Welcome to the SolarEdge conference call for the quarter ended June 30th, 2025. This call is being webcast live on the company's website at www.solaredge.com and the Investors section on the Events Calendar page. This call is the sole property and copyright of SolarEdge with all rights reserved, and any recording, reproduction, or transmission of this call without the express written consent of SolarEdge is prohibited. You may listen to a webcast replay of this call by visiting the Event Calendar page of the SolarEdge Investor website. I would now like to turn the call over to J.B. Lowe, Head of Investor Relations for SolarEdge. Please go ahead. Good morning and thank you for joining us to discuss SolarEdge Technologies' operating results for the second quarter ended June 30th, 2025, as well as the company's outlook for the third quarter of 2025. With me today are Shuki Nir, Chief Executive Officer, and Asaf Alperovitz, Chief Financial Officer. Shuki will begin with a brief review of the results of the second quarter ended June 30th, 2025. Asaf will review the financial results for the second quarter, followed by the company's outlook for the third quarter of 2025. We will then open the call for questions. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the safe harbor statements contained in our earnings press release and our filings with the SEC for a more complete description of such risks and uncertainties. Please note, during this earnings call we may refer to certain non-GAAP measures which are not measures prepared in accordance with U.S. GAAP. The non-GAAP measures are being presented because we believe that they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance. Reconciliation of these measures can be found in our earnings press release and SEC filings. These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U.S. GAAP. Listeners who do not have a copy of the quarter ended June 30th, 2025 press release may obtain a copy by visiting the Investor Relations section of the company's website. With that, I'll turn the call over to Shuki. Thank you. J.B. Good morning everyone and thank you for joining us. I am pleased to share with you today the progress we have made across all four pillars of our turnaround journey. First, let me review the recent changes to regulatory and tariff policies that removed some uncertainties hanging over the industry. The recently enacted One Big Beautiful Bill Act redefines solar and storage markets in several key ways and I'd like to share with you how we intend to maximize the opportunities and navigate the challenges in this environment. First, and most importantly for SolarEdge, the bill validates our multi-year strategy of onshoring manufacturing to the U.S. by preserving the 45X Advanced Manufacturing Credit for the next seven years. With the improved visibility this law provides, we intend to manufacture in the U.S. and to ship U.S.-made SolarEdge products both domestically and across the globe for years to come. Second, U.S. customers have a built-in incentive to prefer products that are made in the U.S., especially if they comply with FIAC requirements and meet domestic content thresholds. This aligns with our U.S. manufacturing and supply chain strategy, which we believe positions us well to support such customers. Third, the extension of storage tax credits will support the trend of increasing battery adoption. This expands our TAM and requires just the kind of sophisticated energy management algorithm that we have refined for years by using the vast amount of data sourced from our large installed base. Lastly, in the residential space, demand is expected to decline in 2026 with the elimination of the 25D credit, a decline that is expected to be partially offset by a shift to TPO as the 48E credit continues through 2027. We believe we are well positioned to benefit from this shift given our strong position and product fit with TPOs. Let's talk about tariffs. Since we last spoke, tariff rates on different countries have changed and we have continued our efforts to optimize our supply chain for prevailing tariff and domestic content levels. When added together, the gross margin headwind in the second half is expected to decline to approximately 2% from the previous expectation of 4%- 6%. Additionally, we now expect free cash flow to be positive for the full year 2025. We still believe that we will fully offset the tariff headwind in 2026 net of pricing adjustments, switching to the progress across our key priorities. Q2 results and Q3 outlook both show that we are firmly moving in the right direction on all four priorities, and I'm proud of how our team has executed despite the challenging global environment. First, on financial strength, in Q2 we delivered quarter-over-quarter and year-over-year top line growth and margin expansion for the second straight quarter. The midpoint of our Q3 guidance follows the same trajectory. At the same time, we have kept our expenses in check and have focused on our core business. Our second priority is recapturing market share in U.S. Resi. We have seen a continued shift to the TPO model, which we expect will significantly accelerate in 2026. In recent years, we have built an infrastructure that supports our CPO partners, so we believe we are well prepared to capitalize on this market dynamic. We believe we have met and plan to continue to make efforts to meet requirements for both domestic content and FIAC, which allow them to