend that is positive, and that is our main option that we are following.

We now have a follow-up question from Constantin Hester from Jefferies.

Just quickly, Kaveh, just on the cadence. I think you said Q3, Q4 revenue and EBITDA faster Q3 and then the strongest is Q4, right? Is that correct?

Yes.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Kaveh Rouhi for any closing remarks.

Well, thank you again for your interest, and please do not hesitate to contact us in case you have any further questions. Having said that, goodbye to all of you, and have a great summer.

Thank you, operator, and welcome, everyone. We very much appreciate that you are taking the time for this investor and analyst call on our first quarter 2026 results. This conference call is scheduled for up to 60 minutes and will be recorded. After the management presentation, I will be happy to answer your questions.

Today's presentation is available on our Investor Relations website. The replay will also be available on the IR website shortly.

Our agenda for today. First, I will review our Q1 figures. Then we will take a look at a number of external factors currently affecting our business, one of our latest highlights projects as well as our current order backlog and outlook for the 2026 financial year. I expect the presentation part to last about 30 minutes.

I refer to our disclaimer on Page 2. So let's move to Page 4, financial highlights for the first quarter 2026. Group sales with EUR 341 million were 4% above last year's quarter. In the Large Scale & Project Solutions division, sales were stable compared to the previous year. The Home & Business Solutions division increased sales by 27%. Reported group EBITDA increased to EUR 26 million after EUR 25 million in Q1 '25. Operating group EBITDA before one-offs increased by 67% to EUR 25 million compared to EUR 15 million the year before. I will provide more insights on the individual divisions in a moment.

Free cash flow was minus EUR 27 million versus positive EUR 96 million last year. The negative free cash flow in Q1 this year is due to a buildup of net working capital from increased receivables related to the high sales in March. I will explain this later. Total order backlog increased to EUR 1.41 billion at the end of March compared to EUR 1.35 billion at the end of December '25.

Now let's go to Page 5. Sales by region and by division. On the left-hand side, you can see that Americas revenue share was stable with a 35% share with good uptake of our Home & Business Solutions revenues growth in the U.S. and another strong quarter for our Large Scale division in the U.S. EMEA revenue share was slightly up to 45% after 41% in the first quarter 2025, driven by sales growth in Germany and Benelux for both Large Scale and Home & Business Solutions. The APAC region share decreased to 20% after 24% in Q1 2025 as Large Scale revenues in Australia were below the extraordinary high level of Q1 last year. The main markets for the SMA Group in Q1 were the U.S., Germany and Australia.

Now let me walk you through the sales per division on the right-hand side of the slide. Given a higher demand than the previous year, sales in the division Home & Business Solutions increased by 27% to EUR 61 million after EUR 48 million in Q1 '25. The division's share of total sales has increased to 18% compared to 15% in Q1 '25. Within our transformation program, EMEA continues to be the key focus region. As expected, EMEA remained the [Technical Difficulty] Large Scale showed a stable revenue development in the first quarter, reaching EUR 280 million, which is on the same level as Q1 last year. Americas was the strongest region with 39%, followed by EMEA with 37% and APAC with 24%.

Now let me provide you with more information on profitability. Operating EBITDA, excluding special items, increased by 67% to EUR 25 million compared to EUR 15 million the year before. Reported EBITDA, including all special items, rose to EUR 26 million after EUR 25 million in Q1 '25. The special items included the reversal of inventory write-downs in connection with the targeted sales measure and related execution costs. Both special items are considered in the Home & Business Solutions Q1 results with a net effect of plus EUR 1.5 million. The prior year period was positively affected by a claim settlement in a high single-digit million euro range, which was reported in our Corporate segment. Taking all these effects into account, reported EBITDA margin came in at 7.7% compared to 7.5% in Q1 '25. Depreciation was stable at EUR 13 million.

Now let's have a look at the divisions in detail. EBIT for HBS improved significantly, reaching minus EUR 20 million compared to minus EUR 46 million in Q1 '25, driven by the successful implementation of the first wave of restructuring and transformation measures. This is another proof point of our transformation progress that we just -- that with just EUR 30 million more net sales, we gained EUR 26 million better EBIT. We still expect improvements to take place on a quarterly basis during the rest of the year if the net sales stay robust. EBIT in our Large Scale division reached EUR 34 million, which was below the level of Q1 '25 with EUR 50 million. This was driven among other factors by increased tariff costs and less R&D project costs as well as capitalized development assets. The overall reporting EBIT margin for the SMA Group was stable with 4%.

Now I will move on to the balance sheet and net working capital on the next slide. Net working capital, which is shown on the top left of the page, increased to EUR 243 million compared to the '25 year-end figure of EUR 213 million. This leads to a net working capital ratio of 16%, which is slightly above the ratio at the end of last year.

Let me walk you through the net working capital positions. Inventories, including advanced payments to suppliers on inventories not yet received, were at EUR 360 million at the end of March, which is rather stable compared to end of last year. Trade receivables at the end of March increased to EUR 242 million due to higher revenues at the end of the quarter. These are expected to be converted to cash in Q2. Trade payables increased by EUR 40 million, mainly related to timing of supplier payments. And advanced payments received from our customers slightly decreased compared to the end of '25, but are expected to increase in Q2 based on the recently high level of order intake for the Large Scale business. Net cash decreased by 16% to EUR 148 million at the end of March as a result of the increase in our net working capital, which is related to the high receivables from the strong March sales as just explained.

Now let's have a look on the group balance sheet on the right-hand side of this page. And as I've already explained, the changes in the net working capital positions. I will now focus on the major changes on the other balance sheet positions. Let's start with the changes in total cash and financial liabilities. As we have been able to maintain a good level of cash over the last several months now, we fully repaid our revolving credit facility, which had been utilized for the amount of EUR 45 million per end of December. You will find this under financial liabilities in our balance sheet on the right-hand side of the page.

Our total cash is EUR 148 million, on the same level as our net cash since we paid back our bank loan. Regarding the other balance sheet items, noncurrent assets have decreased since the end of '25, driven by a scheduled depreciation and amortization of assets, while additions of new investments were on a low level. Other assets are slightly higher than at the end of last year with EUR 58 million, primarily related to the increase of prepaid assets.

Shareholders' equity was stable with EUR 366 million per end of March, leading to an equity ratio of 28%. Provisions slightly decreased to EUR 228 million in the end of March as provisions for restructuring efforts were partly consumed in Q1 and other liabilities decreased slightly to EUR 494 million from running leasing liabilities, including for the new production.

That concludes my explanation of the balance sheet. Let's now have a look at our summary of cash flows on the next slide. Starting with our net income and if we then add back the noncash P&L items such as depreciation and amortization and changes in provisions, you can see that we had a solid positive cash flow from our operating profitability in Q1. The non-P&L cash effects are mainly related to payments of prepaid assets such as annual IT license fees, which are realized as expenses throughout the full year. Net CapEx amounted to EUR 5 million, which is well below the level of Q1 '25 as we are managing our cash spending very closely, including reduced R&D capitalizations, and we are currently focusing investments mainly on our new Large Scale platform, Sunny Central FLEX.

Considering our cash flows from operating and investing activities in total, our free cash flow decreased to minus EUR 27 million versus positive EUR 96 million in Q1 '25, primarily due to cash effective impacts from the restructuring program as well as an increase in net working capital, driven by higher trade receivables, mainly as a result of higher revenues to the end of the quarter.

So let's move to the next page, order backlog. Looking at the left side of this slide, you see that our order backlog increased to EUR 1.41 billion at the end of March compared to EUR 1.35 billion at the end of December '25, and product order backlog nearly reached EUR 1.1 billion. On the right side of the page, you can see that our Large Scale product order backlog remains strong with EUR 1 billion and HBS slightly increased its product order backlog to nearly EUR 50 million after EUR 43 million at the end of December '25. For the group in total, order intake was strong in Q1 for Large Scale with EUR 340 million and for HBS, EUR 71 million.

Now let's turn the page, effects of the geopolitical tensions on SMA. Before we look at our 2026 guidance, let me briefly walk you through the external factors that will influence this fiscal year. First, supply chain and macroeconomic factors. While we do not see significant bottlenecks, logistic costs and lead times are rising. At the same time, higher energy prices and inflation weigh investment decisions. This is currently not a limiting factor, but we will monitor this very closely.

Second, order intake. We currently see increased demand in HBS, partly driven by geopolitical tensions, but also expected EEG changes in Germany. This is reflected in the middle column. In March, order intake started to rise. However, it is too early to determine whether this marks the beginning of a sustained trend. That said, it is encouraging to see some positive momentum returning to this segment. Third, energy policy. As discussed in March, Germany is facing regulatory uncertainty around the grid package and potential EEG amendments. This creates temporary pull-forward effects, but also hesitation among end customers.

It is worth mentioning that the proposed changes to the EEG favor direct marketing of electricity as opposed to a feed-in tariff. This is aligned with our long-term PV and storage strategy and increases emphasis on resilience, affordability and energy sovereignty. At the European level, further discussions around supply chain, resilience and cybersecurity requirements are gaining momentum. In this context, two recent developments are important to take note of.

