Ladies and gentlemen, welcome to the Analyst and Investor Presentation Quarterly Statement January to September 2025. I am Sandra, the Chorus Call operator. I would like to remind you that all participants are in listen-only mode and the conference is being recorded. The presentation will be followed by a Q and A session. You can register for questions at any time by pressing N1 on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast at this time. It is my pleasure to hand over to Ravi Rao, 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, and our presence in the home segment in the U.S. is currently being evaluated. Excellent service will be our USP in the future and enabled by cost-efficient operations via our multi-share solar cell 10 point. 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 non-core markets while building up about 200 FTEs mainly in Poland and India. Now let's talk about large scale. Our Large Scale & 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 Fürth near Kassel, Germany. We are proud to have delivered seven 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. 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 TV 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 & 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 segregation. HBS as well as one-off described earlier. Due to the significant further deterioration in Q3 of the anticipated sales performance for 2025 and the following years in HBS, we had to lower our guidance range on September 1 to EUR 1.45 billion-EUR 1.5 billion for sales and minus EUR 80 million to minus EUR 30 million of EBITDA. Of the expected total one-offs of about EUR 215 million-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 26th 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. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. Our first question comes from Lasse Stueben from Berenberg. Please go ahead. Hi, good afternoon. 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 and what's usually a stronger Q4 than Q3. I'm just wondering what the effects are there. The second question would be, you're profitable on EBIT in C And 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. Thank you for the question, Lasse. Let's start with the Q4 revenues. 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. Q4 will be a bit lower. That is why we were confident with the range that we kind of laid out to answer that question. It is 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 is in year and if it floats to the next year, it can be a change of, let us say, EUR 20 million, EUR 30 million, EUR 40 million. That is why it is always a bit tricky to land, let us say, the large scale revenues exactly. In general terms, Q4 will be a bit lower than Q3 and numbers will add up. First question. Second question, I am not sure I got it. I think you mentioned that C&I has a positive EBIT. I am 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 or if I've answered it. Yeah, 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. Yeah, let's double check. So we had, I mean as shown on page six of the presentation, we had a EUR -322 million. There are EUR 200 million one-offs and the other EUR 100 million, EUR -112 million along the 9 months. So even operationally they were loss making. So maybe we have to check the report how you read it. But no, they were not operationally profitable. Okay, thanks. Thanks. Good. The next question comes from Konstantin Hesse from Jefferies. Please go ahead. Thank you. Hi, Kaveh. 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. I do apologize if you commented on, because I was on my separate call because I have two results at the same time. 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? 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. Thanks, Konstantin, 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. This will not—it's a huge project. This will not come again in Q4. As I mentioned, US is getting back to normal levels. I think that's important, and the rest will be good. We think the order intake will be something at least more than EUR 300 million, up to EUR 400 million, depending again on timing of the project. 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. 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. How you want to read it. This is mostly large scale. Okay, interesting. Going into 2026, this U.S. momentum, you expect that to continue? Yeah, I mean, what's—I mean, just trying to figure out what's the key driver here. Because if I look at the current outlook for us, 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. 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 really 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. I think we are not planning to gain market shares or strongly outperform competition. It's more around keeping the momentum. 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. This is giving us confidence going forward. You said something interesting. I think you said storage versus solar is 50-50 now. Is that the level of storage that you're getting in in terms of order intake? Yeah, roughly. Interesting. Okay. 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-EUR 200 million into the end of 2026. 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? Yeah, yeah, that's a good one. I think we have lots of things in movement. Right. I talked about the value chain and other adaptations that we make. I think the breakeven that we need depends a bit obviously on the product mix and the margins of the product. EUR 300 million sales can be very, very profitable. It can also be afforded with the same profitability of, let's say, EUR 350 million or EUR 360 million revenues. Right. 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 EUR 300 million to get to breakeven and also even higher depending on how much price deterioration and pressure remains in the market. 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-EUR 400 million next year. Okay, 300-400 in order to. Okay, fine. To get to breakeven. We will not be breakeven next year. Obviously not. Because there's still much going on. Yeah, fair enough. Fine. 