maximize 48E credit. We believe that our products are very well suited to support the scale, performance, and integration needs of the unique TPO business model. In the U.S. C&I segment, we believe that the growing importance of domestic content and increasing FIAC restrictions offer us a compelling opportunity to gain share. For example, last week we announced a multi-year agreement with Solar Landscape to deploy SolarEdge equipment on more than 500 C&I rooftops across the country. In addition, we signed a multi-year frame agreement with a leading U.S. retailer that will see SolarEdge products integrated across its locations nationwide. These new agreements underscore the value we bring to enterprises and build on the recent momentum we've had with this customer set. Turning to Europe, last week I met with our regional leadership team in Europe and visited with key customers. The positive momentum that we discussed on our last earnings call and experienced at Intersolar has continued. Our pricing and promotion campaigns have shown signs of success, and our improved go-to-market strategy is strengthening our partnerships with installers and distributors. As a result, the majority of our distribution partners reached normalized inventory levels at the end of Q2 2025 as we had anticipated. Importantly, we have seen initial market share gains in Europe in the second quarter. That said, our share in Europe is still below what SolarEdge commanded in the past and is well below what I think we can and should be. With our energized team, our leading edge and expanding software and service solutions, and our next generation platform coming soon, I believe we have a very good opportunity to grow our business in Europe even further in the quarters ahead. Turning to our third priority, accelerating innovation. Our Nexis platform remains on track for initial volume by the end of the year. We already have several operative units in our facilities and next month at RE+ we will have a hands-on experience for installers to demonstrate how flexible and easy Nexis is to install, connecting inverters and batteries with a simple click. On commercial storage, we had a record sales quarter and we expect growth to continue. While still in the early days, we expect commercial storage to follow the same trend of accelerating adoption that we witnessed in the residential storage space. Moreover, we believe that our commercial storage offering combined with our software capabilities position us well as C&I customers increasingly transition to solutions that combine PV, storage, and energy management software. Speaking of software, we have seen increased traction with our Vivo EV charging software solution in the U.S. Vivo was selected by PG&E to manage its nearly 4,000 EV chargers. Vivo software is also enabling the largest public charging station in New York State, located in Queens and backed by a Con Ed program. Additionally, as we announced this week, we have entered into a strategic partnership with the Schaeffler Group, one of the world's leading manufacturers for the automotive industry. Under the partnership, Vivo will manage the thousands of charge points that Schaeffler intends to deploy at its facilities around the world. Schaeffler has been a SolarEdge PV customer for years and this agreement highlights the additional software and service capabilities that we can add to our value stack for enterprise customers. Our fourth key priority is ramping up our U.S. manufacturing in Q2. We continue to build out and optimize our U.S. manufacturing footprint, which now includes residential inverters in Texas, optimizers and commercial inverters in Florida, and batteries in Utah. We are also planning to ramp up production towards the end of the year in order to support exports of competitive products to our European and international customers. To summarize, we believe we are in a much better position today than we were a quarter ago. A layer of uncertainty has been removed from our business, and we have continued making good progress on all four pillars of our turnaround journey. While we are encouraged by the progress this quarter, we know there is still plenty of work ahead. We see significant room to improve execution and even more opportunity to grow and build a healthier, more profitable business for the long term. With that, I will turn it over to Asaf. Thank you, Shuki, and good morning, everyone. Starting with our quarterly results, total revenues for the second quarter were $289 million. Excluding revenues from our discontinued operations at the Kokam energy storage division of $8 million, our non-GAAP revenues were $281 million. Revenues from the U.S. this quarter amounted to $185 million, representing 66% of our non-GAAP revenues. Revenues from Europe amounted to $65 million, representing 23% of our non-GAAP revenues. International market revenues amounted to $31 million, representing 11% of our non-GAAP revenues. Non-GAAP gross margin this quarter was up to 13.1% compared to 7.8% in Q1. The higher gross margin is largely due to higher revenue, which drove increased utilization of our operational cost structure, higher U.S. production volume, and favorable regional mix with higher U.S. revenue. This was partly offset by incremental tariffs, which impacted our gross margin by 1% compared to an expectation of 2%. Adjusting for the lower than expected tariff impact, our gross margin came in slightly above the high end of our guidance