Earnings Call: Q2 2020

Aug 13, 2020

Good day, and welcome to the analyst and investor presentation of the SMA Solar Technology AG Financial Results Half Year 2020. Today's conference is being recorded. I would like to hand the conference over to Ulrich Haring, Chief Financial Officer. Please go ahead, sir. Thank you, Lianne, and welcome, everyone. We very much appreciate that you are taking the time for this investor and analyst call on SMA's H1 2020 results. You can find today's presentation also on our Investor Relations website, ir. Sma. De. This conference call is scheduled for 30 minutes. A replay will be available for 7 working days. After the presentation, I will be happy to answer any questions you might have. This time, I will start with a review of the financials for the first half of the year before presenting you our expectations regarding market developments and our outlook for the full year 2020. You will see that the presentation as of today will be much shorter than in the past. I refer to our disclaimer on Slide 2. And here on Slide 4, you will find a summary of the key financials for H1 2020. Since I will provide you with more details on our sales, profitability, balance sheet and cash flow in the next slides, I would only focus on quarterly development in the table in the bottom right corner of this Page number 4. As you can see, we achieved 4 consecutive quarters of strong sales and EBITDA. And in Q2 2020, our gross margin improved to 22% of sales, mainly driven by a positive development in our product mix, including improvements in our product portfolio. Positive development of the gross margin is especially noteworthy as it shows that our portfolio strategy, which now concentrates on products with stronger margins, is becoming effective and thereby SMA's business model more resilient. The COVID-nineteen quarter of April through June 2020 gives evidence to that. Now let's please turn to the next slide, and I will provide you with insights regarding our sales performance. Net sales for the first half of twenty twenty grew by 42% to €514,000,000 and increased in terms of nominal inverter capacity sold by 79%. In the first half of this year, all segments increased sales by double digits with Large Scale and Project Solutions revenues growing by 73% as compared to H1 2019. Looking at the regions. Longest region in terms of revenues with €245,000,000 which represents 48% of SMA's global sales and an increase of 19% compared to H1 2019. The region has sustained strong revenue growth since early 2019. And in H2 2020, the Home and Business Solutions segments delivered even double digit growth. Within EMEA, Germany, Benelux, Spain and the UK contributed the highest revenues and grew by high double digits compared to the same period last year. SMA Americas region nearly tripled its sales in the first half of twenty twenty as compared to the same period last year. With €178,000,000 of revenues, the region represents 34% of our total sales. The significant increase in sales compared to H1 twenty nineteen is mainly driven by substantial growth in the U. S. Large scale business, which is largely from regained market share as well as strong sales growth in the Business Solutions segment in the region. Our Asia Pacific region represented only 18% of SMA's total sales. But after a weak Q1 2020, sales grew in the second quarter so that for the first half of twenty twenty, APAC sales grew by 2% compared to H1 2019. Within this region, Australia remains SMA's largest market, and our revenues there grew by high double digits driven by strong sales growth in the Home and Business segments. Japan, which is our 2nd biggest market in APAC, grew revenues by double digits compared to H1 2019. Decline in revenues in our 3rd biggest APAC market, South Korea, was overcompensated by significant sales growth in the Philippines and Singapore in 2020. In summary, SMA started the year with very strong sales growth in the Americas and EMEA regions, while SMA's APAC region grew revenue significantly in the Q2 of 2020. So that revenues grew by 2% compared to 2019. Now looking at the sales per segment on the right side of the slide, you see that all segments significantly increased revenues in H1 compared to the same period last year. Our Home Solutions segment, which has delivered consistent sales growth since Q1 twenty nineteen, grew revenues in the first half of twenty twenty by 36 percent, reaching €139,000,000 Germany, Benelux and Australia delivered high revenues and significant sales growth for this segment. Our Business Solutions segment also grew its top line, achieving €150 8,000,000 representing an increase of 17% over 2019. Germany and U. S. A. Were our top markets for the segments. Australia nearby tripled its revenues in Business Solutions, establishing itself as a key market for this segment. Last but not certainly least, our large scale and Project Solutions segment had a very strong H1 with revenues of EUR 217,000,000 which is an increase of 73% 7 3% compared to the first half of last year. In the U. S, we achieved revenues 5 times higher than in the first half of twenty 19 and regained significant market share. Australia is the 2nd biggest market for this segment, but slightly declined in revenues compared to last year. This could be more than offset by strong growth in the next biggest markets, Japan and the Philippines. Now