First, in March, the European Commission has proposed via the Industry Accelerator Act made in Europe requirements for solar inverters and cells in projects that are awarded through public procurement, auctions or other public support schemes. For battery energy storage systems, similar requirements will be introduced. Second, even more recently, the commission introduced a policy guidance on restricting the use of EU funds for clean energy projects involving inverters from high-risk suppliers. This refers to vendors from jurisdictions where concerns around cybersecurity and geopolitical risks have been publicly raised, namely China, Russia, Korea and Iran.

This guidance is applicable to solar, wind and storage projects within the EU and also to projects outside of the European Union that will be connected to the European grid. So what does that mean for SMA? SMA welcomes the attempts of the European Commission to derisk and diversify the solar supply chain. As for the concrete business impact, the upside potential cannot be fully quantified right now. In Large Scale, it is likely that demand will shift towards non-Chinese inverters in EU-funded and publicly produced projects. These projects, however, only make up approximately 20% of all projects deployed in Europe. The majority remain privately funded.

In Home & Business Solutions, we currently do not expect any material impact as these solutions are usually not part of projects realized within public procurement, auctions or EU funding. What is important, however, is the broader signaling effect. Even beyond subsidized projects, we see increasing awareness among customers regarding supply chain resilience and security. Overall, we expect this to create a supportive environment for European suppliers over time, although we are not in a position yet to quantify the potential upside at this stage.

Beyond the factors shown here, two additional uncertainties are relevant for 2026. FX developments, especially the U.S. dollar-euro exchange rate, which currently supports our Large Scale business and the potential refund of U.S. tariffs where timing and eligibility remain uncertain. Based on the latest information, initial payouts could start as early as May. We are closely monitoring and following up on this, and it could result in a smaller double-digit positive EBIT impact and cash in 2026. This potential upside is considered within our refined guidance range.

Despite the dynamic political, regulatory and demand environment, the SMA management team remains focused on what we can actively influence, executing our HBS transformation, preparing new product lines, advancing our R&D road map in Large Scale and delivering high-quality products and projects. To follow up on this, on the next slide, I want to show you our latest flagship project in Finland.

Our entry into the Finnish market is marked by a flagship project, the Battery Park Alapitka with a capacity of 95 megawatts and a 220-megawatt hour. Finland is currently one of the most dynamic energy storage markets in Europe, driven by the rapid expansion of renewables, increasing price volatility and growing grid stability requirements. This creates exactly the kind of environment where our expertise in grid-forming storage solution makes a difference. The project has been fully developed by SMA Altenso together with our local partner Infinergies, strengthening our European storage footprint and positioning us early in a highly attractive growth market.

At the same time, it is fully aligned with Finland's national energy and climate strategy as well as EU 2030 targets. A key milestone is a successful transfer of the project to the greentech investor re:cap. This underlines our ability to develop not only technologically advanced solutions, but truly investor-ready assets. The partnership combines complementary strength, our engineering and development expertise with strong financial capabilities on the investor side and further strengthens our position in the European BESS ecosystem. Altenso will remain the central execution partner, delivering the full EPC scope, including balance of plant and grid integration. Construction is planned to start in spring 2026 with commissioning in 2027.

The project leverages our grid-forming SMA inverter technology to ensure stability and performance under demanding conditions and will provide frequency response while participating in day ahead and intraday markets. Overall, this project represents a double milestone, entering the Finnish market and demonstrating a scalable end-to-end BESS business model that positions us for further growth in the region.

Now let's turn to the last page, our guidance for 2026. As said in our previous call on March 26, a broader range for our guidance 2026 was necessary to cover the various scenarios and uncertainties given at that time. Due to currently improved general conditions in both divisions, we refined our guidance to the upper 1/3 of group sales ranging between EUR 1.475 billion and EUR 1.675 billion and EUR 50 million to EUR 180 million for EBITDA. Drivers in the Large Scale and Project Solutions divisions are the continued high demand and the current improved development of the U.S. dollar exchange rate. The original planning for this fiscal year '26 was based on the assumption that the U.S. dollar would weaken against the euro.

Since the beginning of the Middle East conflict, the U.S. dollar has appreciated against the euro, which is currently having a positive effect on the development of the Large Scale & Project Solutions division compared to our initial planning. Furthermore, we are currently assuming that the likelihood of potential refunds in connection with the IEEPA tariffs, which were deemed unlawful has increased. Nevertheless, uncertainties remain regarding the timing, the amount and the final entitlement to the claim.

Sales in the Large Scale & Project Solutions division are expected to be slightly above the high level of the previous year as a result of the existing high order backlog and sustained demand. Sales in the Home & Business Solutions division are expected to be higher than the previous year. Again, at this time, it is not possible to reliably assess whether the dynamic demand, which is currently seen will have a sustained impact on the full year sales development of HBS in the current financial year.

Group EBITDA will see a significant positive impact in '26 due to reductions in costs and increases in efficiency as part of the restructuring and transformation program. Additionally, potential tariff refunds and continued favorable FX developments compared to our initial expectations could have a positive effect on EBITDA. For Large Scale, we're expecting EBIT below the previous year as a result of higher cost necessary for operations and less capitalization of R&D costs.

A significant part of the cost increase reflects investments in expanding our service operations to strengthen the service organization within Large Scale. For HBS, the Managing Board is once again expecting negative earnings in '26, but with significant improvements over the previous year, driven by the ongoing transformation program.

So in summary, we are cautiously optimistic despite the different headwinds as management currently also sees some tailwinds, including potential higher-than-expected demand in HBS or a positive FX development in Large Scale. However, any escalation in geopolitical tensions, trade restrictions, tariffs or FX movements may require adjustments to our assumptions at this point and could lead to deviations from the guidance.

Last but not least, a note on our upcoming events. We will host an investor and analyst event on June 24 at Intersolar in Munich. Please save the date. First half year results will be published on August 13, combined with the analyst and investor call. With this, I conclude the presentation, and I'm happy to take your questions.

[Operator Instructions] Our first question comes from Constantin Hesse from Jefferies.

I've got three. So starting on the order intake, maybe you can comment a little bit on what the impact was that you saw in March and what you're seeing in April with regards to HBS, how much of an acceleration we could have seen in those months due to the Middle Eastern conflict? I guess that could be an interesting data. And then the other question around orders that I would have is just going into Q2, if you can comment a little bit about the demand dynamics that you're seeing in Large Scale. As we enter now Q2, Q3, do you anticipate for it to remain pretty solid? So let's start with those two.

Thanks, Constantin, for the questions. I mean what I keep saying is Q1 is free of any impact of the Iran crisis, right? So neither in the revenues nor in the order intake, it had an impact. So basically, as you know, end of February, the crisis started. And then until, let's say, the order intake comes to us, it takes a couple of weeks, right? I think it's fair to say that in April, we see an uplift, which is good, obviously. But again, it's too early to say that's a general trend also. So it has been increased in April, but not really clear how it will continue. Second one was your question on dynamics in Large Scale. Yes, I think we had a great Q1 in terms of order intake, right? And I think we are pretty much on plan. And also for the next quarters, we are confident and quite optimistic.

Kaveh, just on the pipeline in Large Scale since the Middle Eastern conflict started, clearly, we've been seeing a lot of support when you look at the regulatory environment. So when you look at the pipeline -- I guess, a different way of asking the previous question is if we look at the pipeline, have you seen an improvement this year potentially for order intake compared to where we were a few months ago?

No. I would say no, honestly. I think we're on a good trajectory, and it's foreseeing some growth, obviously. But I wouldn't see that we have now spikes or something like that. I think we're on a good path. And no big impact yet.

And lastly, just on storage. Can you -- because I think storage is absolutely key right now. So it would be interesting if you can have a little bit more color on how large Altenso is today? How many of your large-scale orders today are being driven by storage? And what kind of demand dynamics you expect for storage this year? Just to get a little bit more color for what's really driving your order intake.

Yes. I think -- I mean, maybe we start with the boring one. So PV is a main business for us still, right? And it's the biggest market, and we're serving it quite well. However, as you know, in the battery piece, we have much better differentiation capabilities. And that's a big part of the sales already in Q1. So I would say in Q1, the battery part was bigger than the PV part. So we see kind of a shift slightly slowly, but significantly towards batteries. So I would say we are positioned there well. If you want numbers on order intake, I'm not really sure. But in terms of sales, we were, I would say, slightly above the middle. So something around 60% was batteries in Q1 in terms of sales -- battery inverters, right? Not batteries, sorry, battery inverters.

So -- in Large Scale, right? Or you mean overall?

Yes. No, no, for Large Scale, definitely. And also in the home business -- I mean, I thought you were asking about Large Scale, but also in the home business, there is a true shift into hybrid inverters, and PV-only inverters don't work that much anymore in the home space with all the energy management and so on and so forth, right? And also in the order intake, storage is becoming a bigger part. So yes, I think we're there.

Then maybe just lastly, just -- I mean, on this regulatory environment, have you potentially seen customers reaching out more often to SMA that potentially had higher exposure to Chinese inverters and obviously now potentially wanting to work more with SMA as a result of that. Have you seen any change to customer behavior in that sense?

I think when last year around Intersolar, I remember the first FiT rules and all these discussions started, we had already customers approaching us who were, let's say, more on the Chinese side of things. But until that materializes in big projects, that takes time. So I wouldn't overestimate the impact now.

[Operator Instructions] The next question comes from Guido Hoymann from Metzler.