range. During the second quarter, we continued to take action to streamline our operations and exit non-core activities. As a result, we recorded a one-time $18 million expense on the disposition of our tracker business. We also recorded a one-time expense of $37 million related to a write-down of our Cellar 2 facility, which we are looking to divest to reflect fair market value. These charges were partly offset by a one-time $10 million gain on the sale of our non-sand production facility in Korea. Going forward, we will continue to seek avenues to rightsize our business with an emphasis on expense reduction and a focus on our core activities. Non-GAAP operating expenses for the second quarter were $85 million compared to $89 million in the previous quarter. Similar to Q1, in the second quarter. We were able to collect certain aged AR balances which resulted in a reversal of an accrual for bad debt. Excluding this and other non-recurring items that total approximately $4 million net, our non-GAAP operating expenses would have been approximately $89 million. Non-GAAP operating loss for Q2 was $48.3 million compared to a non-GAAP operating loss of $72.4 million in Q1. Our non-GAAP net loss was $47.7 million in Q2 compared to a non-GAAP net loss of $66.1 million in Q1. Non-GAAP net loss per share was $0.81 in Q2 compared to $1.14 in Q1. The lower operating and net loss are largely due to higher revenue, higher gross margin, and lower operating expense. Turning now to our balance sheet, as of June 30, 2025, our cash and investment portfolio was approximately $812 million. Our cash position net of short-term debt was up approximately $19 million to approximately $470 million. Free cash flow in the quarter was the use of approximately $9 million, largely due to the timing of certain working capital items. For the first half of the year, we generated $10.8 million in free cash flow. As Shuki mentioned, considering the recent development in anticipated tariffs and the progress we have made on our turnaround, we now expect to be free cash flow positive. For the full year 2025. AR Net increased this quarter to $217 million compared to $133 million last quarter, mostly due to higher revenue. With continuous improvement over DSO for effective collection management, our inventory was down by $108 million- $529 million. Q2 marked the fifth consecutive quarter of inventory reduction. This is despite our continued ramp up of U.S. production to support anticipated growth and the introduction of new products. As you may know, we have approximately $343 million in convertible notes that come due next month. As we have said previously, we intend to pay off these notes with cash on hand upon maturity. Given our healthy cash balance and the reduced uncertainty after the passage of the One Big Beautiful Bill Act, we are c onfident that our liquidity position is sufficient to both redeem this note and support our business for the foreseeable future. As Shuki mentioned, by the end of the second quarter the majority of our distribution partners had normalized their inventory level. As a result, we will no longer be providing quarterly sell-through figures. SolarEdge is focused on providing full system solutions combining inverters, optimizers, EV chargers, storage system and energy management software. This aligns with evolving market demand and customer preferences and coincides with the streamlining Of our product portfolio. Therefore, we will no longer be providing a breakdown of megawatt shipments by region or by end markets as management focus is on regional revenue. Turning now to our guidance for the third quarter of 2025, we are expecting revenues to be within the range of $315 million- $355 million. We expect non-GAAP gross margin to be within the range of 15%- 19%, including approximately 2 percentage points of new tariff impact. We expect the non-GAAP operating expenses to be within the range of $85 million- $90 million. I will now turn the call over to the operator to open it up for questions. Operator? Certainly. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. In the interest of time, we ask that you please limit your questions to one question and one follow-up. Once again, that is star and one to ask a question. We will take our first question from Mark Strouse with JPMorgan. Please go ahead. Yes, good afternoon. Thank you very much for taking our questions. Wanted to ask about kind of sustainability of the revenue that you're seeing here in 2Q and 3Q. Was there any benefit that you saw from safe harbor or in the 3Q guide? Are you assuming any kind of pull forward from maybe some of your 25D customers? I know that's a smaller portion for you guys. Just curious if you're seeing any kind of one timers that you might potentially normalize for. Thank you. I have a follow up. Thank you. Yeah, sure. Thank you, Mark, for your question. First of all, I'll start by saying that our Q3 guidance does not include a significant pull forward of demand relative to 25D or to safe harbor. We are pleased with the progress that we are making. As I said in my prepared remarks, both in Q2 and in the midpoint of the guidance for Q3, we are showing year over year and quarter- over- quarter revenue growth, and they are a result of building our business back to where it should be. Okay, that's great to hear, thank you. Also, on gross margin, good to see the progress that you're making there. Just curious, to the extent that you're willing to talk