let me report to you on how our profitability developed, thanks to our strong revenues in the first half. For the first half of twenty twenty, SMA generated an EBITDA of €24,000,000 and EBITDA, Margin of 5%. EBITDA significantly improved compared to 2019, mainly driven by our substantial sales growth. Profitability is adversely affected by a negative exchange rate effect of approximately €2,000,000 in H120. There were no unplanned depreciations in H1, thereby remaining on its usual level. And also, there were no significant extraordinary effects in the first half of twenty twenty. Let's now have a look on the segments in detail. Home Solutions was very profitable in the first half with €12,000,000 of EBIT. The significant improvement in profitability was driven by the strong sales in combination with a stable price level and positive developments in our product portfolio. In the Business Solutions segment, EBIT was only slightly positive and roughly in line with 2019. Higher sales in 2020 helped to offset for moderate price erosion and a still unfavorable product mix for this segment as compared to the first half of last year. The Large Scale and Project Solutions segment improved its profitability compared to H1 of last year, but remained in the red. Despite strong sales growth, profitability of the segment continued to be affected by price decline and the high share of trading business in the first half of the year coming with smaller margins. So now a few words to the balance sheet and net working capital. We began 2020 with net working capital balance of €160,000,000 and a net working capital ratio of 17%. As you may recall from our 2019 annual results call, our net working capital was extraordinarily low at the end of last year as a result of a onetime advanced customer payment in Q4 'nineteen, for which we delivered the products and booked the sales in Q1 2020. At the end of June 2020, our net working capital, therefore, increased to €252,000,000 or a ratio of 24%, which is slightly above our normal level, mainly due to the high level of inventories we are maintaining to ensure our ability to supply our customers during the COVID-nineteen crisis. The decrease of trade payables was partly offset by a decrease of our trade receivables. In detail, as mentioned, our inventories remain on a high level in order to mitigate supply risks due to the COVID-nineteen crisis and also mirroring the more and more complex product portfolio, which has gone way beyond inverters in the last few years as well as our very international customer base, which is served by our production plant in Germany. We increased both our finished goods and our raw materials inventories by €5,000,000 compared to the end of 2019. Our unfinished goods stock decreased by €4,000,000 Thanks to early action and good execution by our supply chain management, we have maintained a stable supply situation through the COVID-nineteen crisis and remain well prepared to fulfill our high level of order backlog. Debt receivables decreased from €145,000,000 at the end of 2019 to €112,000,000 at the end of H1 as a result of good HR collection work AR, sorry, AR collection work. Trade payables decreased from the very high level at the end of 2019 to €122,000,000 at the end of 2020. And as already mentioned, advanced payments from our customers decreased by €67,000,000 to a balance of €24,000,000 This development was expected given the extraordinarily high at the end of 2019, which was mainly related to a key project in our large scale business. Now let's have a look on the group balance sheet on the right side of this page. In the balance sheet, the most noteworthy changes the beginning of 2020 are related to the development of the net working capital positions as just explained. An increase of other assets mainly results mainly from prepaid expenses for IT software licenses and the change in our total cash position. Total cash decreased from €318,000,000 at the end of 2019 to €240,000,000 at the end of 2020. The lower balance of total cash is mainly a result of the increase in net working capital, which I just explained. Our equity ratio of 40 2% at the end of the first half of twenty twenty is very solid as the significantly higher liabilities due short term onetime effect at the end of 2019 came down to a normal level in the first half of this year. Let's now turn to our cash flow profile on the next slide. In the first half of twenty twenty, SMA generated a strong positive gross cash flow, mainly driven by our net income adjusted for noncash effects, such as depreciation and amortization. This shows that we are delivering a good level of cash flows from our business operations. Our cash flow from operating activities is negative €86,000,000 in H1 and is mainly a result of a significant increase in net working capital, which, as mentioned earlier, was largely due to the settlement of liabilities from the end of 2019 and cash investments into maintaining a high level of inventories to ensure our ability to supply customers throughout the COVID-nineteen crisis. So in summary, SMA significantly improved its business performance in H1, which reflects in the strong sales growth, positive results and gross cash flow, while our cash flow from operating activities and adjusted free cash flow were negative mainly due to the increase of net working capital, which is mainly from the