Kaveh, two questions from me. The first one is on HBS. The new 3-phase hybrid inverter, I think that's to be presented on the Intersolar. Can this one already be ordered? And as I understand that hybrids are the only product which can be sold these days. And if it's not yet available, do you run the risk that installers will wait for this product until fall or whenever and you will miss out on the current opportunities resulting from high energy prices, all the stuff we just mentioned for prebuying effects, et cetera. So could you miss that out because your product is not available yet? The first question. The second one would be, can you remind us on the approximate cash outflow in '26 in connection with the restructuring booked already in 2025?

Yes, sure. Thanks for the questions, Guido. So to start with the HBS products that are to be presented at Intersolar. So no, they can't be ordered now yet. However, we are pretty good on track with everything. We have actually next week an installer event where we show the installers the whole solution with the app, with the software and they can get familiar with it. So we're doing all kind of premarketing things, but -- and it looks all good. Feedback is very positive. But obviously, we can't order them yet as the plan is to be able to sell those in mass quantities in H2, right? So what do we miss? That's a good one. You don't know what you missed because you missed it, right? So I don't know if maybe I would have 3x the revenues if I had those products right now. That's a question you never can answer.

We do have a loyal base that is willing to wait a couple of months. On the other hand, if the installer has to install something today and they don't have that product, they will take another product, but I'm not able to quantify that, honestly. But we are not concerned that this will hit our planning. We see this, as I mentioned, more of an upside potential, right? So I think that's maybe on that part.

Your second question was about the restructuring payouts. I mean, you remember what we published last year in terms of one-offs, and we expect that most of those will be paid out this year. So we are in line with plan on that, right? So nothing there.

So a rough indication regarding the cash burden for that?

Yes, I think it's something between EUR 20 million and EUR 25 million.

The next question comes from Jeffrey Osborne from TD Cowen.

I just wanted to follow up on the tariff refund. Can you just remind us what the cumulative tariffs you've paid out are and then what the magnitude of the guidance is that you now have a refund coming back, but I guess it's unclear the scope and timing. I was just confused why you're updating guidance with the refund in there, but then I didn't see you break that out.

Yes. I think we got the question last time, why is the guidance range so big, especially for the down part, right? And we said we don't know whether we get the tariffs back, which we had in the plan to get back, right? And what we're now saying is the likelihood of getting repaid has increased. So we have basically a tariff task force, if you want, dealing with the whole topic on a daily basis. We basically sent our notification to the Customs and Border Protection, the entity that is basically handling this, on the first day available, the list of all our entries so that they could process it as soon as possible.

So we try to be upfront as much as possible. Actually, I'm just thinking, last week, there was an announcement that the payment process would start in May, right? And so we are hopeful to see the money coming. The question is when will it be paid out? In total, we paid -- we expect something around EUR 20 million to EUR 30 million upside potential. Parts -- most of it cash, but parts also EBIT because we had it in the books last year, but we haven't invoiced it yet to customers. So it will be just additional one-offs that come in on top.

So basically, what that means is, and if you look at our guidance range, that's the main reason why we don't see the bottom part anymore because the likelihood has increased. So -- but if that changes for whatever reason, you never know these days, of course, it would have an impact. But currently, it looks like we are on a good track to getting that refunded at least parts of it. And then, of course, we'll keep you posted in the next call how far we've come with the refunding and also in the publications that we do.

That's helpful. Just one follow-up on the tariffs and then I'll have additional line of questioning. But on the tariffs, would that show up in the income statement potentially next quarter if you got paid next week, for example, is that a reversal of cost of goods, so a benefit to gross margin? Or does it show up somewhere else?

I mean we would comment on it. We would -- actually, that's a good point. Our IFRS team is currently dealing with how we should even show it in the P&L. So you are ahead of us because we were not really sure if there's even a likelihood to get it. So now that's increased, we're working on an IFRS memo and then we will disclose it in the report. So no worries. We will tell you where it sits.

Perfect. That's helpful. And then just switching gears to the U.S. market. I think you said in your prepared remarks that the utility scale was strong, but I believe you also said that the home and business. Can you just detail the home and business? Is that something on the residential side or more commercial in light of some of the FiT shifts? I'm just trying to understand the moving parts in your HBS segment.

Yes. I mean, currently, the -- in the Q1 results that you can see, commercial is stronger than home, right? And what we were saying is that, especially in Europe with our core markets, mainly Germany and so on, the current developments and the crisis, they have a positive impact more on the home part going forward. But in Q1, commercial was performing better than home.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Kaveh Rouhi for any closing remarks.

Thank you. That was quick. So thanks again for your interest, and please do not hesitate to contact us in case you have any further questions. Having said that, goodbye, and have a great day.

Ladies and gentlemen, welcome to the Analyst and Investor Presentation of Full Year Financial Results 2025 Conference Call. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Kaveh Rouhi, CFO. Please go ahead.

Thank you, operator, and welcome, everyone. We very much appreciate that you are taking the time for this investor and analyst call on our full year 2025 results. This conference call is scheduled for up to 60 minutes and will be recorded. After the management presentation, I will be happy to answer your questions. Today's presentation is available on our Investor Relations website. The replay will also be available on the IR website shortly.

Our agenda for today. First, I will give a review of our full year figures, followed by an update on the restructuring and transformation program and some insights on strategic topics for our Large Scale division. And last but not least, we'll have a look at order backlog as well as our outlook for this financial year 2026. I expect the presentation part to last a little bit more than 30 minutes. I refer to our disclaimer on Page 2.

So let's move to Page 4, financial highlights for the full year 2025. Group sales worth EUR 1.5 billion were nearly in line with last year. In the Large Scale & Project Solutions divisions, sales improved compared to the previous year. The Home & Business Solutions division declined year-on-year.

Reported group EBITDA came in at minus EUR 65 million after reaching minus EUR 16 million in 2024. This was due to the lower sales volume and the resulting lower fixed cost degression in the HBS division as well as several onetime items such as devaluations and scrappage of inventories, provisions for purchase obligations and provisions in connection with the restructuring and transformation program. Operating group EBITDA before one-offs was positive EUR 107 million with a strong operating performance in our Large Scale division more than offsetting for the negative operating results in our HBS division. I will provide more insights on the individual divisions in a moment.

Free cash flow reached EUR 110 million after minus EUR 184 million the year before, driven by our ongoing measures to reduce net working capital, which achieved good results in 2025. The strong positive cash flow also shows that our operating results, which exclude mainly noncash one-off effects were solid last year.

Total order backlog stood at EUR 1.3 billion at the end of December as we maintain a similar level as at the end of 2024. Large Scale product business order backlog remains on a high level, providing us with a good level of visibility on 2026 revenue expectations for the division.

Now let's go to Page 5, sales by region and by division. On the left-hand side, you can see that Americas revenue share was slightly up to 42% after 40% in 2024, driven by another strong year for our Large Scale division in the U.S. EMEA, which is still our biggest region with 46% share, decreased compared to 48% share in 2024 due to the soft sales development in HBS, which has the majority of its sales in the EMEA market. The APAC region share was stable with 12%. Here, Australia showed a strong development in the Large Scale business again with double-digit growth. The main markets for the U.S. -- for the SMA Group in 2025 were the U.S., Germany, Australia and the U.K.

Now let me walk you through the sales per division on the right-hand side of the slide. Sales development in the division Home & Business Solutions was affected by lower demand as well as high competitive and price pressure and therefore, decreased by 30% from EUR 354 million in 2024 to EUR 247 million. Main driver for the decrease in HBS sales was the German market where the installation rate in the home segment was about 30% lower than in 2024. The division's share of sales thus came down to 16% compared to 23%. EMEA remained the biggest region for the division.

Large Scale again showed a strong revenue development from EUR 1.2 billion in '24 to EUR 1.3 billion in '25. Americas was the strongest region with 47%, followed by EMEA with 39% and APAC with 14%.

Now let me provide you with more information on profitability. Including one-offs, reported group EBITDA reached minus EUR 65 million. As mentioned at the beginning of the presentation, one-offs include write-offs and scrappage on inventories as well as additions to provisions for purchase commitments and restructuring provisions in total EUR 182.5 million, provisions for doubtful receivables of EUR 7.5 million and positive onetime effects of around EUR 80 million. These onetime effects significantly affected our results this year. Please note that last year's results also included negative onetime effects as well as positive onetime effects from the sale of the elexon stake of EUR 19 million. If you exclude all this, our operating EBITDA reached EUR 107 million compared to EUR 148 million in '24. Our operating EBIT margin was about 7% for '25 compared to 10% in '24.

So you are probably wondering where do we see the positive effects from our restructuring efforts. What we have not considered in our 2025 one-off adjustments are adverse effects from currency translation and tariffs, which negatively impacted our 2025 results by almost EUR 50 million. The U.S. market represents a significant part of our revenues and is key for our business, while at the same time, this increases our exposure to both FX effects and tariffs. In 2025, we could pass on a large amount of tariffs to our customers, but not fully.

In addition to these two effects, we also faced tough price pressure in the HBS market, which impacted our HBS results with a mid-double-digit million margin erosion. And it is in this division that we see that our restructuring and savings efforts overcompensated for this significant effect.

Taking all these into account, reported EBITDA margin came in at minus 4% compared to minus 1% in '24. Depreciation was well above the prior year level with EUR 123 million in '25 due to the onetime impairments on R&D assets and fixed assets in total of about EUR 71 million in the year.