beyond 3Q, kind of how to think about the cadence of margins as your revenue continues to normalize. Thank you. Hi Mark, good morning. Thank you for the question. I think we said last time that our margin, the biggest driver is more revenue. Of course, the more revenue, better utilization of our fixed cost infrastructure that we've built in our structure. On top of this, the expansion of our production footprint as we sell and produce and sell more. As we noted, we are going to start towards the end of this year to sell the products overseas and enjoy the 45X credits also for out of the U.S. sales. Another positive factor on the new products that are coming up towards the end of the year. We expect better marginality. They are coming with a better cost structure. Of course, I think we have a continuous effort that we related to of fixed cost improvement and reducing by streamlining production. We talked about automation, enhanced inventory logistic. Management and so forth. One thing to remember, of course, until later is that there is an impact of mix of all of this between different geographies, different products, and market segments, which may vary, and we cannot predict that. I think all of these levers I talk to will provide better marginality again with revenue increase, as you can see in our Q3 guidance. Thank you. We will take our next question from Philip Shen with Roth Capital Partners. Please go ahead. Hi, thanks for taking my questions. First one is on safe harbor again. You know some of our checks suggest your C&I business, especially in the U.S., is doing really well. One distributor said it was booming, and I know there's no safe harbor in the guide, but was wondering how much could be in the guide. How much more safe harbor do you think you could have? You've already done one C&I safe harbor. Is there more to come either for C&I or RESI for that matter? Thanks. Thank you, Phil. Good morning. As you know and as we stated in the past, we are not going to get into any details as it pertains to the safe harbor deals, both in RESI or in C&I. I concur with what you implied. I believe that our customers are looking at us as the best partner if and when they consider such deals. If and when they consider such deals, we will definitely be happy to support them. We believe that our solution, both from a product perspective as well as from many years of working together and supporting this type of customers, is going to be beneficial for them. More generally, on the C&I segment, now with the advantage of domestic content and with the expected arc fault requirements that are coming in, we believe that we are going to have a significant opportunity in this segment to gain share. Between our product offering, the arc fault requirements, and the domestic content headers, I believe that these customers are going to find our solution very attractive. Yeah, and I've heard you guys might go into allocation mode soon for C&I, so that's very interesting. Shifting over to 2026 and margins, I know you guys don't got officially, but was wondering if you might be able to share what the 2026 margin puts and takes might be like. Is it safe to use maybe a 15%- 19% range from the Q3 guide and remove the tariff impact? If you remove the tariff impact, it could even be higher. Just some color on that would be fantastic. Thanks. Specifically on the tariff, we related that in the script and noted that we expect for the next two quarters within the year about 2% incremental tariff impact, which is below estimation of 4%- 6%. We also said that next year we are looking to neutralize this entirely with the diversified production basis and some potential price increase in terms of the trajectory of next year overall. I think we talked about the main margin levers, of course the higher revenue again with a better utilization of fixed cost, the new product. These new products will enable us actually to present some new revenue streams, and the ramping up of the U.S. production is very important to us. As you know, the U.S. from a production basis is the most economically attractive for us given the IRA benefits and credits. As we start selling U.S.-made products globally to the EU and international markets, that's another lever we will enjoy from. Thank you. Our next question comes from Brian Lee with Goldman Sachs. Please go ahead. Hey guys, how's it going? Thanks for taking the questions. First question just on the guidance for revenue. I know Europe looked pretty strong in 2Q and now that you got the destock complete in that region, presumably it's going to be just as strong in 3Q. Can you give us a sense? I know you don't want to break out C&I, Resi, and all the different detailed factors, but just in terms of the revenue growth guidance for 3Q, how much more growth are you expecting in Europe? Is the U.S. market expected to be stronger from a sequential growth perspective? Maybe some of the puts and takes given both of those markets look pretty strong in 2Q. Wondering if you're expecting exactly the same trends or any kind of divergence into 3Q based on the guidance, and I had a follow up. Thank you for the question and good morning. I'll start with the U.S. market and then I'll get to Europe and the U.S. I think as we've said, as Shuki just indicated, we believe that we are in a strong position. One is the expected shift towards the TPO that we discussed. Again, the new product introduction. They're coming with the ongoing focus on