settlement of short term liabilities and the buildup of inventories to ensure a stable supply situation. This concludes the detailed review of our 2022 financials. Let me briefly summarize the key figures for you. SMA grew revenue significantly in the first half of twenty twenty, with sales of €540,000,000 that represent an increase of 42% higher compared to H1 of last year. All segments achieved double digit revenue growth. SMA's profitability improved significantly compared to the first half of twenty nineteen with EBITDA reaching €24,000,000 in H1, mainly driven by the high level of sales. Our financial position remains solid with an equity ratio of 42% and net cash balance of more than €200,000,000 a credit facility of €100,000,000 and a debt to equity ratio of 1.37. And now turn to the market and competition part of the presentation. Our market view, which we had adjusted in May due to the global impact of the current COVID-nineteen crisis, remains largely unchanged. Therefore, I will keep my notes here very short. While the COVID-nineteen crisis is currently taking a toll on the development, we expect markets to recover soon. We are closely tracking market developments. And for 2020, we now expect a global market volume of 101 gigawatt, which is 8% down on 2019 and 18% down on our pre COVID-nineteen market outlook. We expect the strongest downturn in APAC. And on the other hand, we see little or no decisive impact from COVID-nineteen on the markets in EMEA. When it comes to the segments, COVID-nineteen crisis will take its strongest toll on the residential segment and to a certain extent on the commercial segment in all regions. Taking renewable energy goals, current political initiatives like the European Green Deal and already permitted and financed projects into consideration, PV development is expected to recover soon. Growth will be at 18% per annum over the next 2 years. Now let's have a look on the same columns in euro terms. The expected dip in demand is also reflected in the global investments in PV System Technology, where we expect a downturn from €4,600,000,000 in 2019 to €3,800,000,000 in 20.20 and a strong recovery of 10% per annum afterwards. The lower annual growth rate in comparison to the market gigawatt is due to the still prevalent price decline in all regions and markets. However, we expect price decline to ease off to 1 digit percentages over the next years. And due to COVID-nineteen related delivery bottlenecks, price pressure may even become less than expected in the near future. And the final view on our addressable market for SMA. As the transition to a decentralized energy supply based on renewable energies proceeds globally, storage and digital energy services become ever more important. This transition also drives the further growth of O and M services for utility power plants. Therefore, in addition to our core PV inverter business, SMA is very well positioned in these segments and will be able to profit from the expected growth. After a COVID-nineteen related dip in 2020, we expect a strong recovery for the whole market addressable by SMA. On the last slide of this chapter, we have gathered our long term market outlook, which remains very strong, and we expect annual growth of 12% over the next 10 years. All right. This brings me to the current developments and their impact on SMA. First issue is corona and ongoing trade wars. SMA is also feeling the effects of the coronavirus crisis and generated lower sales than expected in the Q2. Nevertheless, as you have already seen in the financial slides, we were able to grow sales and earnings in the first half as well as in the Q2 2020. This was possible only thanks to SMA's good IT infrastructure, modified processes, active supplier management, our continuous customer support and especially the great dedication and flexibility of all our employees. Please also note that we did not have to use any government support. We will continue to monitor the further development very closely and react accordingly. Another important development currently in the focus of the financial and business world is the U. S.-China trade war. SMA has sold its Chinese operations last year and is not doing any business in the Chinese market. We are producing all our inverters for the U. S. Market at our state of the art and carbon neutral collection facilities here in Germany and have had our own sales and service company in the U. S. Since 2,001. Therefore, SMA is not and will not be affected in any kind by the continuing U. S.-Chinese trade we would like to present you are new business fields, especially e mobility. In the period under review, SMA has taken further steps towards becoming a true system and solutions provider. E mobility clearly is a future business field with great potential. We have the capabilities and expertise to exploit this potential and have successfully started to tap into this new business field. In order to provide holistic charging solutions for businesses and private households, we combine the competencies within SMA with those of our startups Koneva and Alexson. For corporate customers, we developed intelligent charging infrastructure for their employees, fleet and company cars, combining solutions on the company's premises and charging solutions at the employees' private homes. We combine this with energy management and energy services, such