Now let's have a look at the division in detail. EBIT in our Large Scale division reached EUR 211 million, which was below the level of '24 with EUR 227 million. As explained earlier, this division was especially affected by the depreciation of the U.S. dollar compared to '24, but also by tariffs. In addition to that, our update of warranty cost parameters at year-end resulted in increased warranty provisions, and we had to write down open receivables of EUR 7.5 million in the U.S. in H1 in the division. These negative effects were partly compensated by the reversal of provisions for legal disputes in connection with the settlement of an O&M contract in North America in the mid-single-digit million euro range. In comparison, 2024 was negatively impacted by impairments on inventories of [ EUR 19 million, ] while benefiting from a relatively strong U.S. dollar.

EBIT for HBS amounted to minus EUR 376 million compared to minus EUR 315 million in '24 due to the price and volume-related sales decline as we -- as the one-offs effects from inventory write-offs and scrapping of about EUR 123 million, allocations to provisions for purchase commitments of EUR 36 million as well as R&D and fixed assets impairments of EUR 67 million. The overall reported EBIT margin for the SMA Group amounted to minus 12% compared to 6% in 2024. Operating EBIT margin was 3.6% in '25 versus 6.3% in '24.

Now I will move on to the balance sheet and net working capital on the next slide. Net working capital, which is shown on the left of the page, decreased to EUR 213 million compared to the '24 year-end figure of EUR 473 million. This leads to a net working capital ratio of 14%, which is significantly improved compared to the ratio at the end of last year, but it also includes reductions related to inventory provisions and write-down of receivables already mentioned.

Let me explain the net working capital. Inventories, including advanced payments to suppliers on inventories not yet received, were at EUR 357 million at the end of December compared to EUR 564 million at year-end '24. The decrease is related mainly to the inventory write-downs and to a smaller extent, scrapping of EUR 123 million as well as, and this is very important, operational decreases of physical inventories in our HBS division of about EUR 100 million. This has been offset by a buildup of inventories of about EUR 50 million related to projects in the pipeline for our Large Scale division.

Trade receivables at the end of '25 decreased despite higher revenues, driven by our ongoing measures to ensure timely customer payments and reduce overdues. Trade payables increased by EUR 12 million in '25, mainly related to timing of supplier payments. Advanced payments received from our customers slightly increased compared to '24 as we continue to maintain a strong project pipeline and a stable level of prepayments as part of our terms and conditions in the project businesses.

Net cash more than doubled to EUR 176 million at the end of December, mainly driven by the operative improvements and our solid operating profitability, while the negative one-timers are mostly noncash effect.

Now let's have a look at the group balance sheet on the right-hand side of this page. As I've already explained the changes in the net working capital position, I will now focus on the major changes in the other balance sheet positions.

Let's start with the changes in total cash and financial liabilities. As we need to ensure that we have sufficient cash for our business operations, we continue to use our revolving credit facility with a utilization of EUR 45 million per end of December. On the basis of our strong positive cash flow in '25, we were able to reduce our revolving credit facility position by EUR 100 million over the year. You will find this under financial liabilities in our balance sheet on the right-hand side of the page. Our total cash is EUR 222 million by end of '25.

Regarding the other balance sheet items, noncurrent assets have increased slightly as a result of an increase of our deferred tax assets on losses carried forward and the IFRS 16 asset additions in Q1 related to our new gigawatt factory building long-term lease, which more than offset the one-off impairments of intangible R&D assets and production assets. Other assets were stable with EUR 52 million.

Due to the negative result, shareholder equity decreased to EUR 366 million per end of December, leading to an equity ratio of 28% at year-end. Provisions slightly increased to EUR 237 million at the end of '25 as the majority of our '24 provisions for restructuring and supplier purchase obligations were consumed in '25, while new positions were made for the additional restructuring measures in late '25. Other liabilities increased to nearly EUR 500 million, mainly from the additional leasing liabilities for the new production facility. This is the corresponding liability to the IFRS 16 assets.

That concludes my explanation of the balance sheet. Let's now have a look at our summary of cash flows on the next slide.

Let me walk you through the miracle of having a highly negative net income of EUR 181 million to a highly positive free cash flow of EUR 110 million. In the reporting period, our cash flow from operating activities was plus EUR 156 million as compared to minus EUR 130 million in 2024. The strong turnaround in cash is driven by the optimization of net working capital and the contribution from the operating profit, which is unaffected by the significant one-off effects as these are nearly all noncash items.

These effects can be seen on the slide in the lines depreciation and amortization and noncash P&L effects and changes in provisions. In 2025, the finance operations, sales and business teams worked closer than ever to adopt processes to closely monitor purchasing volumes, follow up even more diligently on late customer payments and to enforce tight cost control. This has been a key driver for our successful cash turnaround in the year.

Net CapEx amounted to EUR 50 million, which is well below the level of '24 as we are managing our cash spending very closely and currently focusing investments mainly on our new Large Scale platform. Cash flows from divestments were EUR 16 million in 2025 coming from the sale of battery storage project companies of our Altenso subsidiary as well as from the sale of our coneva subsidiary. In 2024, we had slightly higher cash flows from divestments with the sale of a battery storage project company of our Altenso subsidiary also last year and from the sale of our elexon shares.

Considering our cash flows from operating and investing activities in total, our free cash flow adds up to a positive EUR 110 million and is much better compared to last year with minus EUR 184 million. Please note that we had cash outflows from the ongoing restructuring program from Q2 onwards in '25.

So let's move to the next page, order backlog. Looking at the left side of the slide, you see that our order backlog remained on the same level like '24 with over EUR 1.3 billion at the end of December '25 and product order backlog stood at EUR 1 billion. On the right-hand side of the page, you can see that our Large Scale product order backlog remained strong with EUR 975 million and HBS continues to maintain a lower level with EUR 43 million. For the group in total, order intake in Q4 for Large Scale was strong again with [ EUR 480 million ] and for HPS, EUR 66 million.

Now let me briefly give you an update on our restructuring and transformation program as well as some new developments in our Large Scale business. As you know, we presented in the 9 months call last year, we were all well on track with our restructuring program in the Home & Business divisions and will achieve our ambitious cost saving targets. However, restructuring the business and bringing down the cost base alone will not be sufficient to ensure competitiveness for HBS going forward. I would like, therefore, to take a look at the transformation journey that we have initiated.

We have already outlined the transformation along the whole value chain in our last call. I would now like to dive into some of our achievements during the last months. Our renewed and leaner portfolio is well underway. This includes the development of new solutions like the 3-phase hybrid solution that will be available in two power classes. We will introduce this solution to our customers at Intersolar in June this year. Already in January, we were able to introduce the new Sunny Tripower X 60, a new storage solution for the U.S. market will be available during '26. Overall, the portfolio is much more attuned to customer demand whilst maintaining a more competitive cost base.

As part of the advanced integrated solutions concept, SMA will focus on software development, outsourcing the hardware development of HBS solutions to partners. In order to serve the need for more competence in this area, we have successfully ramped up our operations at our Global Competence Center in India and recruited 30 FTEs already in '25, planning for additional 20 in 2026. Additionally, the transition of AIS has allowed us to reduce around 50 FTE in solution development in Germany.

Another cornerstone of the HBS transformation is leaner and more efficient supply chain management. We have, in the last month, established a new AIS-focused procurement setup, which also entails an optimization of our warehouse capacity worldwide. These changes enabled us to further reduce the personnel and supply chain management during the course of 2026.

The revised portfolio and our AIS concept naturally have a large impact on our production footprint. We have started to ramp up the assembly at our site in Krakow, first in line were products from the so-called universe line, such as the Sunny Boy Smart Energy as well as the Sunny Tripower X. And just this month, the production of the SMA eCharger has commenced in Krakow as well. Now we will gradually be introducing our solutions that are based on the AIS concept. The shift to Krakow has enabled us to significantly reduce our head count and production in Kassel.

One of the cornerstones of a transformed HBS division will be a much more focused sales and service organization that entails a strategic focus on Europe, service excellence and the USP and cost-efficient operations enabled by the MSSC. We have successfully withdrawn HBS sales businesses from the Australian, Latin American and Asian Pacific markets. We have significantly increased the number of FTEs and customer service in our MSSC in Poland, which will allow us to increase customer care whilst maintaining a lower customer base -- a lower cost base, obviously. We have also taken decisive steps to reduce the service partner costs and will continue to do so.

Overall, the transformation of HBS is in full swing, and we are confident that these steps will lead to a much more flexible and competitive division that will deliver stable growth and profitability in the midterm.

Whilst Large Scale & Project Solutions delivered a great result again in 2025, we are very aware of the fact that markets are also changing in this segment. There are two developments I would like to highlight today. First, we see a change in our customer base and the market for battery energy storage systems, the so-called BESS market that we are actively managing. And second, we are constantly looking into adjacent and new possible business fields that we can develop, building on our strong capabilities and market position. Two of those I would like to mention today.

Over the past months, we have observed a clear shift in the customer structure within the BESS market. Historically, our core customers were system integrators, engineering-driven players focused on turnkey delivery. While they remain important partners, growth is increasingly coming from a different segment, independent power producers and specialized energy storage system developers. These customers approach storage not as a component but as a core asset class. They are optimizing for long-term asset performance, revenue stacking and life cycle costs, not just upfront system pricing. This changes the conversation from CapEx to total value creation. As a result, we are seeing longer project development cycles, larger project sizes and more sophisticated procurement processes.