the full ecosystem. I would say solution with incorporating more software and more elements. C&I opportunities that we see are significant as well, especially with enterprise customers and now to the U.S. territory. We did note that channels are largely clear. We expect to see a catch up of revenue to the underlying demand. At the same time, I think it is important to note that the EU market remains fairly weak and potentially it can go even weaker next year. Of course, our focus is to continue and gain market share. It will be, I would say, an interplay between the weak, potentially weak European market and our new product market share expansion efforts that we're focusing on every day. Overlaying all of this, even on a global basis, the fact that the battery attach rates and demand continue to rise. We certainly expect to see this momentum continue for Q3 and beyond. Okay, fair enough. That's helpful. Then I guess on the gross margin, going back to that question from Phil, if you look at the 3Q guide, I think you're implying an over 40% drop-through on gross margin. Is that maybe the right way to think about leverage on the gross margin line going forward? Every $100 million of incremental revenue from here seems like you could add another 500- 700 basis points of gross margin. If we do the math that way, then curious up to what level t his u nderutilization recapture could drive additional margin leverage, I guess. Where are you in terms of utilization? Where is the headroom, and what does that imply for gross margin? Margin step ups from here as you get more volume in. Thanks, guys. Sure. I think you alluded to the fixed cost infrastructure that we have built in the COGS, which as you know we are trying to reduce in terms of automation, product simplicity, more singular SKU and so forth. I think we told you before that the estimate or the rough number for such fixed cost embedded in our COGS is around $90 million- $95 million. Of course we're working to reduce. As I said. In terms of simple math, just divide that by growing revenue, you'll get the incremental impact associated with the better utilization of the fixed cost infrastructure. Thank you. Our next question comes from Colin Rusch with Oppenheimer. Please go ahead. Thanks so much, guys. Can you talk about some of the key initiatives from an R&D perspective that you're working on? It seems to me that there are some innovations in and around both Virtual Power plants as well as just optimization of the performance of the inverters here that we could be looking at. Just want to see where you can actually get some real leverage out of those hard efforts? Yeah, thank you, Colin, for a great question. As the market evolved, it moved from being a PV-only type of a market in which SolarEdge operated into a market in which batteries and storage play a significant role. You have to, and the grid is actually, with the electrification and the growth in demand for electricity, the grid actually finds it harder and harder to manage all the loads. Between these three, the energy management, optimization, and knowing when to produce power and export it to the grid, when to store it in the battery, using time of use algorithms, and expecting what will happen from a weather perspective and so forth, these are all areas that we are looking at that our talented team is innovating around. We believe that what we have to deliver to the market is eventually a system, a solution that combines PV, storage, and this energy management capabilities in order to maximize the value and the return that they get from the system. When you do all of that, it opens to virtual power plants, like you mentioned, or grid services and other areas that we can potentially look into in the future. Some of them already exist today that are nascent, but definitely an area that we can look into in the future as well. From a cost perspective, are there other areas that you can drive costs out of the system in the organization, or are you fully dripped down as a company here? Can we see some incremental cost savings either anywhere in the OpEx side of things? This is a continuous focus for us, and I don't think we ever get to a situation that we cannot strip down. This is something that we are driving. Management always look at ways to improve efficiency. I think we did relate to the upcoming Nexis platform, that the cost structure it has embedded is more attractive. We expect better marginality on that. I can say that we're constantly looking on avenues to reduce costs, and that's something we are very focused on. Thank you. Our next question comes from Dimple Gosai with Bank of America. Please go ahead. Hi, good morning. Thank you for taking my question. Could you please give us more color on what drove the strong battery performance this quarter? Do you anticipate the TPO market shifts more towards a storage-led market, you know, with ITC in place? I have a follow up, please. Yeah, thank you, Dimple. The storage, the entire market, I would say in all residential regions we are seeing an increased attach rate between solar and storage. The value is clear whether you, even in areas that the tariffs are not dynamic, there is a value of storing what is produced during the day in order to use it overnight. In more advanced markets in which there are more sophisticated schemes, the battery is playing an even more important role, be it flexibility, time of use, and other models. This is the main driver and