as load management, to optimize the use of energy and bring down energy costs for the companies. For private homes, we have developed the SMA EV charger, which enables fast, reliable and cost effective charging with maximum use of solar power and integrates seamlessly into the SMA Energy System home. As said before, we see great potential in e mobility and our e mobility portfolio will increase with the market development and demand. So now I would like to share our outlook and guidance for 2020 with you, starting with our order backlog. Looking at the right side of the slide, you can see that our total order backlog remained on the same high level as in the end of 2019. Our product order backlog decreased to €321,000,000 as a result of high amount of product sales in the first half and weaker order intake due to COVID-nineteen. Nevertheless, our product backlog remains on a solid level. In addition, we could increase our order backlog for services to €439,000,000 in the first half of twenty twenty, including substantial O and M business in the U. S. And most important, we see already a positive development in order intake for our product business in the several in the last several weeks. As you can see on the left side of this page, our Large Scale and Project Solutions pipeline remains on a high level, and nearly half of our orders are for countries in the EMEA region. With a strong level of sales achieved in H1 and a strong order backlog, we can confirm that more than 80% of our 2020 sales guidance is already covered by our year to date revenues and the current product and order backlog, which brings me to our 2020 guidance on the next slide. SMA got off to a strong start in H1, and we have been able to mitigate the effect of COVID-nineteen on our supply chain. Our highly motivated teams continue to work remotely in many countries across the globe. And thanks to our well developed IT infrastructure, we are able to keep our business performance on track. For the first half of twenty twenty, our sales and EBITDA were above 1 were above 20 19. And given our strong order backlog, a good order intake and our ability to manage supply chain issues, we still expect to be able to meet our sales and earnings targets. If we don't experience any currently unforeseeable negative developments in the months to come. Therefore, in spite of the COVID-nineteen crisis, SMA's Managing Board confirms that sales and profitability guidance for the full year 2020 with revenues of €1,000,000,000 to €1,100,000,000 and an EBITDA of €50,000,000 to €80,000,000 And please allow me to emphasize, we have not changed this guidance since its issuance in early February 2020. Let's turn to the last slide. Why invest in SMA? Real sustainability will become a significant topic for important stakeholder groups. SMA sustainability has been proven since the company's inception. Part of the sustainability are also our financial stability and our focus on sustainable energy supply based on PV. With our comprehensive portfolio for all segments and applications In our global sales and in service infrastructure, we can serve all customer groups around the world and thus profit from the whole potential of the global energy transition. This is why if you trust solar, there's no way around SMA. Now I'm happy to take your questions. And we take our first question from Konstantin Haase with Jefferies. Please go ahead, sir. Hi there. Mr. Hiding, how are you? Positive. Quick question. So a couple of quick questions. Just on EV charging, if you can give us a little bit more color on what the market potential is for you there? And what type of charger will you be commercializing? Are these superchargers? And question number 2, if you can give us an update on ShadeFix as well, please? Thank you. Sure. With regard to EV charging, we have to distinguish between 2 different activities. The one is the so called SMA EV charger, which is an AC charging system for private households. So no fast charging solution, but very much designed into a private household environment. That has just been announced and is for sale as of now. The potential for this is a little bit more difficult than the other activity, which I'm coming to in a second. But the margins are good. The customer reception is good. And hopefully, we will have already 6 digit figures this year as revenues and 7 digits next year. The other activity is much more important, and this we are doing by our joint venture called Alexan. Here we are talking about fast charging solutions on a DC basis, which is especially designed for large fleets, especially in the logistics area, where you have just small cycle times and the vehicles have to stay just for a short period of time in the reloading station. And here you need DC charging. And here we combine within this joint venture many USPs from the different participants. So that is going to, let's say, take off quicker. And we see for the joint venture, 7 digit volumes rather soon. SMA is holding a third in this joint venture. But we are profiting from this activity also by 2 other issues. We are combining that with our monitoring software from our subsidiary, Alexan. And also, we are going to produce the EV charging stations here in our production facility. So we are profiting from this also in a second level. All in all, EV charging has clearly 7 digit sorry, has a potential of