At the same time, these customers demand deeper integration capabilities, higher system intelligence and bankability across 15 to 20 years. SMA's technology, combined with our track record in grid integration and life cycle services, gives us an excellent position to serve these more complex value-focused customers. However, it also requires us to adopt particularly in how we engage commercially, support project development and structure long-term service offerings.

No one can ignore the fundamental shift that artificial intelligence has caused in many business operations and in our everyday lives. But apart from being a revolutionary force that will certainly shape the world we live in, AI is also posing great challenges to our electricity system. According to McKinsey, global demand for electricity from data centers alone will reach almost 40 gigawatts in 2023 (sic) [ 2030. ] So it is fair to say that they are a major driver for electrification.

New requirements from grid operators force data centers to actively participate with grid services like ride-through during voltage sags. Additionally, part of the data center battery backup systems can be done in a large-scale manner co-located to the data center. SMA's inverter system can solve these multifaceted requirements and enables the data center to be connected to the grid. And future generations of data centers will be powered directly with DC voltages of 800 volts and more.

This is something that we at SMA are very well prepared for. Highly efficient SiC technology, over 1 gigawatt of track record into comparable use cases like hydrogen and modular and flexible systems make us a perfect fit for these challenging use cases. We see the next generation of hybrid solutions, in particular, the new SMA DC-DC converter so-called Sunny Central FLEX DC-DC kit as a key enabler for the evolution of large-scale solar plus storage systems.

Market grid and financial pressures are making stand-alone solar increasingly difficult to finance, while solar plus storage hybrids are becoming the new standard for bankable projects. SMA's modular hybrid solution with grid forming capability combines solar generation and energy storage within an efficient DC coupling systems approach. We directly address the growing need for stability, flexibility and predictable power in high renewable grids.

For SMA, this creates value in three key areas: first, lower system costs by integrating advanced stability enhanced DC coupling into our product portfolio, external components can be eliminated, installation simplified and system complexity reduced, improving project economies at scale.

Second, higher reliability and stability. Grid forming functionality enables inertia, black start capability and advanced grid services, improving availability and increasing long-term energy yield. Third, greater operational flexibility as solar and storage become more tightly connected, intelligent DC-DC converters improve control of power flows, enabling optimized dispatch and new revenue opportunities.

This is more than a component upgrade. It is the next milestone in a holistic hybrid solution. It strengthens our role as a provider of integrated high-performance grid-forming hybrid systems that reduce costs, enhance performance and unlock additional value for our customers.

Now let's turn to the next page, risk and uncertainty in 2026. Before we have a look at our 2026 guidance, let me say a few words on external factors, which we have to consider this fiscal year.

Regarding the conflict in the Middle East, we are clearly dealing with a new and highly uncertain situation. At this stage, no one can reliably assess its duration or its concrete impact. On the one hand, it would also result in an acceleration of the expansion of solar as energy security becomes even more important. On the other hand, a prolonged conflict is something none of us want, and this could also create supply chain disruptions. That is why our restructuring and transformation efforts to make SMA more flexible and resilient continue to be important. And on the finance and business side, scenario planning remains very important for us.

The U.S. market remains the most important market for the Large Scale. However, since the decision of the Supreme Court in February that the new tariffs introduced in 2025 are unlawful, we have to cope with an additional uncertainty this year. In some cases, as we have shared with you in the past, we have already passed on tariffs to customers. In some cases, these have been invoiced but not yet paid or still need to be passed through.

Until the legal situation is fully clarified, there remains a risk that tariffs may have to be refunded to or cannot ultimately be passed on to customers. Any potential refunds from the U.S. authorities would legally accrue to the importer of record, but it is unclear when these refunds will happen. And given that tariffs were partially passed through to customers in certain cases, the final economic impact will depend on contractual agreements and the evolving legal framework. Our 2026 guidance considers this risk in the mid-double-digit million euro range as a potential negative impact on our top and bottom line.

Regarding the new additional 10% tariffs, which were imposed immediately after the Supreme Court ruling, we currently understand that they are legally valid and will remain in place.

FEOC regulations are increasingly emphasizing the role of trusted system technologies in the solar value chain. SMA is well positioned with the systems and solution portfolio given a high standard of data security.

Due to SMA's significant portion of revenue generated in the U.S. dollar, there is a high degree of dependency on movements of the euro-U.S. dollar exchange rate. While we actively manage this through natural hedging and selective financial hedging, movements in the U.S. dollar can still create fluctuations in revenue and margins. As explained earlier, this resulted in operating margin erosion for us in '25 compared to '24. For '26, we have anticipated a mid-double-digit amount, which can have a negative impact on our earnings this year. Exchange rate fluctuations such as strengthening of the U.S. dollar can, of course, also lead to a favorable effect.

Let's move on to Europe. The Industry Accelerator Act will drive local content in Europe. Once this act is implemented, we will benefit from it as SMA's current positioning already meets future requirements such as reliability, sustainability and cybersecurity.

The current draft of the EEG reform in Germany is only a leak, though the key points from the EEG draft were just recently confirmed by the Federal Ministry of Economic Affairs. In the past, however, EEG reforms ended differently than the first draft suggested. Therefore, also here, it's too early to assess every individual policy measure in detail. However, in conjunction with the proposed net Netzpaket, the discussions create uncertainty for the German energy market.

Australia is still a very attractive market for SMA. The regulatory environment remains highly supportive for solar. With the rapid increase of inverter-based generation, grid stability requirements are changing fundamentally. Grid forming technologies, particularly large-scale battery storage and hybrid PV plus storage systems are therefore becoming a critical building block for future power systems. Additionally, the Australian government decided to expand the Capacity Investment Scheme, which contains a strong policy push for storage and system integration. SMA is well positioned for these developments.

Now let's turn to the last page, our guidance for 2026. Given all these uncertainties, a broader range for our guidance 2026 was necessary to cover the various scenarios we currently consider. This translates into a sales range between EUR 1.475 billion and EUR 1.675 billion for the group and EUR 50 million to EUR 180 million for EBITDA.

The planning is based on our assessment that sales in the Large Scale & Project Solutions division will be slightly above the high level of the previous year as a result of the existing high order backlog and sustained demand. Sales in the Home & Business Solutions division are expected to be higher than the previous year. Following a significant drop demand in '25, we are forecasting that market growth in our core countries will be in the low single digits in '26. In addition, actions to fill gaps in the product portfolio are intended to regain market share.

Group EBITDA will see a significant positive impact in 2026 due to reductions in costs and increases in efficiency as part of the restructuring and transformation program, as explained during the call.

For Large Scale, we're expecting EBIT below the previous year as a result of higher costs necessary for operations, less capitalization of R&D costs and potential currency effects. A significant part of the cost increase reflects investments in expanding our service operations. As revenues continue to grow, we are strengthening the service organization within Large Scale to maintain our high service standards, including targeted measures to further improve response times.

For HBS, the Managing Board is once again expecting negative earnings in 2026, but with a significant improvement over the previous year due to the ongoing transformation process. The Management Board does not anticipate any further significant onetime items. Despite the different headwinds, management is confident that we are on the right track and 2026 will be a much better year for SMA.

Last but not least, a note on our upcoming events. First quarter financial results will be published on May 13, combined with an analyst and investor call.

With this, I conclude the presentation and happy to take your questions.

[Operator Instructions] The first question comes from Constantin Hesse from Jefferies.

First one for me, Kaveh, is, it goes without saying the guidance range this year is abnormally high. Obviously, quite uncertain environment out there, especially around the -- this tariff situation. Can you just give us an idea on what exactly is the base case for this U.S. outcome, which you would believe is the most likely outcome? Because obviously, we're talking about, I think you said a mid-double-digit million figure, so EUR 40 million, EUR 50 million. Is that kind of the magnitude that you're thinking of here?

Yes, that's a magnitude. And that's exactly the problem. I can't right now say what is the most likely outcome. Otherwise, we would have narrowed obviously the range more.

The thing is either the U.S. government pays everything back, then we are in a very good position, or they don't, and we have outstanding receivables, half of that roughly, what I just mentioned, that we would need to write off, right? So that's a pretty difficult spot to be in. Other businesses, like B2C businesses, what they did is they had to swallow it fully. We had a change in law clauses where we could pass them on, but the basis was apparently unlawful. So we have now to go back and find out what we can do. So that's an ongoing process.

And yes, I would say the U.S. team and lawyers are I will not say 100% sure, but they say that there's a good likelihood that the U.S. government might pay back the whole tariff, but the timing is not clear. And obviously, we have now to walk through the whole refund process and see where we are. And yes, it's just a timing problem that we just don't know now yet. But of course, in the course of the next weeks, hopefully, there is more clarity.

Okay. So maybe just -- okay, so I mean you said writing down half of that. So that would be EUR 20 million to EUR 25 million. That still doesn't explain this huge range. Can you -- and then maybe talk a little bit about the assumptions that you have at the top end and at the low end. Just trying to get a feel for what mainly explains such a massive range.

Yes. I think if you look at division by division, if you look at the HBS business, you could -- and then that's the difficulty. The question is what is happening with the different customer groups. So if you say the Middle East crisis is now leading to a place where customers become more cautious. They want to have more energy independence. They go more into home solutions because the gas prices go up, they want an electric vehicle. This could lead to a push for us. That's on the top side of things.