we are supporting the demand that is coming. We are actually helping grow the pie by providing the energy management solutions that I was talking about. As for the TPOs, I believe that they operate in the very same market and the requirements coming from their customers are similar. My expectation at least is that I believe that the attach rate is going to grow for them as well. As they increase their attach rates, we will provide them with the solutions that are actually maximizing the benefits from that. Thank you. On a more technical note, free cash flow was pretty solid this quarter. Can you help quantify how much of that was driven by working capital tailwinds and how we should think about the sustainability of those drivers going forward? Separately, what was the cash impact from 45X in the quarter? Could you maybe talk a bit about the monetization cadence we can expect going forward on that? Continuing the 45X monetization is the ongoing standard part of our business. As we have ramped up our production layout in the U.S., we are not disclosing that in terms of the cash flow. We did provide an indication, some guidance for the year as a whole. As you remember, for H1, Q1 and Q2 together, we generated a positive free cash flow, approximately $11 million. We did guide to free cash flow for the entire year, which is also due to the lower incremental tariff compared to our previous guidance of breaking even. The incremental positive on that is one of the reasons that resulted in that. As you well know, the timing of different cash flow items, working capital items, change. We are working to plan and control. As much as possible, things may shift. That's as much as I can say a bout t he future free cash flow. Thank you. Our next question comes from Corinne Blanchard with Deutsche Bank. Please go ahead. Good morning. Just maybe one question on inventory level. If you can comment what you're seeing in the U.S. and maybe in Europe as well. I think one of your peer had mentioned an increase here. Just trying to put some context. Thank you. I assume that you are referring to the channel inventory. As we said for Europe, most of our distributors have already resumed normal levels of inventory. There are some that are not, but most of them are, and we are very pleased with that. In the U.S., we haven't seen anything that is out of the normal in terms of our channel inventory. I don't know what exactly you refer to, but in our business we haven't seen any buildup of inventory in the channel in the U.S. That's helpful. That's what I was referring to. Maybe just a very high-level question or generic question, what's your view on the U.S. market or U.S. time as we go into 2026 and potentially 2027? Yeah, so that's a question that many people are asking today. The way that we look at it is that with the elimination of 25D at the end of the year, most probably the segment that is supported by 25D is going to decline significantly, call it 50%, 60% year- over- year. At the same time, the TPO segment is going to benefit from that because 48E continues until the end of 2027, and by how much the TPO segment is going to grow. In principle, it can take the entire piece of the pie that people that used to take cash unknown for 25D and all of them, maybe all of them can switch to TPO, maybe only part of it, because of consumer preference or because of capital constraints or any other thing. Your guess is as good as mine in terms of what percentage will go. I think that when you combine both of them, we will see the market declines by something like 20%, maybe a bit more. As it pertains to SolarEdge, our position within the TPO segment is very strong. We believe that the years that we spent in order to build the infrastructure to specifically support this type of customer, as well as the domestic content and the compliance with FIAT requirements that we have. We think that our products are the best out there to support the scale, the performance, and the integration needs of the TPO business model. Because of that, if the TPO segment is actually going to grow, we believe that we are in a good position to leverage or to benefit from that. Thank you. Our next question comes from Chris Dendrinos with RBC Capital Markets. Please go ahead. Hi, good morning and congrats on the strong quarter. I wanted to focus on the European business here, and you mentioned it's mostly normalized, but the market share that you all have is still kind of below where you ultimately want to be. Maybe looking ahead, I think you mentioned Nexis as one opportunity, but what other levers do you have in Europe, and how are you thinking about the strategy maybe from a pricing perspective going forward? Thanks. Yes, thank you, Chris. As I mentioned, we visited Europe last week and first of all, we are pleased with the progress that we have made. We do see data that supports that we've started gaining share in the second quarter. As I mentioned, I believe that we have room to grow here in terms of market share in Europe in general and in every specific country in particular. It will be a result of many different components that we detailed in past calls. We have to continue working very, very closely with our distribution partners, with the installers. We have to win the trust of the installers. They need to want to install SolarEdge. That is one element. The second element is with Nexis, we are going to open additional segments that until today we operated in, but we