low1000000lowone digit1000000 potential in the next year. To your second question, how we are going with our optimizing strategy? What about shape fix? There has nothing materially happened since we last spoke or I touched my first impressions on this in June, we see the technology very well received by our customers, especially by installers, who very well recognize that they will have to justify themselves before the end user of the PV system once in a day. This end user understands that optimizers are actually not needed for shading issues of slight manner. And we see also by the reaction of our competitors that we might have found the right spot here. However, Constantin, as I said, it will take some time until we see that in the figures. We see that SolarEdge and Enphase had difficulties in Q2, but I relate that only to the COVID-nineteen issues and not to shape fix. We have had bad Q2 in the string inverter business in the U. S. So we did certainly not see a market share there. But I confirm our expectation that we see the Shape Fix technology bringing the gain of market share by SolarEdge in Europe to a standstill in the coming months so that they're not going to grab more market share from us. Perfect. In the U. S, it will take some more some months more due to the special related to the special conditions we have in the U. S. Due to the rapid shutdown requirements. It's great. Thank you very much. Welcome. Thank And we take our next question from Jeff Osborne with Cowen and Company. Please go ahead. Yes, good afternoon, Ulrich. I had a couple of questions on my end. You mentioned the mix benefit on gross margins for the quarter. Can you talk about how we should think about gross margins and the trajectory in the second half as mix maybe returns to more normal levels? Yes. Thank you for that question. Indeed, Q2 especially shows gross margins that are in, let's say, in the level where I would like to have it already some time ago. And this is a product mix issue. And it is even more noteworthy that as in Q2, we didn't have these large revenues as in Q1. It is a consequence of our streamlining of our product portfolio and our concentration on offerings with strong margins. And there, we had a strong difference between Q1 and Q2. So Q2 is probably even more representative for the quarters to come than Q1 has been, which gives me confidence to somehow improve my assessment that I gave at the beginning of the year in our Capital Markets Day presentation, where I was saying that I might we might expect gross margins of about 2018, 2019 throughout the year. We may approach 2020 by the end of the year. At least, I see the potential to get there. For next year, it's a little bit too early to really to say something about that. Okay. But we are moving into the right direction. Yes. No, it's great to see and great to hear. And then I think you alluded to pricing being more stable in the second half versus the expectations for the out years. Is that a safe assumption? Yes. You have to always do the calculation also constant that you did in just taking the gigawatts by the revenues has always the difficulty of including more or less trading goods. And here, you also have this irritating factor. So if we just give you some information about that. In Q1 of 2020, we had trading goods of 17% of total sales. In Q2, there were only 11% of trading goods in total sales. So that explains a little bit why margins in Q1 were weaker than in Q2. And if we just look on the ASPs for the inverter business, I can give you the following information. As expected and announced earlier this year, the price pressure is coming down, is easing off. For Home segment, the price is stable. It did not decline this year so far, and we expect it to remain stable for the remainder of the year. For business, it has decreased to the degree that we have planned and forecasted. So it will and that will probably continue. So we see that in the medium one digit area, the price decrease in 2020. And for large scale, the price decrease is even more moderate than we anticipated. So I see that still in the 2 digit area, but really more at about 10% this year. Got it. That's very helpful. Thank you, seeking for Jeff. No, that's excellent. 2 other quick ones. I see on the last page of the filing that you sold your stake in Tygo last month in July. Can you talk is there any financial or accounting treatment that we need to be aware of in terms of one time gains or costs associated with the sale? Not for H1. The extraordinary effect comes in July. Right. That's what I was asking just as we model the Q3. It's a minor one. It's a low €1,000,000 gain, really not of much importance. Got it. And then my last question was just are you having any preliminary discussions around safe harboring for the 26% for shipments by Q1 or April of next year? Do you anticipate the same event to happen where you get paid in cash in Q4 and then have to ship in early next year? Not to the degree we experienced it in 2019. No. Got it. That's all I had. Thank you. We see the pipeline filling up, yes. And clearly, not everything will be shipped in 2020, but a lot in 2021. But there is not this peak that we had last year and this year. It's not to be expected for the coming period. All right. Thanks so much. Thank you. And we take our next question from Guido Hoieman with Metzler. Please Yes, hello. Hi, Marie. Four