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? Could there potentially be any headwinds on profitability there on the margin? Right, yeah. I think there will be two 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. This will impact profitability to a certain extent. The other thing, and I know it's always a bit tricky, but it's 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. As we produce in Germany mostly and export to the U.S. We will get a hit and then we will say, well why do not you produce there? If you do that there, we will have the tariffs on everything coming in and then things are again more expensive and then you pass it on so you have a similar effect. We have done different scenarios and overall we will not be able to keep the 20%. Okay, understood. So we should be thinking about something rather around high to high double digit high teens. Yeah, I mean we're not talking about the EBIT margin for next year right now. Right? I think we will give the guidance for next year. It will be lower than 20% but the group will be positive. All good. Okay, fine. Then just lastly, just wondering if Florian said anything around large scale in the US. I mean, I think it's interesting to see, you know, what could potentially be a very bullish market for you. Right. Because if we assume that FIAT comes out in a rather stringent way, that would of course potentially limit Sungrow's business in the US. Are you seeing any increased interest, I guess, from U.S. developers for SMA? Then not sure if you've seen that Nextpower, they just launched a utility inverter as well. Just wondering if you had some feedback on that yet. Thanks. Yes, the last one just came in this morning. To be honest, I did not 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 FIORC regulations in the U.S., I think it is fair to say that if you are in this regulated market you can have huge swings built on new incentives, tariffs in, tariffs out, protection here, new rules there. When you, let's say, build your business around that, you are very prone to be dependent on what actually happens in the end. You can never be sure that the next guy or even the same guy changes the relation again. Hence, we are kind of ignoring that. As long as it is not harming us, we are not planning with any upsides. Of course we will welcome every customer that decides not to go ahead with Chinese and wants a European and a premium German inverter producer and we will of course serve them right. 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. Great, thank you so much. The next question comes from Guido Hoymann from Metzler. Please go ahead. Yeah, good afternoon. Three or four questions and maybe we can go through them one by one. The first one would be again on a large scale, am I right? Or maybe is that a reasonable assumption to take this. You know 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. That triggered a lot of pre-buying there. Did you observe, you know, particularly high orders before that early September and how did the order development. Over the r est 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 2027 for those projects which did not meet any deadlines, 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. Hi Guido. The safe harbor rule. 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 safe harboring by the start of physical work and hence many of them are doing that and we don't see a drop in our pipeline at a certain point going forward because they have no 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. It's basically a half of a half of our business that's impacted by those rules anyway. Hence I think we are pretty prudent here with how we plan going forward. Okay, cool. 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. The whole integration and the ramp up of the MVPS stations is scheduled for the second half of the year. We do those two things with our partners and they report they're well on track. Maybe also two quick ones. The restructuring cost you're planning for Q4, did you quantify them or can you do that please? Yeah, 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. We estimate something between EUR 30 million-EUR 40 million. That is roughly what we had put into the guidance. The last one again on HBS, obviously you're becoming now a relatively small player. It is a highly price sensitive segment. 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 or something else. Or do you still want to address or do you just want to, let's say, focus you in a geographical perspective but not in the range of products you're selling? Yeah, I think we do focus but it doesn't mean that we will just sell one product. I think I tried to lay it out but let me recap a bit. We will reduce the global footprint and as I've learned the time since I'm with SMA that an inverter is not the same product depending on the countries it is operated due to, you know, grid regulations and all these kind of things, cable width and whatnot. The variety of our products will be lower because we will have fewer countries to serve. Here we will reduce the amount of complexity. Right? That's one topic. The second topic is that also, 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. The full solution these days is a hybrid inverter together with batteries, together with energy management, together with the right software, and an EV charger, of course, if you have a car. 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 hardly serve, if that's kind of making sense. Yeah, it does. All right, very helpful, thank you. The next question comes from Jeff Osborne from TD Cowen. Please go ahead. 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. Yeah, 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 2024 between this point of time and H1 2025 in the home market especially, I think we see price declines between 5%-15% on average. Of course, this hits your profitability if you can't be flexible with your production. That's what we call immense in one year. I'm just curious after the Chinese policy change June 30th, if things got worse in the third quarter as it relates to home and small commercial? Not really, no. Okay, good to hear. 