didn't have the best fit for this segment. At the same time, the Nexis platform, not only that it's designed from the ground up to support the evolution in the market to go into storage and backup, but also the cost structure is better and that will allow us to be more competitive in the market. The last thing I would say is, we've heard it in Intersolar in different meetings in Europe. The channel in Europe, meaning the distributors, the installers and the customers, they are all very happy to see SolarEdge back. The composition of the current market is they would have liked to see a stronger SolarEdge that has higher market share in each of the countries. We see their support as also an important element to help us get to where we want to go. Got it. Maybe just as a follow up on Nexis, you just mentioned maybe you had some products or segment that weren't a great fit, but that improves with Nexis. Can you expand on that a little bit and sort of what specifically is kind of the opportunity there? Thanks. Yeah. For example, in Germany, many of the homeowners that are interested in large systems, maybe 20 kW, and the three phase Nexis is actually going to support up to 20 kW. Our current solution is less than that. The installers who are really loyal to SolarEdge are installing two inverters instead of one. In order to seriously address this segment in the market, and it's a growing segment, we're going to offer not only the three phase inverter, but actually a stackable battery that can go all the way up to 19.6 kWh, which is, you know, it's a very, very respected solution for large houses in Germany. We believe that once we introduce that with the quality, reliability, and the SolarEdge brand, we believe that we'll see an uptick in share. Thank you. We will take our next question from Christine Cho with Barclays. Please go ahead. Thank you for taking my question. Apologies if you've already answered this, but you mentioned that Europe has reached normalized inventory levels by the end of 2Q, and appreciate that you're not going to be providing sell through anymore, but the revenue guide for next quarter is below the $375 million sell through that you gave last quarter. I was just wondering if you could help us bridge the gap. Can you give us a sense of how much the market is down or are customers keeping less inventory? Just sort of any other puts and takes that we should consider. Thank you, Chris. Hey, Christine. You put the numbers together and that's very nice. As we said, most of the distributors have reached the normalized inventory level. There are two things that we have to keep in mind. One is some of them have not yet, and this is, I would say, part of the gap between what you would call the sell through and the revenue that we see in the third quarter. The second piece is even when the channels are normalized, it goes up and down by quarter, by seasonality, by the preference of the distributors in anticipation of a new product or an old product. There are many different factors that are playing a role here, but these are the two main reasons for what you refer to as the gap. Okay, you have some products rolling out for Q, is that right? I'm sorry, again? You have some products. Rolling out at the end of the year, that's kind of what you're alluding to. Okay, yeah. The next. In Europe, historically the revenues and costs I think were pretty much in the same currency. Margin was kind of hedged internally and regionally. As you guys come down on your European inventory on the books and you start shipping U.S. products to Europe and other parts of the world, that internal hedge is no longer. We expect that you guys are going to use hedges to lock this in, especially with FX rates moving around quite. A bit these days? Actually, we are hedging our major currencies, which are the Euro and U.S. dollar or Shekel. Currently, it's mostly versus the expense. Revenues are a little bit more challenging to hedge because you can't really expect the flow. We could certainly hedge the net impact, and we are looking at that constantly. We have a policy, and you're absolutely right. Its natural hedge will no longer be, and we will, of course, plan accordingly and ensure that we have a good and efficient methodology for hedging. Thank you. Our next question comes from Joseph Osha with Guggenheim Partners. Please go ahead. Thank you. Y ou guys have talked about the need to grow into your manufacturing base and absorb fixed cost. I'm wondering if you can give us. Some sense based on where you are now as to how much revenue you could support with your. Your existing manufacturing base. Thank you. I have a follow up. Our current production layout is built to support significant increase in revenue. We plan that and we are executing upon the plans. I cannot give you more than some general color, but certainly we can increase revenue and the buildup to support that. The production volume with existing infrastructure. We're working, as you know, with the major contract manufacturer. We expect that the current facilities and infrastructure that we built in with the automation that we're implementing, more and more, will support us through multiple quarters before we need to ramp up the layout again potentially. Okay, thank you. My follow up, looking at Europe, you're talking about new products that will bring new features, probably also lower cost. I'm curious, in the European residential market, do you think that you are where you