There could also be a scenario where this crisis ends quite fast. Obviously, that's what everyone hopes. And then we have the uncertainty with the German government, where we're not really clear what the impact will be on households if the EEG goes down. So this would then obviously reduce again the baseline that we're looking at in terms of revenue growth for the revenues in the HBS business, right? And then that's just -- we haven't seen this kind of uncertainty, I would say, in the past 2 or 3 years. So that's on the upper and lower range for the HBS business.

And for the Large Scale business, it's more around the tariff situation, for example, in the U.S. So how does it stabilize? If we stick with the 10% that is currently the ruling and the new ruling is okay, then of course, we are confident that we will be more on the higher end of the revenue range, obviously. If for whatever reason, the tariffs will change again because of any political decisions that I can't foresee now, this would have again an impact. So these are, I would say, the big swingers for the two divisions unless -- operationally, I would say we're doing fine.

Okay. Fair enough. Lastly, just -- I mean, obviously, this is now the exciting part. I think after this Middle Eastern conflict, we have a situation now where Europe is probably going to start -- I mean, the second crisis in 4 years, I think there's a high likelihood that Europe will probably start putting renewables at the forefront again. And obviously, storage is becoming a major focus point given grid -- given intermittency sources into the grid. So SMA is probably one of the only manufacturers in Europe with BESS manufacturing capability.

So can you give us a bit of an update on what exactly you manufacture in Europe? Where do you source the components for the BESS? And maybe give us a little bit of an idea of the demand dynamics and the competitive environment just because I think this is really key to the narrative at this point.

Yes. I think -- I mean, obviously, the -- from a production perspective, the inverter itself for us in the whole value chain doesn't make a difference if it's an inverter built for PV applications or for a storage application or for a co-location application, right? So in terms of the supply and the whole value chain, that's basically the same setup, right? So we are there quite well positioned.

When it comes to the capabilities and the technology advantages, and that was basically what I was trying to say in the earlier part, we see ourselves as one of the key forces when it comes to being capable of grid forming capabilities and reaction times. And this is why we think that we are very well positioned.

When it comes to the whole setup, you know that we have moved basically -- we have built up together with a partner, let's say, integration capabilities in the U.S. and the [indiscernible] that goes into the whole station. They will be sourced in the future in the U.S. as well for the U.S. market. Otherwise, we source them in Europe. And the switchgears that goes into that, they are mostly German-based as well. So I think we are here quite western -- have quite a western setup, if that's answering your question.

The next question comes from Guido Hoymann from Metzler.

A number of questions. First one is the ASPs. So the average selling price fell sharply in Q4. What is the reason for that? Shall we do it one by one? I think that's best.

Let's do one by one. Do you mean the total ASP or for a specific segment?

No, total.

No, I think the total is obviously driven by the Large Scale swings. And as you know, they are project-based, right? So this is not a general trend that you say that from a drop in Q4, this will continue in a certain direction. Every project is priced differently. And obviously, we try to maintain the margins. On the other hand, we work a lot on material costs and sometimes we pass them on to customers. So that's maybe the biggest driver there. So it's nothing, I would say, special in terms of trend.

Okay. Okay. Then on Large Scale U.S. So did the -- on current trading, actually, so did the demand in the U.S. hold up in Q1 so far? Or are there any signs of how the ordering behavior of U.S. customers might change when the deadline for the Physical Work Test, I think is the 4th of July, will end. So do you still have -- or do you have a feeling that we have some prebuying? Or do you perceive the market behavior or participants' behavior to be sort of normal?

No, I think -- no, we don't see any change. First of all, Q1 looks also good, I would say. We don't see any major shifts. We are pretty much in what we expected. In terms of behavior, I think we tried to mention that a couple of times when it comes to safe harboring, I think that's where you're going. When we talk to customers, we realize that mostly they don't safe harbor through the inverters, but through other means. And that's why we don't see an uplift through safe harboring and we don't see a drop. We are just basically brought into the game when the customer is in a position to continue their projects. So that's a stable development in current trading. It looks good.

And I think you addressed that already, but still in HBS. So if business wise, would the Polish -- the subsidies for rooftop PV, how big could the impact be on your business? Or in other words, how relevant is the German market for HBS?

So the German HBS market is very relevant for us. That's why we look into that. Now comes a bit -- if you look -- and we did some model calculations, if you look at it from a customer perspective, from a household perspective, if you have -- in the past, you had just a PV rooftop and a PV inverter and most of the electricity you consume directly, right? Or if you didn't, you would pass it on and you would get up to, let's say, EUR 500, EUR 600 a year as kind of subsidy. And over 10 years, that's EUR 5,000 to EUR 6,000, which drives the business case, right?

So if you compare to this being gone, it would have a big impact. However, the new systems that are currently sold are more linked to hybrid inverters and the battery storage. So people consume actually most of the electricity themselves, either through direct usage or using the battery. So what we estimated is something between EUR 100 and EUR 150 that they might lose on an annual basis. So then it's a loss of EUR 1,000 to EUR 1,500, right, compared to the previous cases.

So our estimate is it will not have a positive impact if subsidies are gone, but we don't expect a dramatic drop. What it does is it creates uncertainty amongst the people, and this is maybe the worst part. If you look at it from an economic perspective, there would be an impact, and I mentioned that, but it would not be a -- probably not a dramatic impact.

[Operator Instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Kaveh Rouhi for any closing remarks.

Thank you again for your interest, and please do not hesitate to contact us in case you have any further questions. So thank you all for your time. Goodbye, and have a great day.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the analyst and investor presentation quarterly statement January to September 2025. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Kaveh Rouhi, CFO. Please go ahead, sir.

Thank you, operator, and welcome, everyone. I very much appreciate that you are taking the time for this investor and analyst call on our 9 months 2025 results. This conference call is scheduled for up to 60 minutes and will be recorded. After my management presentation, I will be happy to answer your questions. Today's presentation is available on our Investor Relations website. The replay will also be available on this website shortly.

Our agenda for today, first, I will give a review of our 9 months [indiscernible] our presence in the home segment in the U.S. is currently being evaluated. Excellent service will be our USP in the future, enabled by cost-efficient operations via our [ multi-shared ] service center in Poland.

In general, it means that we will use our global footprint even stronger going forward while strategically focusing more on our core market -- on our core home market in Europe. In total, the program will mean a reduction of about 300 FTEs in Germany and another 50 in noncore markets, while building up about 200 FTEs, mainly in Poland and India.

Now let's talk about large scale. Our large scale and project solutions continues to operate in a highly dynamic global market that is driven by a growing demand for grid stability solutions. SMA is a recognized expert and leader in this field, which puts us in an excellent position to seize this momentum.

One example for the successful inauguration of the first utility-scale battery energy storage system with grid forming technology in continental Europe, in [indiscernible] Germany. We are proud to have delivered 7 medium voltage power stations with our Sunny Central Storage [ UP ] battery inverters and the SMA Power Plant Manager.

Altenso also continues to grow and realize challenging projects, as you can see in our second example here. In September, Altenso commissioned a hydrogen plant conversion unit, Hydrogen Dune, a pioneering green hydrogen plant located on the coast of Namibia. The special feature here, this plant is the first ever to operate 100% off the grid and an intelligent energy management system coordinates the optimal time for hydrogen production.

Large scale has delivered the first Sunny Central FLEX and a Power Plant Manager in the U.S. at the end of July, manifesting our position as a global player in this field. The Sunny Central FLEX is an innovative modular power plant solution that was just last year recognized by pv magazine with Top Innovation Award.

The award recognizes the ability of the Sunny Central FLEX to facilitate the integration of PV, battery, and hydrogen applications into large-scale projects, making it possible to design, build, and adapt for new and exciting power plant use cases.

Now let's turn to the last page, our guidance for 2025. As said several times, the market environment for HBS is still very difficult due to macroeconomic deterioration and the declining expansion rates in the residential and commercial sectors in most key markets. Thus 2025 sales are expected to be well below the previous year's level for this division.

The large scale and project solutions division is planning sales slightly above the high level of the previous year. Group EBITDA and EBIT will be negatively impacted by lower sales and the resulting lower fixed cost integration in HBS as well as one-offs described earlier.

Due to the significant further deterioration in Q3 of the anticipated sales performance for '25 and the following years in HBS, we had to lower our guidance range on September 1st to EUR 1.45 million to EUR 1.5 million for sales and minus EUR 80 million to minus EUR 30 million of EBITDA.

Of the expected total one-offs of about EUR 250 million to EUR 265 million, EUR 45 million were recognized in Q2 and EUR 159 million in Q3. Please note that further provisions for restructuring measures will be added in Q4.

Last but not least, a note on our upcoming events. Full year 2025 financial results will be published on March 26 next year, combined with an analyst and investor call. With this, I conclude the presentation. And of course, I'm happy to take your questions.

[Operator Instructions] Our first question comes from Lasse Stueben from Berenberg.

Just a question on guidance for this year. In terms of revenues, it looks pretty conservative for the fourth quarter. So I'm just wondering how do we square that performance, particularly in large scale in what's usually a stronger Q4 than Q3? So I'm just wondering what the effects are there.

And then the second question would be, you're profitable on EBIT in C&I in Q3. Is that something we should expect going forward as well? Or is there more one-offs that we should be expecting in Q4 and also maybe in 2026?