questions, please. You mentioned the high share of trading goods in Q1. I have to apologize, but can you explain what exactly these trading goods comprise? I think it is a salary. Yes. Yes. But yes, could you elaborate on that? It was a pleasure. Yes. Okay. So maybe my final question. Yes. If I talk of trading goods, I mean batteries, I mean also the amount of optimizers that we still have sold. I mean medium voltage stations, we produce the inverter, but then it is combined with medium voltage gear and then sold as a package, as a skid to the customer and that goes all on our accounts. And other accessories that we have, that is trading goods. And especially in Q1, as we have this huge large scale order in the U. S, which was 100% done on medium voltage stations. The amount of trading goods was extremely high, 17%. 11% as in Q2 is a little bit too low. I would say that the normal average is about 13% to 14% of trading goods that we have. And that comes with a much lower margin than the inverter. And therefore, the product mix has a very heavy impact on gross margins. And every quarter has its own story. Okay. No, possible. All right. Second one is, I think you don't do not really disclose the share of battery inverters. Nevertheless, the question is this business still developing as positively as you expected? And is it still the more profitable one? Yes. I what is always difficult to say is the attach rates. That is something that is always important for the market because there are just a few markets really mature to see that. What I always voluntary disclose is the attach rate in the home segment in Germany. It is about 60%. So more than half of all private householders who are going to buy PV array are also buying storage solutions. With regard to our revenues, the storage portion, which consists of our storage inverters only, not the batteries that we are taking as trading goods, is about 7% to 8%. It has been 7% in Q1, it was 8% in Q2 and counting. It's going to probably to rise in H2. That is very much a project based business because we are talking especially about large scale applications. And those projects may then be completed in 2020 or early 2021, so there is a push out risk. But in general, the trend is positive. Okay. Then maybe one question on the large scale segment. You report the EBIT, this segment is still loss making. Do you expect this business actually to turn profitable, say, by next year or so? And how could we get there because sales, so any sort of operating leverage, sales are huge already. So what could make the difference? And when do we get this business profitable? Yes. Here in large scale, we are absolutely convinced that this is going to be profitable again. And we have already had months in which there were positive EBIT. The segment is still the one that is most affected by price decrease. On the other hand, it is the one where the consolidation of the market has progressed the most. Therefore, we expect this to have an effect on pricing as well. Also, the competition is, let's say, it's short before the end game already. So competitors are very aggressive in selling their product, which will take a toll on quality, delivery performance, service performance, etcetera, especially quality wise. This will take a toll on our competitors. If they are not able to finance this on a long term basis, and not all competitors can in this segment. So we see our business model here to be somehow burdensome this time as we are making losses, but it is sustainable. We will come to the point where customers are more and more shifting towards our customers before to our products because they are more reliable, our service infrastructure more reliable. And we I don't know the exact point in time when this will be sustainably profitable. But as I said, it has already turned into the black in some months. Okay. All right. And maybe the last one, more general one. I think we've seen that space for ground mounted solar systems is becoming scarcer. I think we see more resistance on people. I think in the wind sector, this triggered, let's say, a bigger shift of our growth expectations into off shore, people simply moving or the locations simply being shifted into the oceans. So this is in the wind sector, the area to grow in the coming years decades. Do you see a similar shift in solar? Or what is the answer of your industry to that? And are you also in talks with other, let's say, solar system models like floating plants or accro photovoltaics areas which might be the growth areas of the future. So do you see the shift to this deck into this direction? And do these new facilities need different inverters? Or would that simply be the same product, just different kinds? Yes. So we see the shift into these new applications, especially floating PV, but more as, let's say, talk in the community, not in concrete numbers. But we see, let's say, also the earnest in which some especially module suppliers are working on this subject and also EPCs are working on this subject. However, that doesn't affect us at all. We can, with our product, serve all applications. But more important than that, I think that what you described correctly as a lack of acceptance in the societies with regard to onshore wind. We do not see that same effect with regard to large ground mounted applications. Certainly, in such populated