need to be from a pricing s tandpoint or could we see you take a dditional actions on the pricing front y ou seek to retake market share? Thank you. Hi Joe. The price, as you know, price is only one factor in the go to market strategy. There is the product, there is the partnership that you have with the channel, there is consumer pull. There are so many different things. As of last week when we visited with key customers, pricing doesn't seem to be the blocking parameter in terms of if we want to continue growing. As I said, we started gaining share, we feel confident that we can continue doing that. At this stage it doesn't seem as if we need to make a significant price move at the same time. We're responding to pricing and if the need arises, we will have to do that. Thank you. Our next question comes from Maheep Mandloi with Mizuho. Please go ahead. Hey, thanks for the questions. I think most were answered, but maybe just one. On the battery side, could you just talk about the battery cell sourcing strategy for this year and next, what changes depending on making there? On the margin side, if you could just talk about are we b ack. To target margins for the batteries yet or we have to wait for the new products to get that? Thank you, Maheep. I'll start with the battery sourcing and then you'll have to repeat the gross margin question because we didn't hear it well here. For the battery sourcing, similar to many other components in our supply chain, we first and foremost are looking for quality and reliability of our products to make sure that the products we deliver are actually providing the value that we intend for them to provide for the long term. We are looking into optimizing the supply chain between different requirements that we have and we talked at length about tariffs and about FOC and about other requirements that are making a difference for our customers and for ourselves. We'll continuously look into the best possible way to source battery cells or any other component in our supply chain. Could you please repeat the gross margin question? Yeah, just trying to understand like on the margins on the batteries I know historically were lower because of Samsung batteries. Just curious, are you back to the target levels for battery gross margins. Is that something you expect to achieve next year? Thank you for the question. As you may know, I don't think we provide gross margin by products, but naturally batteries are coming with a lower margin and we're working to further improve the battery cost structure. Other than that, we cannot elaborate at this stage. Thank you. Our next question comes from Moses Sutton with BNP Paribas. Please go ahead. Hey, thanks for squeezing me in g reat to see gross margin improving further. How much is elevated warranty speed still impacting margins? I guess, put differently, how many more like hundreds of basis points can you get back? Just as these issues abate, I noticed there's still some negative flows for warranty. In the cash flow from operating section, you're trying to figure out how. That can benefit you longer term. What we can say is that the quality of a product is improving. We see that continuously, and we expect to continue seeing that again with the Nexus, which provides a simplified product structure and a more single SKU structure that is going to even further improve. Beyond that, we don't provide specific guidelines or guidance toward the warranty impact. Overall, again, the serviceability of the product, the installability of the product, and the quality of the product is improving. Naturally, that should have an ongoing positive trend going forward in terms of the warranty impact. Thank you. Thank you. If you would like to ask a question, please press the star and one on your telephone keypad now. We will take our next question from Philip Shen with Roth Capital Partners. Please go ahead. Hey guys, thanks for taking my follow up. You know, you guys were just talking about the inventory being mostly cleared in Europe, and you talked about price actions on perhaps a case by case basis. I was wondering, we heard that you guys may have cut pricing in Europe last week, effective August 1st, by 10%. Was wondering, can you affirm that at all? If so, was it across the board or perhaps just for certain countries or just some customers? Thanks. Thank you, Phil, for bringing it up. Just to make sure that we are clear about this thing, we did not take any pricing action in Europe last week or, for that matter, recently. What I was referring to, and maybe what you heard about, is at the end of the day, the way that the market flows is we are selling to distributors, they're selling to installers. Maybe there was some local promotion that people might interpret as a price move, or maybe there were some other things that we or the channel initiated, but overall we haven't implemented any price move in Europe recently. Got it. Appreciate the detail. Thank you, Shuki. Thank you. It appears that there are no further questions at this time. I will now turn the call back to management. Thank you, everyone, for attending this call. As we said earlier, we are very pleased with the progress, but we have our work cut out for us, and we are going to continue working very, very hard in order to continue making progress in our turnaround story. Thank you very much. Thank you. This does conclude today's presentation. Thank you for your participation. You may disconnect at any time.