Thank you for the question, Lasse. Let's start with the Q4 revenue. So you're right, in the last 2 years, Q4 was always the strongest quarter in terms of revenues. This year, we don't expect that, to be honest. I think Q3 was very, very good. And hence, Q4 will be a bit lower. And that's why we were confident with the range that we kind of laid out, to answer that question. And it's depending on when the projects are commissioned, you always have the topic that if a large project at the end of December, is commissioned end of December, then it's in year, and if it floats to the next year, it can be a change of, let's say, EUR 20 million, EUR 30 million, EUR 40 million. That's why it's always a bit tricky to land, let's say, the large scale revenues exactly. But in general terms, Q4 will be a bit lower than Q3 and the numbers will add up. First question.

Second question, I'm not sure I got it. I think you mentioned that C&I has a positive EBIT. I'm not so sure about that. Even including -- excluding one-offs, EBIT is negative of that division. So not sure if I got your question right. What if I've answered it?

Yes. I mean, if I look into the Q3 report this year and I go into EBIT, sort of in operating profit terms at least, you had, I think, EUR 10 million positive, unless I'm reading it wrong.

Yes. Let's double check. So we had -- I mean, as shown on Page 6 of the presentation, we had a minus EUR 322 million, thereof EUR 200 million one-offs and the other 100 -- minus EUR 112 million along the 9 months. So even operationally, they were loss-making. So maybe you have to check the report, how you read it. But no, they were not operationally profitable.

The next question comes from Constantin Hesse from Jefferies.

All right. Just on my side, I'd like to start with order intake because clearly blowout quarter in Q4 in terms of large scale. What I -- I do apologize if you had commented on it because I was at a separate call because I have 2 results at the same time. So I would like to just understand, in terms of the momentum that you saw in large scale in Q3, how much of that was related to delays that you saw in Q2? And how should we think about this going forward? I mean, is this something that you think is sustainable? Or how should we think about the Q4 level of orders and into next year?

Thanks, Constantin, and glad you made it to the right call. On the Q3 order intakes, they were higher than what we expect in Q4, to start with that. We had a really good Q3. We had one spike in EMEA, but this will not -- which is a huge project. This will not come again in Q4.

As I mentioned, U.S. is getting back to normal levels. I think that's important. And the rest will be good. So we think the order intake will be, yes, something -- at least more than EUR 300 million up to EUR 400 million, depending again on timing of the project. So hence, it will be lower than Q3, but it will be on a good level in Q4.

Is that group or is that large scale only?

Basically, that's the same these days, right? So that's -- because if you see at our order backlog of HBS, it's pretty much stable because what comes in, we basically convert to revenue. So how you want to read it, but this is mostly large scale.

So going into '26, this U.S. momentum, you expect that to continue. Yes.

Yes.

I mean, what -- I mean, just trying to figure out, what's the key driver here? Because if I look at the current outlook for U.S., it looks relatively -- I mean, it looks obviously less positive around permitting, there are some issues. In Europe, you clearly have a lot more competition. So what's driving this in both regions?

I think the market is there. Let's start with that. As you know, we are operating in batteries and in PV markets, right? It's nearly 50-50 in the regions. And we see that the market is there. We have the right products. We have a good market positioning. We have good sales. So I think we are not planning to gain market shares or strongly outperform competition. It's more around keeping the momentum.

And with all the USPs we have, which is the grid forming capabilities, the lifetime of our products, the quality that we have out there, I think we can be proud of what the team is doing there. And so this is giving us confidence going forward.

You said something interesting. I think you said storage versus solar, it's 50-50 now. So is that the level of storage that you're getting in, in terms of order intake?

Yes. Yes, roughly.

Going into -- Kaveh, so one thing I'm going to ask again, same question that I asked in Q2. Around the building blocks, or should I rather say, how should we think about the development of the bottom line for HBS into next year? Because I think it's been relatively tough to get a clear cut view. I mean, if I add back the one-offs this year and I assume no growth, I'm assuming a loss of about EUR 100 million. But then you obviously have some savings initiatives in place. You said EUR 150 million to EUR 200 million into the end of '26. So if I look at a potential breakeven level for HBS, would that be below EUR 250 million or below EUR 300 million? How should we think about this potential new breakeven level?

Yes. Yes, that's a good one. I think we have -- we have lots of things in movement, right? And I talked about the value chain and all the adaptations that we make. And I think the breakeven that we need depends a bit, obviously, on the product mix and the margins of the product. So EUR 300 million sales can be very, very profitable. It can also be [indiscernible] with the same profitability of, let's say, EUR 350 million or EUR 360 million revenues, right?

So depending on what you assume there in terms of product mix and profitability, the breakeven will never be below EUR 300 million. We will at least need a EUR 300 million to get to breakeven and also even higher depending on how much price deterioration and pressure remains in the market. So I would say, currently looking, and it's a wide range, I know that, forgive me for this, but it's between EUR 300 million to EUR 400 million actually.

Okay. EUR 300 million and EUR 400 million in order to -- okay, fine -- to get...

To get to breakeven. And we will not be breakeven next year, obviously not, because there's still much going on.

So -- and if I look at the profitability for large scale, you're probably going to close this year above 20%. Is that a level that you'd expect going forward? Or do you anticipate to start investing a bit more in R&D or whatever? And could there potentially be any headwinds on profitability there on the margin, right?

Yes, yes. I think there will be 2 trends that will impact the profitability going forward. The one trend is, as you just mentioned, we will need to invest a bit more into this business. We've been a bit prudent last year and also, let's say, until Q2 this year to basically keep the money together and to help with all the other topics. We will now spend more next year for large scale to increase our competitiveness, right? So this will impact profitability to a certain extent.

And the other thing, and I know it's always a bit tricky, but it's the FX rates. So we see that expectations next year for the U.S. dollar and euro rate that they will impact our profitability as well. And as we produce in Germany mostly and export it to the U.S., we will get a hit. And then we will say, well, why don't you produce there? So if you do that there, we will have the tariffs and everything coming in. And then things are again more expensive and then you pass it on, so you have a similar effect. So we've done different scenarios. And overall, we will not be able to keep the 20%.

So we should be thinking about something right around high double digit, high-teens?

Yes. I mean, we're not talking about the EBIT margin for next year right now, right? So I think we will give the guidance for next year. It will be lower than 20%, but the group will be positive, so all good.

And then just lastly, just wondering if Florian said anything around large scale in the U.S. I mean, I think it's interesting to see what could potentially be a very bullish market for you, right? Because if we assume that FEOC comes out in a rather stringent way, that would, of course, potentially limit some gross business in the U.S. So are you seeing any increased interest, I guess, from U.S. developers for SMA?

And then I'm not sure if you've seen that Nextracker, or now they're called Nextpower, they just launched a utility inverter as well. So just wondering if you had some feedback on that yet.

Yes. The last one just came in this morning. To be honest, I didn't have time to build an opinion myself, so I will not comment on that one. Sorry for that.

When it comes to upsides due to the FEOC regulations in the U.S., I think it's fair to say that if you are in this regulated markets, you can have huge swings built on new incentives, tariffs in, tariffs out, protection here, new rules there. And then when you, let's say, build your business around that, you're very prone to be dependent on what actually happens in the end.

And you can never be sure that the next guy or even the same guy changes the regulation again. And hence, we are kind of ignoring that. As long as it's not harming us, we are not planning with any upsides. But of course, we will welcome every customer that decides not to go ahead with Chinese and once a European and a premium German venture -- producer, and we will, of course, serve them, right? But for our planning, we are not considering that as a realistic case. It could be an upside, but that's not what we will put in our budget.

The next question comes from Guido Hoymann from Metzler.

I've got 3 or 4 questions, and maybe we can go through them one by one. The first one would be, again, on large scale. Am I right, or maybe is that a reasonable assumption that the deadline for switching from the 5% safe harbor rule to the so-called physical work test, I think that was the 2nd of September? So that triggered a lot of prebuying there. So did you observe particularly high orders before that, early September? And how did the, yes, order development then -- yes, develop over the rest of the quarter in the U.S.? And do you think that given that there are other deadlines like July '26 for those projects, which passed this physical work test and then year-end '27 for those projects, which did not meet any deadlines. So do you expect all these deadlines to continue to trigger high demand in the U.S. until then in your large scale business? That would be the first one.

Okay. Let's do this one first. Hello, Guido. So the safe harbor rule. So no, we don't see an impact, to be honest, in our business. Neither has there been an increase or a decrease. As mentioned, our order intake was good, a little bit of catch-up because Q2 was very low. And we have lots of discussions with customers. And the question is how do they safe harbor. And they don't have to safe harbor buying inverters. They can also, as you said, do the safe harboring by the start of physical work. And hence, many of them are doing that, and we will -- we don't see a drop in our pipeline at a certain point going forward because they have now safe harbor and then there's nothing else after that.

Plus, what's also important, let's not forget, these rules apply only for PV only, not for batteries, which is again half of the U.S. business. So it's basically a half of a half of our business that's impacted by those rules anyway. And hence, I think we are pretty prudent here with how we plan going forward.

And the second one would be on your status to increase the local content in the U.S. and to avoid or to reduce less tariffs. Can you maybe give me a brief update on the status there?