states like Germany or the Netherlands, this is an issue. But here, we still have a lot of possibilities. Just take the latest ideas that I heard of is shading of motorways with PV, where there actually is no that is not harming any sites or any feelings with regard to the landscapes. And also, our business is mainly made for this segment, large scale ground mounted in the U. S. And Australia. And here you don't have that issue at all. The German market is actually very it's not that important for us with regard to large scale. Okay. All right. Great. Then yes, thanks a lot. Welcome. Yes, great figures. Thank you. Thank you. Thank you. We take our next question from David Loewish with Atlas Impact Partners. Please go ahead. Hi, Ulrich. It's David here from Atlas in London. Hi, David. A quick question for me. Could you just comment a bit more about the U. S. Market and sort of who have you been able to take market share from? The growth number is obviously very impressive, but I'd be just curious to learn a bit more about that dynamic in the U. S. And then maybe as a second question, could you just comment a bit more on, I guess, sort of attach rates of storage with systems that you're selling? And how do you sort of how should we think about that going forward? Thank you. Yes, certainly. So with regard to the U. S. Market, the positive notes are coming from large scale. Home is really underperforming in the U. S. This period, like the entire business does. Business is almost on budget level, but still poor. The big story was large scale in Q1, and that was giving these enormous revenues. So whom did we take it from? Actually, as I said, consolidation has been gone has proceeded. We have seen Siemens, GE, Schneider Electric and effectively also ABB dropping out of the market. And the competitors in the Americas, which are left are SMA, Sungrow, Power Electronics, Yining, a few others with very minor market shares. And we have certainly taken market share from Power Electronics this year and plan to continue to do so in the future. Got you. Okay. With regard to attach rates, there are effectively 2 markets which where you can talk about attach rates. The one is home segment, household applications, household installations. And here only in countries like Germany, Italy perhaps, U. S, Australia, but really certain knowledge do we have only for the German market. And here we know that all potential investors inquire about storage solutions with their installers and that more than 50%, almost 60% actually buy a storage solution in Germany. I think that this figure is still exceeding the attach rates of all other countries because Germany is really the most advanced also from a, let's say, history point of view and Germans being very much tentative to talk about autarky and renewables, etcetera. But the more countries adopt according regulatory frameworks and perhaps even subsidies, but also the attach rates in other countries, like I mentioned, Italy, Australia, U. S, will rise. The other area which is important for us where we are talking about storage is the large scale business. So round mounted installations with an adjacent field for batteries. And here, we see a rising demand. I don't want to talk about an attach rate, but we see rising demand on a regular level. So it is not just a specialty, not just a niche product, who is just ticked by very specialized IPPs or utilities. It is something that more or less everybody thinks about. We have entire countries where the regulatory framework aims at doing all ground mounted installations with batteries right away. And we have seen the discussion in Australia where they were installing a lot of PV and then recognizing the impact it has on with stability. And now they are, let's say, working backwards, not backwards, but they are trying to regain more batteries into the system. The same has happened in the U. K. 2 years ago. So that becomes not it's more of a trend. It is an insight that PV naturally works best with battery storage right at its side. And this trend is strengthening. Okay. Okay. That's helpful. Thank you. That's interesting. Welcome. Thank you. And we have no further questions, I would like to hand the call back over to you for any additional or closing remarks. Thank you. Thank you, Lian. Thanks to all for listening and spending some time with us. I was actually thinking about canceling the call because I thought whatever happens to the share price after the call, it will be I will be told that this has been due to the call because it was doing quite well before that. But it was really worthwhile talking with you and exchanging some ideas. I would like to reiterate one idea that I think is really important. You have experienced me in the last month to be always very shy and conservative with regard to profitability in the past because we were coming out of restructuring. We are really modest and we have to make our homework first. Now I would let's say, I would like to be so bold and say we see the results coming into effect, especially the gross margin in Q2 is something that really gives me confidence that we are on the right track and we'll proceed to become more profitable and that we are a long term shot looking at our current capitalization. So thanks a lot and have a great day. Thank you. And that will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now