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 t he 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. We want to make sure that this is owned by us and owned. By our own development. We go to India where we already have established a hub with very good developers and strong access to the local market, local universities. I think the key driver here is the software part. When it comes to assembly, obviously there is labor arbitrage as one topic. Flexibility is the second topic and we have experience there. I think overall 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. Got it. 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 US 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 FIARC, I think they're the market leader. Year number two. 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 cede that market share? I mean, currently the setup is as you said, we have for the commercial part r ight. We produce in SMA in Kassel and we ship it over there. We have no indications that this is going to deteriorate rate. When I talked about removing ourselves from a potential U.S. and Australia, that's more the home part, not exactly the commercial part. Got it, thank you. Yeah, no concrete plans now to do a localization of that, but could come later. The next question comes from Peter Testa for One Investments, please go ahead. Hi, thanks for taking the questions. 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, start with that. I'm not the technical guy, but to be honest, my understanding is in terms of production costs are pretty sure pretty similar. I don't recall a big difference in the margins. Okay, so margin mix isn't a factor. Okay. Okay, good. 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 HBS part, would you have any particular concerns about pricing in Europe. In particular from the changes in Chinese market situation, becoming exported 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. Overall, I think the price pressure will mostly hit the Chinese markets because it's big and they are cannibalizing themselves a lot. I don't see an additional pressure on Europe due to that at this stage. Great. Okay. You gave a number between EUR 300 million-EUR 400 million for breakeven on the HBS business revenue. Is that for 2026 or post auto restructuring? No, that's post restructuring. That's post restructuring. As I said, we will not be breakeven next year. Yeah. I just wonder whether that sales level is after all the savings or midway. Okay. The last thing is just with the write offs that have happened in various different levels, both in project depreciation, also inventory, when you think about the impact of that on the 2026 profit, that is lower depreciation, lower amortization and maybe what happens to the written off inventory, is there any sense on how that changes the profit base just from the impact of all the write offs? I do not mean by having no write offs, I mean the run rate. Yeah. 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. I can't plan now that we will have better margins because I'm going to use them again. 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. It might be that at one point we find good solutions for that. This could be an uplift, but this would be a one time uplift and not a run rate. Okay, so you'd highlight that related to inventory, but I guess you have lower depreciation, lower amortization because of the write-offs next year. Yeah, but it's not material in that sense. Okay, very good. Thanks for the answers. Thank you. The next question comes from Constantin Hesse from Jefferies. Please go ahead. Javier, 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. Okay, fine. Fair enough. Sorry. As a reminder, if you wish to register for a question, please press star followed by one. We have a follow up question from Peter Testa from One Investments. Please go ahead. Hi, thanks again. Just on the large scale side, could you talk a bit about two 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 and EUR 902 million, how does that phase out in time? By either quarter or years. Just to give a sense, asking for the pipeline. Sure. It depends a bit where you have your backlog. If you have projects in Europe, usually they materialize up to 6 months, around 6 months, I would say 6-9 months, depending a bit. 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. It is usually the, let's say, transport times. Then it is the time that you need for supply for the MVPS station itself, the medium voltage part. These are basically the two things that are hindering the faster turnaround. Hence, you have something between 6- 12 months, depending on the project. Okay. I guess in Australia it would be more like us. Yeah, exactly. Yeah. Okay. On the pipeline, can you give a sense, please, in terms of what you're seeing in project behavior, tendering behavior, that is, speed at which decisions are made, the speed at which permitting is granted. Just so you can kind of understand what you think about pipeline flow and what it means therefore for orders to coming to delivery, arriving and booking revenue. I think in Q2, if you had asked me this, 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. I remember our business discussions with the teams. Nothing specific, to be honest. It looks normal. Okay. And the scale of the pipeline in any different geographic message? No, all good, as I said. I think we will end the year with a similar backlog as last year. That is at least what we expect now to happen in the next month. We will go with a good backlog into next year. The pipeline itself is on a similar level. We are actually uncautious here, given the recent quarters. I am actually quite optimistic. That looks good from our side. That's great. Super. Thanks for the answers. Sure. Once again, to ask a question, please press star followed by one. 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. Yeah. Thank you everyone again for your interest and of course, please do not hesitate to contact us in case you have any further questions. Goodbye and have a great day. Ladies and gentlemen, the conference is now over. 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