Sure. I think the short answer is we're on track. The longer answer would be that, as you know, the MVPS stations, which have the transformers included, they are going to be produced in the U.S. by end of this year, and the integration will start in January. And the whole integration and the ramp-up of the MVPS stations is scheduled for the second half. We do those 2 things with our partners, and they report they're well on track.

Then maybe also 2 quick ones. The restructuring costs you're planning for Q4, did you quantify them or can you do that, please?

Yes, sure. I think the biggest chunk of the still to be booked one-offs for Q4 is the amount of severance payments that we will need to put aside for the labor topics, and we estimate something between EUR 30 million and EUR 40 million. And that is roughly what we had put into the guidance.

And the last one, again, on HBS. Obviously, we're coming now a relatively small player. It is a highly price-sensitive segment. So do you see it to be viable or maybe to get an exit for this question? Do you want to focus on specific niches? EV charger, could be something else. Or do you still want to address? Or do you just want to, let's say, focus in a geographical perspective, but not in the range of products you're selling?

Yes. I think we do focus, but it doesn't mean that we will just sell one product. And I think I tried to lay it out, but let me recap a bit. So we will reduce the global footprint. And as I've learned, these -- the time since I'm with SMA that an inverter is not the same product depending on the countries that is operated due to grid regulations and all these kind of things, cable width, and whatnot. So the variety of our products will be lower because we will have less countries to serve. So here, we will reduce the amount of complexity, right? That's one topic.

The second topic is that also the, let's say, the product variety in terms of how many different PV only we have, or hybrid inverters will also be reduced. But -- and this is very important for the core markets that we will target, we will make sure that we will deliver the full solution. And the full solution these days is in hybrid inverter together with batteries, together with energy management, and together with the right software. And so -- and an EV charger, of course, if you have a car. So what we make sure for the home market is we can give to these core markets a complete portfolio, but not having varieties of it in many regions, which will then [indiscernible] to serve. That's kind of making sense?

Yes. Okay. Very helpful.

The next question comes from Jeff Osborne from TD Cowen.

Just a couple of questions on my side. I was wondering if you could articulate what the pricing changes were either sequentially or year-on-year. I think you had alluded to immense pricing pressure in your statement for the restructuring a few weeks ago.

Yes. I think that's a tough one, right, because it depends product by product. I know that's an easy answer. I think, if you just look at -- and we did the analysis just recently. When you look, what happened H1 '24 between this point of time and H1 '25 in the home market, especially, I think we see price declines between 5% to 15% on average. And of course, this hits your profitability if you can't be flexible with your production. So that's what we call immense in 1 year.

And I'm just curious, after the Chinese policy changed June 30, if things got worse in the third quarter as it relates to home and small commercial?

Not really, no.

Good to hear. And then I just wanted to understand the factory realignment with HBS. It sounds like the majority of the design work will be done in India and manufactured in Poland, if I heard you right. What was the trade-off of possibly using contract manufacturing in eastern Europe or other locations relative to leveraging your own facility, which I think historically made subassemblies and equipment for the utility scale product, if I'm not mistaken?

I think, for us, it's important that we own the product, that we own the development, and that the software where the heart of the product is compared to maybe 20 years ago where the hardware was a key differentiator. So we want to make sure that this is owned by us and owned by our own development. And we go to India where we have -- we already have established a hub, very good developers and a strong access to the local market, local universities. So that's, I think, the key driver here for the software part.

And when it comes to assembly, obviously, there is -- yes, labor arbitrage is one topic. The flexibility is the second topic, and we have experience there. So I think, overall, the -- let's say, the Polish entity is used to do manufacturing, and hence, we will leverage that. Otherwise, it would be a waste of capabilities and good people.

Maybe just my last question is, if I heard you right, you're reevaluating the U.S. and Australia home market, but you have a sizable presence in the U.S. commercial market historically. I know you're working with Create Energy on the utility scale side. But what's your plans in defending market share as it relates to the commercial segment? It would seem you're poised to lose share given that Chint is likely booted out given FEOC. I think they're the market leader, you're #2 historically. Most of the commercial folks are going to want a U.S.-manufactured product. So do you have plans for manufacturing commercial inverters in America? Or are you willing to seed that market share?

I mean, currently, the setup is, as you said, we are for the commercial part, right? We produce in SMA in Kassel and we ship it over there. And we have no indications that this is going to deteriorate. When I talked about removing ourselves from potential U.S. and Australia, that's more the home part, not exactly the commercial. So no -- so yes, no concrete plans now to do a localization of that, but could come later.

The next question comes from Peter Testa from One Investments.

I was wondering, on the large scale side, could you just give a sense as to whether the value-added margin is particularly different between battery and PV, whether you see a particular difference in value-add margin? I'll go one at a time. Stop there.

I mean, I'm not a technical guy, but to be honest, my understanding is in terms of production costs, they are pretty similar. And so I don't recall a big difference in the margins.

So margin mix isn't a factor. Okay. Fine.

Yes.

And then on the Chinese side in terms of competition, you said there had not been any particular difference in pricing at this stage, I guess, in the HBS part. Would you have any particular concerns about pricing in Europe and APAC, in particular, from the changes in Chinese market situation becoming exporter going forward? Or are you not seeing that?

No, I think, when we were at Intersolar, I heard a person from Sungrow saying that all the low-tier Chinese players are ruining the market with their pricing, right? And this was referring to China itself, which was, for me, an astonishing statement, to be honest, coming from Sungrow. So overall, I think the price pressure will mostly hit the Chinese market because it's big and they are cannibalizing themselves a lot. And I don't see an additional pressure on Europe due to that at this stage.

And you gave a number between EUR 300 million and EUR 400 million for breakeven on the HBS business revenue. Is that for 2026 or post all the restructuring?

No, that's post restructuring. That's post restructuring. So as I said, we will not be breakeven next year.

Yes. I'm just wondering what -- whether that sales level is after all the savings or midway?

No.

And then the last thing is just on -- with the write-offs that have happened in various different levels, both in projects, depreciation, also inventory. When you think about the impact of that on the 2026 profit, i.e., lower depreciation, lower amortization and maybe what happens to the written-off inventory, is there any sense on how that changes the, say, profit base just from the impact of all the write-offs? I don't mean by having no write-offs, I mean, the run rate.

Yes, yes. So no, it should not impact the run rate because the rules are we can only write off things that we're not going to use next year. So I can't plan now that we will have better margins because I'm going to use them again. So the write-offs are real write-offs.

Obviously, we have still the material. We don't plan in the next years, so to say, to use it. However, we need to come up with a plan in terms of how to deal with this amount of materials. And then it might be that at one point, we find good solutions for that, and this could be an uplift, but it will be a onetime uplift and not a run rate [indiscernible].

So you'd highlight that related to the inventory. But I guess you have lower depreciation, lower amortization because of the write-offs next year.

Yes, but it's not material in that sense.

Material? Fine. Okay.

The next question comes from Constantin Hesse from Jefferies.

Kaveh, a quick follow-up. Just on cash, I mean, your balance sheet is looking quite good again. And I'm just wondering, is there any M&A potential here that you could be keen or focused on, be it a segment M&A, be it a regional M&A, anything interesting? Or is this even a focus potentially? Or will you just continue to focus on making sure that you continue building up the balance sheet?

No. I think, even if we had an M&A plan, we would not talk about it here, right, to be honest.

[Operator Instructions] We have a follow-up question from Peter Testa from One Investments.

Just on the large scale side, could you talk a bit about 2 things on the backlog and the pipeline? On the backlog, if you look at phasing in terms of how that phases in time, the EUR 900 million -- EUR 902 million, how does that phase out in time by either quarter or years, just to give a sense? I'll ask about the pipeline.

Sure. So the -- it depends a bit where you have your backlog. So if you have projects in Europe, usually, they materialize up to 6 months -- around 6 months, I would say, 6 to 9 months, depending a bit. And if you have projects in the U.S., they can take up to 12 months because you have to produce here, bring it to Italy, ship it over, bring it then from the coast to the -- so it's usually the, let's say, transport times and it's the time that you need for supply for the MVPS station itself, the medium voltage part. So these are basically the 2 things that are hindering a faster turnaround. And hence, you have something between 6 to 12 months depending on the project.

And I guess, in Australia, it would be more like U.S.?

Exactly.

And then on the pipeline, can you give a sense, please, in terms of what you're seeing in project behavior -- tendering behavior, i.e., speed at which decisions are made, the speed at which permitting is granted? And just so we can kind of understand what you think about pipeline flow and what it means, therefore, for orders coming to delivery, arriving, and booking of revenue?

I think, in Q2, if you had asked me this, we were very -- yes, we were very cautiously looking at that because we saw that the turnaround times were a bit slower. I would say we have gone to normal levels. So when I remember our business discussions with the teams, nothing specific, to be honest. So it looks normal.

And the scale of the pipeline, any different geographic message?

No, all good. As I said, so I think we will end the year with a similar backlog as last year. That's at least what we expect now to happen in the next months. And we will go with a good backlog into next year. And the pipeline itself is on a similar level. So we are -- actually, I'm cautious here given the recent quarters, but I'm actually quite optimistic. So that looks good from our side.

[Operator Instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Kaveh Rouhi for his closing remarks.

Yes. Thank you, everyone, again, for your interest. And of course, please do not hesitate to contact us in case you have any further questions. So goodbye, and have a great day.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.